Confused by cheese? You may not be alone. U.S. District Court Judge Robert W. Gettleman granted Kraft Foods a preliminary injunction on July 1 that blocks Cracker Barrel Old Country Store restaurant from making, marketing, or selling a new line of hams and other meats.

Kraft filed a trademark infringement suit against Cracker Barrel, alleging that consumers would be confused by the restaurant chain’s about-to-launch line of retail products – including ham, bacon, lunch meat, glazes for meat, jerky, and summer sausage – since Kraft has been selling cheese under the “Cracker Barrel” trademark since 1957. Today it has more than 20 cheese products.

Cracker Barrel Old Country Store, or CBOCS, was established in 1969 and has 620 locations around the country. Although CBOCS’ products are not identical to Kraft’s cheese, the court said that the products were “complementary to and in close proximity” to each other and the distance between the dairy case and meat section was not sufficient to eliminate consumer confusion.

Because Kraft need only show that it had a “better than negligible” chance of success on the merits, Judge Gettleman found that the company “is likely to prevail on the merits of its trademark infringement and unfair competition claims.” Kraft’s mark “is indisputably strong,” he noted, with annual sales in excess of $130 million and a presence in more than 16,000 stores across the country.

The marks themselves are not identical – the font and style of the packaging text is different and the Cracker Barrel mark includes a pictorial representation of a barrel and a figure of “Uncle Herschel.” But the court found enough similarity that a “consumer who views the Kraft mark briefly in the dairy section of the grocery store and subsequently views the CBOCS mark in the deli or meat section of the same store may not distinguish between the two brands.”

Judge Gettleman focused on the “somewhat complementary nature” of the products. CBOCS contracted with John Morrell to sell a line of meats, including whole hams. It argued that whole hams and snacking cheeses are not served together and therefore not complementary. But the court said other items in the line, like deli meats, are complementary to cheese, finding “a substantial risk that consumers will believe Kraft cheese and CBOCS licensed meats come from the same source.”

The intended markets for the products overlap, as CBOCS planned to sell its meat products in nationwide grocery stores and the placement of various CBOCS branded food items would contribute to consumer confusion (food products in the refrigerated meat section and gift cards in the checkout area). Retailers will likely add to the problem, as Kraft provided evidence that some stores describe the CBOCS products simply as “Cracker Barrel” without more detail.

Judge Gettleman also relied upon national survey evidence presented by Kraft, which found an 18.8 percent confusion rate among consumers. Although CBOCS presented its own evidence, the court said it was “not convinced” by the defendant’s survey because it was conducted primarily in locations with a heavy CBOCS presence and not on a national scale.

Finally, the court determined that the release of the CBOCS products would result in irreparable harm to Kraft, as its Cracker Barrel brand “will be overwhelmed and diluted.” Any potential harm to CBOCS and John Morrell would not outweigh the potential damage to Kraft, Judge Gettleman wrote, and the public interest would be served by keeping the marketplace free of confusion.

CBOCS’ argument that Kraft acquiesced to its expansion into food products was without merit, he added. Acquiescence cannot be inferred by a failure to object, the court said, particularly where CBOCS’ initial expansion was limited to its own restaurants, stores, Internet site, and catalog. Only CBOCS gift cards were sold in grocery stores, and those are redeemable only in Old Country stores and restaurants.

“This limited encroachment is not sufficient to demonstrate that Kraft acquiesced in CBOCS’ expansion of food products into retail grocery stores,” Judge Gettleman concluded.

Therefore, the court enjoined CBOCS (and John Morrell) “from manufacturing, advertising, distributing, shipping, promoting, offering for sale, selling or licensing third parties…to use the Cracker Barrel mark on food products in retail or wholesale trade other than through CBOCS’ traditional trade channels consisting of CBOCS’ restaurants, adjoining CBOCS stores, CBOCS catalogs, CBOCS’ Internet sites, and CBOCS gift cards as currently distributed.”

To read the court’s preliminary injunction order in Kraft Foods v. Cracker Barrel, click here.

Why it matters: In a statement to USA Today, Cracker Barrel said it plans to appeal the ruling. “While we respect the court’s ruling, we will explore all of our legal options, including a possible appeal of the preliminary injunction,” according to the statement. “We continue to stand firm in our belief of the merits of our case. We are convinced the marketplace understands and recognizes the differences in the Cracker Barrel Old Country Store brand and Kraft’s Cracker Barrel cheese. We are not selling cheese or any cheese-related products.” The company faces an uphill battle as Judge Gettleman already predicted a victory for Kraft, finding that the company “is likely to prevail on the merits of its trademark infringement and unfair competition claims.”