8th Circuit Finds Laches Delay Begins When Infringement Is Actionable But That Knowledge of Objection Hinders Laches Defense

In Champagne Louis Roederer v. J. Garcia Carrion S.A., 569 F.3d 855; 91 USPQ2d 1214 (8th Cir. 2009), the plaintiff produces, among other things, a high-end champagne sold under the mark CRISTAL that was initially created in 1876 as the official wine of the Imperial Court of Russia.  Carrion is a Spanish corporation owned by another Spanish corporation Priesca.  Priesca also owns a Spanish winery Jaume Serra.  In 1998, Jaume Serra and Carrion merged into a single entity operating under the Carrion name.  Prior to that merger, in 1984, Jaume Serra began making cava, a type of sparkling wine distinct from champagne.  By 1987, Jaume Serra was selling its cava under the names “Cristalino Jaume Serra” or “Cristalino.” By 1989, Jaume Serra was selling Cristalino cava in theUnited States. By 1997, Cristalino had sold nearly 400,000 bottles in theUnited States.

In 1989, Roederer successfully objected to Jaume Serra’s attempt to register the “CRISTALINO” mark inSpain. Roederer filed a similar objection to the registration of the “CRISTALINO JAUME SERRA” mark inColombiain 1991, but inexplicably abandoned those proceedings in 2000. Similarly, Roederer abandoned its opposition to Jaume Serra’s application to register “CRISTALINO JAUME SERRA” in theU.S.in 1997. Roederer first learned that Cristalino was being sold in theU.S.in 1995. In unrelated proceedings before the U.S. Patent and Trademark Office, Roederer’s attorneys came across an affidavit indicating that “a sparkling wine from Spain called Cristalino” was found on sale at a Cost Plus store in California on June 8, 1995.

After the merger of Carrion and Jaume Serra, Carrion spent 14 million Euros between 1997 and 2002 to modernize and expand its winery facilities, improving Jaume Serra’s cava production.  In February 2002, Carrion’sU.S.intent-to-use trademark application to register the “CRISTALINO” mark was published for opposition. In June and July 2002, Roederer responded with cease-and-desist letters requesting that Carrion withdraw its application for the CRISTALINO mark. Carrion refused. Roederer filed its notice of opposition with the Trademark Trial and Appeal Board (“TTAB Board”). Roederer filed suit in January 2006, and its opposition was stayed pending the instant suit.

The district court granted Carrion’s motion for summary judgment, asserting that Roederer’s claims for trademark infringement were barred by the doctrine of laches. The court determined that Roederer was put on constructive notice that Cristalino was being sold in theUnited Statesin 1995 when its attorneys read about the sale in an affidavit. The court held that it would be inequitable to permit Roederer’s request for injunctive relief because Carrion made substantial investments in its facilities between 1995 and 2002, the time when Roederer first objected to Carrion’s use of the “CRISTALINO” mark in theUnited States.

The Eight Circuit reviewed the district court’s grant of summary judgment for abuse of discretion since the determination of laches as applied was within the sound discretion of the district court.  Brown-Mitchell v. Kansas City Power & Light Co., 267 F.3d 825, 827 (8th Cir. 2001). Laches is an equitable defense to an action to enforce a trademark. Hubbard Feeds, Inc. v. Animal Feed Supplement, Inc., 182 F.3d 598, 601 (8th Cir. 1999).  To successful assert laches as a defense, the defendant must show: (1) a delay in asserting a right or a claim; (2) that the delay was not excusable; and (3) that there was undue prejudice to the party against whom the claim is asserted. Kason Indus., Inc. v. Component Hardware Group, Inc., 120 F.3d 1199, 1203 (11th Cir. 1997).  Further, in trademark suits, courts also consider: (1) the doctrine of progressive encroachment, and (2) notice to the defendant of the plaintiff’s objections to the potentially infringing mark.

Delay in asserting trademark rights

The Eight Circuit noted that the time of delay is to be measured from when the infringement became actionable and provable, not from the time when the plaintiff first learned of the potentially infringing mark.  See Angel Flight of Ga., Inc. v. Angel Flight Am., Inc., 522 F.3d 1200, 1207 (11th Cir. 2008).  The doctrine of progressive encroachment mitigates a potentially inequitable dilemma for trademark holders.  Rather than making trademark holders sue immediately and lose because the alleged infringer is insufficiently competitive to create a likelihood of confusion, or wait and be dismissed for unreasonable delay, the doctrine of progressive encroachment enables a timely and potentially successful claim for trademark holders. See Sara Lee Corp., 81 F.3d at 462.

