Opinion ID: 768341
Heading Depth: 2
Heading Rank: 1

Heading: Laches, Acquiescence and Progressive Encroachment

Text: 36 In its motion for summary judgment, Exxon asserted the affirmative defenses of laches and acquiescence. Although laches precludes a plaintiff from recovering damages, it does not bar injunctive relief. See TWM Mfg. Co., Inc. v. Dura Corp., 592 F.2d 346, 349-50 (6th Cir. 1979) (Laches alone does not foreclose a plaintiff's right in an infringement action to an injunction and damages after the filing of the suit. Only by proving the elements of estoppel may a defendant defeat such prospective relief.); Tandy Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 366 n.2 (6th Cir. 1985) (same). BecauseKellogg withdrew its claim for actual and punitive damages, seeking injunctive relief only, the district court properly determined that laches was inapplicable and that Exxon must prove acquiescence. 37 Acquiescence, like laches, requires a finding of conduct on the plaintiff's part that amounted to an assurance to the defendant, express or implied, that plaintiff would not assert his trademark rights against the defendant. Elvis Presley Enter., Inc., v. Elvisly Yours, Inc., 936 F.2d 889, 894 (6th Cir. 1991) (quoting Sweetheart Plastics, Inc. v. Detroit Forming, Inc., 743 F.2d 1039, 1046 (4th Cir. 1984)). Although both laches and acquiescence require proof that the party seeking to enforce its trademark rights has unreasonably delayed pursuing litigation and, as a result, materially prejudiced the alleged infringer, acquiescence requires more. See Elvis, 936 F.2d at 894 (holding that with acquiescence, more is necessary than the ordinary requirement of showing unreasonable delay and prejudice to the defendant); Tandy, 769 F.2d at 366 n.2 (To deny injunctive relief in trademark litigation,... some affirmative conduct in the nature of an estoppel, or conduct amounting to 'virtual abandonment,' is necessary.) (internal citations omitted); Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 462 (4th Cir. 1996) (Although the doctrines of acquiescence and laches, in the context of trademark law, both connote consent by the owner to an infringing use of his mark, acquiescence implies active consent, while laches implies a merely passive consent.); SCI Sys., Inc. v. Solidstate Controls, Inc., 748 F. Supp. 1257, 1262 (S.D. Ohio 1990) (same). 38 In University of Pittsburgh v. Champion Prod., Inc., 686 F.2d 1040, 1044-45 (3d Cir. 1982), a decision relied upon by this Court in Tandy, the Third Circuit recognized that although mere delay by an injured party in bringing suit would not bar injunctive relief, there is that narrow class of cases where the plaintiff's delay has been so outrageous, unreasonable and inexcusable as to constitute a virtual abandonment of its right. (citing Anheuser-Busch, Inc. v. DuBois Brewing Co., 175 F.2d 370, 374 (3d Cir. 1949) ([M]ere delay by the injured party in bringing suit would not bar injunctive relief. This doctrine, however, has its limits; for example, had there been a lapse of a hundred years or more, we think it highly dubious that any court of equity would grant injunctive relief against even a fraudulent infringer.)). 39 Implicit in a finding of laches or acquiescence is the presumption that an underlying claim for infringement existed at the time at which we begin to measure the plaintiff's delay 2 . In Brittingham v. Jenkins, 914 F.2d 447 (4th Cir. 1990), the Fourth Circuit held: 40 While the operation of laches depends upon the particular facts and circumstances of each case, the following factors ordinarily should be considered: (1) whether the owner of the mark knew of the infringing use; (2) whether the owner's delay in challenging the infringement of the mark was inexcusable or unreasonable; and (3) whether the infringing user was unduly prejudiced by the owner's delay. 41 Id. at 456. In Sara Lee, the Fourth Circuit recognized that a laches analysis assumes the existence of an infringement for an extended period prior to the commencement of litigation. 81 F.3d at 462 (relying on Brittingham and holding that to the extent that a plaintiff's prior knowledge may give rise to the defense of estoppel by laches, such knowledge must be of a pre-existing, infringing use of a mark.). In other words, when a defendant charged with trademark infringement avails itself of an acquiescence defense, we must presume the existence of some underlying infringement to which the plaintiff acquiesced, and any delay attributable to theplaintiff must be measured from the time at which the plaintiff knew or should have known that this infringement had ripened into a provable claim. See Kason Indus., Inc. v. Component Hardware Group, 120 F.3d 1199, 1206 (11th Cir. 1997) ([D]elay is to be measured from the time at which the plaintiff knows or should know she has a provable claim for infringement.); Gasser Chair Co. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 777 (Fed. Cir. 1995) (holding that the trigger for delay begins when the plaintiff's right ripens into one entitled to protection) (citation omitted). 