Tillamook v. Tillamook County Creamery

• Decision Date: 11 October 2006
• Docket Number: No. 04-35843.,04-35843.
• Parties: TILLAMOOK COUNTRY SMOKER, INC., an Oregon corporation, Plaintiff-Appellee, v. TILLAMOOK COUNTY CREAMERY ASSOCIATION, an Oregon cooperative corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

465 F.3d 1102

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.

Argued and Submitted September 12, 2006.

Filed October 11, 2006.

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; 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, Tillamook 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 Sept. 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 "Tillamook" mark with the U.S. Patent and 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 rebranded 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.

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 was issued, Creamery lodged its opposition. In 2002, Creamery sought to cancel Smoker's 1997 registration of its ribbon-design. Second, on April 10, 2000, Smoker applied for registration of the word mark "Tillamook Jerky." The PTO denied the application, ruling that the "Tillamook" wording was "highly similar" with Creamery's registered mark.

In 1998, Creamery began recording instances of brand confusion between its products and Smoker's. Several grocery chains wrongly displayed Smoker's products under the Creamery "Tillamook" mark or the Creamery logo. Another chain mistakenly sent invoices for Smoker products to Creamery. Consumers also contacted Creamery about Smoker products, including a group of teachers who worried about the resemblance between Smoker's "jerky chew" product and chewing tobacco. Between 1997 and 1999, Creamery noted four confusion contacts. In 2000, the number of confusion contacts rose to 40 instances, 96 in 2001, and 106 in 2002.

In September 2000, twenty-five years after Tillamook Country Smoker began business and started selling under that name, Creamery wrote a cease-and-desist letter to Smoker, objecting to Smoker's use of the word "Tillamook." In response, Smoker brought this suit in the District of Oregon seeking the following declaratory judgments: (i) Smoker is the owner of the trademark "Tillamook Country Smoker" and the mark does not infringe on Creamery's "Tillamook" mark; (ii) Smoker's registration of the ribbon-design mark is valid; and (iii) Smoker is entitled to issuance of a trademark registration for the word mark "Tillamook Country Smoker."

Creamery asserted various counterclaims for trademark infringement, dilution, and unfair competition. It sought an injunction preventing Smoker from using the name "Tillamook" or any other mark which is likely to cause confusion. Additionally, Creamery sought an order declaring that Smoker's use of the "Tillamook Country Smoker" mark, the "Tillamook Jerky" mark, and the "TillamookJerky.com" domain name infringed on Creamery's trademark.

The parties filed cross-motions for summary judgment. The district court granted partial summary judgment to Smoker on the use of the "Tillamook Country Smoker" mark, finding that Creamery's objections were barred by laches. Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass'n ("Tillamook I"), 311 F.Supp.2d 1023, 1040 (D.Or.2004). The court granted partial summary judgment to Creamery, finding that Smoker's use of the "Tillamook Jerky" mark was infringing. Id. at 1044-45.

In a second opinion, the court granted Smoker's motion for summary judgment regarding the registration of the "Tillamook Country Smoker" mark, holding that Smoker's use of the marks would not cause a likelihood of confusion. Tillamook Country Smoker, Inc. v. Tillamook County Creamery Ass'n ("Tillamook II"), 333 F.Supp.2d 975, 983-85 (D.Or.2004).

II. Jurisdiction

The district court had jurisdiction under 28 U.S.C. § 1331 and § 1338(a). We have jurisdiction pursuant to 28 U.S.C. § 1291.

III. Analysis

A. Trademark Infringement Claim

In its counterclaim, Creamery sought prospective equitable relief — an injunction against Smoker's continued use of the "Tillamook" mark — on a theory of trademark infringement. An...