memo-mediation-prep-settlement-valuation.docx

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CALDERWOOD & HARKNESS LLP intellectual Property Practice Group

INTERNAL MEMORANDUM

FROM: Christy Bauer, Lead Associate, intellectual Property, Calderwood & Harkness LLP

TO: Alan Ngo, Responsible Partner, intellectual Property Marcus Delgado, Billing Partner, intellectual Property

DATE: February 10, 2023

RE: Mediation Preparation and Settlement Valuation — Meridian Consumer Brands LLC v. Brindoval Home Goods Inc., S.D.N.Y. Case No. 1:22-cv-09483; TTAB Opposition No. 91/278,415

MATTER NO.: 1011-00003

BILLING CODE: 11470-001

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I. Purpose and Executive Summary

The purpose of this memorandum is to prepare the engagement team for the court-ordered mediation currently scheduled for February 15, 2023, before the Honorable Harold K. Novotny (Ret.) of Novotny ADR Services LLC, located at 140 Broadway, Suite 2810, New York, NY 10005. Judge Novotny was appointed by the Court as mediator following the entry of the Preliminary Injunction Order on January 9, 2023, and the parties' joint consent to participate in alternative dispute resolution prior to the close of discovery.

Current Posture. The litigation remains in an early but active stage. Meridian Consumer Brands LLC ("MCB") filed its Complaint on November 7, 2022, asserting claims for federal trademark infringement, false designation of origin, and state-law trademark dilution against Brindoval Home Goods Inc. ("Brindoval"). Following an expedited briefing schedule, the Court entered a Preliminary Injunction Order on January 9, 2023, granting in part MCB's motion by ordering Brindoval to modify its packaging trade dress — specifically, to remove the wave device and change the teal-and-white color scheme — within forty-five (45) days. However, the Court declined to enjoin Brindoval's use of the word mark MERIDIAN FRESH pending trial. Initial disclosures were exchanged on January 23, 2023, pursuant to Federal Rule of Civil Procedure 26(a)(1), and fact discovery is now underway. MCB served its First Set of Interrogatories and First Set of Requests for Production on January 30, 2023, and responses are not yet due. In the parallel TTAB proceeding, MCB's Notice of Opposition (Opposition No. 91/278,415) against Brindoval's pending trademark application Serial No. 97/412,558 for MERIDIAN FRESH in International Class 3 remains pending.

Scope of This Memorandum. This memorandum addresses the following topics in detail:

(1) Damages analysis under three alternative theories — lost profits, reasonable royalty, and disgorgement of defendant's profits;

(2) Litigation risk factors, including an assessment of the strengths and weaknesses of MCB's claims and the probability of prevailing at trial;

(3) Cost-of-litigation projections through mediation/settlement and through trial;

(4) Settlement valuation and recommended monetary range for the mediation;

(5) A proposed coexistence framework as an alternative to seeking complete cessation of Brindoval's use of MERIDIAN FRESH; and

(6) BATNA analysis and anticipated Brindoval positions, including Brindoval's likely settlement range and negotiation strategy.

Bottom-Line Recommendation. Based on the analysis set forth below, MCB should enter mediation seeking a monetary settlement in the range of $1.2 million to $1.75 million, combined with a comprehensive trademark coexistence agreement providing ongoing, enforceable brand protection. A coexistence framework is preferable to pursuing complete cessation of Brindoval's use of MERIDIAN FRESH for two principal reasons. First, complete cessation is unlikely achievable given the Court's refusal to enjoin the word mark at the preliminary injunction stage and Brindoval's significant revenue investment in the MERIDIAN FRESH product line. Second, a well-drafted coexistence agreement can provide structured, enforceable restrictions on Brindoval's use of any MERIDIAN-incorporating mark — including channel limitations, product-category restrictions, trade-dress modifications, and liquidated-damages provisions — that would deliver meaningful, long-term brand protection exceeding what MCB might obtain through a contested trial. This memorandum recommends an opening monetary demand of $2.5 million at mediation, with authority to settle within the recommended range, and a walk-away floor of $1.0 million on the monetary component alone (which must be coupled with meaningful coexistence terms).

II. Procedural Background and Current Posture

A. Pre-Litigation

Calderwood & Harkness LLP opened this matter on September 26, 2022, at the direction of Thomas R. Hennessy, General Counsel of Meridian Consumer Brands LLC. The genesis of the matter was MCB's identification of Brindoval Home Goods Inc.'s launch of a line of household cleaning products under the brand name MERIDIAN FRESH, which MCB's Brand Management team discovered through competitive market monitoring in the summer of 2022.

On September 26, 2022, this firm transmitted a detailed cease-and-desist letter to Brindoval Home Goods Inc., directed to the attention of Karen A. Whitfield, General Counsel. The letter identified MCB's portfolio of registered trademarks in the MERIDIAN family, described the areas of product overlap, and demanded that Brindoval immediately cease all use of the MERIDIAN FRESH mark and any confusingly similar trade dress, and withdraw its pending trademark application, Serial No. 97/412,558.

On October 10, 2022, the law firm of Halverson McKay & Pruitt LLP responded on behalf of Brindoval. The response letter, signed by Gregory T. Halverson as lead partner, denied that Brindoval's MERIDIAN FRESH brand infringed any of MCB's trademark rights. The letter asserted that MERIDIAN is a common English word with suggestive connotations and that the addition of "FRESH" and Brindoval's distinctive branding were sufficient to distinguish the products in the marketplace. The letter further stated that Brindoval had independently selected the MERIDIAN FRESH brand name through an internal development process and that Brindoval intended to continue its use of the mark.

Having received an unsatisfactory response to its cease-and-desist demand, MCB authorized the filing of a Notice of Opposition before the Trademark Trial and Appeal Board ("TTAB") on October 14, 2022. The opposition, docketed as Opposition No. 91/278,415, was filed against Brindoval's pending trademark application Serial No. 97/412,558 for MERIDIAN FRESH in International Class 3 (household cleaning preparations). The TTAB proceeding has been instituted, and discovery periods in the TTAB matter are currently running in parallel with the federal litigation, though we anticipate that the TTAB proceeding will be suspended if the parties reach a global settlement at mediation.

B. Federal Litigation

On November 7, 2022, MCB filed its Complaint in the United States District Court for the Southern District of New York, which was assigned Case No. 1:22-cv-09483 and allotted to the Honorable Patricia M. Albright, United States District Judge. The Complaint asserts three causes of action:

(1) Trademark Infringement under Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1), based on Brindoval's use of MERIDIAN FRESH in connection with household cleaning products that are identical or closely related to the goods covered by MCB's registered marks;

(2) False Designation of Origin under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), based on Brindoval's use of a confusingly similar mark and trade dress that is likely to cause consumer confusion as to the source, sponsorship, or affiliation of Brindoval's products; and

(3) Trademark Dilution under New York General Business Law § 360-l, based on Brindoval's use of a mark substantially similar to MCB's MERIDIAN marks, which dilutes the distinctive quality of MCB's marks through blurring.

On November 18, 2022, MCB filed its Motion for Preliminary Injunction, seeking to enjoin Brindoval from any further use of the MERIDIAN FRESH mark and any trade dress confusingly similar to MCB's registered marks, including the wave device and teal-and-white color scheme. The motion was supported by two key declarations:

• The Declaration of Rachel Dominguez, Vice President of Brand Management at MCB, which detailed the history of the MERIDIAN brand, MCB's investment in building consumer recognition, the commercial significance of the brand to MCB's business, and the competitive harm MCB has experienced since Brindoval's launch of MERIDIAN FRESH; and

• The Declaration of Dr. Elaine Furman of Lakeshore Brand Consulting LLC, which presented the methodology and results of a consumer confusion survey. Dr. Furman's survey, conducted using a modified Eveready protocol (sometimes referred to as a "Squirt" protocol), measured a net confusion rate of 31.4% among 612 respondents, after accounting for control-group noise of 7.2%.

On December 5, 2022, Brindoval filed its Answer and Counterclaim. The Answer denied the material allegations of the Complaint, asserted various affirmative defenses (including that MERIDIAN is descriptive or suggestive, that there is no likelihood of confusion, and that Brindoval independently adopted its mark in good faith), and included a Counterclaim seeking a declaratory judgment of non-infringement. Brindoval's legal team at Halverson McKay & Pruitt LLP consists of Gregory T. Halverson (lead partner), Megan Janssen, and David Kowalski. This is a well-resourced defense team with significant trademark litigation experience.

The Court conducted an evidentiary hearing on MCB's Motion for Preliminary Injunction on December 19, 2022. Both sides presented oral argument and the Court questioned counsel extensively regarding the survey evidence, the competitive proximity of the parties' products, and the availability of injunctive relief short of a total ban on Brindoval's use of MERIDIAN FRESH.

C. The Preliminary Injunction Order (January 9, 2023)

On January 9, 2023, the Court issued its Preliminary Injunction Order, granting MCB's motion in part and denying it in part. The Court's ruling can be summarized as follows:

• Granted: The Court ordered Brindoval to modify its packaging trade dress within forty-five (45) days of the Order. Specifically, Brindoval was directed to remove the wave device from its MERIDIAN FRESH packaging and to change its teal-and-white color scheme so that it no longer resembles the trade dress associated with MCB's registered stylized logo (U.S. Reg. No. 5,589,320). The Court found that MCB had demonstrated a likelihood of success on the merits of its trade-dress confusion claim and that irreparable harm was presumed given the strength of the showing.

• Denied: The Court declined to enjoin Brindoval from using the word mark MERIDIAN FRESH pending trial. In its analysis, the Court noted that while MERIDIAN FRESH incorporated MCB's core mark, the addition of the word "FRESH" and the differences in product labeling (once the trade-dress elements were removed) created sufficient differentiation that a preliminary injunction on the word mark alone was not warranted at this stage. The Court emphasized that this was a preliminary determination and did not foreclose MCB from seeking a permanent injunction at trial.

The significance of the PI Order for settlement valuation purposes is twofold. On the positive side, the Order validates MCB's trade-dress claims and confirms that the Court found a likelihood of success on those claims — a significant litigation asset that increases MCB's leverage at the mediation table. On the negative side, the Court's refusal to enjoin the word mark MERIDIAN FRESH at the PI stage introduces meaningful risk that a full, permanent injunction against all use of MERIDIAN FRESH at trial is not certain. This is a critical factor in calibrating MCB's settlement expectations and in supporting the recommendation for a coexistence framework rather than insisting on complete cessation.

Following the PI Order, we understand from informal disclosures and publicly available information that Brindoval has retained Pinnacle Research Group Inc. and specifically Dr. Ronald Trask as a rebuttal survey expert. Dr. Trask is a well-known survey expert who frequently testifies on behalf of defendants in trademark confusion cases. His retention signals that Brindoval intends to mount a vigorous challenge to Dr. Furman's confusion survey, which is a central pillar of MCB's damages case.

D. Discovery Status

Initial disclosures were exchanged on January 23, 2023, in accordance with Federal Rule of Civil Procedure 26(a)(1). MCB's initial disclosures identified key custodians within MCB's organization, including Rachel Dominguez (VP, Brand Management), Dr. Elaine Furman (survey expert), and relevant financial personnel, along with categories of documents supporting MCB's claims.

On January 30, 2023, MCB served its First Set of Interrogatories (Nos. 1 through 25) and First Set of Requests for Production (Nos. 1 through 30) on Brindoval. These discovery requests are targeted at, among other things, the development history of the MERIDIAN FRESH brand, Brindoval's trademark clearance efforts (if any), Brindoval's financial records for the MERIDIAN FRESH product line (including revenue, cost of goods sold, marketing spend, and profit margins), and documents relating to any consumer confusion complaints or incidents.

Responses to MCB's discovery requests are not yet due under the applicable rules, and only limited document production has been received to date. The discovery posture is therefore relatively early, which has implications for the mediation: MCB's damages analysis at this stage necessarily relies on publicly available information, MCB's own records, and the limited financial data obtained through the PI proceedings. Full discovery, particularly of Brindoval's internal financial records and the development history of the MERIDIAN FRESH brand, would significantly refine MCB's damages estimates and risk assessment. This early-stage uncertainty cuts both ways and may provide motivation for both parties to settle.

