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Del Monte Litigation Highlights Complexity of Business Licensing Agreements

Del Monte Litigation Highlights Complexity of Business Licensing Agreements

When drafting any type of business contract, it is important to make sure the terms are as precise as possible so that all parties understand their rights and obligations under the agreement. Civil litigation often arises from ambiguity in a business contract. Once litigation commences, it can take years—even decades—to fully resolve the issues between the parties.

Defining the Scope of “Fresh” vs. “Non-Fresh” Produce

An ongoing dispute over the use of one of the country's best known food brands offers a good illustration of this point. Many New Yorkers are familiar with the “Del Monte” brand of fruits and vegetables. What you may not know is that Del Monte is actually two distinct entities: Del Monte Foods and Fresh Del Monte. The latter was spun off from the original Del Monte Corporation in 1989. As the name suggests, Fresh Del Monte sells fresh fruits and vegetables, while Del Monte Foods markets shelf-stable and frozen produce. Del Monte Foods retained the “Del Monte” trademark, which is then licensed to Fresh Del Monte.

Since the late 1990s, Fresh Del Monte and Del Monte Foods have faced off in court several times over the exact scope of this trademark license. In 1999, a federal judge in Manhattan ruled Fresh Del Monte could sell “cut refrigerated fresh fruit” without violating the terms of its license. The judge noted the license itself was “riddled with ambiguity,” but he nevertheless divined a clear line between “fresh” and “non-fresh” produce.

Two more lawsuits followed. In the most recent case, Del Monte Foods again asserts Fresh Del Monte exceeded its “fresh” foods license by selling “medley” produces that combine “fresh fruits or vegetables with a product that is not made entirely from fruits, vegetables, or produce.” In a January 2016 decision, a federal judge—not the same one who issues the 1999 decision—argued the results of earlier litigation foreclosed some, but not all, of Del Monte Foods' claims. Specifically, the judge agreed with the 1999 judge's decision that the license covers any Fresh Del Monte product “combining fresh fruit and either fresh vegetables or fresh produce.” But Del Monte Foods can still pursue a claim based on any Fresh Del Monte “products which combine nonfresh fruit with vegetables or produce.”

The judge further rejected Del Monte Foods' argument that it was entitled to terminate the licensing agreement outright due to Fresh Del Monte's alleged violations. As the judge explained, the agreement itself specifies the license is “perpetual” and may only be terminated if Fresh Del Monte “abandons” its use of the trademark. Since the contract specifies this as the “exclusive grounds for termination,” the judge said he must hold the parties to this language.

Need Help with a Business or Civil Litigation Matter?

While the nature and length of the Del Monte dispute is exceptional, it highlights a common issue faced in many business agreements, namely the precise scope and interpretation of an agreement's language. That is why you should never into any complex business contract without the assistance of a qualified New York business attorney. Contact the offices of Nisar & Mason, P.C. today if you need help with any type of business or civil litigation matter.
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