Court Opinion

ID: 3049611
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:27:59.531439+00
Date Added: 2024-06-11T11:41:14.501448
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

GROCERY OUTLET INC.,                   
                Plaintiff-Appellant,
                 v.                          No. 06-16380
ALBERTSON’S INC.; AMERICAN                    D.C. No.
STORES COMPANY, LLC; LUCKY                 CV-06-02173-JSW
STORES, INC.; AMERICAN STORES
COMPANY, LLC,
              Defendants-Appellees.
                                       

GROCERY OUTLET INC.,                   
                 Plaintiff-Appellee,
                v.                           No. 06-16448
ALBERTSON’S INC.; AMERICAN                    D.C. No.
                                           CV-06-02173-JSW
STORES COMPANY, LLC; LUCKY
STORES, INC.; AMERICAN STORES                 OPINION
COMPANY, LLC,
            Defendants-Appellants.
                                       
        Appeal from the United States District Court
           for the Northern District of California
         Jeffrey S. White, District Judge, Presiding

                  Argued and Submitted
       February 13, 2007—San Francisco, California

                    Filed August 9, 2007

    Before: J. Clifford Wallace, Dorothy W. Nelson, and
          M. Margaret McKeown, Circuit Judges.

                            9551
9552    GROCERY OUTLET v. ALBERTSON’S
            Per Curiam Opinion;
       Concurrence by Judge Wallace;
       Concurrence by Judge McKeown
              GROCERY OUTLET v. ALBERTSON’S           9553

                       COUNSEL

Peter W. Craigie, Kristen E. Drake, Craigie, McCarthy &
Clow, San Francisco, California, and Louis T. Pirkey, Susan
J. Hightower, Pirkey Barber, LLP, Austin, Texas, for the
plaintiff-appellant.

Robert A. Weikert, Veronica Colby Devitt, John A. Cha-
towski, Marlene J. Williams, Thelen Reid & Priest, LLP, San
Francisco, California, for the defendants-appellees.

                        OPINION

PER CURIAM.

  Grocery Outlet, Inc. (“Grocery”) appeals from a prelimi-
nary injunction granted in favor of Albertson’s, Inc.
9554            GROCERY OUTLET v. ALBERTSON’S
(“Albertson’s”), one of its competitors in the retail grocery
industry. The district court concluded, at this stage of the pro-
ceedings, that Albertson’s was the legal owner of the LUCKY
mark for retail grocery services and products and rejected
Grocery’s claim that Albertson’s abandoned the LUCKY
mark through its publicly advertised announcement that
LUCKY stores were converted to Albertson’s stores after a
company merger in late 1999.

   We review a preliminary injunction for abuse of discretion.
Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., Inc., 240
F.3d 832, 839 (9th Cir. 2001). We review underlying legal
issues de novo and findings of fact for clear error. Brookfield
Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036,
1046 (9th Cir. 1999).

   A preliminary injunction may be granted in a trademark
case where the moving party demonstrates either (1) “a com-
bination of probable success on the merits and the possibility
of irreparable injury or (2) the existence of serious questions
going to the merits and that the balance of hardships tips
sharply in [its] favor.” Sardi’s Rest. Corp. v. Sardie, 755 F.2d
719, 723 (9th Cir. 1985) (emphases in original). “These two
formulations represent two points on a sliding scale in which
the required degree of irreparable harm increases as the prob-
ability of success decreases.” A&M Records, Inc. v. Napster,
Inc., 239 F.3d 1004, 1013 (9th Cir. 2001) (quotation marks
and citation omitted). They are not separate tests but “the
outer reaches of a single continuum.” Los Angeles Mem’l Col-
iseum Comm’n v. Nat’l Football League, 634 F.2d 1197, 1201
(9th Cir. 1980) (quotation marks and citation omitted).

   [1] To establish infringement of a registered trademark, the
trademark holder must show that it is (1) the owner of a valid,
protectable mark, and (2) that the alleged infringer is using a
confusingly similar mark. 15 U.S.C. § 1114(1); Brookfield,
174 F.3d at 1046. Abandonment is a defense to a claim of
infringement of a registered trademark. 15 U.S.C.
                 GROCERY OUTLET v. ALBERTSON’S                 9555
§ 1115(b)(2). The Lanham Act provides for two ways that a
trademark may be abandoned, namely, through (1) nonuse, or
(2) the mark becoming generic. See 15 U.S.C. § 1127. To
show abandonment by nonuse, the party claiming abandon-
ment must prove both the trademark owner’s (1) “discontinu-
ance of trademark use” and (2) “intent not to resume such
use.” Electro Source, LLC v. Brandess-Kalt-Aetna Group,
Inc., 458 F.3d 931, 935 (9th Cir. 2006) (citing 15 U.S.C.
§ 1127).

