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.

               

 

District Court's Finding Regarding Infringement of Apple's D'677 Patent

 The District Court agreed with Apple, finding that Samsung’s accused Infuse 4G and Galaxy S 4G phones would likely infringe Apple’s D’677 patent. The court looked at the side-by-side, pictorial comparisons in reaching this finding. According to the court, Samsung’s accused cell phones “would likely appear substantially the same [as the D’677 patent] to the ordinary observer” (Court Order Denying Motion for Preliminary Injunction at 26).

Substantial similarities that contributed to overall similarity of appearance between the Galaxy S 4G and D’677 included: Galaxy S 4G’s “similar shape, size and glass-like black front face as the D’677 patent”; the location of the speaker on the Samsung Galaxy S 4G was in almost the same place as the speaker on the D’677 patent; the screens on the Galaxy S 4G and D’677 were similarly sized. Substantial similarities between the Infuse 4G included: the Infuse 4G’s similar “large, flat, transparent black front screen, a slot-shaped speaker and a streamlined, simplistic design”.

On the whole, these similarities gave the Samsung accused cell phones the same overall appearance as the D’677 patent. Because of these findings, the court held that Apple would be likely to succeed at proving infringement at trial.

However, while this is the case, the court did disagree on the significance of the differences between Samsung’s accused cell phones and Apple’s D’677. Some of the identified differences between the Galaxy S4G and D’677 included: Samsung’s camera lens at the top of its Galaxy S 4G’s front faces; Samsung’s logo, as well as the service carrier’s logo on the front face of the Galaxy S 4G and four buttons at the bottom of Samsung’s Galaxy S 4G phones. Some of the identified differences between the Infuse 4G and D’677 included: the larger and broader size of the Infuse 4G; writing on Infuse 4G (no writing on D’677) and the buttons on Infuse 4G (not present in D’677).

Though the court defined these as minor differences, they also assumed greater significance for two reasons. The first was the general simplicity and minimalism of the design of both Apple’s D’677 and Samsung’s cell phones. The second was that the iPhone (embodiment of D’677) and Samsung’s cell phones were all expensive products, and consumers were likely to note and consider the differences while making their purchasing decisions. Additionally, the court also disagreed with Apple’s argument that its D’677 patent was conspicuously different from the prior art. Citing to another case, the court noted, “‘if the claimed design is close to the prior art designs, small differences between the accused design and the claimed design assume more importance”.Then, the court went on to state that the prior art for the D’677 patent “may make minor differences… take on greater significance”.

Nevertheless, the existence of these differences was not enough to detract from the overall substantial similarities in appearance between Samsung’s accused cell phones and the D’677 patent. The Federal Circuit did not address the issue of likely infringement of D’677 in its appellate opinion. This indicates that it did not disagree with the district court’s finding.

The next business litigation blog post will discuss Apple’s argument about the likely validity of the D’677 patent. 

WORLDCARE Trademark Injunction Part I

 Worldcare Limited Corporation v. World Insurance Company, Case No. 8:11CV99 (D. Neb. May 9, 2011).

Written by Jay Lewis

On May 9, 2011, WorldCare Limited Corporation (“WorldCare”) was granted a preliminary injunction against World Insurance Corporation (“Defendant”) preventing further use of the “WORLDCARE” mark or name.

WorldCare is a provider of second-opinion telemedicine services.  The service allows individuals and insureds to request second opinions through WorldCare’s consortium of specialized physicians at highly regarded hospitals and universities.  WorldCare sells its services through insurance policies as an additional benefit.  WorldCare registered its trademark, “WORLDCARE,” in June of 1996.

Defendant provides health insurance products and services including basic medical, major medical, comprehensive major medical, short-term medical, and dental insurance.  Defendant began using WORLDCARE in February 2003 as a brand name on its insurance products.  Defendant applied for a registration of the WORLDCARE mark on March 28, 2005, but the application was rejected.  Defendant continued to use the mark creating customer confusion in violation of the Lanham Act, 15 U.S.C. §§ 1114(a), 1125(a). WorldCare filed for a preliminary injunction against Defendant on September 21, 2010.

Defendant argued that WorldCare failed to renew its ownership in the WORLDCARE mark under 15 U.S.C. § 1059(a). The Court stated: “Nevertheless, ownership of registration is not determinative of ownership of trademark rights, and ‘the absence of federal registration does not unleash the mark to public use.’" quoting, Gilbert/Robinson, Inc. v. Carrie Beverage-Missouri, Inc., 989 F.2d 985, 992 (8th Cir. 1993).

The Court cited Dataphase Sys., Inc. v. C.L. Systems Inc., 640 F.2d 109 (8th Cir. 1981) for the four factors of a preliminary injunction: “(1) The threat of irreparable harm to the movant; (2) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that movant will succeed on the merits; and (4) the public interest.” Dataphase at 114.

Balance of Harms

The Court first reviewed the ‘balance of harms’ between the parties and found in favor of WorldCare.  Defendant’s executive testified that the company had already started to phase out the use of the WORLDCARE mark from its products.  The executive explained, however, the phase-out was only temporary.  Defendant was not willing to consent to a complete termination of the mark’s use.  The executive believed the company was not legally obligated to terminate the use and it could be harmed by a negative public perception if did so voluntarily.  The Court found that due to Defendant’s own actions in phasing out the use of the mark, the burden of an injunction had been significantly minimized.  An injunction reinforcing the phase-out would not cause significant additional harm.

Part II of this post will examine the Probability of Success on the Merits.