A Tale of Two Cracker Barrels

There are many species of commercial litigation where a preliminary injunction may prove helpful, or even necessary, and trademark protection is one of the most important. The recent litigation between Kraft and Cracker Barrel Old Country Store is a good example of this kind of dispute.

This trademark dispute has a long and complicated history. Suffice to say that, as of the present, Kraft owns the trademark rights to the Cracker Barrel line of products, mostly meat and cheeses, sold in grocery stores throughout the country. At the same time, however, there is also a national chain of restaurants that label themselves as “Cracker Barrel Old Country Store” (CBOCS), which also holds a trademark on the name. The two companies had, in the past, acknowledged that Kraft had the superior trademark, but they were not direct competitors.

Recently, however, CBOCS licensed its brand to John Morrell for a line of meat products to be sold in grocery stores throughout the country. Kraft filed a suit for trademark infringement, as well as a preliminary injunction to stop CBOCS from bringing its own products to grocery stores.  The court granted the injunction, and it is instructive to examine why.

The first element that the court examined was whether or not the suit was likely to succeed on its merits. The exact standard for what chance of success a claim might have varies from circuit to circuit. As this case was filed in the U.S. District Court for Northern Illinois, the Seventh Circuit’s standard, that the claim need only have a “better than negligible” chance was used. Kraft was easily able to clear this barrier. Both parties had, in the past, acknowledged that Kraft had the superior trademark over the “Cracker Barrel” name. In addition, the court noted that the particular packaging used by CBOCS on its licensed line and the relative similarity of the Kraft and CBOCS products created a significant likelihood for confusion between the two lines, a necessary part of any trademark infringement case.

The court next turned to whether there was an adequate remedy at law, and whether irreparable harm would be done if CBOC were allowed to sell its meat products in grocery stores. In trademark cases, it is established precedent, at least in the Seventh Circuit that there is a presumption that this element will be met if a trademark if infringed upon. Kraft also argued that should CBOCS be allowed to use the Cracker Barrel brand in its meat line, then Kraft’s Cracker Barrel brand would become diluted, and the reputation of the brand will fall outside of Kraft’s control. The damages, in such a scenario, would be difficult to ascertain. The court generally agreed with this rationale, and found that Kraft had met this element as well.

The court then looked at the final two elements, both of which it disposed of relatively quickly. First, it balanced the harms, and concluded that because this new line of products was essentially an ancillary business for CBOCS, and because the products had been withdrawn from circulation as a result of the litigation, that there was little harm done to CBOCS in comparison to the potential harm that Kraft might suffer absent an injunction. Next, the court looked at the public interest in this case, and simply concluded that the public interest was preventing confusion in the marketplace, supporting Kraft’s argument for a preliminary injunction.

As the granting of a preliminary injunction is an equitable remedy, however, the court was also forced to consider a pair of defenses raised by CBOCS. First, CBOCS argued that Kraft had shown acquiescence by allowing CBOCS to use the Cracker Barrel name for decades to sell food in its own restaurants and stores, and to sell it through other channels, such as catalogues and the internet as well. The court did not find this argument persuasive, as Kraft was not selling its own Cracker Barrel products in any of those locations, and thus had no fears of confusion in those locations, unlike the grocery store market, which was Kraft’s primary point of sale for its Cracker Barrel products.

CBOCS next argued that laches applies, as CBOCS had first broached the idea of selling its own Cracker Barrel products in grocery stores in 2006, and that Kraft and CBOCS had discussed the issues regarding CBOCS bringing their own Cracker Barrel products to grocery stores at that time, and that, if Kraft had any objections to the plan, it should have made them in 2006, rather than waiting until CBOCS had already planned and begun distribution of its line. The court was not persuaded by this argument either. It found that while the two parties had exchanged some correspondence in 2006, the discussions were more preliminary than decisive, and Kraft had been concerned about trademark infringement at the time, and had requested that CBOCS give them notice before undertaking any venture into grocery retail.

As a final matter, the bond requirement was upheld in this case, and Kraft was required to post a $5 million bond before the injunction would be entered. Even though Kraft had made many compelling arguments, including showing that CBOCS was not poised to lose much more than opportunity costs should the injunction be granted, the court still took the bond requirement from the Federal Rules of Civil Procedure very seriously, and required a substantial bond from the movant, as is not unusual in cases of this type.

In conclusion, the Cracker Barrel case shows how a preliminary injunction intersects with other forms of commercial litigation, and what effect the laws of trademark have on showing the elements of a preliminary injunction.