   [2] Grocery does not dispute the district court’s finding that
Albertson’s is the legal owner of various federal and state
trademark registrations of the LUCKY mark associated with
retail grocery services and products. Nor does it dispute that
Grocery’s use of the LUCKY mark for retail grocery services
was likely to cause consumer confusion. Thus, the district
court’s conclusion that Albertson’s was likely to succeed on
its trademark infringement claim necessarily turned on
whether Grocery was likely to prove its abandonment
defense.

   Although the parties disagree as to the standard of proof
applicable to the defense of abandonment, Grocery waived its
challenge on this point by adopting the clear and convincing
standard in its briefing in the district court. In light of the dis-
trict court’s findings and this concession, we need not resolve
the burden of proof issue.

   [3] The district court’s analysis is careful and thorough.
The findings are preliminary and, as the district court noted,
“are not meant to be binding.” We conclude that the district
court did not abuse its discretion in concluding that Albert-
son’s demonstrated a strong likelihood of prevailing on the
merits of its trademark infringement claim and the possibility
of irreparable injury in the absence of a preliminary injunc-
tion. Nor did it abuse its discretion in concluding that Grocery
did not establish its defense of abandonment, where Albert-
son’s offered sufficient evidence of its intent to resume use of
9556           GROCERY OUTLET v. ALBERTSON’S
the LUCKY mark within the reasonably foreseeable future
during the short period of alleged non-use. See 15 U.S.C.
§ 1127; Electro Source, 458 F.3d at 935.

  AFFIRMED.

WALLACE, Senior Circuit Judge, concurring:

   I agree with our opinion resolving this appeal, but write
separately on the burden-of-proof issue. We have held that
under the Lanham Act, 60 Stat. 427, 15 U.S.C. §§ 1051-1127
(1946), the burden of proving abandonment is “strict.” Pru-
dential Ins. Co. of Am. v. Gibraltar Fin. Corp. of Cal., 694
F.2d 1150, 1156 (9th Cir. 1982). We have also indicated that
this strict burden is equivalent to a “high” one. See Edwin K.
Williams & Co., Inc. v. Edwin K. Williams & Co.-East, 542
F.2d 1053, 1059 (9th Cir. 1976), citing Am. Foods, Inc. v.
Golden Flake, Inc., 312 F.2d 619, 625 (5th Cir. 1963) (hold-
ing that defendant failed to meet the “burden of strict proof”
required to show abandonment).

   Despite these statements, Judge McKeown repeats the
incorrect argument she recently made in Electro Source, LLC
v. Brandess-Kalt-Aetna Group, Inc., 458 F.3d 931, 935 n.2
(9th Cir. 2006), that the burden of proof in abandonment cases
is a question unanswered in our circuit. True, we are more
accustomed to applying the “clear and convincing evidence”
and “preponderance of the evidence” standards. But merely
because Prudential and Williams invoke an unfamiliar or for-
gotten standard does not mean that the burden-of-proof issue
is unresolved or that we may disregard those cases.

   In my view, meeting a strict burden requires proof by clear
and convincing evidence. Before the enactment of the Lan-
ham Act, courts often required strict proof to establish a for-
feiture. See, e.g., Empress Theatre Co. v. Horton, 266 F. 657,
               GROCERY OUTLET v. ALBERTSON’S              9557
664 (8th Cir. 1920) (rights under a lease); United States v.
Four Packages of Cut Diamonds, 247 F. 354, 357 (D.C.N.Y.
1917) (diamonds); Aetna Ins. Co. of Hartford, Conn. v. Rob-
inson, 10 N.E.2d 601, 604 (Ind.1937) (rights under an insur-
ance policy). This was also the standard applied to
abandonment of trademarks. See, e.g., Saunders v. Stringer,
251 N.W. 342, 343 (Mi. 1933); Julian v. Hoosier Drill Co.,
78 Ind. 408, 1881 WL 6748, at *3 (Ind. 1881) (per curiam)
(Hoosier Drill).

   In equally disparate cases, however, pre-Lanham Act courts
required clear and convincing evidence to establish a forfei-
ture. See, e.g., Hammer v. Garfield Min. & Mill. Co., 130 U.S.
291, 301 (1889) (mine); C. C. Co. v. United States, 147 F.2d
820, 823-24 (5th Cir. 1945) (canned oysters); Carrington v.
Crandall, 147 P.2d 1009, 1011 (Idaho 1944) (real property);
Hoff v. Girdler Corp., 88 P.2d 100, 102 (Colo. 1939) (en
banc) (gas lease) (requiring “clear, unequivocal and decisive”
evidence); Lane v. Amis Bros., 43 P.2d 73, 75 (Okla. 1935)
(homestead); Dwyer v. Ill. Oil Co., 252 N.W. 837, 838 (Minn.
1934) (rights under a contract); Supervisor of Pub. Accounts
v. Montreuil, 157 So. 783, 784 (La. App. 1934) (cigarettes
and a truck). And at least one court expressly required clear
and convincing evidence of abandonment of a trademark. See
Mathy v. Republic Metalware Co., 35 App. D.C. 151, 1910
WL 20792, at *3 (D.C. Cir. 1910); see also Hoosier Drill, 78
Ind. 408, 1881 WL 6748, at *3 (requiring “clear and unmis-
takable evidence”).