42 Potential plaintiffs in trademark infringement cases steer a hazardous course between the Scylla of laches and acquiescence and the Charybdis of premature litigation. The Fourth Circuit articulated this quandary as follows: 43 From the time that [defendant] Kayser-Roth first introduced its Leg Looks (R) products, [plaintiff] Sara Lee has been on the horns of a dilemma: If [the trademark owner] waits for substantial injury and evidence of actual confusion, it may be faced with a laches defense. If it rushes immediately into litigation, it may have little or no evidence of actual confusion and real commercial damage, may appear at a psychological disadvantage as shooting from the hip and may even face a counterclaim for overly aggressive use of litigation. 44 Sara Lee, 81 F.3d at 462 (internal quotation marks and citation omitted) (third alteration in original). This common predicament has given rise to the doctrine of progressive encroachment. 45 Progressive encroachment is relevant in assessing whether laches or acquiescence may be used to bar a plaintiff's trademark claim; it applies in cases where the defendant has engaged in some infringing use of its trademark--at least enough of an infringing use so that it may attempt to avail itself of a laches or acquiescence defense--but the plaintiff does not bring suit right away because the nature of defendant's infringement is such that the plaintiff's claim has yet to ripen into one sufficiently colorable to justify litigation. 46 In Kason, the Eleventh Circuit addressed a plaintiff's progressive encroachment claim in the context of a defendant's laches defense, explaining the relationship between the two doctrines as follows: 47 Though courts typically discuss encroachment as an excuse for delay, a close examination of... cases reveals that the doctrine significantly overlaps the courts' inquiry into when delay begins. In AmBrit, for example, this court measured delay from the point where the plaintiff knew the defendant was manufacturing the allegedly infringing product, but we considered the plaintiff's reasonable explanation for failing to sue immediately. Kason, 120 F.3d at 1206 (citing AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1546 (11th Cir. 1986)). 48 The plaintiff in Kason was a manufacturer and distributor of commercial refrigeration and food services hardware, and the defendant produced and marketed nearly identical hardware. See id. at 1201. Both parties competed in two markets: the original equipment manufacturer's market (OEMs) and the replacement parts distribution markets. See id. However, with regard to some particular parts, the plaintiff alleged that the defendant had been competing only in one market and had slowly encroached upon the other market--that is, the market in which plaintiff had been competing. See id. at 1201-2. Kason held that where a defendant begins use of a trademark or trade dress in the market, and then directs its marketing or manufacturing efforts such that it is placed more squarely in competition with the plaintiff, the plaintiff's delay is excused. Id. at 1205. 49 Because the doctrines of laches and acquiescence must assume some underlying infringement, we recognize progressive encroachment as simply giving the plaintiff some latitude in the timing of its bringing suit, that is, waiting until the likelihood ofconfusion looms large to bring the action. Sara Lee, 81 F.3d at 462 (quoting Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 31.06[2][a] (3d ed. 1995), renumbered as § 31.19 (4th ed. 1997)); see also O. & W. Thum Co. v. Dickinson, 245 F. 609, 623 (6th Cir. 1917) (recognizing that progressive encroachment is a course [that] does not tend to arouse hostile action until it is fully developed). Progressive encroachment is an offensive countermeasure to the affirmative defenses of laches and acquiescence; upon a finding of progressive encroachment, the delay upon which those defenses are premised is excused. In other words, progressive encroachment allows the plaintiff to demonstrate that although it might have been justified in bringing suit earlier but did not, certain factors now exist that have prompted it to do so. 50 The Kason Court, like many courts before it, recognized that implicit in a progressive encroachment analysis is an inquiry into the likelihood of confusion between the parties' marks. 51 The district court should have evaluated under the progressive encroachment theory the point at which Kason could have demonstrated likelihood of confusion in its primary (either OEM or replacement) market.... It is not clear when Kason determined there was a likelihood of confusion in either market to file a claim for dress infringement. Thus, the district court on remand must view the merits of Kason's claims of trade dress infringement for each product in terms of the market involved. It must determine whether there is a difference between the two markets material to the infringement claim, and whether and when any likelihood of confusion might have ripened into a claim. We deem all of these facts not only relevant to the merits of Kason's claims, but also relevant to the equitable doctrine of laches and when, if at all, Kason legally could have asserted a provable claim of trade dress infringement. On the record submitted, without further explication by the district court, we cannot say as a matter of law that laches bars any claim. 