III. MCB's Trademark Portfolio and Brand Strength

MCB holds a strong and well-established portfolio of registered trademarks in the MERIDIAN family, all in International Class 3 (cleaning preparations, household products). The relevant registrations are as follows:

MCB has maintained continuous, uninterrupted commercial use of the MERIDIAN mark in connection with household cleaning products since approximately 2011 — a period of over eleven (11) years. This extended period of use, combined with the commercial significance discussed below, strongly supports a finding that MCB's marks are commercially distinctive and have acquired significant consumer recognition.

The commercial strength of the MERIDIAN brand is substantial. In fiscal year 2022, MCB's MERIDIAN cleaning product line generated $94.5 million in revenue, representing approximately 24.4% of MCB's total fiscal year 2022 revenue of $387 million. The MERIDIAN cleaning line is the single largest revenue-generating brand in MCB's portfolio and is the cornerstone of the company's market positioning in the household cleaning segment.

MCB has invested heavily in building consumer awareness and brand equity for the MERIDIAN marks. Cumulative advertising and promotional expenditures from 2011 through 2022 total approximately $47.2 million, representing an average annual investment of approximately $3.93 million per year over the twelve-year period. These expenditures encompass television advertising, digital marketing, social media campaigns, in-store promotional displays, trade show participation, and co-marketing partnerships with major retailers.

MCB's MERIDIAN cleaning products enjoy widespread national distribution across major grocery chains, club stores (including Harborview Enterprises and Westmark Industries), mass-market retailers, and major e-commerce platforms including Amazon and Walmart.com. Distribution extends to all fifty states, giving the MERIDIAN brand a national presence that significantly increases the geographic scope of potential consumer confusion with Brindoval's MERIDIAN FRESH products.

It is important to note the broader corporate context. MCB is a portfolio company of Waypoint Capital Partners LLC, a private equity firm whose Managing Partner is James Alderton. Waypoint acquired MCB in 2019 for approximately $625 million, and the value of MCB's brand portfolio — with the MERIDIAN brand as its most valuable asset — was a significant component of the acquisition price and the investment thesis. MCB is led by CEO Sandra Kwan, with Thomas R. Hennessy serving as General Counsel. The protection of the MERIDIAN brand is therefore not only a matter of MCB's ongoing commercial operations but also directly relevant to the preservation of Waypoint's substantial investment.

Taken together, these facts support the conclusion that MCB's MERIDIAN marks are strong, commercially distinctive marks with significant consumer recognition. The marks have achieved strong secondary meaning through over a decade of continuous use, tens of millions of dollars in advertising investment, nearly $100 million in annual brand revenue, and nationwide distribution. This strength is a critical factor both in assessing MCB's likelihood of success on its trademark infringement claims and in valuing the settlement.

IV. Damages Analysis

This section presents three alternative damages theories available to MCB under the Lanham Act and analyzes the realistic range of provable damages at trial. Because discovery is still in its early stages and MCB has not yet obtained complete financial records from Brindoval, the estimates presented below are necessarily based on the available information and reasonable assumptions. These estimates will be refined as discovery progresses.

A. Theory 1: Lost Profits

Under Section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a), MCB may recover its own lost profits attributable to consumer confusion caused by Brindoval's infringing use. The Second Circuit applies the multi-factor test set forth in Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir. 1961), and its progeny to assess the likelihood and extent of consumer confusion. Where consumer confusion has been established, the plaintiff may recover the profits it would have earned but for the defendant's infringement, provided it can demonstrate a causal nexus between the confusion and the lost sales.

Factual Basis. Brindoval launched its MERIDIAN FRESH line of household cleaning products in July 2022, distributing them across all 148 Brindoval retail store locations and through its e-commerce platform at www.crestviewhomegoods.com. The products at issue include an all-purpose spray, a glass cleaner, disinfecting wipes, and a dish soap — product categories that directly overlap with MCB's MERIDIAN cleaning product line, which includes all-purpose cleaners, glass cleaners, disinfecting sprays, and floor cleaners. The degree of product overlap is substantial, and both parties target the same consumer demographic (household consumers purchasing everyday cleaning products).

Based on information obtained during the PI proceedings, Brindoval's MERIDIAN FRESH line generated gross revenue of $6.8 million during the initial five-month period from July through November 2022. Annualized, this equates to projected revenue of approximately $16.32 million ($6.8 million ÷ 5 months × 12 months). The actual annualized figure may vary based on seasonal purchasing patterns and the impact of the Court's PI Order on Brindoval's trade dress, but $16.32 million represents a reasonable working estimate.

Application of Confusion Rate. MCB's principal argument for lost profits is that a meaningful portion of Brindoval's MERIDIAN FRESH sales were diverted from MCB's MERIDIAN cleaning line as a direct result of consumer confusion between the two brands. Dr. Furman's consumer confusion survey supports this argument, having measured a net confusion rate of 31.4%. The survey was conducted using a Squirt/modified Eveready protocol among 612 respondents and yielded a raw confusion rate of 38.6%, from which the 7.2% control-group noise was subtracted to arrive at the net figure. A 31.4% net confusion rate is well above the threshold that courts in the Second Circuit have found sufficient to establish a likelihood of confusion. See, e.g., Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 875 (2d Cir. 1986) (confusion levels above 20% generally considered strong evidence of likelihood of confusion).

As a rough approximation, applying the 31.4% confusion rate to Brindoval's $6.8 million in actual revenue over the five-month launch period yields an estimated diverted-sales figure of approximately $2.14 million (31.4% × $6.8M). On an annualized basis, this figure would be approximately $5.12 million (31.4% × $16.32M).

Caveats and discounts. These figures overstate the likely recoverable lost profits for several reasons that must be candidly acknowledged:

• Not all consumers who experienced confusion would have purchased MCB's MERIDIAN products instead. Some confused consumers may not have been in the market for cleaning products at all, or may have selected a different competing brand had MERIDIAN FRESH not been available.

• The confusion rate measures the likelihood of confusion in a controlled survey setting, not the actual rate of confusion-driven purchasing decisions in real-world retail environments.

• Brindoval will vigorously challenge the causal link between measured confusion and actual lost sales, and will argue that its products compete with dozens of other cleaning brands, not solely with MCB's MERIDIAN line.

• The Court may require MCB to present expert economic testimony establishing a reliable methodology for calculating the portion of diverted sales, which introduces additional evidentiary burden and potential challenges.

Accounting for these discounts, the realistic range for lost-profits damages is $1.0 million to $2.5 million for the period from Brindoval's July 2022 launch through the projected trial date (estimated Q4 2023 or Q1 2024). This range assumes that a properly qualified economic expert can credibly establish that approximately 15% to 35% of consumers who experienced confusion would have purchased MCB's products instead, after applying appropriate discounts to the raw confusion-rate calculation.

B. Theory 2: Reasonable Royalty

As an alternative damages measure, MCB may recover a reasonable royalty — that is, the amount that a willing licensor (MCB) and a willing licensee (Brindoval) would have agreed to as compensation for Brindoval's use of the MERIDIAN mark in connection with International Class 3 household cleaning products. The reasonable royalty approach is rooted in the principle articulated in Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964), and its progeny, and is frequently applied in trademark cases as a measure of damages where lost profits are difficult to quantify with precision.

Industry Benchmarks. Royalty rates for consumer products brand licenses in the cleaning and household products category typically range from 3% to 8% of net sales, depending on the strength of the licensed mark, the exclusivity of the license, the geographic scope, and the competitive significance of the product category. A midpoint rate of 5% is a reasonable benchmark for purposes of this analysis, though MCB could argue for a higher rate given the strength of its marks and the directly competitive nature of Brindoval's products.

Calculation. Applying a 5% midpoint royalty rate to Brindoval's actual gross revenue of $6.8 million for the five-month period yields a reasonable royalty of approximately $340,000. On an annualized basis, a 5% royalty applied to the projected $16.32 million in annual revenue yields approximately $816,000.

Assessment. The reasonable-royalty approach is useful as a conservative baseline and a damages floor. Courts have consistently held that the reasonable royalty represents the minimum measure of damages — the least that a trademark owner is entitled to recover for unauthorized use of its mark. See Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) (articulating the foundational factors for reasonable royalty analysis in the patent context, widely adopted by analogy in trademark cases). However, the reasonable royalty likely understates MCB's actual harm given (a) the strength of the MERIDIAN marks, (b) the directly competitive nature of the products, (c) the high confusion rate measured by Dr. Furman, and (d) the fact that MCB would never have voluntarily licensed its core MERIDIAN mark to a competitor for use on directly competing cleaning products.

C. Theory 3: Disgorgement of Defendant's Profits

Under 15 U.S.C. § 1117(a), the Court has discretion to award MCB the profits earned by Brindoval attributable to the infringement. The statutory framework places the initial burden on MCB to prove Brindoval's gross revenue from the infringing products; the burden then shifts to Brindoval to prove any deductions for costs and expenses.

Brindoval's Revenue. As noted, Brindoval's MERIDIAN FRESH line generated gross revenue of $6.8 million from July through November 2022. Full discovery of Brindoval's financial records will be necessary to determine Brindoval's cost of goods sold, marketing and distribution costs, and net profit margin for the MERIDIAN FRESH line. In the absence of complete financial data, we rely on industry benchmarks: private-label or store-brand products in the household cleaning category typically carry net profit margins of 25% to 40%, which are generally higher than national-brand margins due to lower marketing costs and direct-to-consumer distribution.

Estimated Profits. Applying these margin assumptions to Brindoval's $6.8 million in gross revenue yields estimated Brindoval net profits of $1.7 million to $2.72 million for the actual five-month period. On an annualized basis, the estimated net profits range from approximately $4.08 million to $6.53 million.

Discretionary Factors. Disgorgement of defendant's profits is a discretionary remedy. While the Second Circuit does not require a showing of willfulness as an absolute prerequisite to disgorgement (see Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), holding that willfulness is not a categorical prerequisite under § 1117(a)), evidence of willfulness or bad faith remains a highly relevant factor in the Court's exercise of discretion. MCB can argue bad faith based on the following:

• Brindoval's apparent failure to conduct adequate trademark clearance before launching a product line under a name incorporating MCB's well-known MERIDIAN mark;

• The striking similarity of Brindoval's trade dress — the wave device and the teal-and-white color scheme — to MCB's registered stylized logo (U.S. Reg. No. 5,589,320), which suggests deliberate copying rather than independent development; and

• Brindoval's refusal to cease use of the mark following receipt of MCB's cease-and-desist letter.

Risk Factors for Disgorgement. Brindoval will likely argue good-faith independent adoption and present testimony from Nathan Cho, Vice President of Private Label Development at Brindoval, who is expected to testify that the MERIDIAN FRESH name and packaging were developed through an independent internal process without reference to MCB's marks. If Brindoval's witnesses are credible on this point, it could undermine MCB's willfulness argument and reduce the likelihood that the Court will exercise its discretion to award disgorgement. Additionally, the Court has discretion to enhance or reduce a disgorgement award, and may apportion profits to account for factors other than the infringing mark that contributed to Brindoval's sales (such as store location, pricing, and Brindoval's own brand reputation).

D. Summary of Damages Range

The following table summarizes the estimated damages ranges under each theory:

Several important qualifications apply to this summary. These damages theories are not all cumulative. Under the Lanham Act, the Court will select the appropriate measure of damages based on the facts and equities of the case. MCB cannot recover both lost profits and a reasonable royalty to the extent they measure the same harm; the reasonable royalty functions as a floor. Similarly, while disgorgement of defendant's profits can in some circumstances be awarded in addition to plaintiff's lost profits, courts are careful to avoid double-counting.

Taking into account the litigation risk factors discussed in Section V below, including the probability of prevailing at trial and the evidentiary challenges associated with each damages theory, the best estimate of provable damages at trial is in the range of $1.5 million to $3.0 million. This range reflects a blend of the moderate (lost profits) and aggressive (disgorgement) theories, discounted for litigation risk.

V. Litigation Risk Factors

A candid assessment of the strengths and weaknesses of MCB's position is essential for calibrating settlement expectations and developing an effective mediation strategy. This section identifies the key factors on both sides and provides an overall risk assessment.

