February 2014: Trademark Litigation Update

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Trademark Laches: An Effective Exit in the Right Circumstances. Delay-based defenses in trademark cases are rarely an effective way for a defendant to exit a case before discovery. Statute of limitations defenses almost never dispose of so-called continuing tort cases, where every new act of alleged infringement is often held to start its own limitations clock running. Instead, the statutory period in these cases usually works only to limit the time frame for the plaintiff’s recovery for damages, even if the plaintiff waited decades to bring suit.

In cases based on a single instance of infringement, the defense of laches can result in a complete dismissal in trademark cases, barring all past damages and prospective relief, such as injunctions. See, e.g., Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 840 (9th Cir. 2002); Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 190, 192-93 (2d Cir. 1996); Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813, 824 & n.3 (7th Cir. 1999). It is generally more difficult to establish laches in a continuing tort case than a statute of limitations defense in a case premised on a single occurrence, such as a personal injury, where the defendant needs only to prove that the date of the occurrence, or the date it was discovered or should have been reasonably discovered, is outside of the limitations period. This is because laches applies only where the defendant can prove that the plaintiff unreasonably delayed in bringing suit and that prejudice would result.

In most jurisdictions, laches is presumed to apply if the delay is longer than the statute of limitations period. See, e.g., Conopco, 95 F.3d at 191; Santana Prods. v. Bobrick Washroom Equip., Inc., 401 F.3d 123, 139-41 (3d Cir. 2005); Lyons Partnership, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 799 (4th Cir. 2001); Nartron Corp. v. STMicroelectronics, Inc., 305 F.3d 397, 408 (6th Cir. 2002); Hot Wax, Inc., 191 F.3d at 821; Jarrow Formulas, 304 F.3d at 837; Kason Indus., Inc. v. Component Hardware Group, Inc., 120 F.3d 1199, 1203 (11th Cir. 1997). Even in a jurisdiction that does not apply the presumption, or where the plaintiff has offered some evidence to rebut it, a long delay can decrease the level of prejudice the defendant needs to prove. See, e.g., Goodman v. McDonnell Douglas Corp., 606 F.2d 800, 807 (8th Cir. 1979); accord Hot Wax, Inc., 191 F.3d at 824; Miller v. Glenn Miller Productions, Inc., 454 F.3d 975, 1000 (9th Cir. 2006).

In trademark cases, the Ninth Circuit supplements the two basic criteria of unreasonableness and prejudice with four additional factors: the strength and value of the mark asserted, harm to the plaintiff if relief is denied, whether the parties are competitors, and whether the defendant’s use of the mark was in good faith. E–Systems Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir. 1983). These fact-intensive inquiries, called the E-Systems factors, and three of which overlap with the likelihood of confusion factors evaluated on the merits of the claim, can make it challenging to succeed in asserting a laches defense at the pleading stage and even at summary judgment.

Nevertheless, pretrial victories on laches grounds occur. In Grupo Gigante SA De CV v. Dallo & Co., Inc., 391 F.3d 1088 (9th Cir. 2004), for example, a four-year delay from the point of actual knowledge to filing suit was sufficient to apply laches to bar a dispute between competing grocery store chains both using the term “Gigante.” The plaintiff learned of the defendant’s use of the mark in 1995, waited until 1998 to confront the defendant when it planned to open a store in the same area, and then waited another year before filing suit. The trial court ruled on summary judgment that laches barred the action and the Ninth Circuit agreed because the plaintiff had failed to excuse its delay, the defendant had built a valuable business using the mark during that period, the mark was found to be relatively weak, and the defendant acted in good faith—even though the parties were competitors and some evidence of actual confusion existed.

Laches victories at the pleading stage are much more rare, but not impossible. Recently the court applied laches at the pleading stage in Parts.com v. Google Inc. 3:13-cv-01074-JLS-WMC (S.D. Cal. Dec. 4, 2013). In its complaint, the plaintiff, an online auto parts retailer, alleged that Google had been continuously infringing the PARTS.COM trademark since at least November 2007 by allowing third party advertisers to use the term “parts.com” in Google’s AdWords advertising program. Parts.com alleged that it sent Google a cease and desist letter in November 2007—almost six years before it filed suit—and that it was suffering $2 million dollars in lost sales each year as a result of the allegedly continuous infringement. The court ruled that Parts.com’s delay was presumed unreasonable, the complaint offered no excuse for it, and Google would suffer expectation-based prejudice because each year of delay created millions of dollars in potential liability. Although the presumption applied, the court also analyzed the remaining E-Systems factors, finding a weak mark, no bad faith, and no competition between the parties.

Notwithstanding the relative rarity with which it applies, laches remains a viable defense in the right circumstances.

Topics:  Trademark Litigation, Trademarks

Published In: Civil Procedure Updates, Communications & Media Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Quinn Emanuel Urquhart & Sullivan, LLP | Attorney Advertising

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