The decision of the U.S. Court of Appeals for the First Circuit in Oriental Financial Group, Inc. v. Cooperativa de Ahorro y Crédito Oriental, 698 F.3d 9 (1st Cir. 2012), highlights the continued vitality of the often overlooked and misunderstood doctrine of “progressive encroachment,” which may come to the aid of trademark owners whose infringement claims would otherwise be barred by laches or acquiescence. Understanding this doctrine may assist trademark owners who might otherwise refrain from trying to assert their rights and thereby tolerate infringement of their marks or allow them to be diluted in situations where valid trademark claims could be asserted.
In the United States, if two similar trademarks have coexisted in the same marketplace for a lengthy period of time and are used for the same type of product without confusion’s arising among consumers, it might be very difficult for the senior party suddenly to raise a successful objection to the junior party’s mark. However, if the junior party engages in acts that change the nature of the use of its trademark, the outcome may favor the senior party, despite a lengthy period of concurrent use. The junior party’s “progressive encroachment” into the realm of infringement may therefore make a difference in the outcome of trademark litigation.
Bars to Injunctive Relief
Under U.S. practice, injunctive relief “aids the vigilant,” and those trademark owners who simply fail to enforce their rights in a timely manner may find that they cannot avail themselves of the power of the courts. Such “estoppel” preventing enforcement of the senior party’s rights may arise in two ways. The first is estoppel by laches, which occurs when the senior user inexcusably delays in filing legal action and the rights of the junior user are prejudiced by that delay. The second is estoppel by acquiescence, which is not based on the passage of time but is instead generally signaled by some type of assent by the senior user to the use of the junior mark, coupled with reliance on those assurances by the junior user to its prejudice. Such assent may be express (active affirmative consent: “I do not object to your use of XYZ mark”) or implied by conduct (e.g., the senior user distributes its own products and those of the junior user to the same customers). In the context of either estoppel by laches or estoppel by acquiescence, “prejudice” means an injury to the junior user’s business and the goodwill it has already created in its mark resulting from the junior user’s reasonable reliance upon a justifiable expectation that the senior user would take no action against the potential infringement.
However, courts generally are reluctant to apply laches or acquiescence as a bar to injunctive relief, especially in situations where there is a public interest that merits protection. This is true in trademark litigation, particularly where consumer confusion has occurred or is likely to occur. For this reason, the courts sometimes have avoided applying laches or acquiescence where significant actual confusion has arisen among consumers or where the junior user will not suffer substantial damage if an injunction issues. Laches will also not be applied if the defendant has “unclean hands,” which generally means that the junior user subjectively and knowingly intended to cause confusion among consumers as to the source of its goods or services (akin to active passing off). A number of courts have also indicated that a finding of laches alone will not ordinarily bar injunctive relief, reasoning that the senior user’s unreasonable delay amounts to only an implied license and that such a license may be revoked.
Courts have also carved out several different types of “progressive encroachment” that may prevent the junior user from shielding itself behind the laches or acquiescence defenses. Progressive encroachment is therefore referred to as a counter-defense or offensive countermeasure to the defenses of laches and acquiescence.
Invoking the Progressive Encroachment Doctrine
In order for the senior user to invoke the progressive encroachment doctrine, the junior user must have taken some action that materially alters the present situation in the marketplace. However, if the senior user’s conduct brings the two parties into closer competition, the progressive encroachment doctrine does not apply, although under some circumstances the senior user may prevail in litigation. For example, if the senior user is also the senior federal trademark registrant and the senior user moves into the geographic territory of the junior user, neither laches nor acquiescence may apply, because the relevant court previously may not have had jurisdiction to determine an infringement claim. Under such circumstances, the senior user generally may prevail in infringement litigation.
Similarly, if the commercial environment should change through no fault of either party (e.g., Internet sales suddenly bring the two parties into direct competition, whereas before the introduction of the Internet they were geographically separated), the determination of whether laches or acquiescence should apply will hinge on factors other than whether the junior user has progressively encroached on the senior user’s trademark rights. In such situations, where the junior user has not caused the activities of the parties to come into conflict, if a court determines that consumer confusion is likely, it may attempt to fashion remedies that do not completely restrain use of the junior party’s mark (e.g., requiring that the junior user employ additional words in its mark, use a modified logo or apply a disclaimer to goods or advertisements in an effort to prevent consumer confusion).
