Kraft Foods Group is pursuing a trademark infringement suit under the Lanham Act against Cracker Barrel Old Country Store. The federal district judge granted Kraft a preliminary injunction against the sale by Cracker Barrel Old Country Store of food products to grocery stores under the name Cracker Barrel, which is a registered trademark of Kraft. The Country Store appealed and the Seventh Circuit Court of Appeals has now affirmed the injunction. Brands LLC v. Cracker Barrel Old Country Store, Inc., No. 13–2559 (7th Cir. November 14, 2013).
Kraft products in grocery stores include a number of packaged cheeses sold under the trademarked “Cracker Barrel” label. Kraft has been selling cheese in grocery stores under that name for more than half a century. Thousands of grocery stores carry Kraft cheeses bearing that label. Kraft does not sell any non-cheese products under the name Cracker Barrel.
Cracker Barrel Old Country Store is a well-known chain of low-price restaurants. Upon learning recently that the Old Country Store planned to sell a variety of food products (not including cheese, however), such as packaged hams, in grocery stores under its logo, “Cracker Barrel Old Country Store” (the last three words are in smaller type in the logo), Kraft filed suit.
Kraft claims that many consumers will be confused by the similarity of the logos and think that food products so labeled are Kraft products, with the result that if they are dissatisfied with the Old County Store product they will blame Kraft.
In its suit, Kraft does not question the Old County Store’s right to sell the food products at issue under the name Cracker Barrel in its own restaurants, in the small “country stores” that adjoin the restaurants, or by mail order or on the Web. Kraft objects only to their sale in grocery stores.
The court of appeals agreed that there was a sufficient showing of possible confusion to warrant the injunction. According to the court of appeals:
Were Cracker Barrel cheeses and Cracker Barrel meats exhibited side by side on the shelf, the difference in the appearance of the logos of the two brands might as we said lead some consumers to think they were made by different companies—but might lead others to think the opposite, since different products of the same manufacturer are often exhibited together. If on the other hand the Kraft cheeses and CBOCS food products are at different locations in the store, some consumers might forget the difference between the logos and think all the products Kraft products. […] Even savvy consumers might be fooled, because they know that producers often vary the appearance of their trademarks.
The court noted that another reason to expect confusion is that both Cracker Barrel cheeses and most meat products that the Old Country Store has licensed for sale to grocery stores are inexpensive—under $5:
Generally only very cost-conscious consumers are apt to scrutinize carefully the labels of the less expensive items sold in a grocery store. Familiarity is likely to have made the name Cracker Barrel salient to grocery shoppers, and so any product bearing that name might be attributed to Kraft even if close scrutiny of the label would suggest that the product might well have a different origin.
The court concluded that Kraft could be damaged if a significant number of consumers confused the names and thought the Old County Store’s products were made by Kraft:
A trademark’s value is the saving in search costs made possible by the information that the trademark conveys about the quality of the trademark owner’s brand. The brand’s reputation for quality depends on the owner’s expenditures on product quality and quality control, service, advertising, and so on. Once the reputation is created, the firm will obtain greater profits because repeat purchases and word-of-mouth endorsements will add to sales and because consumers will be willing to pay a higher price in exchange for a savings in search costs and an assurance of consistent quality. These benefits depend on the firm’s ability to maintain that consistent quality. When a brand’s quality is inconsistent, consumers learn that the trademark does not enable them to predict their future consumption experiences from their past ones. The trademark does not then reduce their search costs. They become unwilling to pay more for the branded than for the unbranded good, and so the firm no longer earns a sufficient return on its expenditures on promoting the trademark to justify them.
Id. In short, if a consumer has a bad experience with an Old County Store product and blames Kraft, thinking it the producer, Kraft’s sales of Cracker Barrel cheeses are likely to decline; “for a consumer who thinks Kraft makes bad hams may decide it probably makes bad cheeses as well.” Id. Thus, “competition in food products will be harmed … to the extent that the sale of [Old Country Store] food products in grocery stores confuses consumers and as a result impairs sales of Kraft products for reasons having nothing to do with any product-quality problems with Kraft.” Id.
The court of appeals affirmed the district judge’s finding that the likelihood of confusion, and of resulting harm to Kraft, from Cracker Barrel Old Country Store selling its products to grocery stores warranted a preliminary injunction. Given the similarity of logos and of products, and of the channels of distribution (and the advertising overlap) as well as the availability to Old Country Store of alternatives to grocery stores for reaching a large consumer public under the logo, the court of appeals found there was adequate support for the issuance of the preliminary injunction.
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