A. Strengths of MCB's Position

MCB enters the mediation from a position of considerable strength, grounded in the following factors:

1. Strong Registered Marks with Extensive Commercial Use. MCB holds three federal trademark registrations in the MERIDIAN family, the earliest of which dates to August 2012 and is supported by first use in commerce since approximately 2011. Over eleven years of continuous, uninterrupted commercial use in a high-visibility consumer products category establishes substantial secondary meaning and commercial distinctiveness. The marks are incontestable under Section 15 of the Lanham Act (15 U.S.C. § 1065), as MCB has filed the requisite Section 8 and 15 declarations for U.S. Reg. No. 4,218,506, which significantly strengthens MCB's position against challenges to the validity of the core MERIDIAN mark.

2. High Consumer Confusion Rate. Dr. Furman's consumer confusion survey measured a net confusion rate of 31.4%, which is well above the threshold generally recognized by courts in the Second Circuit as probative of likelihood of confusion. Survey evidence of this magnitude is difficult for a defendant to overcome, even with a rebuttal survey, and provides strong evidentiary support for both liability and damages.

3. Preliminary Injunction Order. The January 9, 2023 PI Order represents a significant judicial validation of MCB's trade-dress claims. The Court's finding of a likelihood of success on the merits — the most demanding element of the preliminary injunction standard — is a powerful signal of the strength of MCB's case. While the PI Order is not dispositive of the merits at trial, it carries meaningful persuasive weight and serves as a strong negotiating tool at mediation.

4. Directly Overlapping Product Categories. Both parties sell household cleaning products in International Class 3, and the specific product types overlap substantially (all-purpose cleaners, glass cleaners, disinfecting products). This overlap maximizes the likelihood of consumer confusion and the competitive harm to MCB, and distinguishes this case from trademark disputes involving related but distinct product categories.

5. Incorporation of MCB's Core Mark. Brindoval's mark, MERIDIAN FRESH, incorporates the entirety of MCB's core registered mark, MERIDIAN. Courts routinely find that marks incorporating a senior mark in its entirety are more likely to cause confusion, particularly when used in connection with identical or closely related goods. See, e.g., In re Mighty Leaf Tea, 601 F.3d 1342, 1348 (Fed. Cir. 2010).

6. Trade-Dress Copying. The similarity between Brindoval's original trade dress (wave device and teal-and-white color scheme) and MCB's registered stylized logo (U.S. Reg. No. 5,589,320) suggests deliberate copying or, at minimum, reckless disregard of MCB's rights. This factor supports arguments of willfulness or bad faith relevant to disgorgement, enhanced damages, and attorney's fees.

B. Weaknesses and Risks

Notwithstanding MCB's strong position, several significant risks must be candidly assessed:

1. Court's Refusal to Enjoin the Word Mark. The most significant adverse development is the Court's decision not to enjoin Brindoval's use of MERIDIAN FRESH at the PI stage. This signals that Judge Albright may view the word mark alone — separate from the trade-dress elements — as less confusing than the combination of the mark and the packaging trade dress. If this analysis holds at trial, MCB faces a meaningful risk that it will not obtain a permanent injunction against all use of MERIDIAN FRESH. This risk is a primary driver of the recommendation for a coexistence approach rather than pursuing complete cessation.

2. Rebuttal Survey Expert. Brindoval's retention of Dr. Ronald Trask of Pinnacle Research Group Inc. as a rebuttal survey expert presents a real threat to MCB's confusion evidence. Dr. Trask is a highly credentialed and experienced expert who has successfully challenged plaintiff's confusion surveys in numerous reported cases. If Trask's rebuttal survey shows materially lower confusion rates — for example, in the 10%–15% range — it could substantially undermine Dr. Furman's results and weaken MCB's position on both liability and damages. The ultimate outcome will depend on the methodological rigor of both surveys and the Court's assessment of their relative credibility.

3. Potential Weakness of the MERIDIAN Mark. "Meridian" is an English word with suggestive qualities that may evoke freshness, nature, or geographic connotations. Brindoval will argue that the mark is relatively weak or that it is entitled to a narrow scope of protection because of the word's suggestive character. Brindoval may also identify third-party uses of "Meridian" in connection with other consumer products, which could further dilute the mark's perceived distinctiveness. While MCB has strong arguments to rebut these claims — including the extensive evidence of secondary meaning — this line of defense is not frivolous and could resonate with the Court or a jury.

4. Brindoval's Litigation Resources. Brindoval is a substantial company with fiscal year 2022 revenue of approximately $2.1 billion, 148 retail stores across twelve states, and a growing e-commerce platform. Brindoval has the financial resources to litigate aggressively through trial and, if necessary, through appeal. Brindoval's counsel, Halverson McKay & Pruitt LLP, is a well-resourced firm with significant trademark litigation experience. MCB should not assume that Brindoval will settle simply to avoid litigation costs; Brindoval has the resources to take this case to verdict if it believes the economics or legal position justify doing so.

5. Brindoval's Counterclaim. Brindoval's counterclaim for a declaratory judgment of non-infringement creates a two-front litigation posture. While the counterclaim does not change the legal standard or the ultimate burden of proof, it requires MCB to defend against affirmative claims and contributes to the complexity and cost of the litigation.

6. Damages Causation Challenges. Proving that consumer confusion caused by Brindoval's infringement resulted in actual lost sales to MCB will require expert economic testimony establishing a reliable methodology for linking confusion to diversion. This is a complex and contested area, and Brindoval will vigorously challenge the causal nexus. Courts vary in their willingness to accept confusion surveys as direct proof of actual damages, and MCB's economic expert will need to present a credible model that accounts for the many factors influencing consumer purchasing decisions beyond trademark confusion.

7. Jury Optics. Although this factor is secondary to the legal merits, it is worth noting that jury sympathies in the Southern District of New York may be marginally influenced by the parties' relative profiles. Brindoval is a regional retailer based in the Midwest, while MCB is a private equity-backed consumer products company acquired by Waypoint Capital Partners LLC for $625 million. A skilled defense attorney could frame the narrative as a large PE-backed company seeking to bully a regional retailer. While this framing does not reflect the merits of MCB's claims, it is a risk that should be considered, particularly in a case that could reach a jury trial.

C. Overall Risk Assessment

Based on the foregoing analysis, we assess the litigation risk as follows:

The expected value calculation reflects the probability-weighted average of potential outcomes: a 70%–75% chance of prevailing and recovering damages in the $1.5M–$3.0M range, offset by a 25%–30% chance of an adverse outcome (no recovery, or a minimal damages award). The expected value does not account for litigation costs, which are addressed in Section VI below, or for the non-monetary value of injunctive relief and coexistence protections.

VI. Cost-of-Litigation Projections

This section provides an estimate of the costs MCB has incurred to date and projects the additional costs through trial, as well as the incremental costs through settlement, to support the cost-benefit analysis that underpins our settlement recommendations.

A. Costs Incurred to Date

As of approximately January 31, 2023, the following costs have been incurred in connection with this matter:

These figures reflect the substantial investment required to pursue the preliminary injunction motion, including the preparation of supporting declarations, the retention and management of the survey expert, the briefing and argument of the PI motion, and the initiation of discovery. The investment has yielded meaningful results — the PI Order represents a significant favorable development — but the costs of continuing litigation to trial must be weighed against the potential incremental recovery.

B. Projected Costs Through Trial

Based on the current discovery schedule and our estimate of the case timeline (trial projected for Q4 2023 or Q1 2024, subject to the Court's calendar), we project the following additional costs from the current date through conclusion of trial:

Adding the costs already incurred, the total cumulative projected cost through trial is approximately $800,000 to $1,025,000. This range may increase if the litigation involves unexpected motions practice, extended discovery disputes, or the need for additional expert testimony.

It bears noting that Brindoval's litigation costs through trial would likely be comparable. Halverson McKay & Pruitt LLP is a well-resourced firm with billing rates that are broadly competitive with ours, and Brindoval's defense — including the engagement of Dr. Trask for the rebuttal survey — will require similar investment. Brindoval's anticipated litigation costs are relevant to the BATNA analysis in Section IX because they influence Brindoval's motivation to settle.

C. Costs Through Mediation/Settlement

If the matter settles at or shortly after the February 15 mediation, the additional costs from the current date through the closing of the settlement would be substantially lower. We estimate the following incremental costs:

Rounding to account for contingencies, the additional costs through settlement would be approximately $100,000 to $150,000, yielding a total matter cost if settled at or shortly after mediation of approximately $550,000 to $650,000.

D. Cost-Benefit Analysis

The cost-benefit calculus strongly favors settlement within the recommended range. The key comparison points are:

Litigation to Trial:

• Total estimated investment: $800,000–$1,025,000

• Expected monetary recovery (risk-adjusted): $1.0M–$2.1M

• Net expected recovery: approximately $0–$1.3M (pre-tax), with significant variance

• Downside scenario (25%–30% probability): no monetary recovery, $800,000–$1,025,000 in sunk costs

• upside scenario: higher recovery, but offset by additional time, distraction, and uncertainty

Settlement at Mediation:

• Total estimated investment: $550,000–$650,000

• Monetary settlement received: $1.2M–$1.75M (recommended range)

• Net gain: approximately $550,000–$1.2M, with certainty

• Additional value: comprehensive coexistence agreement providing ongoing brand protection (not achievable through litigation alone)

The comparison demonstrates that settlement eliminates risk and transaction costs while delivering a comparable or superior net economic outcome. A settlement at the target of $1.35 million, coupled with a strong coexistence agreement, would yield a net gain of approximately $700,000–$800,000 after deducting total matter costs, with certainty. By contrast, proceeding to trial offers a range of outcomes from a net loss of over $1 million (in the adverse scenario) to a net gain of approximately $1.3 million (in the favorable scenario), with the most likely outcome falling somewhere in between. Risk-adjusted, the settlement path is clearly preferable.

Moreover, the cost-benefit analysis does not fully capture the intangible costs of continued litigation, including management distraction for MCB's leadership team, the risk of adverse precedent on the scope of the MERIDIAN mark, and the ongoing uncertainty that may affect MCB's brand-extension strategies and Waypoint's investment valuation.

VII. Settlement Valuation and Recommended Range

Based on the damages analysis, litigation risk assessment, and cost-of-litigation projections set forth above, this section presents the recommended settlement valuation and strategy for the mediation.

A. Monetary Payment

The monetary component of the settlement should reflect MCB's provable damages, appropriately discounted for litigation risk, while also accounting for MCB's litigation investment and the avoided costs of continued litigation. The recommended monetary parameters are as follows:

Floor: $1.0 million. This figure represents the approximate lower bound of MCB's reasonable-royalty damages calculation extrapolated through the projected trial date, and roughly recoups MCB's total litigation investment to date plus projected settlement costs ($550,000–$650,000) with a modest premium. A settlement below $1.0 million would not adequately compensate MCB for the demonstrated infringement or provide a credible return on the litigation investment. Importantly, a $1.0 million monetary settlement must be coupled with meaningful coexistence terms to be acceptable; the monetary floor alone is insufficient without strong non-monetary protections.

Target: $1.35 million. This figure represents a credible compromise between MCB's moderate damages estimate (lost profits of $1.0M–$2.5M) and the range we anticipate Brindoval would find acceptable ($800,000–$1.35M, as discussed in Section IX below). A settlement at $1.35 million coupled with the coexistence framework would represent a strong outcome for MCB, delivering meaningful monetary recovery while securing the long-term brand protections that are of critical strategic importance.

Ceiling: $1.75 million. This represents the upper bound of what MCB could reasonably expect to achieve in a negotiated settlement, given the litigation risk factors and Brindoval's likely negotiation positions. A settlement above $1.75 million is possible but would likely require Brindoval to accept a figure approaching its risk-adjusted expected litigation cost (damages plus legal fees), which may not be achievable without additional leverage.

Recommended Opening Demand: $2.5 million. Consistent with standard mediation practice, MCB should open with a demand that provides adequate negotiation room to reach the target range. An opening demand of $2.5 million is aggressive but credible — it falls within the range of MCB's damages theories (between the moderate lost-profits estimate and the aggressive disgorgement estimate) and signals the seriousness of MCB's position without being so extreme as to undermine credibility with the mediator.

Recommended Walk-Away Floor: $1.0 million. MCB should not accept a monetary settlement below $1.0 million under any circumstances without further authorization from the client. This floor applies to the monetary component alone and assumes that the settlement includes meaningful coexistence terms as described in Section VIII.

