465 F.3d 1102 (9th Cir. 2006), 04-35843, Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass'n

Docket Nº:04-35843.
Citation:465 F.3d 1102, 80 U.S.P.Q.2d 1460
Party Name:TILLAMOOK COUNTRY SMOKER, INC., an Oregon corporation, Plaintiff-Appellee, v. TILLAMOOK COUNTY CREAMERY ASSOCIATION, an Oregon cooperative corporation, Defendant-Appellant.
Case Date:October 11, 2006
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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465 F.3d 1102 (9th Cir. 2006)

80 U.S.P.Q.2d 1460

TILLAMOOK COUNTRY SMOKER, INC., an Oregon corporation, Plaintiff-Appellee,

v.

TILLAMOOK COUNTY CREAMERY ASSOCIATION, an Oregon cooperative corporation, Defendant-Appellant.

No. 04-35843.

United States Court of Appeals, Ninth Circuit.

October 11, 2006

Argued and Submitted

September 12, 2006—Portland, Oregon.

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J. Peter Staples, Chernoff, Vilhauer, McClung & Stenzel, Portland, OR, for the plaintiff-appellee.

James N. Westwood, Stoel Rives, Portland, OR, for the defendant-appellant.

Appeal from the United States District Court for the District of Oregon D.C. No. CV-02-01540 MWM, Michael W. Mosman, District Judge, Presiding. D.C. No. CV-02-01540 MWM.

Before: HAWKINS, SILVERMAN, and GOULD, Circuit Judges.

SILVERMAN, Circuit Judge.

The Tillamook County Creamery Association, the maker of the Tillamook brand of cheese for nearly a hundred years, has a beef with a company called Tillamook Country Smoker, a purveyor of smoked meats and jerky. In 1976, Tillamook Country Smoker began selling its meat products under its name. The cheese people had actual knowledge of Tillamook Country Smoker's activities, but never said a word. Not only that, the cheese folks even sold Tillamook Country Smoker's products in its own gift shop and in its mail-order catalog.

Twenty-five years later, when Tillamook Country Smoker began selling its meat snacks in supermarkets, the cheese people for the first time claimed trademark infringement and sought to enjoin the meat people from making any further use of the Tillamook Country Smoker name. The cheese people explain their quarter-century delay in taking action against Tillamook Country Smoker by contending that they are victims of "progressive encroachment." The district court ruled that the cheese people are barred by laches. We agree.

I. Background

The Tillamook County Creamery Association ("Creamery") is a 150-member dairy cooperative in the city of Tillamook in Tillamook County, Oregon. The association has a major presence in the area. On its official website, Tilla-mook County describes itself as "The Land of Cheese, Trees and Ocean Breeze." See Tillamook County, Oregon, at http://www.co.tillamook.or.us (last visited September 25, 2006).

Creamery markets its products nationally through retail grocery and club stores, with annual revenues topping $250 million. Its primary product is cheese, and is second only to Kraft in the sale of certain cheeses. Besides selling in retail stores, Creamery also maintains a mail-order catalog and a factory store along Highway 101 in Tillamook.

Creamery began using the "Tillamook" mark for its cheese and butter products as early at 1918. It registered the "Tilla-mook" mark with the U.S. Patent and

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Trademark Office ("PTO") in 1921 and 1950.

In 1975, a member of the Creamery Association, Crawford Smith, approached Creamery's General Manager Beale Dixon about his desire to start a processed meat company. Smith informed Dixon of his wish to operate the business under the mark "Tillamook Country Smoker." Dixon did not object "so long as Mr. Smith did not build a cheese factory." Tillamook Country Smoker ("Smoker"), also based in Tillamook County, was thus born. Today, it employs about 250 workers and grosses $41 million annually.

Smoker began operations in 1976, employing a number of label designs. Two prominent designs featured a "burning ham" and a ribbon. All labels, however, featured the words "Tillamook Country Smoker." On some of its labels the word "Tillamook" was the same font size as "Country Smoker." On several others, the word "Tillamook" was larger than "Country Smoker." Creamery never objected.

Smoker's original product line was marketed to deli counters. After 10 months, Smoker began distributing jerky and smoked beef chunks primarily to convenience stores and mom-and-pop groceries, although some of Smoker's products ended up in supermarkets as early as 1984. Not only did Creamery refrain from objecting to Smoker's use of the word "Tillamook," it actively encouraged the use by selling Smoker's products in its own store and mail-order catalog.

In 1985, after approximately 10 years in business, Smoker applied for registration of the mark "Tillamook Country Smoker." Smoker notified Creamery of this application, but Creamery said nothing. The PTO refused the application because the mark was "confusingly similar" with Creamery's, and the two companies were selling complementary products in similar channels of trade. Nevertheless, Smoker continued to use the mark after the PTO's rejection — all without complaint from Creamery.

In 1995, Smoker filed a new trademark application seeking to register a combined word and design mark consisting of the words "Tillamook Country Smoker" fronting its "ribbon" design. Creamery did not object, and the PTO approved this application in 1997. The parties refer to this label as Smoker's "ribbon design" mark, the registration of which Creamery seeks to cancel in this litigation.

Creamery and Smoker's symbiotic relationship continued during this period. Creamery's catalog often described its products and Smoker's with little distinction between the companies. For example, in its 1997-1998 catalog, Creamery referred to Smoker's "Jerky in a Jar" as "our one pound jars of Old Style Beef Jerky" (emphasis added). Similar cheese and meat combinations were also offered in Creamery's factory store and website. During this period, Smoker employees would regularly deliver its products to Creamery. Creamery would then deliver Smoker's products to customers.

In the mid-1990s, Smoker sought to increase its direct sales to grocery stores. Believing that its brand image was unsuited for grocery chains, Smoker hired a label designer and brand consultant. In a report dated November 12, 1996, the consultant informed Smoker that it lacked brand identity with its customers due in large part to the generic look of Smoker's past labels, and Smoker's inconsistent label designs. In response, Smoker re-branded most of its products with the "circle T" design. The word "Tillamook" appeared in block lettering above the small phrase "Country Smoker." Below or to the side of "Tillamook Country Smoker" appeared a large "T" with a circle around it.

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Smoker's direct sales to grocery stores and club warehouses grew significantly in the following years. In 1997, sales to such entities were less than $170,000. By 2002, Smoker's sales had increased to over $7 million.

Smoker submitted two trademark applications during this period. First, on September 21, 1999 and despite the PTO's prior denial in 1985 Smoker applied for registration of the "Tillamook Country Smoker" word mark. The PTO approved the application, but before the final registration...

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