Grocery Outlet Inc. v. Albertson's Inc.

• Decision Date: 09 August 2007
• Docket Number: No. 06-16448.,No. 06-16380.,06-16380.,06-16448.
• Citation: 497 F.3d 949
• Parties: GROCERY OUTLET INC., Plaintiff-Appellant, v. ALBERTSON'S INC.; American Stores Company, LLC; Lucky Stores, Inc.; American Stores Company, LLC, Defendants-Appellees. Grocery Outlet Inc., Plaintiff-Appellee, v. Albertson's Inc.; American Stores Company, LLC; Lucky Stores, Inc.; American Stores Company, LLC, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

497 F.3d 949

GROCERY OUTLET INC., Plaintiff-Appellant, v. ALBERTSON'S INC.; American Stores Company, LLC; Lucky Stores, Inc.; American Stores Company, LLC, Defendants-Appellees.

Grocery Outlet Inc., Plaintiff-Appellee, v. Albertson's Inc.; American Stores Company, LLC; Lucky Stores, Inc.; American Stores Company, LLC, Defendants-Appellants.

No. 06-16380.

No. 06-16448.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 13, 2007.

Filed August 9, 2007.

Peter W. Craigie, Kristen E. Drake, Craigie, McCarthy & Clow, San Francisco, CA, and Louis T. Pirkey, Susan J. Hightower, Pirkey Barber, LLP, Austin, TX, for the plaintiff-appellant.

Robert A. Weikert, Veronica Colby Devitt, John A. Chatowski, Marlene J. Williams, Thelen Reid & Priest, LLP, San Francisco, CA, for the defendants-appellees.

Appeal from the United States District Court for the Northern District of California; Jeffrey S. White, District Judge, Presiding. D.C. No. CV-06-02173-JSW.

Before: J. CLIFFORD WALLACE, D.W. NELSON, and M. MARGARET McKEOWN, Circuit Judges.

PER CURIAM Opinion; Concurrence by Judge WALLACE; Concurrence by Judge McKEOWN

PER CURIAM.

Grocery Outlet, Inc. ("Grocery") appeals from a preliminary injunction granted in favor of Albertson's, Inc. ("Albertson's"), one of its competitors in the retail grocery industry. The district court concluded, at this stage of the proceedings, that Albertson's was the legal owner of the LUCKY mark for retail grocery services and products and rejected Grocery's claim that Albertson's abandoned the LUCKY mark through its publicly advertised announcement that LUCKY stores were converted to Albertson's stores after a company merger in late 1999.

We review a preliminary injunction for abuse of discretion. Stuhlbarg Int'l Sales Co. v. John D. Brush & Co., Inc., 240 F.3d 832, 839 (9th Cir.2001). We review underlying legal issues de novo and findings of fact for clear error. Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1046 (9th Cir.1999).

A preliminary injunction may be granted in a trademark case where the moving party demonstrates either "(1) a combination of probable success on the merits and the possibility of irreparable injury or (2) the existence of serious questions going to the merits and that the balance of hardships tips sharply in [its] favor." Sardi's Rest. Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir.1985) (emphases in original). "These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir. 2001) (quotation marks and citation omitted). They are not separate tests but "the outer reaches of a single continuum." Los Angeles Mem'l Coliseum Comm'n v. Nat'l Football League, 634 F.2d 1197, 1201 (9th Cir.1980) (quotation marks and citation omitted).

To establish infringement of a registered trademark, the trademark holder must show that it is (1) the owner of a valid, protectable mark, and (2) that the alleged infringer is using a confusingly similar mark. 15 U.S.C. § 1114(1); Brookfield, 174 F.3d at 1046. Abandonment is a defense to a claim of infringement of a registered trademark. 15 U.S.C. § 1115(b)(2). The Lanham Act provides for two ways that a trademark may be abandoned, namely, through (1) nonuse, or (2) the mark becoming generic. See 15 U.S.C. § 1127. To show abandonment by nonuse, the party claiming abandonment must prove both the trademark owner's (1) "discontinuance of trademark use" and (2) "intent not to resume such use." Electro Source, LLC v. Brandess-Kalt-Aetna Group, Inc., 458 F.3d 931, 935 (9th Cir.2006) (citing 15 U.S.C. § 1127).

Grocery does not dispute the district court's finding that Albertson's is the legal owner of various federal and state trademark registrations of the LUCKY mark associated with retail grocery services and products. Nor does it dispute that Grocery's use of the LUCKY mark for retail grocery services was likely to cause consumer confusion. Thus, the district court's conclusion that Albertson's was likely to succeed on its trademark infringement claim necessarily turned on whether Grocery was likely to prove its abandonment defense.

Although the parties disagree as to the standard of proof applicable to the defense of abandonment, Grocery waived its challenge on this point by adopting the clear and convincing standard in its briefing in the district court. In light of the district court's findings and this concession, we need not resolve the burden of proof issue.

The district court's analysis is careful and thorough. The findings are preliminary and, as the district court noted, "are not meant to be binding." We conclude that the district court did not abuse its discretion in concluding that Albertson's demonstrated a strong likelihood of prevailing on the merits of its trademark infringement claim and the possibility of irreparable injury in the absence of a preliminary injunction. Nor did it abuse its discretion in concluding that Grocery did not establish its defense of abandonment, where Albertson's offered sufficient evidence of its intent to resume use of the LUCKY mark within the reasonably foreseeable future during the short period of alleged nonuse. See 15 U.S.C. § 1127; Electro Source, 458 F.3d at 935.