However, where only the conduct of the junior user has significantly changed, the progressive encroachment doctrine may come into play to aid the senior user if that conduct brings the parties into more direct competition and the senior user was not unreasonable in delaying action against the junior user. Progressive encroachment tends to fall into six categories, and many times more than one of these types of encroachment on the rights of the senior user are present in the same case. Naturally, the more types of encroachment a court detects and the greater the likelihood that consumer confusion will arise therefrom, the more likely the court will refrain from applying estoppel by laches or acquiescence.
The six major categories of progressive encroachment are as follows:
1. The junior user has altered its mark to resemble more closely that of the senior user (noted as early as in O. & W. Thum Co. v. Dickinson, 245 F. 609 (6th Cir. 1917), and continuing through Minnesota Mining & Manufacturing Co. v. Shurtape Technologies, Inc., 2001 WL 530551 (D. Minn. May 17, 2001); also a factor noted in Oriental Financial Group, Inc. v. Cooperativa de Ahorro y Crédito Oriental, 698 F.3d 9 (1st Cir. 2012)).
2. The junior user has altered its trade dress or product configuration to resemble more closely that of the senior user (also a factor in Thum, above, as well as in American Rice, Inc. v. Arkansas Rice Growers Cooperative Ass’n, 532 F. Supp. 1376 (S.D. Tex. 1982), aff’d, 701 F.2d 408 (5th Cir. 1983), and continuing through Deere & Co. v. MTD Holdings, Inc., 70 U.S.P.Q.2d 1009 (S.D.N.Y. 2004), and Johnson & Johnson v. Actavis Group hf, 87 U.S.P.Q.2d 1125 (S.D.N.Y. 2008); also noted in Oriental Financial).
3. The advertising or promotion of the junior user has been changed in a manner that emphasizes the similarities between the marks of the parties (noted as early as in Radio Corp. of America v. R.C.A. Rubber Co., 114 F. Supp. 162 (N.D. Ohio 1953), and through Angel Flight of Georgia, Inc. v. Angel Flight America, Inc., 522 F.3d 1200 (11th Cir. 2008)).
4. The junior user has expanded its geographic trading territory to overlap that of the senior user, as was the situation in Oriental Financial and in other cases going back to at least Saperstein v. Grund, 85 F. Supp. 647 (S.D. Iowa 1949)).
5. The junior user has expanded or altered the nature of its products or services to include ones the same as or more similar to those offered by the senior user (noted as early as in Miss Universe, Inc. v. Patricelli, 271 F. Supp. 104 (D. Conn. 1967), and through Operation ABLE of Greater Boston, Inc. v. National Able Network, Inc., 646 F. Supp. 2d 166 (D. Mass. 2009), and Champagne Louis Roederer v. J. Garcia Carrion, S.A., 569 F.3d 855 (8th Cir. 2009)).
6. The junior user has significantly raised the visibility of its use of its mark (such as by dramatically increasing its advertising and promotional activities or substantially increasing the volume of its sales) and thereby increased the likelihood of confusion with the senior user’s mark (noted as early as in A.T. Cross Co. v. Jonathan Bradley Pens, Inc., 355 F. Supp. 365 (S.D.N.Y. 1972), and through Johnson & Johnson v. Actavis Group hf, above).
There remains, however, the question of how long and under what circumstances the senior user may wait before taking action and still be entitled to assert that the junior user’s acts constitute progressive encroachment. For example, if the junior user adopts a mark more similar to that of the senior user but the senior user waits until the junior user has developed a significant market presence before bringing litigation, should the senior user be barred from pursuing its claims or may it rely solely upon the junior user’s market expansion to avail itself of the progressive encroachment counter-defense? What is the moment in time when a reasonably prudent senior user, in reviewing all of the facts and circumstances known to it, should have been prompted to take action against a junior user? When does the scale of the junior user’s activities pass out of the realm of de minimis activity and reach the point where it should compel the senior user to take action?
What the Courts Say
In considering the progressive encroachment counter-defense, some courts have held that the senior user may wait until the junior user’s conduct has “fully developed” before pursuing its infringement claims. This approach is exemplified by the defendant’s activities in Oriental Financial Group, Inc. v. Cooperativa de Ahorro y Crédito Oriental, 698 F.3d 9 (1st Cir. 2012).
