Posner likes trademarks, hates surveys

Kraft Foods Group Brands LLC v. Cracker Barrel Old Country Store, Inc., No. 13‐2559 (7^th Cir. Nov. 14, 2013)

This is a classic Posner trademark opinion, with a combination of skepticism and credulity (about his favored theory of trademark) whose inconsistency even more than its self-confidence/arrogance shows why Posner can drive critics up the wall.

Kraft sued Cracker Barrel over Cracker Barrel’s introduction of food products to grocery stores.  The district court found that Cracker Barrel’s meat and other products would likely cause confusion with Kraft’s Cracker Barrel cheese brand if sold in grocery stores and granted an injunction. The court of appeals affirmed.

Identical marks can be nonconfusing if sold on different products through different sales channels; Kraft didn’t challenge Cracker Barrel’s right to sell food products under the name Cracker Barrel in its restaurants, the small “country stores” that adjoin the restaurants, or by mail order or on the web—only in grocery stores.

The court of appeals agreed that, even if the Kraft cheese and Cracker Barrel ham were displayed side by side, which would make consumers more likely to notice the differences, the use of the same words might lead them to think that both products came from Kraft.  “If on the other hand the Kraft cheeses and [Cracker Barrel] 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.”  Name similarity and product similarity (low-cost packaged food) weren’t decisive, but those similarities coupled with the distribution channel and advertising channels were.  The court noted that, before the preliminary injunction was issued, “an online ad for Cracker Barrel Sliced Spiral Ham by a coupons firm provided a link to a coupon for Kraft’s Cracker Barrel cheeses.”  The products would likely appear in the same store ads, increasing the likelihood of consumer confusion “detrimental to Kraft.”  (Those three words are the key.) 

Plus, the products are inexpensive, increasing the likelihood of confusion.  “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.”

Now here’s the part that is pure trademark religion: “If a significant number of consumers confused the names and thought [Cracker Barrel’s] products were made by Kraft, Kraft could be badly hurt.”  A trademark’s value comes from its effects on search costs; a good reputation leads to more sales.  But inconsistent quality teaches consumers that the trademark isn’t helpful, and they stop being willing to pay more for the branded good.  If Cracker Barrel’s products are “inferior in any respect to what the consumer expects—if a consumer has a bad experience with a [Cracker Barrel] 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.” 

Notice what’s missing here: any empirics at all in the causal chain.  Are Kraft’s products high quality?  Do Cracker Barrel’s products diverge in quality from them?  Is there any risk that Cracker Barrel’s products will deteriorate in quality during the pendency of the litigation (since it is a preliminary injunction with which we are concerned)?  Is there in fact any reason to think that a consumer would use a bad experience with ham to conclude that cheese from the same source is not worth buying?  (As Mark McKenna and I, among others, have explained in detail, marketers know that this is in fact highly unlikely even with actual brand extensions, much less with confusion.)  Even Posner knows this is all “mays” and “mights,” but somehow this is “likely” harm.

Posner concedes there’s a countervailing consumer interest in product variety, but that’s super hard to weigh against confusion risks, especially at the preliminary injunction stage, and anyway Cracker Barrel has alternate routes to reach consumers, including the internet, “an alternative channel of ever greater significance in the electronic age.”  “The weighing and balancing of these competing interests with any precision are not feasible undertakings in a preliminary‐injunction proceeding, and probably not in a full trial either. Imponderables are likely to dominate.”

So we do what we can.  For a preliminary injunction, you also need irreparable harm, which was present here.  “The likelihood of confusion seems substantial and the risk to Kraft of the loss of valuable goodwill and control therefore palpable. … [I]rreparable harm is especially likely in a trademark case because of the difficulty of quantifying the likely effect on a brand of a nontrivial period of consumer confusion ….”  (Maybe it’s difficult to quantify because it rarely exists?)  Since Cracker Barrel wasn’t losing heavily as a result of not being able to sell through grocery stores, the preliminary injunction was justified.

However, “mainly for future reference we want to say something about the consumer survey that Kraft presented in support of its claim of confusion.”  Consumer surveys by parties’ expert witnesses are

prone to bias. There is such a wide choice of survey designs, none foolproof …. Among the problems identified by the academic literature are the following: when a consumer is a survey respondent, this changes the normal environment in which he or she encounters, compares, and reacts to trademarks; a survey that produces results contrary to the interest of the party that sponsored the survey may be suppressed and thus never become a part of the trial record; and the expert witnesses who conduct surveys in aid of litigation are likely to be biased in favor of the party that hired and is paying them, usually generously.

While judges and jurors “have their own biases and blind spots,” caution is required in screening “proposed experts.”  Here, Hal Poret emailed 300 consumers of whole-ham products photos of the Cracker Barrel ham and asked them whether the company that makes the ham also makes other products, and, if so, what products.  About 25% said cheese, but that didn’t necessarily mean much, since they may have “assumed that a company with a logo that does not specify a particular food product doesn’t make just sliced spiral ham,” then guessed.  A control group of 100 saw the same ham, labeled Smithfield, and none of them said cheese.  It was “plausible” that it was the name Cracker Barrel that made the difference, but Posner thought the relevance of that was “obscure,” because “Kraft’s concern is not that people will think that Cracker Barrel cheeses are made by [Cracker Barrel] but that they will think that [Cracker Barrel] ham is made by Kraft, in which event if they have a bad experience with the ham they’ll blame Kraft.”  (Hunh?  Why doesn’t the survey plausibly show that those 25% think that Cracker Barrel ham is made by Kraft, as the senior/familiar brand?)

Anyway, the context of a photo shown online in a survey is very different from actually choosing products in a grocery store, where the stakes are higher because real money is on the line.  Instead of surveys, maybe statistical data should be used, at least when the product is already on the market.  Some stores would carry both products and others wouldn’t.  “By examining the ‘lift’ (greater sales) if any that [Cracker Barrel] hams obtain by proximity to the Kraft Cracker Barrel label, an expert witness might be able to estimate the extent of consumer confusion. The greater the lift (and hence the greater the confusion) the greater the likelihood of a consumer’s blaming Kraft as the supposed maker of the [Cracker Barrel] hams if the consumer has a bad experience with the hams.”  (I don’t think Posner even realizes that he’s suggesting measuring something different.)  Here, of course, such a study wasn’t feasible because of the preliminary injunction, and anyway the court didn’t have enough confidence in the reliability of that kind of survey to deem it “an adequate basis for refusing to grant preliminary injunctions in trademark cases.”

Other types of expert testimony might help—“testimony by experts on retail food products about the buying habits and psychology of consumers of inexpensive food products.”  Courts haven’t made a real attempt to understand consumers’ mindsets, even though that’s supposedly central to trademark law.  Sometimes they describe consumers as smart, other times as dumb, but rarely do they look to any empirical evidence.  (Citing Thomas R. Lee, Glenn L. Christensen & Eric D. DeRosia, Trademarks, Consumer Psychology, and the Sophisticated Consumer, 57 Emory L.J. 575 (2008).)

In any event, the similarity of logos, products, channels of distribution, and advertising were enough to support the preliminary injunction even without the survey.