AFFIRMED.

WALLACE, Senior Circuit Judge, concurring:

I agree with our opinion resolving this appeal, but write separately on the burden-of-proof issue. We have held that under the Lanham Act, 60 Stat. 427, 15 U.S.C. §§ 1051-1127 (1946), the burden of proving abandonment is "strict." Prudential Ins. Co. of Am. v. Gibraltar Fin. Corp. of Cal., 694 F.2d 1150, 1156 (9th Cir.1982). We have also indicated that this strict burden is equivalent to a "high" one. See Edwin K. Williams & Co., Inc. v. Edwin K. Williams & Co.-East, 542 F.2d 1053, 1059 (9th Cir.1976), citing Am. Foods, Inc. v. Golden Flake, Inc., 312 F.2d 619, 625 (5th Cir.1963) (holding that defendant failed to meet the "burden of strict proof" required to show abandonment).

Despite these statements, Judge McKeown repeats the incorrect argument she recently made in Electro Source, LLC v. Brandess-Kalt-Aetna Group, Inc., 458 F.3d 931, 935 n. 2 (9th Cir.2006), that the burden of proof in abandonment cases is a question unanswered in our circuit. True, we are more accustomed to applying the "clear and convincing evidence" and "preponderance of the evidence" standards. But merely because Prudential and Williams invoke an unfamiliar or forgotten standard does not mean that the burden-of-proof issue is unresolved or that we may disregard those cases.

In my view, meeting a strict burden requires proof by clear and convincing evidence. Before the enactment of the Lanham Act, courts often required strict proof to establish a forfeiture. See, e.g., Empress Theatre Co. v. Horton, 266 F. 657, 664 (8th Cir.1920) (rights under a lease); United States v. Four Packages of Cut Diamonds, 247 F. 354, 357 (D.C.N.Y.1917) (diamonds); Aetna Ins. Co. of Hartford, Conn. v. Robinson, 213 Ind. 44, 10 N.E.2d 601, 604 (1937) (rights under an insurance policy). This was also the standard applied to abandonment of trademarks. See, e.g., Saunders v. Stringer, 265 Mich. 301, 251 N.W. 342, 343 (1933); Julian v. Hoosier Drill Co., 78 Ind. 408, 1881 WL 6748, at *3 (Ind.1881) (per curiam) (Hoosier Drill).

In equally disparate cases, however, pre-Lanham Act courts required clear and convincing evidence to establish a forfeiture. See, e.g., Hammer v. Garfield Min. & Mill. Co., 130 U.S. 291, 301, 9 S.Ct. 548, 32 L.Ed. 964 (1889) (mine); C.C. Co. v. United States, 147 F.2d 820, 823-24 (5th Cir. 1945) (canned oysters); Carrington v. Crandall, 65 Idaho 525, 147 P.2d 1009, 1011 (1944) (real property); Hoff v. Girdler Corp., 104 Colo. 56, 88 P.2d 100, 102 (1939) (en banc) (gas lease) (requiring "clear, unequivocal and decisive" evidence); Lane v. Amis Bros., 171 Okla. 593, 43 P.2d 73, 75 (1935) (homestead); Dwyer v. Ill. Oil Co., 190 Minn. 616, 252 N.W. 837, 838 (1934) (rights under a contract); Supervisor of Pub. Accounts v. Montreuil, 157 So. 783, 784 (La.App.1934) (cigarettes and a truck). And at least one court expressly required clear and convincing evidence of abandonment of a trademark. See Mathy v. Republic Metalware Co., 35 App. D.C. 151, 1910 WL 20792, at *3 (D.C.Cir.1910); see also Hoosier Drill, 78 Ind. 408, 1881 WL 6748, at *3 (requiring "clear and unmistakable evidence").

Strict proof was no different than clear and convincing evidence, and they were the same burden. Unsurprisingly, when the Court of Appeals of New York required "strict proof" of trademark abandonment, see Neva-Wet Corp. of Am. v. Never Wet Processing Corp., 277 N.Y. 163, 13 N.E.2d 755, 761 (1938), it relied on Mathy and Hoosier Drill.

It is not difficult to imagine why there were simultaneously two equivalent standards of proof under the common law. Statutes or contracts underlying a forfeiture were "strictly" construed. See C.C. Co., 147 F.2d at 824; Cartos v. Hartford Acc. & Indem. Co., 160 Va. 505, 169 S.E. 594, 598 (1933). The same language used to describe the rule of construction may also have come to describe the "higher degree of proof than a mere preponderance" that was the "natural corollary" of that rule. C.C. Co., 147 F.2d at 824.

I will not presume, as Judge McKeown does, that Prudential and Williams idly required "strict proof" or that a "high burden" be met. I have no doubt that our court meant that abandonment under the Lanham Act must be shown by clear and convincing evidence. This is the only plausible translation of strict proof and high burden, and Judge McKeown offers no other.

I agree with Judge McKeown that 15 U.S.C. § 1127 says nothing about the burden of proof, but she mistakenly concludes that the preponderance of the evidence standard was the "traditional" one. The traditional standard was...