52 Kason, 120 F.3d at 1206-07 (emphasis added). 53 In SCI Systems, 748 F. Supp. at 1257, the district court also was faced with a progressive encroachment claim countering a laches defense. There, the plaintiff provided a variety of electrical and electronic goods, including electrical power supplies and engineering services, and the defendant manufactured and sold electrical power control equipment. See id. at 1259. The plaintiff admitted that it had been aware of defendant's trademark and product since 1969, but claimed that the defendant had only recently departed from the business practices which had allowed the parties to co-exist peaceably for many years, and that defendant has only recently encroached on plaintiff's rights. Id. at 1262. The plaintiff presented evidence showing that the defendant made certain changes to its mark, making it more similar in appearance to plaintiff's mark. See id. at 1262-63. 54 [I]t was not until the 1980's when defendant entered into the data processing market, of which plaintiff had been a part for many years, by offering uninterruptible power supplies specially designed for use with data processing equipment... that actual confusion between the companies developed. It was not until this time, plaintiff contends, that the defendant changed its color scheme and its trademark presentation significantly which brought its usage of the mark SCI much closer to plaintiff's use. 55 Id. at 1262 (emphasis added). 56 The SCI Court recognized that under a progressive encroachment analysis, changes to a trademark and entry into the same marketing area can defeat a claim of laches. See id. at 1262. Because the defendant in SCI had expanded its line and entered into new marketing areas[, and]... changed the appearance of its mark through presentation changes in design and color, the SCI Court, without addressing the merits of the underlying dispute or whether defendant was within its rights to make such changes, reversed the district court's grant of summary judgment in favor of the defendant on the defense of laches. Id. at 1263. 57 In Prudential Ins. Co. v. Gibraltar Fin. Corp., 694 F.2d 1150, 1154 (9th Cir. 1982), a decision largely relied upon by the SCI Court, the plaintiff was a general insurance provider, and the defendant was a savings and loan association with insurance sales comprising less than 0.3 % of its business. See id. at 1155. Relying on a number of progressive encroachment cases, the Prudential Court stated: 58 These cases all rely on the principle that if the junior user of a mark moves into direct competition with the senior user, selling the same product through the same channels and causing actual market confusion, laches is no defense. Gibraltar has not moved into direct competition with Prudential as contemplated in these cases. Gibraltar and Prudential do not offer the same services to any substantial extent and there is no evidence that actual confusion of their services has occurred. 59 Id. at 1154 (emphasis added) (citing Chandon Champagne Corp. v. San Marino Wine Corp., 335 F.2d 531, 535 (2nd Cir. 1964); Standard Oil Co. v. Standard Oil Co., 252 F.2d 65 (10th Cir. 1958); Independent Nail & Packing Co. v. Stronghold Screw Products, Inc., 205 F.2d 921, 927 (7th Cir. 1953); Miss Universe, Inc. v. Patricelli, 271 F. Supp. 104, 110 (D. Conn. 1967)). 60 Kason, SCI and Prudential, however, do not stand for the proposition that direct competition of identical products in identical markets is required for a finding of progressive encroachment. For example, in Independent Nail & Packing, 205 F.2d at 923, the plaintiff was a manufacturer of nails, and registered its Stronghold Nails trademark in 1938. Shortly thereafter, the defendant, a manufacturer of screws, nuts, and bolts, began using the name Stronghold in the design of a bolt and washer displayed on its business forms and catalogs; also displayed on these items was the company's name, Manufacturers Screw Products. See id. at 923-24. The plaintiff was aware of defendant's use of the name Stronghold on its business forms as early as 1941. See id. at 924, 927. In 1946, the defendant changed its name from Manufacturers Screw Products to Stronghold Screw Products, and the plaintiff filed suit in 1948. See id. The district court held that the plaintiff was barred by laches because it knew of defendant's infringing use of its trademark as early as 1940 or 1941 and did not bring suit until 1948. See id. The Seventh Circuit reversed the district court under a theory of progressive encroachment, stating: 61 Prior to 1946 there was no confusion among prospective customers that had come to the attention of plaintiff's officers. It was defendant's incorporation of the word Stronghold into its business name that caused most of the confusion. Defendant's course was progressive    encroachment and such a course does not tend to arouse hostile action until it is fully developed. 