B. Non-Monetary Terms: Brand Protection Value

While the monetary component of the settlement is important, the long-term strategic value of a well-drafted coexistence agreement may exceed the monetary settlement component in terms of its impact on MCB's business and brand equity. The rationale is straightforward: MCB's MERIDIAN cleaning line generates $94.5 million in annual revenue, and the brand is the cornerstone of MCB's portfolio valuation. A settlement that provides a one-time monetary payment but fails to restrict Brindoval's future use of MERIDIAN FRESH (or any MERIDIAN-incorporating mark) would leave MCB vulnerable to continued and potentially expanding competitive harm.

A comprehensive coexistence agreement that restricts Brindoval's use of any MERIDIAN-incorporating mark to narrow distribution channels and product categories provides ongoing, enforceable protection for MCB's $94.5 million cleaning-line business and its broader brand portfolio. The restrictions would limit the geographic and channel overlap between the parties, reduce the risk of consumer confusion on a going-forward basis, and prevent Brindoval from expanding its use of the MERIDIAN FRESH brand into new product categories or distribution channels that would encroach further on MCB's market position.

This is particularly important in light of Waypoint Capital Partners LLC's $625 million acquisition of MCB. The MERIDIAN brand was a central component of the acquisition valuation, and Waypoint has a direct interest in ensuring that the brand's distinctiveness and market position are preserved. A coexistence agreement that provides structured, enforceable protections directly supports the investment thesis and preserves long-term brand value in a way that a monetary-only settlement cannot.

C. Recommended Settlement Range

In summary, the recommended settlement range for the mediation is:

Monetary Component: $1.2 million to $1.75 million, payable as a one-time lump sum within thirty (30) days of execution of the definitive settlement and coexistence agreement.

Non-Monetary Component: A comprehensive Trademark Coexistence Agreement containing the terms detailed in Section VIII below.

Combined Value to MCB: The monetary payment, combined with the prospective brand protection afforded by the coexistence agreement, is deemed strategically significant and represents the best achievable outcome on a risk-adjusted basis.

VIII. Coexistence Framework — Alternative to Complete Cessation

A. Rationale for Coexistence Approach

In an ideal outcome, MCB would obtain Brindoval's complete cessation of all use of the MERIDIAN FRESH mark and any similar marks in the household cleaning category. However, a realistic assessment of the facts and litigation dynamics leads to the conclusion that complete cessation is unlikely to be achieved, whether through negotiation or at trial.

Three factors support this conclusion. First, the Court's refusal to enjoin the word mark MERIDIAN FRESH at the preliminary injunction stage signals judicial skepticism about the necessity or propriety of a complete ban on Brindoval's use of the word mark. While the PI standard is distinct from the permanent injunction standard, Judge Albright's analysis is instructive and suggests that MCB faces a meaningful risk of failing to obtain a complete permanent injunction at trial. Second, Brindoval has invested significantly in the MERIDIAN FRESH product line, which generated $6.8 million in revenue in its first five months. Brindoval has a strong economic incentive to resist complete cessation, and the size of this investment makes it less likely that Brindoval would agree to abandon the brand entirely in a settlement. Third, the mediator, Judge Novotny, is unlikely to recommend or endorse a settlement requiring complete cessation when the Court's own PI Order did not reach that result; a mediated outcome will almost certainly involve compromise.

Given these realities, a structured coexistence agreement provides the most effective path to meaningful brand protection for MCB. A coexistence agreement creates enforceable guardrails — including channel restrictions, product-category limitations, mark modifications, and trade-dress requirements — that substantially reduce the risk of consumer confusion while allowing both parties to continue operating in the market. Coexistence agreements are common in trademark disputes where marks overlap but can be differentiated through house marks, prefixes, distribution channels, and visual elements. Well-drafted coexistence agreements have been recognized and enforced by courts and the USPTO, and they provide a level of specificity and control that may exceed what a court-ordered injunction would provide.

B. Proposed Coexistence Terms for Mediation

MCB should present the following proposed terms as the framework for a Trademark Coexistence Agreement at mediation. These terms are designed to maximize brand protection for MCB while leaving Brindoval with a workable path to continue limited use of a modified mark in its existing distribution channels.

1. Mark Modification. Brindoval shall rebrand its products from MERIDIAN FRESH to BRINDOVAL MERIDIAN FRESH. The word "BRINDOVAL" must be displayed in no less than seventy-five percent (75%) of the type size used for "MERIDIAN FRESH" and must appear immediately preceding "MERIDIAN FRESH" on all packaging, signage, advertising, and digital content. The purpose of this requirement is to create a strong house-brand association — ensuring that consumers encountering the modified mark immediately associate it with the Brindoval brand rather than with MCB's MERIDIAN line. Empirical research consistently demonstrates that prominent house marks significantly reduce consumer confusion in cases involving overlapping trademarks.

2. Channel Restrictions. Brindoval may use the modified mark (BRINDOVAL MERIDIAN FRESH) only in the following channels:

(a) Brindoval-branded retail stores (currently 148 locations across twelve Midwestern and Mountain West states); and

(b) Brindoval's own e-commerce platform (www.crestviewhomegoods.com).

Brindoval shall be prohibited from using the modified mark or any MERIDIAN-incorporating mark on third-party e-commerce platforms (including but not limited to Penmark Holdings, Walmart.com, Adriatic Corporation, and Cascade Holdings.com), in wholesale distribution to third-party retailers, or in any other distribution channel. This channel restriction is critical because MCB's MERIDIAN products are sold nationally through major grocery, club, and e-commerce channels in all fifty states. By limiting Brindoval's use to its own stores and website, the coexistence agreement eliminates the primary vectors of consumer confusion — encounters in shared retail and e-commerce environments — while acknowledging the reality that some degree of overlap will persist in the Midwestern and Mountain West markets where Brindoval operates physical stores.

3. Product-Category Restrictions. Brindoval's use of the modified mark shall be limited exclusively to household cleaning products in International Class 3 (i.e., all-purpose cleaners, glass cleaners, disinfecting products, and dish soap). Brindoval shall be prohibited from using any mark incorporating the word MERIDIAN in connection with personal care products, home fragrance products, laundry detergents, or any other product categories. This restriction protects MCB's broader brand portfolio and prevents Brindoval from leveraging the MERIDIAN FRESH brand as a platform for expansion into adjacent product categories where MCB may have current or future commercial interests.

4. Trade-Dress Changes. Consistent with the Court's PI Order, Brindoval shall permanently discontinue the use of the teal-and-white color scheme and the wave device on all MERIDIAN FRESH packaging and marketing materials. Brindoval's replacement trade dress must be submitted to MCB for review (not approval) at least thirty (30) days before commercial use. MCB shall have the right to object if the proposed replacement trade dress is confusingly similar to MCB's registered or unregistered trade dress, and any dispute shall be submitted to expedited arbitration.

5. Quality Monitoring. Brindoval shall provide MCB with annual product samples of all BRINDOVAL MERIDIAN FRESH products and shall permit MCB (or its designated representative) to conduct one (1) quality inspection per calendar year at Brindoval's manufacturing or distribution facilities, upon reasonable notice. This provision serves two purposes: it maintains MCB's quality-control argument (relevant to the enforceability of the coexistence agreement as a quasi-license) and prevents trademark abandonment issues that could arise from naked licensing or uncontrolled use.

6. Non-Challenge Covenant. Brindoval shall covenant not to challenge the validity, enforceability, or scope of MCB's U.S. Registration Nos. 4,218,506, 5,034,771, and 5,589,320, or any future registrations in the MERIDIAN family owned by MCB. This covenant protects MCB against the possibility that Brindoval could use the coexistence relationship as a platform from which to attack MCB's trademark rights.

7. Amendment of Brindoval's Pending Application. As a condition of the settlement, Brindoval shall amend its pending trademark application Serial No. 97/412,558 to reflect the modified mark BRINDOVAL MERIDIAN FRESH and to narrow the goods description to "household cleaning preparations, namely, all-purpose cleaners, glass cleaners, disinfecting wipes, and dish soap, all sold exclusively through applicant's own retail stores and e-commerce platform." MCB shall withdraw its TTAB Opposition No. 91/278,415 upon the filing of the amendment and the execution of a consent agreement to be filed with the USPTO.

8. Liquidated Damages. Any breach of the channel restrictions or product-category restrictions set forth in the coexistence agreement shall trigger liquidated damages of $500,000 per occurrence, in addition to any actual damages MCB may prove. This provision is essential to provide a meaningful deterrent against breach and to avoid the need for costly enforcement litigation. The liquidated-damages figure is calibrated to reflect the significant harm that a breach of these restrictions would cause to MCB's brand and the difficulty of proving actual damages on a per-occurrence basis.

9. Governing Law. The Trademark Coexistence Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts-of-law principles. Any disputes arising under the agreement shall be subject to the exclusive jurisdiction of the United States District Court for the Southern District of New York.

10. Term. The Trademark Coexistence Agreement shall be perpetual in duration, unless terminated by mutual written consent of the parties or by MCB upon material breach by Brindoval that remains uncured after thirty (30) days' written notice.

11. Rebranding Timeline. Brindoval shall complete all rebranding activities — including the modification of all product packaging, in-store signage, digital content, and e-commerce listings — within one hundred twenty (120) days of execution of the definitive agreement. Brindoval shall provide MCB with written certification of completion within five (5) business days of the rebranding deadline.

C. Anticipated Points of Contention

We anticipate that Brindoval will raise objections to several of the proposed coexistence terms. The following assessment identifies the most likely points of contention and MCB's recommended posture on each:

75% Type-Size Requirement. Brindoval will likely resist the requirement that "BRINDOVAL" appear in no less than 75% of the type size of "MERIDIAN FRESH," viewing this as an unreasonable constraint on packaging design. Brindoval may counter-propose 50% or even a less specific "prominent display" standard. MCB should hold firm at 75% as the initial position but may accept 60% as a floor if necessary to reach agreement on other key terms. Below 60%, the house-brand association becomes too weak to serve its intended purpose.

Channel Restrictions. Brindoval may seek broader channel rights, particularly the ability to sell BRINDOVAL MERIDIAN FRESH products through third-party e-commerce platforms such as Amazon. This would significantly dilute the value of the coexistence agreement for MCB, as Amazon is one of MCB's most important distribution channels. MCB should hold firm on the channel restrictions as a core, non-negotiable protection. If Brindoval insists on some form of third-party distribution, MCB should reject this outright or, in the alternative, condition any expansion on a significant increase in the monetary payment and additional territorial limitations.

Liquidated Damages. Brindoval will likely argue that the $500,000 per-occurrence liquidated-damages figure is punitive and unenforceable. MCB should be prepared to defend the figure as a reasonable estimate of the harm that would result from a breach of the channel or product-category restrictions, given the difficulty of quantifying actual damages in real time. MCB may accept a reduction to $250,000 per occurrence as a last resort, but only in exchange for strengthened enforcement mechanisms (e.g., an injunctive-relief provision or expedited arbitration).

Quality Monitoring. Brindoval may argue that quality-monitoring provisions are inappropriate in a coexistence agreement (as opposed to a license agreement) and may resist facility inspections as intrusive and burdensome. MCB should frame the quality-monitoring provision as a standard protection necessary to maintain the integrity of the coexistence arrangement and should be willing to negotiate reasonable limitations on the scope and notice requirements for inspections if necessary to secure agreement on the other terms.

Overall Negotiation Posture. MCB should approach the mediation with the mindset that the channel restrictions and liquidated-damages provisions are the most important non-monetary terms and should be protected even at the cost of flexibility on other issues. The mark-modification requirement (BRINDOVAL MERIDIAN FRESH) is also a core term that should not be abandoned. MCB can show greater flexibility on the type-size percentage, the quality-monitoring scope, and the trade-dress review mechanism if necessary to reach agreement.

IX. BATNA Analysis (Best Alternative to Negotiated Agreement)

An effective mediation strategy requires a clear understanding of each party's Best Alternative to a Negotiated Agreement ("BATNA") — the course of action available to each side if the mediation fails to produce a settlement. This section analyzes MCB's BATNA and Brindoval's likely BATNA to establish the zone of possible agreement and identify MCB's leverage points.

