The U.S. Court of Appeals for the Eighth Circuit recently overturned a district court’s dismissal of a trademark infringement suit on the basis of laches, holding that the district court abused its discretion by failing to conduct “a meaningful analysis” of key factors relevant to a laches defense in trademark infringement cases. Champagne Louis Roederer v. J. Garcia Carrión, S.A., Case No. 08-2907 (8th Cir., June 24, 2009) (Shepherd, J.).

Champagne Louis Roederer, the maker of CRISTAL champagne, sued J. Garcia Carrión, S.A., the Spanish maker of CRISTALINO sparkling wine, for trademark infringement in 2006.

Roederer had previously opposed registration of the CRISTALINO mark in Spain in 1990. Roederer first learned that CRISTALINO was being sold in the United States in 1995, when Roederer’s attorneys discovered an affidavit indicating that a Spanish sparking wine called CRISTALINO was being sold in California. Seven years later in 2002, Carrión’s U.S. trademark application to register the CRISTALINO mark was published for opposition. Roederer responded with a cease-and-desist letter. After settlement talks failed, Roederer filed a notice of opposition at the Trademark Trial and Appeal Board (TTAB), as well as the present suit.

Carrión moved for summary judgment, arguing that Roederer’s delay in filing its trademark action was unreasonable and prejudiced Carrión because Carrión had already invested millions to expand its sales of CRISTALINO in the United States. The district court agreed, ruling that Roederer’s seven-year delay from 1995 to 2002, the time it first objected to Carrión’s use of the CRISTALINO mark in the United States, was inexcusable and constituted laches. Roederer appealed.

The Eighth Circuit reversed, holding that the district court failed to properly analyze laches in a trademark context. To successfully assert a laches defense, a defendant must prove that the plaintiff delayed in asserting a right or a claim, that the delay was not excusable and that there was undue prejudice to the defendant. The Eighth Circuit focused its analysis on two additional factors that courts apply when evaluating the merits of a laches defense in a trademark context: “(1) the doctrine of progressive encroachment, and (2) notice to the defendant of the plaintiff’s objections to the potentially infringing mark.”

As for progressive encroachment, the Eighth Circuit found that the time of delay is to be measured not from when the plaintiff first learned of the potentially infringing mark, but from when such infringement became actionable and provable. As the Court explained, the rational for the doctrine of progressive encroachment is to avoid placing trademark holders the horns of an inequitable dilemma—sue immediately and lose because the alleged infringer is insufficiently competitive to create a likelihood of confusion or wait and be dismissed for unreasonable delay.

As to the notice issue, the Court further observed that if the defendant knew that the plaintiff objected to the use of the mark, a laches defense generally will not lie. This rule can be understood either as an analogue to assumption of risk or as a factor that prevents the plaintiff from suffering undue prejudice. In either event, being forewarned of a trademark owner’s objections generally prevents a defendant from raising a successful laches defense.

The 8th Circuit found that the district court erred by failing to adequately analyze these factors. The Eighth Circuit noted that since Roederer had opposed several trademark registration applications filed by Carrion in Spain, the U.S. and Columbia in the early and late 1990s—long before Carrion had made a significant investment in improving a particular production plant in 2003—Carrion was certainly on notice of Roederer’s objection to Carrion’s use of the CRISTALINO trademark.

In addition, the Eighth Circuit also held that the district court erred in finding that defendant was prejudiced by plaintiff’s delay in bring its suit. “When a defendant has invested generally in an industry, and not a particular product, the likelihood of prejudicial reliance decreases in proportion to the particular product’s role in the business,” the court wrote. Given the fact that the majority of defendant’s investments were for the benefit of the defendant’s general private label brands rather than the specific product line at issue, undue prejudice was not established. This failure of the defendant to show undue prejudice as a result in the plaintiff’s delay in bringing suit is by itself sufficient to bar the laches defense.

Practice Note: Laches is no bar to trademark infringement suit when defendant was forewarned that plaintiff objected to defendant’s use of its trademark, no undue prejudice is established by the defendant and the plaintiff acted reasonably soon after the claim became actionable.