The district court found that Roederer inexcusably delayed in asserting its claim, because it was on notice in 1995 when attorneys learned of the use of mark “CRISTALINO” in theU.S.The Eight Circuit held that the district court failed to conduct a meaningful analysis of when infringement would become actionable to determine the period of delay.  The district court did not reference trademark infringement law, but instead merely stated that “the evidence shows that sales of Cristalino have been greater than sales of Cristal since at least the mid-1990’s” and that “evidence of significant changes in the quality of the cava is lacking.”  The Eight Circuit found that this meager analysis did not merit the finding that Roederer had an actionable claim in 1995.

The Eight Circuit noted that trademark infringement through the Lanham Act is only actionable when the use of a mark in connection with goods or services is likely to cause confusion as to the source or sponsorship of the goods or services. Davis v. Walt Disney Co., 430 F.3d 901, 903 (8th Cir. 2005). In evaluating the likelihood of confusion, the following factors are considered: 1) the strength of the plaintiff’s mark; 2) the similarity between plaintiff’s and defendant’s marks; 3) the degree to which the allegedly infringing product competes with the plaintiff’s goods; 4) the alleged infringer’s intent to confuse the public; 5) the degree of care reasonably expected of potential customers, and 6) evidence of actual confusion. 

Given these factors, the Eight Circuit ruled that the district court’s findings did not support the finding that Roederer had an actionable claim in 1995.   Specifically, the Eight Circuit noted that while “Cristalino’s sales volume had edged past that of Cristal in 1995,” this fact in and of itself does not establish that an actionable claim existed as of that time.  Moreover, the Court noted that the qualities of the two wines “were so disparate in 1995 as to preclude Roederer’s infringement claim.”  Thus, the Eight Circuit held that the determination as to when a claim is actionable for purposes of determining when the laches delay period begins requires a likelihood of confusion analysis and more “than merely citing marginal or irrelevant factors without reference to any of the principles governing trademark infringement.”

Notice and Undue Prejudice

Next, the Eight Circuit noted that a defense of laches is less persuasive if the defendant had knowledge that the plaintiff objected to the use of the mark. The defendant’s knowledge can be understood either as an assumption of risk, or as a factor that prevents the defendant from suffering undue prejudice. See McCarthy, supra, § 31:12. In either case, knowledge that a plaintiff objects to the use of a mark generally prevents a defendant from making a laches defense. See Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 205 (5th Cir. 1998); Conan Props., Inc. v. Conans Pizza, Inc., 752 F.2d 145, 151-52 (5th Cir. 1985); Citibank v. Citibanc Group, Inc., 724 F.2d 1540, 1546-47 (11th Cir. 1984).

Here, Carrion was on notice that Roederer objected to the use of the “CRISTALINO” mark. Roederer successfully opposed Jaume Serra’s registration of the “CRISTALINO” mark in Spainin 1990. Further, Roederer had also opposed the registration of the “CRISTALINO JAUME SERRA” mark in Columbiain 1991 and in the U.S.in 1997. Although the district court gave Carrion standing to assert the defense of laches, the Federal Circuit held that the district court disregarded the fact that Carrion had to be deemed constructively aware of Roederer’s opposition to the “CRISTALINO” mark before its merger with Jaume Serra in 1998. Carrion’s financial director testified that he knew of no attempt by Carrion to determine whether any of Jaume Serra’s marks were infringing at the time of acquisition. However, the Court found that the testimony did not change the fact that Roederer had made known its objections to the use of both the “CRISTALINO” and “CRISTALINO JAUME SERRA” marks. Even if Carrion was able to show that it expanded and improved the Jaume Serra facilities because of Roederer’s delay in bringing suit in the United States, the Eight Circuit stated that it cannot claim that it was ignorant of the fact that Roederer opposed the registration of the “CRISTALINO” and “CRISTALINO JAUME SERRA” marks. See Elvis Presley Enters., 141 F.3d at 205; Conan Props., 752 F.2d at 151-52; Citibank, 724 F.2d at 1546.

The Eight Circuit also found that the district court erred in finding that Carrion would be prejudiced by this delay if Roederer’s suit were permitted to proceed.  The appellate court asserted that no evidence existed, outside of Carrion’s self-serving assertions, that Carrion would not have made investments in the Jaume Serra plant had Roederer objected earlier. Because the Cristalino brand accounted for only 9% of Jaume Serra’s output after the improvements to the facilities, the Eight Circuit did not place as much emphasis as the district court on the investment Carrion made to improve the Jaume Serra facilities.  Rather, the Eight Circuit acknowledged that when a defendant has invested generally in an industry, and not a particular product, the likelihood of prejudicial reliance decreases in proportion to the particular product’s role in the business. See Univ. of Pittsburgh v. Champion Prods., Inc., 686 F.2d 1040, 1048-49 (3d. Cir. 1982). Consequently, the Eight Circuit held that Carrion failed to show that it suffered undue prejudice as a result of Roederer’s delay in bringing suit, thus barring Carrion’s laches defense.  As a result, the Eight Circuit reversed and remanded the case.


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