A. MCB's BATNA

If the mediation does not result in a settlement, MCB's best a

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the individuals identified herein. Any disclosure, copying, or distribution of this memorandum or the information contained herein to any person other than the intended recipients is strictly prohibited.
CALDERWOOD & HARKNESS LLP intellectual Property Practice Group
INTERNAL MEMORANDUM
FROM: Christy Bauer, Lead Associate, intellectual Property, Calderwood & Harkness LLP
TO: Alan Ngo, Responsible Partner, intellectual Property Marcus Delgado, Billing Partner, intellectual Property
DATE: February 10, 2023
RE: Mediation Preparation and Settlement Valuation — Meridian Consumer Brands LLC v. Brindoval Home Goods Inc., S.D.N.Y. Case No. 1:22-cv-09483; TTAB Opposition No. 91/278,415
MATTER NO.: 1011-00003
BILLING CODE: 11470-001
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I. Purpose and Executive Summary
The purpose of this memorandum is to prepare the engagement team for the court-ordered mediation currently scheduled for February 15, 2023, before the Honorable Harold K. Novotny (Ret.) of Novotny ADR Services LLC, located at 140 Broadway, Suite 2810, New York, NY 10005. Judge Novotny was appointed by the Court as mediator following the entry of the Preliminary Injunction Order on January 9, 2023, and the parties' joint consent to participate in alternative dispute resolution prior to the close of discovery.
Current Posture. The litigation remains in an early but active stage. Meridian Consumer Brands LLC ("MCB") filed its Complaint on November 7, 2022, asserting claims for federal trademark infringement, false designation of origin, and state-law trademark dilution against Brindoval Home Goods Inc. ("Brindoval"). Following an expedited briefing schedule, the Court entered a Preliminary Injunction Order on January 9, 2023, granting in part MCB's motion by ordering Brindoval to modify its packaging trade dress — specifically, to remove the wave device and change the teal-and-white color scheme — within forty-five (45) days. However, the Court declined to enjoin Brindoval's use of the word mark MERIDIAN FRESH pending trial. Initial disclosures were exchanged on January 23, 2023, pursuant to Federal Rule of Civil Procedure 26(a)(1), and fact discovery is now underway. MCB served its First Set of Interrogatories and First Set of Requests for Production on January 30, 2023, and responses are not yet due. In the parallel TTAB proceeding, MCB's Notice of Opposition (Opposition No. 91/278,415) against Brindoval's pending trademark application Serial No. 97/412,558 for MERIDIAN FRESH in International Class 3 remains pending.
Scope of This Memorandum. This memorandum addresses the following topics in detail:
(1) Damages analysis under three alternative theories — lost profits, reasonable royalty, and disgorgement of defendant's profits;
(2) Litigation risk factors, including an assessment of the strengths and weaknesses of MCB's claims and the probability of prevailing at trial;
(3) Cost-of-litigation projections through mediation/settlement and through trial;
(4) Settlement valuation and recommended monetary range for the mediation;
(5) A proposed coexistence framework as an alternative to seeking complete cessation of Brindoval's use of MERIDIAN FRESH; and
(6) BATNA analysis and anticipated Brindoval positions, including Brindoval's likely settlement range and negotiation strategy.
Bottom-Line Recommendation. Based on the analysis set forth below, MCB should enter mediation seeking a monetary settlement in the range of $1.2 million to $1.75 million, combined with a comprehensive trademark coexistence agreement providing ongoing, enforceable brand protection. A coexistence framework is preferable to pursuing complete cessation of Brindoval's use of MERIDIAN FRESH for two principal reasons. First, complete cessation is unlikely achievable given the Court's refusal to enjoin the word mark at the preliminary injunction stage and Brindoval's significant revenue investment in the MERIDIAN FRESH product line. Second, a well-drafted coexistence agreement can provide structured, enforceable restrictions on Brindoval's use of any MERIDIAN-incorporating mark — including channel limitations, product-category restrictions, trade-dress modifications, and liquidated-damages provisions — that would deliver meaningful, long-term brand protection exceeding what MCB might obtain through a contested trial. This memorandum recommends an opening monetary demand of $2.5 million at mediation, with authority to settle within the recommended range, and a walk-away floor of $1.0 million on the monetary component alone (which must be coupled with meaningful coexistence terms).
II. Procedural Background and Current Posture
A. Pre-Litigation
Calderwood & Harkness LLP opened this matter on September 26, 2022, at the direction of Thomas R. Hennessy, General Counsel of Meridian Consumer Brands LLC. The genesis of the matter was MCB's identification of Brindoval Home Goods Inc.'s launch of a line of household cleaning products under the brand name MERIDIAN FRESH, which MCB's Brand Management team discovered through competitive market monitoring in the summer of 2022.
On September 26, 2022, this firm transmitted a detailed cease-and-desist letter to Brindoval Home Goods Inc., directed to the attention of Karen A. Whitfield, General Counsel. The letter identified MCB's portfolio of registered trademarks in the MERIDIAN family, described the areas of product overlap, and demanded that Brindoval immediately cease all use of the MERIDIAN FRESH mark and any confusingly similar trade dress, and withdraw its pending trademark application, Serial No. 97/412,558.
On October 10, 2022, the law firm of Halverson McKay & Pruitt LLP responded on behalf of Brindoval. The response letter, signed by Gregory T. Halverson as lead partner, denied that Brindoval's MERIDIAN FRESH brand infringed any of MCB's trademark rights. The letter asserted that MERIDIAN is a common English word with suggestive connotations and that the addition of "FRESH" and Brindoval's distinctive branding were sufficient to distinguish the products in the marketplace. The letter further stated that Brindoval had independently selected the MERIDIAN FRESH brand name through an internal development process and that Brindoval intended to continue its use of the mark.
Having received an unsatisfactory response to its cease-and-desist demand, MCB authorized the filing of a Notice of Opposition before the Trademark Trial and Appeal Board ("TTAB") on October 14, 2022. The opposition, docketed as Opposition No. 91/278,415, was filed against Brindoval's pending trademark application Serial No. 97/412,558 for MERIDIAN FRESH in International Class 3 (household cleaning preparations). The TTAB proceeding has been instituted, and discovery periods in the TTAB matter are currently running in parallel with the federal litigation, though we anticipate that the TTAB proceeding will be suspended if the parties reach a global settlement at mediation.
B. Federal Litigation
On November 7, 2022, MCB filed its Complaint in the United States District Court for the Southern District of New York, which was assigned Case No. 1:22-cv-09483 and allotted to the Honorable Patricia M. Albright, United States District Judge. The Complaint asserts three causes of action:
(1) Trademark Infringement under Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1), based on Brindoval's use of MERIDIAN FRESH in connection with household cleaning products that are identical or closely related to the goods covered by MCB's registered marks;
(2) False Designation of Origin under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), based on Brindoval's use of a confusingly similar mark and trade dress that is likely to cause consumer confusion as to the source, sponsorship, or affiliation of Brindoval's products; and
(3) Trademark Dilution under New York General Business Law § 360-l, based on Brindoval's use of a mark substantially similar to MCB's MERIDIAN marks, which dilutes the distinctive quality of MCB's marks through blurring.
On November 18, 2022, MCB filed its Motion for Preliminary Injunction, seeking to enjoin Brindoval from any further use of the MERIDIAN FRESH mark and any trade dress confusingly similar to MCB's registered marks, including the wave device and teal-and-white color scheme. The motion was supported by two key declarations:
• The Declaration of Rachel Dominguez, Vice President of Brand Management at MCB, which detailed the history of the MERIDIAN brand, MCB's investment in building consumer recognition, the commercial significance of the brand to MCB's business, and the competitive harm MCB has experienced since Brindoval's launch of MERIDIAN FRESH; and
• The Declaration of Dr. Elaine Furman of Lakeshore Brand Consulting LLC, which presented the methodology and results of a consumer confusion survey. Dr. Furman's survey, conducted using a modified Eveready protocol (sometimes referred to as a "Squirt" protocol), measured a net confusion rate of 31.4% among 612 respondents, after accounting for control-group noise of 7.2%.
On December 5, 2022, Brindoval filed its Answer and Counterclaim. The Answer denied the material allegations of the Complaint, asserted various affirmative defenses (including that MERIDIAN is descriptive or suggestive, that there is no likelihood of confusion, and that Brindoval independently adopted its mark in good faith), and included a Counterclaim seeking a declaratory judgment of non-infringement. Brindoval's legal team at Halverson McKay & Pruitt LLP consists of Gregory T. Halverson (lead partner), Megan Janssen, and David Kowalski. This is a well-resourced defense team with significant trademark litigation experience.
The Court conducted an evidentiary hearing on MCB's Motion for Preliminary Injunction on December 19, 2022. Both sides presented oral argument and the Court questioned counsel extensively regarding the survey evidence, the competitive proximity of the parties' products, and the availability of injunctive relief short of a total ban on Brindoval's use of MERIDIAN FRESH.
C. The Preliminary Injunction Order (January 9, 2023)
On January 9, 2023, the Court issued its Preliminary Injunction Order, granting MCB's motion in part and denying it in part. The Court's ruling can be summarized as follows:
• Granted: The Court ordered Brindoval to modify its packaging trade dress within forty-five (45) days of the Order. Specifically, Brindoval was directed to remove the wave device from its MERIDIAN FRESH packaging and to change its teal-and-white color scheme so that it no longer resembles the trade dress associated with MCB's registered stylized logo (U.S. Reg. No. 5,589,320). The Court found that MCB had demonstrated a likelihood of success on the merits of its trade-dress confusion claim and that irreparable harm was presumed given the strength of the showing.
• Denied: The Court declined to enjoin Brindoval from using the word mark MERIDIAN FRESH pending trial. In its analysis, the Court noted that while MERIDIAN FRESH incorporated MCB's core mark, the addition of the word "FRESH" and the differences in product labeling (once the trade-dress elements were removed) created sufficient differentiation that a preliminary injunction on the word mark alone was not warranted at this stage. The Court emphasized that this was a preliminary determination and did not foreclose MCB from seeking a permanent injunction at trial.
The significance of the PI Order for settlement valuation purposes is twofold. On the positive side, the Order validates MCB's trade-dress claims and confirms that the Court found a likelihood of success on those claims — a significant litigation asset that increases MCB's leverage at the mediation table. On the negative side, the Court's refusal to enjoin the word mark MERIDIAN FRESH at the PI stage introduces meaningful risk that a full, permanent injunction against all use of MERIDIAN FRESH at trial is not certain. This is a critical factor in calibrating MCB's settlement expectations and in supporting the recommendation for a coexistence framework rather than insisting on complete cessation.
Following the PI Order, we understand from informal disclosures and publicly available information that Brindoval has retained Pinnacle Research Group Inc. and specifically Dr. Ronald Trask as a rebuttal survey expert. Dr. Trask is a well-known survey expert who frequently testifies on behalf of defendants in trademark confusion cases. His retention signals that Brindoval intends to mount a vigorous challenge to Dr. Furman's confusion survey, which is a central pillar of MCB's damages case.
D. Discovery Status
Initial disclosures were exchanged on January 23, 2023, in accordance with Federal Rule of Civil Procedure 26(a)(1). MCB's initial disclosures identified key custodians within MCB's organization, including Rachel Dominguez (VP, Brand Management), Dr. Elaine Furman (survey expert), and relevant financial personnel, along with categories of documents supporting MCB's claims.
On January 30, 2023, MCB served its First Set of Interrogatories (Nos. 1 through 25) and First Set of Requests for Production (Nos. 1 through 30) on Brindoval. These discovery requests are targeted at, among other things, the development history of the MERIDIAN FRESH brand, Brindoval's trademark clearance efforts (if any), Brindoval's financial records for the MERIDIAN FRESH product line (including revenue, cost of goods sold, marketing spend, and profit margins), and documents relating to any consumer confusion complaints or incidents.
Responses to MCB's discovery requests are not yet due under the applicable rules, and only limited document production has been received to date. The discovery posture is therefore relatively early, which has implications for the mediation: MCB's damages analysis at this stage necessarily relies on publicly available information, MCB's own records, and the limited financial data obtained through the PI proceedings. Full discovery, particularly of Brindoval's internal financial records and the development history of the MERIDIAN FRESH brand, would significantly refine MCB's damages estimates and risk assessment. This early-stage uncertainty cuts both ways and may provide motivation for both parties to settle.
III. MCB's Trademark Portfolio and Brand Strength
MCB holds a strong and well-established portfolio of registered trademarks in the MERIDIAN family, all in International Class 3 (cleaning preparations, household products). The relevant registrations are as follows:
MCB has maintained continuous, uninterrupted commercial use of the MERIDIAN mark in connection with household cleaning products since approximately 2011 — a period of over eleven (11) years. This extended period of use, combined with the commercial significance discussed below, strongly supports a finding that MCB's marks are commercially distinctive and have acquired significant consumer recognition.
