Eat Right Foods Ltd. v. Whole Foods Mkt., Inc.

Decision Date29 January 2018
Docket NumberNo. 15-35524,15-35524
Citation880 F.3d 1109
Parties EAT RIGHT FOODS LTD., Plaintiff-Counter-Defendant-Appellant, v. WHOLE FOODS MARKET, INC., Defendant, and Whole Foods Market Services, Inc.; Whole Foods Market Pacific Northwest, Inc., Defendants-Counter-Claimants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Mark P. Walters (argued) and Lawrence D. Graham, Lowe Graham Jones PLLC, Seattle, Washington, for Plaintiff-Counter-Defendant-Appellant.

Stephen P. Meleen (argued), Jered E. Matthysse, and Travis R. Wimberly, Pirkey Barber PLLC, Austin, Texas; Christopher Tompkins, Betts Patterson Mines, Seattle, Washington; for Defendants-Counter-Claimants-Appellees.

Before: Richard C. Tallman and Paul J. Watford, Circuit Judges, and Richard F. Boulware II,* District Judge.

TALLMAN, Circuit Judge:

Eat Right Foods Ltd. (ERF) appeals the district court's summary judgment dismissal of its claims against Whole Foods Market Services, Inc., and Whole Foods Market Pacific Northwest, Inc. (Whole Foods). ERF, which sold "EatRight"-branded cookies to Whole Foods for many years, argues that its former customer infringed on its trademark by selling a variety of foods under the "EatRight America" mark from 20102013. Whole Foods argues, and the district

court held, that ERF's suit is barred by the affirmative defenses of laches and acquiescence. Because disputed material facts establishing or defeating the defenses must be resolved, we vacate the district court's decision and remand for further proceedings.

I

ERF is a New Zealand company that sells organic foods. It has used the "EAT RIGHT" and "EATRIGHT" marks on its food products in the United States since 2001 and 2003, respectively. It owns registered trademarks for use of the "EATRIGHT" mark on several classes of goods, including certain types of snack foods.

Whole Foods Market Services, Inc., and Whole Foods Market Pacific Northwest, Inc., are subsidiaries of Whole Foods Market, Inc., which operates hundreds of grocery stores throughout North America. From 2004 through 2013, ERF sold a line of gluten-free cookies to Whole Foods.

Nutritional Excellence, LLC, is a health and nutrition company that once did business under the name "Eat Right America." In late 2009, Whole Foods contracted with Nutritional Excellence to use its patented Aggregate Nutrient Density Index (ANDI), a "food-scoring system" designed to communicate the nutritional value of foods to consumers. Whole Foods' agreement with Nutritional Excellence allowed it to display the ANDI scores of certain foods in its stores. Wherever an ANDI value was displayed, Whole Foods was required to display the "EatRight America" mark.1

In early 2010, Whole Foods rolled out the ANDI system and launched an associated health-and-wellness program called "Health Starts Here" in all of its 289 stores. As part of "Health Starts Here," Whole Foods promoted Nutritional Excellence's "Eat Right America" diet and nutrition program. The company issued a press release about ANDI and "Health Starts Here" on January 20, 2010, and it featured both initiatives prominently on its website. The ANDI logo and the "EatRight America" mark were displayed on promotional materials, including chalkboards outside stores and signs inside stores. The mark also appeared alongside the ANDI scores of a variety of foods, including bulk foods, produce, and prepared foods.

In February or early March of 2010, ERF Managing Director Rebecca Douglas–Clifford, traveling from New Zealand, visited a Whole Foods store in San Francisco, California. She noticed the "EatRight America" mark on "books, DVDs and some promotional files," but did not observe the mark on any food products.2

In March 2010, Douglas–Clifford e-mailed Whole Foods counsel Chris Graff and stated that, "[o]n a recent trip to San Francisco I couldn't help but notice Whole Foods ‘America's Healthiest Grocery Store’ positioning and their alliance with Eat Right America ... fantastic to see."3 In the same e-mail, Douglas–Clifford asked Graff to discuss with Whole Foods officials the possibility of "Whole Foods purchasing our EATRIGHT brand."

In November 2010, ERF became aware that Nutritional Excellence principal Kevin Leville was seeking to register the "EATRIGHT AMERICA" mark for "a variety of food products." Douglas–Clifford investigated and determined that Nutritional Excellence was selling snack bars online, but she did not discover that it had licensed use of the "EatRight America" mark to Whole Foods. ERF opposed Leville's registration before the Trademark Trial and Appeal Board (TTAB) from October 2011 through April 2013, arguing that use of the mark would confuse consumers.