62 Independent Nail & Packing, 205 F.2d at 927 (emphasis added) (citing O. & W. Thum, 245 F. at 623). In determining whether, for purposes of the defendant's laches defense, the plaintiff had unreasonably delayed in filing suit, the court did not consider the period prior to the defendant's incorporation of the word Stronghold into its business name, when there was little likelihood of confusion. Rather, the court determined when the likelihood of confusion began to loom large, considering such factors as the similarity in scope of the parties' geographic markets, the degree to which the parties contacted the same prospective customers and appealed to the same general users' market, and the interchangeability of the products the partiessold; the court calculated the reasonableness of the plaintiff's delay from that point. The court's finding of progressive encroachment was not dependent upon a finding of direct competition between identical products; rather the progressive encroachment finding involved a recognition that the defendant's increasing use of the challenged word was not actionable until it actually caused a likelihood of confusion. 63 It is clear from all of these cases that the progressive encroachment analysis turns not on the single question of direct competition, but rather, on the likelihood of confusion resulting from the defendant's moving into the same or similar market area and placing itself more squarely in competition with the plaintiff. This approach is consistent with the principle that the touchstone of liability for trademark infringement is the likelihood of confusion, not direct competition of identical products. Although direct competition of identical products certainly would make it easier for a plaintiff to show a likelihood of confusion, this factor alone is not dispositive of progressive encroachment. In evaluating a plaintiff's claim of progressive encroachment, a court must perform a likelihood of confusion analysis, informed by factors such as whether the defendant has brought itself more squarely into competition with the plaintiff, whether the defendant has made changes to its mark over the years so that it more closely resembles plaintiff's mark, whether the parties market to the same customers or area, and whether the parties sell products interchangeable in use. 64 In the case before us here, the district court held both that Kellogg had acquiesced in Exxon's use of the cartoon tiger and that Kellogg could not demonstrate progressive encroachment by Exxon on Kellogg's mark. We will address first the district court's holding that Kellogg acquiesced in Exxon's use of the cartoon tiger. 65 In granting Exxon's motion for summary judgment based on acquiescence, the district court held that Kellogg's remaining silent for a grossly extended period of time and refusing to facilitate the protection of its trademark constituted conduct amounting to virtual abandonment such that it acquiesced in Exxon's infringing use of its cartoon tiger. See SCI, 748 F. Supp. at 1262; Tandy, 769 F.2d at 366 n.2. Relying on the Anheuser-Busch decision, 3 the district court found that Kellogg similarly was grossly remiss in that Exxon registered its Whimsical Tiger in 1965-with no opposition from Kellogg-and Kellogg did not file suit until 31 years later. See Kellogg, 50 U.S.P.Q.2d at 1505. 66 We think that the district court erred in this conclusion. The failure to oppose Exxon's registration of its tiger and the lapse of time from that event until the filing of this action are not dispositive here. Although Exxon did in fact register its Whimsical Tiger trademark in 1965--with no opposition from Kellogg--Exxon's trademark registration was for use in connection with the sale of petroleum products, a product and product market with which Kellogg had no connection. Exxon had used its cartoon tiger to promote petroleum sales and Kellogg used its trademark to promote food sales; the two marks peaceably co-existed, each catering to its own market. Because proof of the likelihood of confusion is necessary in any trademark infringement claim, Kellogg was not obligated to bring suit at that time in order to protect its trademark. It is undisputed, however, that at some point after registering its cartoon tiger in 1965, Exxon moved into the non-petroleum market of food, beverages, and retail convenience stores and used its cartoon tiger in connection with those sales. The point atwhich Exxon established itself in this non-petroleum market was the point at which Kellogg knew or should have known that it now had a provable claim for infringement; it was at this point that Kellogg's duty to defend its trademark was triggered, and it is from this point that any delay must be measured for purposes of determining laches or acquiescence. We hold that Exxon's 1965 registration was insufficient to put Kellogg on notice of Exxon's later use of its cartoon tiger in connection with the sale of non-petroleum products. The district court's failure to distinguish between Exxon's sale of petroleum and non-petroleum products resulted in the clearly erroneous conclusion that Kellogg acquiesced in Exxon's use of its cartoon tiger to promote any and all of its products. 67 Although Kellogg originally challenged Exxon's use of its cartoon tiger in connection with both petroleum and non-petroleum products, Kellogg now seeks injunctive relief only to prohibit Exxon's continued use of its cartoon tiger in connection with food, beverages, and retail convenience stores. 