The commercial strength of the MERIDIAN brand is substantial. In fiscal year 2022, MCB's MERIDIAN cleaning product line generated $94.5 million in revenue, representing approximately 24.4% of MCB's total fiscal year 2022 revenue of $387 million. The MERIDIAN cleaning line is the single largest revenue-generating brand in MCB's portfolio and is the cornerstone of the company's market positioning in the household cleaning segment.
MCB has invested heavily in building consumer awareness and brand equity for the MERIDIAN marks. Cumulative advertising and promotional expenditures from 2011 through 2022 total approximately $47.2 million, representing an average annual investment of approximately $3.93 million per year over the twelve-year period. These expenditures encompass television advertising, digital marketing, social media campaigns, in-store promotional displays, trade show participation, and co-marketing partnerships with major retailers.
MCB's MERIDIAN cleaning products enjoy widespread national distribution across major grocery chains, club stores (including Harborview Enterprises and Westmark Industries), mass-market retailers, and major e-commerce platforms including Amazon and Walmart.com. Distribution extends to all fifty states, giving the MERIDIAN brand a national presence that significantly increases the geographic scope of potential consumer confusion with Brindoval's MERIDIAN FRESH products.
It is important to note the broader corporate context. MCB is a portfolio company of Waypoint Capital Partners LLC, a private equity firm whose Managing Partner is James Alderton. Waypoint acquired MCB in 2019 for approximately $625 million, and the value of MCB's brand portfolio — with the MERIDIAN brand as its most valuable asset — was a significant component of the acquisition price and the investment thesis. MCB is led by CEO Sandra Kwan, with Thomas R. Hennessy serving as General Counsel. The protection of the MERIDIAN brand is therefore not only a matter of MCB's ongoing commercial operations but also directly relevant to the preservation of Waypoint's substantial investment.
Taken together, these facts support the conclusion that MCB's MERIDIAN marks are strong, commercially distinctive marks with significant consumer recognition. The marks have achieved strong secondary meaning through over a decade of continuous use, tens of millions of dollars in advertising investment, nearly $100 million in annual brand revenue, and nationwide distribution. This strength is a critical factor both in assessing MCB's likelihood of success on its trademark infringement claims and in valuing the settlement.
IV. Damages Analysis
This section presents three alternative damages theories available to MCB under the Lanham Act and analyzes the realistic range of provable damages at trial. Because discovery is still in its early stages and MCB has not yet obtained complete financial records from Brindoval, the estimates presented below are necessarily based on the available information and reasonable assumptions. These estimates will be refined as discovery progresses.
A. Theory 1: Lost Profits
Under Section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a), MCB may recover its own lost profits attributable to consumer confusion caused by Brindoval's infringing use. The Second Circuit applies the multi-factor test set forth in Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir. 1961), and its progeny to assess the likelihood and extent of consumer confusion. Where consumer confusion has been established, the plaintiff may recover the profits it would have earned but for the defendant's infringement, provided it can demonstrate a causal nexus between the confusion and the lost sales.
Factual Basis. Brindoval launched its MERIDIAN FRESH line of household cleaning products in July 2022, distributing them across all 148 Brindoval retail store locations and through its e-commerce platform at www.crestviewhomegoods.com. The products at issue include an all-purpose spray, a glass cleaner, disinfecting wipes, and a dish soap — product categories that directly overlap with MCB's MERIDIAN cleaning product line, which includes all-purpose cleaners, glass cleaners, disinfecting sprays, and floor cleaners. The degree of product overlap is substantial, and both parties target the same consumer demographic (household consumers purchasing everyday cleaning products).
Based on information obtained during the PI proceedings, Brindoval's MERIDIAN FRESH line generated gross revenue of $6.8 million during the initial five-month period from July through November 2022. Annualized, this equates to projected revenue of approximately $16.32 million ($6.8 million ÷ 5 months × 12 months). The actual annualized figure may vary based on seasonal purchasing patterns and the impact of the Court's PI Order on Brindoval's trade dress, but $16.32 million represents a reasonable working estimate.
Application of Confusion Rate. MCB's principal argument for lost profits is that a meaningful portion of Brindoval's MERIDIAN FRESH sales were diverted from MCB's MERIDIAN cleaning line as a direct result of consumer confusion between the two brands. Dr. Furman's consumer confusion survey supports this argument, having measured a net confusion rate of 31.4%. The survey was conducted using a Squirt/modified Eveready protocol among 612 respondents and yielded a raw confusion rate of 38.6%, from which the 7.2% control-group noise was subtracted to arrive at the net figure. A 31.4% net confusion rate is well above the threshold that courts in the Second Circuit have found sufficient to establish a likelihood of confusion. See, e.g., Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 875 (2d Cir. 1986) (confusion levels above 20% generally considered strong evidence of likelihood of confusion).
As a rough approximation, applying the 31.4% confusion rate to Brindoval's $6.8 million in actual revenue over the five-month launch period yields an estimated diverted-sales figure of approximately $2.14 million (31.4% × $6.8M). On an annualized basis, this figure would be approximately $5.12 million (31.4% × $16.32M).
Caveats and discounts. These figures overstate the likely recoverable lost profits for several reasons that must be candidly acknowledged:
• Not all consumers who experienced confusion would have purchased MCB's MERIDIAN products instead. Some confused consumers may not have been in the market for cleaning products at all, or may have selected a different competing brand had MERIDIAN FRESH not been available.
• The confusion rate measures the likelihood of confusion in a controlled survey setting, not the actual rate of confusion-driven purchasing decisions in real-world retail environments.
• Brindoval will vigorously challenge the causal link between measured confusion and actual lost sales, and will argue that its products compete with dozens of other cleaning brands, not solely with MCB's MERIDIAN line.
• The Court may require MCB to present expert economic testimony establishing a reliable methodology for calculating the portion of diverted sales, which introduces additional evidentiary burden and potential challenges.
Accounting for these discounts, the realistic range for lost-profits damages is $1.0 million to $2.5 million for the period from Brindoval's July 2022 launch through the projected trial date (estimated Q4 2023 or Q1 2024). This range assumes that a properly qualified economic expert can credibly establish that approximately 15% to 35% of consumers who experienced confusion would have purchased MCB's products instead, after applying appropriate discounts to the raw confusion-rate calculation.
B. Theory 2: Reasonable Royalty
As an alternative damages measure, MCB may recover a reasonable royalty — that is, the amount that a willing licensor (MCB) and a willing licensee (Brindoval) would have agreed to as compensation for Brindoval's use of the MERIDIAN mark in connection with International Class 3 household cleaning products. The reasonable royalty approach is rooted in the principle articulated in Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964), and its progeny, and is frequently applied in trademark cases as a measure of damages where lost profits are difficult to quantify with precision.
Industry Benchmarks. Royalty rates for consumer products brand licenses in the cleaning and household products category typically range from 3% to 8% of net sales, depending on the strength of the licensed mark, the exclusivity of the license, the geographic scope, and the competitive significance of the product category. A midpoint rate of 5% is a reasonable benchmark for purposes of this analysis, though MCB could argue for a higher rate given the strength of its marks and the directly competitive nature of Brindoval's products.
Calculation. Applying a 5% midpoint royalty rate to Brindoval's actual gross revenue of $6.8 million for the five-month period yields a reasonable royalty of approximately $340,000. On an annualized basis, a 5% royalty applied to the projected $16.32 million in annual revenue yields approximately $816,000.
Assessment. The reasonable-royalty approach is useful as a conservative baseline and a damages floor. Courts have consistently held that the reasonable royalty represents the minimum measure of damages — the least that a trademark owner is entitled to recover for unauthorized use of its mark. See Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) (articulating the foundational factors for reasonable royalty analysis in the patent context, widely adopted by analogy in trademark cases). However, the reasonable royalty likely understates MCB's actual harm given (a) the strength of the MERIDIAN marks, (b) the directly competitive nature of the products, (c) the high confusion rate measured by Dr. Furman, and (d) the fact that MCB would never have voluntarily licensed its core MERIDIAN mark to a competitor for use on directly competing cleaning products.
C. Theory 3: Disgorgement of Defendant's Profits
Under 15 U.S.C. § 1117(a), the Court has discretion to award MCB the profits earned by Brindoval attributable to the infringement. The statutory framework places the initial burden on MCB to prove Brindoval's gross revenue from the infringing products; the burden then shifts to Brindoval to prove any deductions for costs and expenses.
Brindoval's Revenue. As noted, Brindoval's MERIDIAN FRESH line generated gross revenue of $6.8 million from July through November 2022. Full discovery of Brindoval's financial records will be necessary to determine Brindoval's cost of goods sold, marketing and distribution costs, and net profit margin for the MERIDIAN FRESH line. In the absence of complete financial data, we rely on industry benchmarks: private-label or store-brand products in the household cleaning category typically carry net profit margins of 25% to 40%, which are generally higher than national-brand margins due to lower marketing costs and direct-to-consumer distribution.
Estimated Profits. Applying these margin assumptions to Brindoval's $6.8 million in gross revenue yields estimated Brindoval net profits of $1.7 million to $2.72 million for the actual five-month period. On an annualized basis, the estimated net profits range from approximately $4.08 million to $6.53 million.
Discretionary Factors. Disgorgement of defendant's profits is a discretionary remedy. While the Second Circuit does not require a showing of willfulness as an absolute prerequisite to disgorgement (see Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), holding that willfulness is not a categorical prerequisite under § 1117(a)), evidence of willfulness or bad faith remains a highly relevant factor in the Court's exercise of discretion. MCB can argue bad faith based on the following:
• Brindoval's apparent failure to conduct adequate trademark clearance before launching a product line under a name incorporating MCB's well-known MERIDIAN mark;
• The striking similarity of Brindoval's trade dress — the wave device and the teal-and-white color scheme — to MCB's registered stylized logo (U.S. Reg. No. 5,589,320), which suggests deliberate copying rather than independent development; and
• Brindoval's refusal to cease use of the mark following receipt of MCB's cease-and-desist letter.
Risk Factors for Disgorgement. Brindoval will likely argue good-faith independent adoption and present testimony from Nathan Cho, Vice President of Private Label Development at Brindoval, who is expected to testify that the MERIDIAN FRESH name and packaging were developed through an independent internal process without reference to MCB's marks. If Brindoval's witnesses are credible on this point, it could undermine MCB's willfulness argument and reduce the likelihood that the Court will exercise its discretion to award disgorgement. Additionally, the Court has discretion to enhance or reduce a disgorgement award, and may apportion profits to account for factors other than the infringing mark that contributed to Brindoval's sales (such as store location, pricing, and Brindoval's own brand reputation).
D. Summary of Damages Range
The following table summarizes the estimated damages ranges under each theory:
Several important qualifications apply to this summary. These damages theories are not all cumulative. Under the Lanham Act, the Court will select the appropriate measure of damages based on the facts and equities of the case. MCB cannot recover both lost profits and a reasonable royalty to the extent they measure the same harm; the reasonable royalty functions as a floor. Similarly, while disgorgement of defendant's profits can in some circumstances be awarded in addition to plaintiff's lost profits, courts are careful to avoid double-counting.
Taking into account the litigation risk factors discussed in Section V below, including the probability of prevailing at trial and the evidentiary challenges associated with each damages theory, the best estimate of provable damages at trial is in the range of $1.5 million to $3.0 million. This range reflects a blend of the moderate (lost profits) and aggressive (disgorgement) theories, discounted for litigation risk.
V. Litigation Risk Factors
A candid assessment of the strengths and weaknesses of MCB's position is essential for calibrating settlement expectations and developing an effective mediation strategy. This section identifies the key factors on both sides and provides an overall risk assessment.
A. Strengths of MCB's Position
MCB enters the mediation from a position of considerable strength, grounded in the following factors:
