Thursday, July 31, 2008

Cristal light: laches bars claim against Cristalino

Roederer v. J. Garcia Carrion, S.A., 2008 WL 2901609 (D. Minn.)

Roederer sells the upmarket champagne Cristal. Carrion sells wine from the Spanish winery Jaume Serra, including cava, a bubbly wine. Jaume Serra first used “Cristalino” as a mark for a cava sometime before 1987. By 1989, US sales began at a low volume. By 1997, US sales were at 400,000 bottles/year and Cristalino had nationwide penetration.

The initial label used “Cristalino Jaume Serra.” But in 1993, “Jaume Serra” was deemphasized, leaving “Cristalino” with sole prominence.

In 1998, Carrion began a 14-million-euro modernization project that expanded its capacity to produce all its wines, including Cristalino. Annual US sales for the next three years were about 700,000 bottles; 2002 saw seven-figure sales; and Carrion presently sells three million bottles a year in the US, about 27% of Carrion’s total cava production, making Carrion one of the largest cava exporters.

Increased sales brought increased publicity, starting with minor reviews by Wine & Spirits in 1991 and by The Wine Spectator and San Francisco Independent in 1993. The frequency of such mentions grew significantly by 1999. Carrion has marketed Cristalino in the US as a “value brand,” using standard wine advertising media and in-store promotions.

Roederer’s Cristal champagne, by contrast, is expensive and sold in distinctive, flat-bottomed crystal bottles. Roederer has a US registration for CRISTAL CHAMPAGNE and a related design. It opposed registration of CRISTALINO and similar marks by Carrion in various non-US jurisdictions, including Spain in 1982 and 1990, Colombia in 1991, and the EU in 2004. In 1995, as part of unrelated PTO proceedings, Roederer’s trademark attorneys received an affidavit indicating that Cristalino had been found on sale in California in 1995; the affidavit identified the bottler and included a photo of the bottles. Roederer did not object at the time, though its attorneys did submit an affidavit in response.

In 1997, the CRISTALINO JAUME SERRA mark was published for opposition; Roederer requested two extensions of time to file an opposition, but never did. The application, however, never matured to registration and was deemed abandoned in 2000. (The application was filed as an ITU, for reasons that do not appear obvious from the facts but might have to do with the presentation of the mark on the label.) In 2000, Carrion filed an application to register CRISTALINO, and this one was published for opposition in 2002. Roederer sent letters demanding that Carrion withdraw the application and cease using the mark; it ultimately filed an opposition, then sued, so the opposition has been stayed.

Carrion argued laches. The elements: plaintiff’s knowledge of the use; inexcusable delay; and prejudice to the defendant.

The court quickly disposed of Roederer’s argument that Carrion didn’t stand in the shoes of its predecessors for laches purposes. It owned the goodwill and continued to make the same product. Likewise, Carrion’s importer, though not a trademark owner, had standing to assert laches, just as it would be able to assert a statute of limitations defense (if the Lanham Act had one).

Roederer’s knowledge began no later than 1995, but it waited nearly seven years to object. This exceeds the analogous 6-year statute of limitations in Minnesota, and courts generally borrow analogous state laws for purposes of assessing Lanham Act laches.

The court also found prejudice. During the 7-year delay, Carrion marketed Cristalino, expanded production, and were rewarded by market success. Though Carrion could use its production facilities to make cava under another name, it would lose the benefit of any brand loyalty, which would devastate sales.

Roederer argued that any delay should be excused because the early acts weren’t enough to infringe—a trademark owner has no obligation to sue until there’s a substantial likelihood of confusion, and need not be trigger-happy. For laches purposes, the doctrine of progressive encroachment may require assessing delay from some point after the first instance of infringement, when a defendant comes more squarely in competition with the plaintiff. McCarthy states that, though “a slow, steady increase in the level of business attributable only to the normal growth of any business may not always be sufficient to excuse a prior delay, any change in the format or method of use of the mark or expansion into new product lines or territories should be sufficient to excuse a prior delay.”