68 To defeat a suit for injunctive relief, a defendant must also prove elements of estoppel which requires more than a showing of mere silence on the part of the plaintiff; defendant must show that it had been misled by plaintiff through actual misrepresentations, affirmative acts of misconduct, intentional misleading silence, or conduct amounting to virtual abandonment of the trademark. 69 SCI, 748 F. Supp. at 1262. The record reflects a genuine factual dispute as to whether Kellogg was put on notice of such use by Exxon in the mid 1980s or the early 1990s; indeed, the evidence suggests that in 1992, when Kellogg requested examples of Exxon's then-current use of its cartoon tiger in the United States, Exxon did not include a single example of its cartoon tiger used in connection with the sale of food items, leading Kellogg to believe that Exxon's use of its cartoon tiger in the United States was limited to the promotion of petroleum products. But even if we were to assume for the sake of argument that Kellogg should have known as early as 1984, when Exxon opened its first convenience store, that Exxon was using the cartoon tiger to promote the sale of food products, Kellogg's failure to bring suit until 1996 was not so outrageous, unreasonable and inexcusable as to constitute a virtual abandonment of its right to seek injunctive relief with regard to the sale of non-petroleum products. See University of Pittsburgh, 686 F.2d at 1044-45. There simply is no evidence in this record that in waiting until 1996 to file its complaint, Kellogg actively consented to Exxon's use of its cartoon tiger in connection with the sale of non-petroleum products or that it engaged in some affirmative conduct in the nature of an estoppel, or conduct amounting to 'virtual abandonment.'  See Tandy, 769 F.2d at 366 n.2 (internal citations omitted). 70 We therefore hold that, as a matter of law, Kellogg did not acquiesce in Exxon's use of its cartoon tiger in connection with the sale of non-petroleum products. Accordingly, we reverse the district court's grant of summary judgment to Exxon on the infringement claim and remand this matter for trial on the merits of that claim. 71 We turn next to the district court's conclusion, based largely on the Prudential decision, that direct competition was dispositive of Kellogg's progressive encroachment claim: 72 Although Exxon has entered into the convenient market food sales arena, Exxon has not become a manufacturer or distributor of food items. Exxon's product is a retail convenience store engaged in the business of selling food on the premises of gasoline service stations. Kellogg's product for the purposes of this case is cereal. Although, Exxon may sell Kellogg's cereal product in the Tiger Mart or Tiger Express stores, this fact alone does not establish that the parties are competitors in the same or even a related market. Even ifthere is actual confusion between the Kellogg and Exxon cartoon tiger trademarks, connection between the parties' products and marketing channels for the sale of their products is too attenuated to support Kellogg's claim of progressive encroachment. 73 Kellogg, 50 U.S.P.Q.2d at 1507. In ruling, without engaging in any analysis of the likelihood of confusion, that progressive encroachment requires direct competition of identical products, the district court erred as a matter of law. The district court held that (1) a plaintiff who failed to bring suit when it first learned of the defendant's infringing use of plaintiff's mark has acquiesced in the defendant's infringing use, but (2) the plaintiff does not have a meritorious claim of progressive encroachment because the parties' products are dissimilar and the connection between their marketing channels is attenuated. These two propositions are fundamentally irreconcilable. If the second were true, there could be no likelihood of confusion; without a likelihood of confusion, the plaintiff would not have a provable claim of infringement; in the absence of a provable claim of infringement, there would be no basis for the plaintiff's filing suit in the first place, and no infringing conduct in which the plaintiff could have acquiesced. Put another way, if there is sufficient similarity between the products and connection between the marketing channels to start the clock running on the defendant's affirmative defense of acquiescence, then there is sufficient similarity and connection to permit the plaintiff to counter that defense with a showing of progressive encroachment. 74 Here, we have found as a matter of law that Kellogg did not acquiesce in Exxon's use of the cartoon tiger. Because progressive encroachment has relevance only to counter Exxon's claim of acquiescence, the district court erred in treating progressive encroachment as a claim independent of Exxon's acquiescence defense. Therefore, we will vacate the district court's grant of summary judgment to Exxon with regard to progressive encroachment; we note that the district court need not engage in a progressive encroachment analysis on remand.