How Nabisco's competition got to call their cereal Shredded Wheat

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This is a true story about the intersection of trademark law, the invention of cold breakfast cereal and a landmark decision of the United States Supreme Court that cost Nabisco the exclusive rights to manufacture a pillow-shaped breakfast cereal and call it Shredded Wheat.

Cold cereal: Once there was none

In the 19th century, the breakfast of the rich was the same as dinner. Heavy on eggs, pork and other meats; light on fiber. Not surprisingly, this diet caused painful gastric problems including constipation, and filled 19th-century health sanitariums with wealthy people.

Enter cold breakfast cereals, developed by evangelical crusaders of health and spiritual causes, many of whom ran health sanitariums.

“Granula” was the first known cold cereal in the U.S., created in 1863 by Dr. James Caleb Jackson. Jackson ran a health sanitarium and was a disciple of Dr. Sylvester Graham (creator of the Graham cracker), a colorful and interesting character, described by one 19th century newspaper as “a greater humbug or a more disgusting writer never lived.” Prompting this editorial was Graham’s deep belief that most health problems were caused by diet and sexual desires and that a diet involving the ingestion of huge quantities of whole grains and a regiment of water and yogurt enemas would dampen those desires. Likely, they did.

In 1876 Dr. John Harvey Kellogg, the patent holder for peanut butter made from steamed peanuts, was the superintendent of a sanitarium in Battle Creek, Mich. Like Jackson and Graham, Kellogg believed that all health problems could be solved by a good diet and a great enema.

Kellogg determined to develop a fiber-rich, ready-to-eat cold cereal for his patients. His first cereal product, also named GRANULA, was a mix of cornmeal and oatmeal, baked into biscuits and ground. Jackson sued for trademark infringement and Kellogg changed the name of his cereal to Granola.

In 1893, 38-year old C.W. Post spent time at Kellogg’s Sanitarium after he collapsed following a string of entrepreneurial failures. Post wasn’t cured, but he took note of the market for cold cereals, and leased a farm house in Battle Creek where he began to experiment. Two years later he developed Grape Nuts.

Then, there was no FTC controlling the health claims of advertisers and Post wrote his own ad copy, claiming Grape Nuts was a treatment for an inflamed appendix, cured malaria and fixed loose teeth. Post’s company soon became the country’s largest advertiser, and Battle Creek became the mecca of fast food and advertising with more than 40 cereal manufacturers setting up shop.

Henry Perky introduced Shredded Wheat at the 1893 World’s Fair; it was described as “tasting like a shredded door mat.” Perky had developed a process for making these things, and in 1895, he and William Ford were issued utility patents for Shredded Wheat and the machine that made it.

Perky’s business plan was to sell the machines, but the biscuits proved more popular. Eventually, he began manufacturing them in Niagara Falls.

Shredded Wheat was made by boiling, drying, pressing, shredding and baking the paste into a pillow-shaped biscuit with a center bulge and thin ends. A long-running English TV advertisement claimed that eating 3 would give you superhuman powers. Someone quipped, “A bald person should eat 2 and wear one on his head.”

Perky died in 1908 but his company, the Natural Food Co., continued on, becoming the Shredded Wheat Co. and later the National Biscuit Co., or Nabisco.

Willie Kellogg

The business manager of Kellogg’s sanitarium was his younger brother, Willie Keith Kellogg. The brothers founded the Sanitas Nut Co. in 1897 to sell peanut butter to local grocery stores. They experimented with cold cereal, but fought over whether it should contain sugar. Willie quit the sanitarium, resigned from Sanitus and established what would soon be called The Kellogg Co.

Dr. Kellogg and Willie never spoke to each other again, and Dr. Kellogg, who performed more than 22,000 abdominal surgeries with hardly any deaths, died in 1943 holding more than 30 patents. Willie, meanwhile, invented Corn Flakes in 1903.

By 1912 The Kellogg Co. was well established and entered the shredded wheat biscuit market following the expiration of the Perky and Ford patents.

Natural Food objected and Kellogg, for a few years, stopped selling the stuff — but not for long. By 1927 it was manufacturing and selling shredded wheat biscuits similar to those sold by the Shredded Wheat Co. (National Food’s successor in interest), which sued. Kellogg then agreed to call its product Kellogg’s Whole Wheat Biscuits.