   Strict proof was no different than clear and convincing evi-
dence, and they were the same burden. Unsurprisingly, when
the Court of Appeals of New York required “strict proof” of
trademark abandonment, see Neva-Wet Corp. of Am. v. Never
Wet Processing Corp., 13 N.E.2d 755, 761 (N.Y. 1938), it
relied on Mathy and Hoosier Drill.

  It is not difficult to imagine why there were simultaneously
two equivalent standards of proof under the common law.
9558           GROCERY OUTLET v. ALBERTSON’S
Statutes or contracts underlying a forfeiture were “strictly”
construed. See C. C. Co., 147 F.2d at 824; Cartos v. Hartford
Acc. & Indem. Co., 169 S.E. 594, 598 (Va. 1933). The same
language used to describe the rule of construction may also
have come to describe the “higher degree of proof than a mere
preponderance” that was the “natural corollary” of that rule.
C. C. Co., 147 F.2d at 824.

   I will not presume, as Judge McKeown does, that Pruden-
tial and Williams idly required “strict proof” or that a “high
burden” be met. I have no doubt that our court meant that
abandonment under the Lanham Act must be shown by clear
and convincing evidence. This is the only plausible translation
of strict proof and high burden, and Judge McKeown offers
no other.

   I agree with Judge McKeown that 15 U.S.C. § 1127 says
nothing about the burden of proof, but she mistakenly con-
cludes that the preponderance of the evidence standard was
the “traditional” one. The traditional standard was clear and
convincing evidence (or strict proof), and there is nothing in
the Lanham Act indicating that Congress relaxed this burden.
See Chappell v. Robbins, 73 F.3d 918, 924 (9th Cir. 1996)
(“We may fairly presume that Congress is aware of the
common-law background against which it legislates . . . .”).

   Judge McKeown also correctly observes that the abandon-
ment defense under the Lanham Act is different than the one
under the common law. The Lanham Act requires proof of
“intent not to resume . . . use” and permits a presumption of
abandonment in certain cases, see 15 U.S.C. § 1127, while the
common law required proof of “intent to abandon,” Mathy,
1910 WL 20792, at *3. But that does not mean that the Lan-
ham Act adjusted the burden required to prove the defense. In
any event, Prudential and Williams require a different conclu-
sion. I would follow our cases.
                   GROCERY OUTLET v. ALBERTSON’S                     9559
McKEOWN, Circuit Judge, concurring:

   Given the standard of review on appeal and Grocery’s con-
cession as to the standard of proof for abandonment, I concur
in the court’s per curiam opinion. I write separately to express
my view on a question unanswered in our circuit. Although
we have previously held that “[a]bandonment of a trademark,
being in the nature of forfeiture, must be strictly proved,”
Prudential Insurance Company of America v. Gibraltar
Financial Corporation of California, 694 F.2d 1150, 1156
(9th Cir. 1982), and that “[b]ecause a finding of insufficient
control [of a tradename] essentially works a forfeiture, a per-
son who asserts insufficient control must meet a high burden
of proof,” Edwin K. Williams & Co., Inc. v. Edwin K. Wil-
liams & Co.-East, 542 F.2d 1053, 1054 (9th Cir. 1976), we
have not elaborated on the meaning of “strict proof” or “high
burden.” See Electro Source, LLC v. Brandess-Kalt-Aetra
Group, Inc., 458 F.3d 931, 935 n.2 (9th Cir. 2006) (reserving
the issue of the standard of proof to show trademark abandon-
ment).1

