Splenda leaves a bitter taste in competitors’ mouthsApril 10, 2007

The business may be all about sweetness, but the competition can be bitter. That's the story right now in the artificial sweetener business, with much of the action centered around sucralose, the sweetener in Splenda^®. The sweetener is the subject of several currently pending cases.

In the first, rival sweetener maker Merisant, maker of Equal^® and Nutrasweet^®, have sued the producer of Splenda^®, McNeil Nutritionals, LLC, a subsidiary of Johnson & Johnson, for false advertising. At issue is the advertising campaign stating that Splenda^® is "made from sugar, so it tastes like sugar." Merisant alleges that this statement misleads consumers into thinking that sucralose either contains sugar or is not an artificial product. Compounding the problem, according to Merisant, in 2003, Splenda's^® advertisements used to include "but it's not sugar" at the end, but this language was dropped in an effort to lead consumers to believe that sucralose was more "natural." Notably, this change corresponds with a sizeable increase in U.S. sales of Splenda^®, with a total of $212 million in sales in 2006.

The key is that sugar is used as a starting ingredient when making Splenda^®, but the sugar is removed during the manufacturing process as the sucralose is produced. McNeil's argument is that its advertisements are factually correct: sucralose is "made from sugar," because sugar is used at the beginning of the manufacturing process. The judge summarized its position as: "how could a consumer interpret a product that is ‘made from sugar’ and ‘tastes like sugar’ as actually being sugar?" Some of the evidence shows that consumers aren't getting that message, though, as one expert stated that 40-50% of survey respondents either think that Splenda^® contains sugar or is a mix of Splenda^® and sugar.

The trial in this case began on April 9, and is scheduled to last two weeks. Merisant is seeking disgorgement of $176 million in McNeil's profits based on the allegedly false advertising. The stakes are not only money, though, but also include the share of the artificial sweetener market. In 2006, Splenda^® held 68% of the market, and Merisant wants to take a bite out of Splenda's^® market share.

In another false advertising lawsuit in California regarding the same advertising campaign, McNeil is facing off with the Sugar Association, scheduled to go to trial in November. For its part, McNeil is counterclaiming that the Sugar Association has engaged in a "malicious smear campaign" against Splenda^®, and seeks damages in the form of corrective advertising to correct any mistaken consumer impression that Splenda^® is unsafe.

While McNeil is on the defensive in that case, it is on the offensive when it comes to "generic" sucralose being imported into the United States. On April 6, McNeil filed a complaint with the International Trade Commission against several Chinese producers of sucralose. While the text of the complaint is not available, there are several patents covering sucralose and various methods of producing it held by a British company, Tate & Lyle (because Tate & Lyle is the owner of the patents, it is the actual party before the ITC). Given the ITC's enforcement power under 19 U.S.C. § 1337 to prevent importation of products that infringe intellectual property rights in the United States, the ITC action most likely seeks to prevent importation of these items based on patent infringement. (Update (4/13): The Chiniese companies have denied infringement.)

Further update (4/25): Another Splenda^® case has been brought to my attention: McNeil sued Heartland Sweeteners, a manufacturer of "generic" sweeteners, for trade dress infringement in December 2006. Heartland sells "store brand" sweeteners, and, according to McNeil, uses Splenda's^® distinctive color scheme on its packaging. Below is a comparison of the packaging from the complaint:

The case is pending in the Eastern District of Pennsylvania (case no. 2:06-cv-05336-JP), and a hearing on McNeil's request for a preliminary injunction was held on March 13. No decision has yet been rendered.

This battle of the sweeteners may be a bitter one, but these cases illustrate the importance of intellectual property laws in protecting a company's rights to do business, and the types of enforcement mechanisms that are in place to assist in enforcing these rights, as well as fairness in the marketplace.

Update (5/11): The Equal v. Splenda case has settled, according to the AP. According to the report, the jury was set to find in favor of the Equal makers, although not to award as much as they were requesting.