Federal trademark law requires trademark owners to police their marks. This means that trademark owners must diligently enforce their rights to prevent their marks from being used by others without permission.
Although there’s no fixed statute of limitations for a federal trademark infringement lawsuit, an infringer can raise a defense known as “laches.” The laches doctrine is based on the theory that those who “sleep on their rights” may lose those rights.
To establish laches as a defense, a defendant must show that the plaintiff’s delay in filing the lawsuit was unreasonable and that the defendant would suffer prejudice as a result of the delay if the suit continues.
Earlier this week, the Court of Appeals for the Ninth Circuit decided a case involving the issue of how settlement negotiations affect a laches defense.
Eat Right Foods has used the mark EATRIGHT on organic foods since 2001. In early 2010, Whole Foods began promoting Nutritional Excellence’s “EatRight America” diet.
Later in 2010, the managing director of Eat Right Foods noticed the EATRIGHT AMERICA mark displayed in Whole Foods stores. She emailed Whole Foods that it was “fantastic to see” Whole Foods’ partnership with Nutritional Excellence and asked whether Whole Foods would be interested in buying its EATRIGHT brand.
In early 2011, Eat Right Foods’ managing director saw the EATRIGHT AMERICA mark on food products in Whole Foods stores. It was not until April 2012 that Eat Right Foods demanded that Whole Foods stop using the mark. At that time, Whole Foods responded that it would cease use of the EATRIGHT AMERICA trademark by the end of the year.
In September 2012, Eat Right Foods advised Whole Foods that the EATRIGHT AMERICA trademark was still being widely used in Whole Foods stores and again asked whether Whole Foods was interested in buying its EATRIGHT trademarks.
Although Whole Foods responded in October 2012 that it was not interested in purchasing the marks, in November, Eat Right Foods asked Whole Foods about a “potential brand purchase as a way to resolve outstanding infringement claims.” Whole Foods again said no.
Despite this, Eat Right Foods didn’t sue Whole Foods for trademark infringement until December 2013. The district court granted Whole Foods’ motion for summary judgment based on laches, dismissing the case.
The Court of Appeals for the Ninth Circuit determined that the lower court had not used the correct standard in making its decision, and sent the case back for reconsideration. The lower court again found that laches barred Eat Right Foods’ claims.
Eat Right Foods appealed this ruling to the Ninth Circuit as well. Earlier this week, the appellate court ruled in favor of Whole Foods.
The Ninth Circuit noted that because Eat Right Foods’ delay in filing suit exceeded Washington state’s three-year statute of limitation for trade name infringement, the strong presumption is that laches applies.
To rebut the presumption, said the court, Eat Right Foods needed to “show that its delay in suing was nonetheless reasonable.” Eat Right Foods had argued that it delayed filing suit because it was trying to settle its claims against Whole Foods.
Settlement efforts justify delay only where those efforts have “a fair chance of success,” but Whole Foods had repeatedly declined Eat Right Foods’ offers to sell its brand.
The Ninth Circuit, therefore, held that Eat Right Foods’ expectation of a positive settlement outcome involving a sale of its brand had become unreasonable by the time the state statute of limitations expired, and that Eat Right Foods had not overcome the presumption of laches.
As the above case makes clear, it’s important for trademark owners to police their marks and to enforce their rights within a reasonable time frame.
Please feel free to contact us if you have any questions about registering or enforcing your trademarks.
Photo by Janeris Marte on Unsplash
