Rolling out the Settlement Agreement: General Mills vs. Kraft Foods

untitled1.bmpGeneral Mills sells a rolled fruit snack under the trademark FRUIT BY THE FOOT, and has obtained not one but two patents: U.S. Patent Nos. 5,284,667 (“Rolled Food Item Fabricating Methods”) and 5,723,163 (“Rolled Food Item”).  How mashed fruit and corn syrup can be a patentable invention is a separate issue. 

General Mills sued Farley, a rival maker of rolled fruit snacks, for patent infringement.  The parties settled out of court, and the resulting agreement made it clear that Farley’s successors would benefit from the settlement terms if Farley sold its entire “rolled food product business”.  Farley later sold its assets to Kraft Foods, and Kraft Foods in turn sold part of the Farley assets to a third company. General Mills then sued Kraft for patent infringement.

Did Kraft’s sale of part of the Farley assets strip Kraft of the protection in the settlement agreement, and expose it to a patent infringement suit by General Mills?  The Federal Circuit Court of Appeals said no, in General Mills v. Kraft Foods (Fed. Cir. 2007) stating that there was nothing in the agreement to deprive Kraft of protection as Farley’s successor.  General Mill’s “covenant not to sue” applied to Kraft as successor.

The lessons for business?

  • When buying intellectual assets, ensure your lawyers review any past litigation and any Settlement Agreements to assess the scope of protection for successors;
  • General Mills wanted to control the onward sale of assets through the settlement agreement – this is possible, but the terms must be clear in the settlement agreement and this case provides some guidelines on how that should be done;
  • And yes, even rolled fruit can be an intellectual asset.


Calgary – 09:54 MST


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