Other courts have indicated that there may be a culminating event or particularly provocative act by the junior user that should precipitate an objection by the senior user. This was the situation in O. & W. Thum Co. v. Dickinson, 245 F. 609 (6th Cir. 1917), perhaps the earliest decision to recognize the progressive encroachment counter-defense.
But other tribunals have found that the senior user, when confronted with a clear case of infringement (an infringement that is “clearly actionable”), is under an obligation to take immediate, or at least reasonably prompt, action, while the junior user’s activities are small in scale in order to prevent the junior user from suffering any more damage than is reasonably necessary if it is forced to change its mark. A discussion of this factor may be found in Chattanooga Manufacturing, Inc. v. Nike, Inc., 301 F.3d 789 (7th Cir. 2002).
The case of American Rice, Inc. v. Arkansas Rice Growers Cooperative Ass’n, 532 F. Supp. 1376 (S.D. Tex. 1982), aff’d, 701 F.2d 408 (5th Cir. 1983), helps to illustrate the complexities that may arise in attempting to employ the progressive encroachment counter-defense. In that case, the senior party used trade dress consisting of a woman dressed in what the court described as “oriental-style clothing” on rice bags colored yellow, red and black. The junior party initially sold its rice in bags imprinted with a lion design. In 1974, the junior party changed its label from a lion design to a “two girl” brand. The senior party took no action. In 1978, the junior party changed its label to feature a single woman, but still the senior party took no action. Then, in 1981, after discontinuing sales for a couple of years, the junior party came back on the market with a single woman logo in the colors yellow, red and black, the same color scheme used by the senior party. Although perhaps the senior party had a colorable claim of infringement as early as 1978 (when the junior party adopted a logo featuring the depiction of a single woman), the court had no difficulty applying the progressive encroachment counter-defense, since the junior party’s use of the senior party’s color scheme clearly made consumer confusion much more likely to arise.
Therefore, a few initial acts that move the junior user somewhat closer to the senior user may not be enough to require action by the senior user, provided those incremental acts are followed by a culminating event that greatly increases the likelihood of confusion.
Some courts, however, have held that multiple acts by the junior party, even if none of them is singularly pronounced, may produce a cumulative effect that entitles the senior party to rely upon the progressive encroachment counter-defense. This evolutionary encroachment may make it very difficult for a court to determine the precise moment when the senior party should act.
Thus, there are both “big bang” (culminating event) and “evolutionary” (gradual) forms of progressive encroachment, and either of them may provide a senior user with the ability to reduce the effectiveness of a laches or acquiescence claim. However, determining the exact point at which the senior user should take action against gradual or pronounced encroachments on its trademark rights appears to provide courts with great discretion and may lead to unpredictable results. It will benefit trademark owners, therefore, to avoid sleeping on their rights for too long before commencing infringement litigation against growing threats posed by a junior user.
From a practical standpoint, it is advisable for trademark owners to consider the following basic guidelines in order to guard against laches or acquiescence’s foreclosing action against junior trademark users:
Once a potential infringement comes to its attention, the senior party should assess whether the junior party’s activities have an immediate and serious impact on its trademark rights, or may have such an adverse impact on those rights in the near future. If the risk of infringement is significant from the outset, action against the junior party should not be delayed.
If the junior party’s trademark use is geographically remote, its product or service offerings have not yet entered the sphere of use occupied by the senior party, the form or appearance of its mark is not yet sufficiently similar to that of the senior party’s trademark or its advertising and promotion are unlikely to reach the senior party’s consumers, delay in bringing action against the junior party may be excusable. However, vigilance and monitoring of the junior party’s activities are advisable in order to gauge any gradual or sudden actions that bring the junior party into closer competition with the senior party.
As these guidelines suggest, there are no precise rules that govern when a court might find that a senior user has delayed too long in exercising its rights. Fortunately, most courts that have rejected a senior user’s claim of progressive encroachment have nevertheless provided some form of injunctive relief where actual confusion among consumers either has occurred or is highly likely to result from the junior user’s conduct. However, where such injunctive relief is granted it may be far more limited than what the senior user would have been entitled to receive had it asserted its rights at an earlier date, and there is no guarantee that damages, profits or attorneys’ fees will be awarded where a senior user has waited too long to challenge a known infringement.
Although every effort has been made to verify the
accuracy of items in the INTA Bulletin, readers are urged to check
independently on matters of specific concern or interest.
© 2014 International Trademark Association