   In my view, the language of 15 U.S.C. § 11272 does not
  1
     The brief analysis in Edwin K. Williams & Co. does not address what
a “high” burden requires and the case relied on refers only to the “strict”
burden of proof of abandonment otherwise undefined in our circuit. See
id. at 1054 (citing Am. Foods, Inc. v. Golden Flake, Inc., 312 F.2d 619,
624-25 (5th Cir. 1963)).
   2
     A mark shall be deemed to be “abandoned” if either of the following
occurs:
      (1) When its use has been discontinued with intent not to
      resume such use. Intent not to resume may be inferred from cir-
      cumstances. Nonuse for 3 consecutive years shall be prima facie
      evidence of abandonment. “Use” of a mark means the bona fide
      use of such mark made in the ordinary course of trade, and not
      made merely to reserve a right in a mark.
      (2) When any course of conduct of the owner, including acts of
      omission as well as commission, causes the mark to become the
      generic name for the goods or services on or in connection with
9560              GROCERY OUTLET v. ALBERTSON’S
support an elevated standard of “clear and convincing.” The
statute does not impose a burden beyond the traditional pre-
ponderance of the evidence standard applicable in civil mat-
ters. Nor is there any evidence that Congress intended to raise
the bar to clear and convincing evidence,3 as argued by
Albertson’s. The federal courts of appeals that have consid-
ered the issue are in accord and have consistently applied the
preponderance of the evidence standard in the trademark
abandonment context. See Emergency One, Inc. v. Am.
FireEagle, Ltd., 228 F.3d 531, 536 (4th Cir. 2000) (applying
preponderance of the evidence standard); Roulo v. Russ Ber-
rie & Co., Inc., 886 F.2d 931, 938 (7th Cir. 1989) (same);
Cervecceria Centroamericana, S.A. v. Cervecerria India, Inc.,
892 F.2d 1021, 1023-24 (Fed. Cir. 1989) (same, in appeal
from trademark cancellation proceeding before Trademark
Trial and Appeal Board). These cases are predicated on the
statutory language of the Lanham Act, not on the common
law or some judicially-created hybrid standard.

  In addressing the Lanham Act’s changes from the common
law with respect to the law of abandonment, the Federal Cir-
cuit noted that

     [a]t common law there was no similar presumption

    which it is used or otherwise to lose its significance as a mark.
    Purchaser motivation shall not be a test for determining abandon-
    ment under this paragraph.
15 U.S.C. § 1127.
   3
     Rather, the statute recognizes that proving the subjective intent of a
trademark holder may be burdensome for a defendant and provides two
aids for demonstrating intent not to resume use: (1) intent may be inferred
from the circumstances, and (2) a rebuttable presumption of abandonment
arises after three consecutive years of nonuse. 15 U.S.C. § 1127; see
Cumulus Media, Inc. v. Clear Channel Communications, Inc., 304 F.3d
1167, 1174 (11th Cir. 2002). With that acknowledgment expressed in the
statute, I do not presume that Congress intended to raise the burden of
proof without specifying its intention to do so.
                   GROCERY OUTLET v. ALBERTSON’S                      9561
      of abandonment of a mark simply from proof of non-
      use. A challenger had to prove not only nonuse of
      the mark but also that the former user intended to
      abandon the mark. However, with respect to rights
      under the Lanham Act, proof of abandonment was
      facilitated by the creation of the . . . statutory pre-
      sumption.

Imperial Tobacco, Ltd., Assignee of Imperial Group PLC v.
Philip Morris, Inc., 899 F.2d 1575, 1579 (Fed. Cir. 1990)
(appeal from trademark cancellation proceeding before
TTAB) (citations omitted). Thus, the Federal Circuit cau-
tioned that “statements from opinions under the common law
of abandonment concerning the nature of the element of intent
and who had the burden of proof cannot be applied indiscrim-
inately to an abandonment case under the Lanham Act.” Id.
Although the vacuum in our circuit with respect to a square
holding on the burden of proof in abandonment cases may
cause some litigants and judges to fall back on pre-Lanham
Act cases, we are bound by the statute, not the common law.4
  4
    In his separate concurrence, Judge Wallace argues that the applicable
burden is clear and convincing evidence, relying on a case decided more
than 30 years before the Lanham Act. See Mathy v. Republic Metalware
Co., No. 623, 35 App. D.C. 151, 1910 WL 20792, at *3 (D.C. Cir. 1910).
That case is inapposite, however, as it was decided under the common law
regime requiring proof of “intent to abandon,” see id., rather than the Lan-
ham Act, which requires proof of “intent not to resume use” and permits
a presumption of abandonment after three consecutive years of nonuse.
See 15 U.S.C. § 1127; see also Exxon Corp. v. Humble Exploration Co.,
Inc., 695 F.2d 96, 102-03 (5th Cir. 1983) (“There is a difference between
intent not to abandon or relinquish and intent to resume use in that an
owner may not wish to abandon its mark but may have no intent to resume
its use. . . . An ‘intent to resume’ requires the trademark owner to have
plans to resume commercial use of the mark. Stopping at an ‘intent not to
abandon’ tolerates an owner’s protecting a mark with neither commercial
use nor plans to resume commercial use. Such a license is not permitted
by the Lanham Act.”) (emphasis added). Nor do the other non-trademark
cases, also decided before adoption of the Lanham Act, shed light on the
applicable burden of proof under the statute.