## Facts

- PepsiCo owned and used registered trademarks for “Pepsi,” “Pepsi-Cola,” and “Pep-Kola” for soft drinks.
- A third party (H. Fox & Co.) registered “Peppy” in 1926 and renewed the registration in 1946 and 1966.
- Fox used “Peppy” primarily for a cola-flavored syrup sold on a limited, local basis (mostly in parts of New York, New Jersey, and Connecticut), first to fountain trade and later in consumer-size bottles sold to jobbers.
- In 1965, Grapette developed a new “pepper-type” soft drink and sought to use the name “Peppy.”
- Grapette obtained an assignment of the “Peppy” trademark from Fox for $7,500 while Fox was in a Chapter 11 proceeding.
- Although the assignment recited transfer of goodwill, Grapette conceded it did not acquire Fox’s physical assets, formulas, business operations, or customers.
- PepsiCo objected to Grapette’s proposed use and sought an injunction for trademark infringement.

## Issues

1. Whether the assignment of the “Peppy” trademark to Grapette was invalid as an assignment in gross because it was not accompanied by the goodwill or business associated with the mark.
2. Whether laches barred PepsiCo from obtaining injunctive relief despite a likelihood of confusion between “Peppy” and “Pepsi.”

## Decision

- The court reversed the district court and remanded for entry of appropriate injunctive relief.
- The court held the “Peppy” assignment to Grapette was an invalid assignment in gross, conveying no enforceable trademark rights.
- The court accepted the district court’s finding that “Peppy” was confusingly similar to “Pepsi” and would constitute infringement under the Lanham Act.
- The court rejected laches, concluding the record did not show unreasonable delay by PepsiCo or sufficient prejudice to Grapette to make injunctive relief inequitable.

## Legal Principles

- A trademark cannot be validly assigned “in gross”; it must be transferred with the goodwill of the business connected to the mark, not as a standalone symbol.
- Recitals of “goodwill” do not validate an assignment where the assignor’s business and associated goodwill are not actually transferred.
- Laches in trademark cases requires both unreasonable delay and material prejudice; timely objection and lack of reliance-based harm undermine the defense.
- Where consumer confusion is likely, equitable defenses are applied cautiously because of the public interest in avoiding confusion.

## Conclusion

The Eighth Circuit concluded that Grapette’s acquisition of “Peppy” was a legally ineffective assignment in gross and that laches did not bar relief; the case was remanded with directions to issue an injunction preventing use of “Peppy” in a manner infringing PepsiCo’s rights.


PepsiCo, Inc. v. Grapette Co., 416 F.2d 285 (8th Cir. 1969)