1. Strong Registered Marks with Extensive Commercial Use. MCB holds three federal trademark registrations in the MERIDIAN family, the earliest of which dates to August 2012 and is supported by first use in commerce since approximately 2011. Over eleven years of continuous, uninterrupted commercial use in a high-visibility consumer products category establishes substantial secondary meaning and commercial distinctiveness. The marks are incontestable under Section 15 of the Lanham Act (15 U.S.C. § 1065), as MCB has filed the requisite Section 8 and 15 declarations for U.S. Reg. No. 4,218,506, which significantly strengthens MCB's position against challenges to the validity of the core MERIDIAN mark.
2. High Consumer Confusion Rate. Dr. Furman's consumer confusion survey measured a net confusion rate of 31.4%, which is well above the threshold generally recognized by courts in the Second Circuit as probative of likelihood of confusion. Survey evidence of this magnitude is difficult for a defendant to overcome, even with a rebuttal survey, and provides strong evidentiary support for both liability and damages.
3. Preliminary Injunction Order. The January 9, 2023 PI Order represents a significant judicial validation of MCB's trade-dress claims. The Court's finding of a likelihood of success on the merits — the most demanding element of the preliminary injunction standard — is a powerful signal of the strength of MCB's case. While the PI Order is not dispositive of the merits at trial, it carries meaningful persuasive weight and serves as a strong negotiating tool at mediation.
4. Directly Overlapping Product Categories. Both parties sell household cleaning products in International Class 3, and the specific product types overlap substantially (all-purpose cleaners, glass cleaners, disinfecting products). This overlap maximizes the likelihood of consumer confusion and the competitive harm to MCB, and distinguishes this case from trademark disputes involving related but distinct product categories.
5. Incorporation of MCB's Core Mark. Brindoval's mark, MERIDIAN FRESH, incorporates the entirety of MCB's core registered mark, MERIDIAN. Courts routinely find that marks incorporating a senior mark in its entirety are more likely to cause confusion, particularly when used in connection with identical or closely related goods. See, e.g., In re Mighty Leaf Tea, 601 F.3d 1342, 1348 (Fed. Cir. 2010).
6. Trade-Dress Copying. The similarity between Brindoval's original trade dress (wave device and teal-and-white color scheme) and MCB's registered stylized logo (U.S. Reg. No. 5,589,320) suggests deliberate copying or, at minimum, reckless disregard of MCB's rights. This factor supports arguments of willfulness or bad faith relevant to disgorgement, enhanced damages, and attorney's fees.
B. Weaknesses and Risks
Notwithstanding MCB's strong position, several significant risks must be candidly assessed:
1. Court's Refusal to Enjoin the Word Mark. The most significant adverse development is the Court's decision not to enjoin Brindoval's use of MERIDIAN FRESH at the PI stage. This signals that Judge Albright may view the word mark alone — separate from the trade-dress elements — as less confusing than the combination of the mark and the packaging trade dress. If this analysis holds at trial, MCB faces a meaningful risk that it will not obtain a permanent injunction against all use of MERIDIAN FRESH. This risk is a primary driver of the recommendation for a coexistence approach rather than pursuing complete cessation.
2. Rebuttal Survey Expert. Brindoval's retention of Dr. Ronald Trask of Pinnacle Research Group Inc. as a rebuttal survey expert presents a real threat to MCB's confusion evidence. Dr. Trask is a highly credentialed and experienced expert who has successfully challenged plaintiff's confusion surveys in numerous reported cases. If Trask's rebuttal survey shows materially lower confusion rates — for example, in the 10%–15% range — it could substantially undermine Dr. Furman's results and weaken MCB's position on both liability and damages. The ultimate outcome will depend on the methodological rigor of both surveys and the Court's assessment of their relative credibility.
3. Potential Weakness of the MERIDIAN Mark. "Meridian" is an English word with suggestive qualities that may evoke freshness, nature, or geographic connotations. Brindoval will argue that the mark is relatively weak or that it is entitled to a narrow scope of protection because of the word's suggestive character. Brindoval may also identify third-party uses of "Meridian" in connection with other consumer products, which could further dilute the mark's perceived distinctiveness. While MCB has strong arguments to rebut these claims — including the extensive evidence of secondary meaning — this line of defense is not frivolous and could resonate with the Court or a jury.
4. Brindoval's Litigation Resources. Brindoval is a substantial company with fiscal year 2022 revenue of approximately $2.1 billion, 148 retail stores across twelve states, and a growing e-commerce platform. Brindoval has the financial resources to litigate aggressively through trial and, if necessary, through appeal. Brindoval's counsel, Halverson McKay & Pruitt LLP, is a well-resourced firm with significant trademark litigation experience. MCB should not assume that Brindoval will settle simply to avoid litigation costs; Brindoval has the resources to take this case to verdict if it believes the economics or legal position justify doing so.
5. Brindoval's Counterclaim. Brindoval's counterclaim for a declaratory judgment of non-infringement creates a two-front litigation posture. While the counterclaim does not change the legal standard or the ultimate burden of proof, it requires MCB to defend against affirmative claims and contributes to the complexity and cost of the litigation.
6. Damages Causation Challenges. Proving that consumer confusion caused by Brindoval's infringement resulted in actual lost sales to MCB will require expert economic testimony establishing a reliable methodology for linking confusion to diversion. This is a complex and contested area, and Brindoval will vigorously challenge the causal nexus. Courts vary in their willingness to accept confusion surveys as direct proof of actual damages, and MCB's economic expert will need to present a credible model that accounts for the many factors influencing consumer purchasing decisions beyond trademark confusion.
7. Jury Optics. Although this factor is secondary to the legal merits, it is worth noting that jury sympathies in the Southern District of New York may be marginally influenced by the parties' relative profiles. Brindoval is a regional retailer based in the Midwest, while MCB is a private equity-backed consumer products company acquired by Waypoint Capital Partners LLC for $625 million. A skilled defense attorney could frame the narrative as a large PE-backed company seeking to bully a regional retailer. While this framing does not reflect the merits of MCB's claims, it is a risk that should be considered, particularly in a case that could reach a jury trial.
C. Overall Risk Assessment
Based on the foregoing analysis, we assess the litigation risk as follows:
The expected value calculation reflects the probability-weighted average of potential outcomes: a 70%–75% chance of prevailing and recovering damages in the $1.5M–$3.0M range, offset by a 25%–30% chance of an adverse outcome (no recovery, or a minimal damages award). The expected value does not account for litigation costs, which are addressed in Section VI below, or for the non-monetary value of injunctive relief and coexistence protections.
VI. Cost-of-Litigation Projections
This section provides an estimate of the costs MCB has incurred to date and projects the additional costs through trial, as well as the incremental costs through settlement, to support the cost-benefit analysis that underpins our settlement recommendations.
A. Costs Incurred to Date
As of approximately January 31, 2023, the following costs have been incurred in connection with this matter:
These figures reflect the substantial investment required to pursue the preliminary injunction motion, including the preparation of supporting declarations, the retention and management of the survey expert, the briefing and argument of the PI motion, and the initiation of discovery. The investment has yielded meaningful results — the PI Order represents a significant favorable development — but the costs of continuing litigation to trial must be weighed against the potential incremental recovery.
B. Projected Costs Through Trial
Based on the current discovery schedule and our estimate of the case timeline (trial projected for Q4 2023 or Q1 2024, subject to the Court's calendar), we project the following additional costs from the current date through conclusion of trial:
Adding the costs already incurred, the total cumulative projected cost through trial is approximately $800,000 to $1,025,000. This range may increase if the litigation involves unexpected motions practice, extended discovery disputes, or the need for additional expert testimony.
It bears noting that Brindoval's litigation costs through trial would likely be comparable. Halverson McKay & Pruitt LLP is a well-resourced firm with billing rates that are broadly competitive with ours, and Brindoval's defense — including the engagement of Dr. Trask for the rebuttal survey — will require similar investment. Brindoval's anticipated litigation costs are relevant to the BATNA analysis in Section IX because they influence Brindoval's motivation to settle.
C. Costs Through Mediation/Settlement
If the matter settles at or shortly after the February 15 mediation, the additional costs from the current date through the closing of the settlement would be substantially lower. We estimate the following incremental costs:
Rounding to account for contingencies, the additional costs through settlement would be approximately $100,000 to $150,000, yielding a total matter cost if settled at or shortly after mediation of approximately $550,000 to $650,000.
D. Cost-Benefit Analysis
The cost-benefit calculus strongly favors settlement within the recommended range. The key comparison points are:
Litigation to Trial:
• Total estimated investment: $800,000–$1,025,000
• Expected monetary recovery (risk-adjusted): $1.0M–$2.1M
• Net expected recovery: approximately $0–$1.3M (pre-tax), with significant variance
• Downside scenario (25%–30% probability): no monetary recovery, $800,000–$1,025,000 in sunk costs
• upside scenario: higher recovery, but offset by additional time, distraction, and uncertainty
Settlement at Mediation:
• Total estimated investment: $550,000–$650,000
• Monetary settlement received: $1.2M–$1.75M (recommended range)
• Net gain: approximately $550,000–$1.2M, with certainty
• Additional value: comprehensive coexistence agreement providing ongoing brand protection (not achievable through litigation alone)
The comparison demonstrates that settlement eliminates risk and transaction costs while delivering a comparable or superior net economic outcome. A settlement at the target of $1.35 million, coupled with a strong coexistence agreement, would yield a net gain of approximately $700,000–$800,000 after deducting total matter costs, with certainty. By contrast, proceeding to trial offers a range of outcomes from a net loss of over $1 million (in the adverse scenario) to a net gain of approximately $1.3 million (in the favorable scenario), with the most likely outcome falling somewhere in between. Risk-adjusted, the settlement path is clearly preferable.
Moreover, the cost-benefit analysis does not fully capture the intangible costs of continued litigation, including management distraction for MCB's leadership team, the risk of adverse precedent on the scope of the MERIDIAN mark, and the ongoing uncertainty that may affect MCB's brand-extension strategies and Waypoint's investment valuation.
VII. Settlement Valuation and Recommended Range
Based on the damages analysis, litigation risk assessment, and cost-of-litigation projections set forth above, this section presents the recommended settlement valuation and strategy for the mediation.
A. Monetary Payment
The monetary component of the settlement should reflect MCB's provable damages, appropriately discounted for litigation risk, while also accounting for MCB's litigation investment and the avoided costs of continued litigation. The recommended monetary parameters are as follows:
Floor: $1.0 million. This figure represents the approximate lower bound of MCB's reasonable-royalty damages calculation extrapolated through the projected trial date, and roughly recoups MCB's total litigation investment to date plus projected settlement costs ($550,000–$650,000) with a modest premium. A settlement below $1.0 million would not adequately compensate MCB for the demonstrated infringement or provide a credible return on the litigation investment. Importantly, a $1.0 million monetary settlement must be coupled with meaningful coexistence terms to be acceptable; the monetary floor alone is insufficient without strong non-monetary protections.
Target: $1.35 million. This figure represents a credible compromise between MCB's moderate damages estimate (lost profits of $1.0M–$2.5M) and the range we anticipate Brindoval would find acceptable ($800,000–$1.35M, as discussed in Section IX below). A settlement at $1.35 million coupled with the coexistence framework would represent a strong outcome for MCB, delivering meaningful monetary recovery while securing the long-term brand protections that are of critical strategic importance.
Ceiling: $1.75 million. This represents the upper bound of what MCB could reasonably expect to achieve in a negotiated settlement, given the litigation risk factors and Brindoval's likely negotiation positions. A settlement above $1.75 million is possible but would likely require Brindoval to accept a figure approaching its risk-adjusted expected litigation cost (damages plus legal fees), which may not be achievable without additional leverage.
Recommended Opening Demand: $2.5 million. Consistent with standard mediation practice, MCB should open with a demand that provides adequate negotiation room to reach the target range. An opening demand of $2.5 million is aggressive but credible — it falls within the range of MCB's damages theories (between the moderate lost-profits estimate and the aggressive disgorgement estimate) and signals the seriousness of MCB's position without being so extreme as to undermine credibility with the mediator.
Recommended Walk-Away Floor: $1.0 million. MCB should not accept a monetary settlement below $1.0 million under any circumstances without further authorization from the client. This floor applies to the monetary component alone and assumes that the settlement includes meaningful coexistence terms as described in Section VIII.
B. Non-Monetary Terms: Brand Protection Value
