The U.S. Court of Appeals for the Ninth Circuit denied a laches defense where the senior user had knowledge of the junior user's activities, acquiesced in the junior user's use and only acted when, after 25 years, the channels of trade of the products of both users merged in the supermarket trade. Tillamook Country Smoker v. Tillamook County Creamery Association, Case No. 04-35843 (9th Cir., Oct. 11, 2006) (Silverman, J.).
The Tillamook County Creamery Association (Tillamook Creamery) has marketed cheeses under its name for nearly 100 years. It registered the word mark "Tillamook" with the U.S. Patent and Trademark Office (USPTO) in 1912 and again in 1950. In 1975, a member of the Tillamook Creamery approached the Creamery's general manager about his desire to start a processed meat company under the name Tillamook Country Smoker (Tillamook Smoker). The general manager of the Tillamook Creamery did not object so long as Tillamook Smoker did not build a cheese factory.
The Tillamook Smoker began operations in 1976 and quickly expanded and started selling its products under the name Tillamook Country Smoker. Not only did the Tillamook Creamery refrain from objecting to the use of the word Tillamook, it actively encouraged the use by selling Tillamook Country Smoker products in its own store and mail-order catalog.
In 1998, the Tillamook Creamery began recording instances of brand confusion between its own products and Tillamook Smoker's. The Tillamook Creamery then sent a cease-and-desist letter to Tillamook Smoker, which prompted Tillamook Smoker to file a declaratory judgment action to seek a ruling that it was not infringing the Tillamook mark. The trial court ruled, in part, that the Tillamook Creamery's objections to the use of the Tillamook Country Smoker were barred by laches. Tillamook Creamery appealed.
The Ninth Circuit affirmed the district court's decision. Holding that the limitations period for laches starts from the time that plaintiff knew or should have known about its potential cause of action.
When analyzing a laches defense, courts first determine when the statute of limitations period expired for the most closely analogous action under state law. If the plaintiff filed within that period, there is a strong presumption against laches. If the plaintiff filed outside that period, the presumption is reversed. Here, the district court identified two possible limitations periods under state law -- two years or 10 years. Under either period, it was not disputed that Tillamook Smoker began using the Tillamook Country Smoker mark in 1976 and that Tillamook Creamery did not file suit until 2002.
Where, as here, the requisite amount of time had passed without action by plaintiff, the court must balance the following six factors to determine whether the trademark owner's delay in filing suit was unreasonable and, therefore, barred: strength and value of the trademark rights asserted, plaintiff's diligence in enforcing mark, harm to senior user, good faith ignorance by junior user, competition between senior and junior users and extent of harm suffered by the junior user because of senior user's delay.
With regard to due diligence factor, the court found that Tillamook Creamery knew about the use of the infringing mark on complementary products in the same geographical area but did nothing to prevent it for 25 years. Tillamook Creamery raised the doctrine of progressive encroachment in an effort to explain and excuse its long delay in bringing suit. The doctrine of progressive encroachment allows a trademark owner to wait to sue a junior user until the junior user engages in directed competition. Specifically, Tillamook Creamery claimed that Tillamook Smoker's sales expanded significantly in the late 1990s making the infringement claim timely. The court held that the doctrine of progressive encroachment does not apply under these circumstances because the Tillamook Smoker merely grew its existing business and did not expand into a new product market in competition with the Tillamook Creamery. The court noted that had Tillamook Smoker expanded its business into selling cheese in grocery stores, it would have been a different story.
The court also rejected Tillamook Creamery's argument that an injunction should issue to protect the public from inevitable confusion, holding that inevitable confusion is actionable only where the product is harmful or otherwise a threat to public safety, which was not the case here. Accordingly, the Ninth Circuit found that the Tillamook Creamery was barred from asserting claims for infringement and from obtaining injunctive relief to stop the use of the Tillamook County Smoker mark.
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