In February or March of 2011, Douglas–Clifford visited two Whole Foods stores. This time, she noticed the "EatRight America" mark on "a wide variety of food products." But it was not until the following September that she contacted Graff to discuss what she described as Whole Foods' "infringement" of her company's trademark, and Graff told her to "look to Nutritional Excellence for a remedy." Douglas–Clifford instead proposed that Graff "approach Whole Foods to inquire whether Whole Food[s] would agree to purchase our rights in the brand EATRIGHT," and he told her he would talk to Whole Foods and "get back to" her.

In February 2012, ERF counsel James Martin began communicating with Graff about Whole Foods' alleged infringement. On April 4, 2012, ERF sent Whole Foods a cease-and-desist letter asserting that ERF owned the rights to the "EATRIGHT" mark and Whole Foods had been using "a confusingly similar mark."

On April 20, 2012, Graff responded that Whole Foods' use of the mark was licensed by Nutritional Excellence, but that because Whole Foods had "no desire to become involved in a trademark dispute" with ERF, it would "agree to cease its use of the designation Eat Right America" by the end of the year. The first line of the e-mail read "PRIVILEGED SETTLEMENT NEGOTIATIONS UNDER FED. R. EVID. § 408."

Graff and Martin corresponded or spoke on the phone about the matter multiple times in April and June 2012. They discussed different options for resolving the dispute, including the possibility of Whole Foods funding ERF's legal battle against Nutritional Excellence or acquiring ERF's brand. Martin followed up with Graff in July and August.

On September 26, 2012, Martin sent Graff a letter reiterating ERF's objection to Whole Foods' use of "EatRight America" and stating that despite Whole Foods' assurances that the mark was no longer in use, it was "continuing to be used widely in Whole Foods stores." The letter requested that Whole Foods "give serious consideration to acquisition of the EATRIGHT brand," or "confirm that it will immediately cease all use of the infringing" mark.

On October 9, 2012, Graff told Martin via e-mail that Whole Foods was "not interested in pursuing a possible acquisition of your client's EATRIGHT brand at this time."

In November and December 2012, Douglas–Clifford corresponded with Whole Foods' Vice President of Business Development "regarding a potential brand purchase as a way to resolve outstanding infringement claims." In January 2013, Martin sent Graff a letter requesting that Whole Foods confirm that it had ceased using the "EatRight America" mark in stores. The next month, Graff repeated that Whole Foods was "not interested in pursuing" an acquisition of ERF's brand and that any claims ERF had regarding the mark should be directed at Nutritional Excellence.

In April 2013, ERF and Leville reached a settlement agreement under which Leville agreed to abandon his application for registration of the mark "EATRIGHT AMERICA" in the classes in which ERF's "EATRIGHT" mark was already registered. However, he would be permitted to use the mark "EAT RIGHT AMERICA," with "EAT RIGHT" spelled as two words.

The next month, ERF sent Whole Foods a letter stating that "[n]ow that [ERF] has successfully enforced [its] rights in the ‘EATRIGHT’ brand with respect to" Leville and Nutritional Excellence, it was "the appropriate time to resolve the outstanding issues with Whole Foods." It asserted that ERF had "lost substantial business" due to Whole Foods' actions and asked Whole Foods "to account for the damage and enter into negotiations for a final settlement of this dispute."

In December 2013, ERF brought suit alleging trademark infringement, false designation of origin, and unfair competition claims against Whole Foods in the Western District of Washington. Whole Foods moved for summary judgment, asserting the affirmative defenses of laches and acquiescence. ERF cross-moved for summary judgment.

The district court granted Whole Foods' motion and denied ERF's cross-motion for summary judgment. It found that ERF "knew, or in the exercise of reasonable diligence, should have known," that Whole Foods was using the "EatRight America" mark "in late 2009/early 2010," but that ERF allowed and even encouraged Whole Foods to use the mark for years. Therefore, it found that ERF's claim was barred by both laches and acquiescence. ERF timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1291.

II

We apply a hybrid standard of review to grants of summary judgment on the basis of laches. In re Beaty , 306 F.3d 914, 921 (9th Cir. 2002). "[C]ertain aspects of the district court's decision" are reviewed de novo, including "[w]hether laches is available as a potential defense to a particular kind of action" and "whether the district court inappropriately resolved any disputed material facts in reaching its decision." Id. at 920–21 (quotation omitted). But "the application of the laches doctrine to the facts" is reviewed for abuse of discretion. Id. at 921 ; see also Internet Specialties W. v. Milon–Digiorgio Enters., Inc. , 559 F.3d 985, 991 (9th Cir. 2009).

The application of the doctrine of acquiescence "is within the discretion of the trial court and also is reviewed for abuse of...

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