While the monetary component of the settlement is important, the long-term strategic value of a well-drafted coexistence agreement may exceed the monetary settlement component in terms of its impact on MCB's business and brand equity. The rationale is straightforward: MCB's MERIDIAN cleaning line generates $94.5 million in annual revenue, and the brand is the cornerstone of MCB's portfolio valuation. A settlement that provides a one-time monetary payment but fails to restrict Brindoval's future use of MERIDIAN FRESH (or any MERIDIAN-incorporating mark) would leave MCB vulnerable to continued and potentially expanding competitive harm.
A comprehensive coexistence agreement that restricts Brindoval's use of any MERIDIAN-incorporating mark to narrow distribution channels and product categories provides ongoing, enforceable protection for MCB's $94.5 million cleaning-line business and its broader brand portfolio. The restrictions would limit the geographic and channel overlap between the parties, reduce the risk of consumer confusion on a going-forward basis, and prevent Brindoval from expanding its use of the MERIDIAN FRESH brand into new product categories or distribution channels that would encroach further on MCB's market position.
This is particularly important in light of Waypoint Capital Partners LLC's $625 million acquisition of MCB. The MERIDIAN brand was a central component of the acquisition valuation, and Waypoint has a direct interest in ensuring that the brand's distinctiveness and market position are preserved. A coexistence agreement that provides structured, enforceable protections directly supports the investment thesis and preserves long-term brand value in a way that a monetary-only settlement cannot.
C. Recommended Settlement Range
In summary, the recommended settlement range for the mediation is:
Monetary Component: $1.2 million to $1.75 million, payable as a one-time lump sum within thirty (30) days of execution of the definitive settlement and coexistence agreement.
Non-Monetary Component: A comprehensive Trademark Coexistence Agreement containing the terms detailed in Section VIII below.
Combined Value to MCB: The monetary payment, combined with the prospective brand protection afforded by the coexistence agreement, is deemed strategically significant and represents the best achievable outcome on a risk-adjusted basis.
VIII. Coexistence Framework — Alternative to Complete Cessation
A. Rationale for Coexistence Approach
In an ideal outcome, MCB would obtain Brindoval's complete cessation of all use of the MERIDIAN FRESH mark and any similar marks in the household cleaning category. However, a realistic assessment of the facts and litigation dynamics leads to the conclusion that complete cessation is unlikely to be achieved, whether through negotiation or at trial.
Three factors support this conclusion. First, the Court's refusal to enjoin the word mark MERIDIAN FRESH at the preliminary injunction stage signals judicial skepticism about the necessity or propriety of a complete ban on Brindoval's use of the word mark. While the PI standard is distinct from the permanent injunction standard, Judge Albright's analysis is instructive and suggests that MCB faces a meaningful risk of failing to obtain a complete permanent injunction at trial. Second, Brindoval has invested significantly in the MERIDIAN FRESH product line, which generated $6.8 million in revenue in its first five months. Brindoval has a strong economic incentive to resist complete cessation, and the size of this investment makes it less likely that Brindoval would agree to abandon the brand entirely in a settlement. Third, the mediator, Judge Novotny, is unlikely to recommend or endorse a settlement requiring complete cessation when the Court's own PI Order did not reach that result; a mediated outcome will almost certainly involve compromise.
Given these realities, a structured coexistence agreement provides the most effective path to meaningful brand protection for MCB. A coexistence agreement creates enforceable guardrails — including channel restrictions, product-category limitations, mark modifications, and trade-dress requirements — that substantially reduce the risk of consumer confusion while allowing both parties to continue operating in the market. Coexistence agreements are common in trademark disputes where marks overlap but can be differentiated through house marks, prefixes, distribution channels, and visual elements. Well-drafted coexistence agreements have been recognized and enforced by courts and the USPTO, and they provide a level of specificity and control that may exceed what a court-ordered injunction would provide.
B. Proposed Coexistence Terms for Mediation
MCB should present the following proposed terms as the framework for a Trademark Coexistence Agreement at mediation. These terms are designed to maximize brand protection for MCB while leaving Brindoval with a workable path to continue limited use of a modified mark in its existing distribution channels.
1. Mark Modification. Brindoval shall rebrand its products from MERIDIAN FRESH to BRINDOVAL MERIDIAN FRESH. The word "BRINDOVAL" must be displayed in no less than seventy-five percent (75%) of the type size used for "MERIDIAN FRESH" and must appear immediately preceding "MERIDIAN FRESH" on all packaging, signage, advertising, and digital content. The purpose of this requirement is to create a strong house-brand association — ensuring that consumers encountering the modified mark immediately associate it with the Brindoval brand rather than with MCB's MERIDIAN line. Empirical research consistently demonstrates that prominent house marks significantly reduce consumer confusion in cases involving overlapping trademarks.
2. Channel Restrictions. Brindoval may use the modified mark (BRINDOVAL MERIDIAN FRESH) only in the following channels:
(a) Brindoval-branded retail stores (currently 148 locations across twelve Midwestern and Mountain West states); and
(b) Brindoval's own e-commerce platform (www.crestviewhomegoods.com).
Brindoval shall be prohibited from using the modified mark or any MERIDIAN-incorporating mark on third-party e-commerce platforms (including but not limited to Penmark Holdings, Walmart.com, Adriatic Corporation, and Cascade Holdings.com), in wholesale distribution to third-party retailers, or in any other distribution channel. This channel restriction is critical because MCB's MERIDIAN products are sold nationally through major grocery, club, and e-commerce channels in all fifty states. By limiting Brindoval's use to its own stores and website, the coexistence agreement eliminates the primary vectors of consumer confusion — encounters in shared retail and e-commerce environments — while acknowledging the reality that some degree of overlap will persist in the Midwestern and Mountain West markets where Brindoval operates physical stores.
3. Product-Category Restrictions. Brindoval's use of the modified mark shall be limited exclusively to household cleaning products in International Class 3 (i.e., all-purpose cleaners, glass cleaners, disinfecting products, and dish soap). Brindoval shall be prohibited from using any mark incorporating the word MERIDIAN in connection with personal care products, home fragrance products, laundry detergents, or any other product categories. This restriction protects MCB's broader brand portfolio and prevents Brindoval from leveraging the MERIDIAN FRESH brand as a platform for expansion into adjacent product categories where MCB may have current or future commercial interests.
4. Trade-Dress Changes. Consistent with the Court's PI Order, Brindoval shall permanently discontinue the use of the teal-and-white color scheme and the wave device on all MERIDIAN FRESH packaging and marketing materials. Brindoval's replacement trade dress must be submitted to MCB for review (not approval) at least thirty (30) days before commercial use. MCB shall have the right to object if the proposed replacement trade dress is confusingly similar to MCB's registered or unregistered trade dress, and any dispute shall be submitted to expedited arbitration.
5. Quality Monitoring. Brindoval shall provide MCB with annual product samples of all BRINDOVAL MERIDIAN FRESH products and shall permit MCB (or its designated representative) to conduct one (1) quality inspection per calendar year at Brindoval's manufacturing or distribution facilities, upon reasonable notice. This provision serves two purposes: it maintains MCB's quality-control argument (relevant to the enforceability of the coexistence agreement as a quasi-license) and prevents trademark abandonment issues that could arise from naked licensing or uncontrolled use.
6. Non-Challenge Covenant. Brindoval shall covenant not to challenge the validity, enforceability, or scope of MCB's U.S. Registration Nos. 4,218,506, 5,034,771, and 5,589,320, or any future registrations in the MERIDIAN family owned by MCB. This covenant protects MCB against the possibility that Brindoval could use the coexistence relationship as a platform from which to attack MCB's trademark rights.
7. Amendment of Brindoval's Pending Application. As a condition of the settlement, Brindoval shall amend its pending trademark application Serial No. 97/412,558 to reflect the modified mark BRINDOVAL MERIDIAN FRESH and to narrow the goods description to "household cleaning preparations, namely, all-purpose cleaners, glass cleaners, disinfecting wipes, and dish soap, all sold exclusively through applicant's own retail stores and e-commerce platform." MCB shall withdraw its TTAB Opposition No. 91/278,415 upon the filing of the amendment and the execution of a consent agreement to be filed with the USPTO.
8. Liquidated Damages. Any breach of the channel restrictions or product-category restrictions set forth in the coexistence agreement shall trigger liquidated damages of $500,000 per occurrence, in addition to any actual damages MCB may prove. This provision is essential to provide a meaningful deterrent against breach and to avoid the need for costly enforcement litigation. The liquidated-damages figure is calibrated to reflect the significant harm that a breach of these restrictions would cause to MCB's brand and the difficulty of proving actual damages on a per-occurrence basis.
9. Governing Law. The Trademark Coexistence Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts-of-law principles. Any disputes arising under the agreement shall be subject to the exclusive jurisdiction of the United States District Court for the Southern District of New York.
10. Term. The Trademark Coexistence Agreement shall be perpetual in duration, unless terminated by mutual written consent of the parties or by MCB upon material breach by Brindoval that remains uncured after thirty (30) days' written notice.
11. Rebranding Timeline. Brindoval shall complete all rebranding activities — including the modification of all product packaging, in-store signage, digital content, and e-commerce listings — within one hundred twenty (120) days of execution of the definitive agreement. Brindoval shall provide MCB with written certification of completion within five (5) business days of the rebranding deadline.
C. Anticipated Points of Contention
We anticipate that Brindoval will raise objections to several of the proposed coexistence terms. The following assessment identifies the most likely points of contention and MCB's recommended posture on each:
75% Type-Size Requirement. Brindoval will likely resist the requirement that "BRINDOVAL" appear in no less than 75% of the type size of "MERIDIAN FRESH," viewing this as an unreasonable constraint on packaging design. Brindoval may counter-propose 50% or even a less specific "prominent display" standard. MCB should hold firm at 75% as the initial position but may accept 60% as a floor if necessary to reach agreement on other key terms. Below 60%, the house-brand association becomes too weak to serve its intended purpose.
Channel Restrictions. Brindoval may seek broader channel rights, particularly the ability to sell BRINDOVAL MERIDIAN FRESH products through third-party e-commerce platforms such as Amazon. This would significantly dilute the value of the coexistence agreement for MCB, as Amazon is one of MCB's most important distribution channels. MCB should hold firm on the channel restrictions as a core, non-negotiable protection. If Brindoval insists on some form of third-party distribution, MCB should reject this outright or, in the alternative, condition any expansion on a significant increase in the monetary payment and additional territorial limitations.
Liquidated Damages. Brindoval will likely argue that the $500,000 per-occurrence liquidated-damages figure is punitive and unenforceable. MCB should be prepared to defend the figure as a reasonable estimate of the harm that would result from a breach of the channel or product-category restrictions, given the difficulty of quantifying actual damages in real time. MCB may accept a reduction to $250,000 per occurrence as a last resort, but only in exchange for strengthened enforcement mechanisms (e.g., an injunctive-relief provision or expedited arbitration).
Quality Monitoring. Brindoval may argue that quality-monitoring provisions are inappropriate in a coexistence agreement (as opposed to a license agreement) and may resist facility inspections as intrusive and burdensome. MCB should frame the quality-monitoring provision as a standard protection necessary to maintain the integrity of the coexistence arrangement and should be willing to negotiate reasonable limitations on the scope and notice requirements for inspections if necessary to secure agreement on the other terms.
Overall Negotiation Posture. MCB should approach the mediation with the mindset that the channel restrictions and liquidated-damages provisions are the most important non-monetary terms and should be protected even at the cost of flexibility on other issues. The mark-modification requirement (BRINDOVAL MERIDIAN FRESH) is also a core term that should not be abandoned. MCB can show greater flexibility on the type-size percentage, the quality-monitoring scope, and the trade-dress review mechanism if necessary to reach agreement.
IX. BATNA Analysis (Best Alternative to Negotiated Agreement)
An effective mediation strategy requires a clear understanding of each party's Best Alternative to a Negotiated Agreement ("BATNA") — the course of action available to each side if the mediation fails to produce a settlement. This section analyzes MCB's BATNA and Brindoval's likely BATNA to establish the zone of possible agreement and identify MCB's leverage points.
A. MCB's BATNA
If the mediation does not result in a settlement, MCB's best a

INTERNAL MEMORANDUM

MATTER NO.: 1011-00003

BILLING CODE: 11470-001

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