In 1930, Nabisco bought the Shredded Wheat Co. and Kellogg again began to market its product by the name Shredded Wheat. Nabisco sued.

The lawsuit

The shredded wheat patents had long expired, so Nabisco’s legal theory was based on trademark and unfair competition laws. Nabisco claimed rights in the name and shape of Shredded Wheat and asserted that Kellogg, by using the name and shape, was passing-off its products as Nabisco’s, causing confusion among their customers.

Nabisco sued Kellogg for three things: 1) use of a cereal box with a picture of 2 pillow-shaped biscuits submerged in a milk bowl; 2) manufacture of the biscuit in Nabisco’s pillow shape; and 3) use of the name Shredded Wheat to describe the product.

The trial court threw out Nabisco’s suit, ruling that “shredded wheat” described both Kellogg’s and Nabisco’s product. It had become generic and could no longer serve anyone as a trademark.

The appellate court reversed.

The Supreme Court granted cert and held that Kellogg’s competition with Nabisco was proper and in the public’s interest. In a short 7-2 opinion authored by Justice Brandeis, the Supreme Court reversed the appellate court. The end result was that Kellogg could manufacture the pillow-shaped biscuit and call it Shredded Wheat — and a precedent of trademark law was established that is still followed 80 years later. Here’s why.

The decision

The Supreme Court agreed that the name had become generic and unprotectable because it did not identify a single source for consumers. The brand had become the object.

The shape, too, was unprotectable, for three reasons: 1) it was functional; 2) it was not distinctive; and 3) with the expiration of the patent on the equipment that made SHREDDED WHEAT the public had the right to use the machine that made the shape to make the shape. Thus the court reasoned, the pillow shape was dedicated to the public when the patent expired.

Functional shapes are not protected as trademarks for to prevent their use by competitors could dampen the market. Trademarks, unlike patents, last as long as the mark is used; there are trademarks in use over 500 years old. Today, patents expire 20 years from date of filing.

The court ruled the pillow shape was generic, having become associated with the article and not the producer.

The court further justified its decision by making a factual determination – unusual for the Supreme Court – that there was no consumer confusion because the Kellogg’s brand was prominently featured on the product’s box, and the Kellogg biscuit was 2/3 the size of Nabisco’s biscuit.

But Justice Brandeis’ analysis left a bit to be desired. In some ways it was perfunctory and did not address the relationship among the different grounds of the decision and so it has been since cited as standing for numerous propositions.

Some have cited the opinion as permitting free manufacturing and use of another’s trade dress (the look of a product or package) after the expiration of a patent. The decision really did not say this, however. What it held was that if a defendant can establish the functionality of a shape, it can copy that functional shape because function can only be protected by patent law.

The decision also caught Congress’ eye. It added a provision to the Lanham Act that allows the existence of a utility patent pertaining to trade dress function to be a factor in deciding whether the shape of a product is functional once the patent expires. (Congress also codified in the Lanham Act that generic marks can never be protected, and that registrations of marks that become generic during their lifetime can be cancelled.)

Brandeis’ last stand

It’s interesting to note that, at the time he wrote Kellogg, Justice Brandeis was, perhaps, distracted: He was holding private meetings with President Franklin D. Roosevelt to urge that the president and the United States take steps to save European Jews who were being persecuted by Nazi Germany.

Brandeis, a Jew, was appointed to the Court in 1916, and his appointment was attacked by business interests and anti-Semites. The hostility of Associate Supreme Court Justice James McReynolds toward Jews was so strong that Chief Justice Taft had to cancel the annual photograph of the Justices because McReynolds refused to sit next to Brandeis.

Justice Brandeis had offered to retire from the Supreme Court in 1937 but the Chief Justice would not accept his resignation. Kellogg was one of his last opinions and he retired a few months after it was written.

When Brandeis wrote Kellogg, perhaps he had recalled a case in which he was the lone dissenter some 20 years earlier. Brandeis used his decision in Kellogg to vindicate the position he alone took in that earlier case, and to establish a part of the law of unfair competition as he thought it should be written.

Editor’s note: This is an abridged version of a lecture Mr. Astrachan gave to the 90-year-old Baltimore Lecture Group in January, 2007.

James B. Astrachan is a principal of Astrachan Gunst & Thomas, P.C. in Baltimore and teaches Trademark and Unfair Competition Law at the University of Maryland School of Law.