The court rejected this argument. Cristalino’s sales have grown over time, but it has outsold Cristal since at least the mid-90s. Carrion’s quality control changed, but there was no evidence of significant changes in the product’s quality. And the label was largely stable by 1993. There was a “mere possibility” that older-style labels were around for some unknown period as inventory was depleted, and an older label may have been featured on the importer’s website for a while, but that didn’t change the court’s conclusion that Roederer should have acted much earlier.

Roederer then argued that laches does not bar injunctive relief. This is sometimes true, and sometimes not. When an injunction would cause substantial prejudice to a defendant’s investment in brand equity, laches may not apply. Here, given the equities, mechanical application of a rule allowing injunctive relief despite laches would be inappropriate.

The court was particularly attentive to Roederer’s minimal evidence of likely confusion; when laches applies, courts generally require strong or elevated proof of likely confusion, and sometimes even a threat to public safety. Here, the evidence was: (1) name similarity; (2) product similarity in that both are sparkling wines sold nationwide; (3) “one incident in which a bottle of Cristalino was sold as Cristal after the label had been altered to obscure the ‘ino’ in Cristalino (comment: I believe Inwood v. Ives has something to say about that); and (4) “photos and written passages taken from the internet featuring individuals discussing both Cristal and Cristalino or pretending that bottles of Cristalino are bottles of Cristal.” Here’s what I found in a quick search: Cristalino, Cristal’s younger, cheaper brother; Cristalino is what Cristal dreams of growing up to become;

from a newsletter for a wine tasting business;
from flickr (caption: not Cristal, but Cristalino!); and
(from Grape Finds, using Cristal Pop as a sort of headline for Cristalino; this is one that Roederer might well want to take up with Grape Finds, which is no stranger to litigation itself).

Roederer also submitted a shopping mall survey of likely buyers of imported sparkling wine who were familiar with Cristal. (Query: proper universe, given Cristal’s actual purchasers? Isn’t that kind of like saying that a Toyota buyer would be a good person to ask about potential confusion over a Lamborghini? Your answer may differ if your theory is dilution—though here I imagine there’d be an insurmountable barrier to proving that Cristal was famous before Cristalino’s use began.)

In any event, the survey began by showing participants a bottle of Cristal. The bottle was removed, and then test cell subjects were shown four other bottles of sparkling wine. They were then asked whether they saw the same brand; whether they saw a wine produced by the same company; whether they saw a wine affiliated with the company that produced the first bottle; and whether permission from the company that made the first bottle was required to produce any of the sparkling wines. (Comment: Those aren’t leading at all, especially in combination! Now, there may not be many better ways to elucidate likely confusion, but I think the repetition here seems likely to drive up “yes” answers in a way that won’t necessarily be controlled for by the presence of a control group. The respondents are prodded to think about whether there’s a connection, and if there’s even a tiny hook to hang that idea on, they may say yes even though they’d never come to the same conclusion in the wild and even though they’ll say “no” when presented with four bottles with no wording similarity. This is perhaps another reason to cut back on our overly expansive concept of “confusion” as any suggestion of affiliation or connection—a concept that broad is too hard to measure in any reliable way.)

Results: “6.9% of respondents believed the bottle of Cristalino was the same brand as the bottle of Cristal, 9.2% believed Cristal and Cristalino were produced by the same company, 4.6% believed the Cristal and Cristalino were produced by affiliated companies, and 2.3% believed that permission from the maker of Cristal was required in order to produce Cristalino.” The court didn’t mention the percentages among the control group. But it considered the survey insufficient, quoting McCarthy’s summary that 25-50% percentages have been considered “solid support” for a confusion finding. Here, in light of the other evidence, the survey showed only a possibility of confusion, not a likelihood.

The dramatically different price points and differences between the names and labels were important factors. Cristal’s distinctive bottle further differentiated the products, and (aside from the case of the altered label) there was no evidence of actual marketplace confusion. And lack of evidence of confusion over an extended period of time is good evidence that there isn’t a likelihood of confusion. Roederer’s internet evidence showed that people recognize similarity between the two names, but none of it showed confusion.

As a result, defendants won summary judgment on laches.

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