What happens when a party attempts to sidestep the strict guidelines of a court order? A cannabis company’s non-compliance with an injunction illuminates the consequences of playing with fire. Wm. Wrigley Jr. Company v. Terphogz, LLC U.S. District Court for the Northern District of Illinois, Case: 1:21-cv-02357.
In 2021, Wm. Wrigley Jr. Company (“Wrigley”) filed a lawsuit against Terphogz, LLC (“Terphogz”), alleging trademark infringement. Terphogz had been using the ZKITTLEZ mark to market its cannabis products, which Wrigley claimed was confusingly similar to its SKITTLES mark. Terphogz also used a mark containing a stylized Z within a circle (the “Z Logo”), which bears resemblance to the SKITTLES candy.
In June 2022, the parties reached a settlement agreement, and an injunction was entered, which incorporated the terms of the agreement. The injunction prohibited Terphogz from using the ZKITTLEZ mark or any similar marks. Terphogz was allowed to use the letter “Z” under specific conditions, but the injunction strictly prohibited any use that could be perceived as referring to or imitating the SKITTLES mark.
In 2023, Wrigley obtained evidence that Terphogz was in violation of the injunction. Terphogz failed to comply after several objections from Wrigley. Fed up, Wrigley filed a motion for contempt in December 2024, alleging that Terphogz had violated the injunction.
Wrigley presented to the court photographs of ZKITTLEZ branded t-shirts and Z Logo branded vape pens for sale at various cannabis events. However, Terphogz attempted to skirt the terms of the injunction by using the ZKITTLEZ mark and Z Logo in dubious ways.
Wrigley submitted evidence that Terphogz pixelated the ZKITTLEZ mark, had the mark appear as Z******Z, or included the term “censored” over a portion of the mark. Terphogz also used the Z Logo in reference to some of its other branded offerings including “ZRUNTS” and “PELLEZINO” (emphasis added). Further, Terphogz used the ZKITTLEZ mark in reference to the lineage of some of its current cannabis offerings.
The injunction explicitly prohibited any use of the ZKITTLEZ and Z Logo marks “in any way that refers, suggests, alludes, conjures, conveys, imitates, simulates, sounds like, looks like, abbreviates or otherwise draws a connection, directly or indirectly, to the SKITTLES” mark.
The court determined that the violations were significant and not merely minor infractions. The deliberate use of the ZKITTLEZ mark, even in a pixelated form, was seen as a clear attempt to circumvent the injunction.
The court found that Terphogz had failed to take reasonable steps to comply with the injunction and the continued use of the prohibited marks indicated a lack of genuine effort to adhere to the court’s order.
As a result of these findings, the court imposed several sanctions, including:
- Terphogz had to come into full compliance with the injunction by February 4, 2025;
- Wrigley may seek recovery of profits from Terphogz;
- Terphogz will be fined $1,000 per day until it demonstrates full compliance with the injunction; and
- Terphogz will pay Wrigley’s attorney’s fees and costs associated with the contempt motion.
This ruling underscores the importance of strict compliance with court orders in trademark disputes. It also highlights the potential consequences of failing to adhere to such orders, including significant financial penalties. This case serves as a reminder of the critical need to respect trademark rights, the legal obligations that come with settlement agreements and injunctions, and the need to monitor for compliance with the same. In this case, Terphogz may “taste the rainbow” of the court’s sanctions.
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