Inadequate Disclosures Preclude Monetary Damages Recovery in Trademark Infringement Suit

Order Granting in Part and Denying in Part Defendant’s Motion for Summary Judgment, Sazerac Co., Inc., et al. v. Fetzer Vineyards, Inc., Case No. 3:15-cv-04618-WHO (Judge William H. Orrick)

As any practitioner who has sought to establish trademark infringement already knows, likelihood of confusion is difficult to prove at trial. Nonetheless, a recent Order in Sazerac Co., Inc., et al. v. Fetzer Vineyards, Inc. demonstrates that plaintiffs still retain certain inherent advantages at the summary judgment stage in proving that there exists a likelihood of confusion, given the high hurdle for defendants to convince a court that no genuine issues of fact exist and that summary judgment is warranted.  But as this case also demonstrates, that does not mean that plaintiffs can “sleep at the wheel,” so to speak, when disclosing infringement or damages theories during discovery.

At issue in Sazerac were several of Plaintiff Sazerac’s registered designs and word marks related to its “Buffalo Trace” bourbon whiskey, first introduced in 1999.  In 2011, Defendant Fetzer Vineyards’s CEO—Giancarlo Bianchetti—sought to capitalize on a trend of swelling American pride and decided that the buffalo was the perfect icon to capture this trend.  According to Fetzer, its CEO was unaware of the existence of either Sazerac or Buffalo Trace Bourbon when its own “1000 Stories Wine” and its accompanying buffalo logo were created.  Still, Fetzer admitted that it targets the American bourbon consumer by prominently advertising its wine as “Bourbon Barrel Aged,” and by marketing the wine throughout bourbon-focused magazines and events.  Some of Fetzer’s internal documents even specifically mentioned targeting Sazerac’s consumers.

Notwithstanding these facts, Judge Orrick dismissed several (but not all) of the trademark and related trade dress claims raised by Sazerac against Fetzer because Sazerac offered no argument regarding whether certain marks were infringed. And while Sazerac’s claims for its buffalo logos and Buffalo Trace word mark (and related trade dress claims) survived, it lost the opportunity to recover monetary damages due to deficient initial disclosures and its failure to disclose any damages calculation until after the close of fact discovery.

First, the Court addressed Sazerac’s unregistered[1] Buffalo Trace trade dress claims.  The Court held that Sazerac’s trade dress was product packaging[2] because its predominant function was source identification.  And while the trade dress was not inherently distinctive,[3] the Court found that there was a genuine issue as to whether Buffalo Trace had developed secondary meaning, as Sazerac presented evidence of thousands of social media followers, significant sales, consumer surveys, and co-existence agreements between Sazerac and other alcoholic beverage companies using a buffalo image.

Second, the Court dove into the likelihood of confusion analysis, examining the marks on which Sazerac based its infringement arguments: its Buffalo logos, Buffalo Trace word mark, and Buffalo Trace trade dress. The Court noted that because of the intensely factual nature of trademark disputes, summary judgment is generally disfavored.  And Judge Orrick found that there was at least a genuine issue of material fact as to whether each of the following eight so-called “Sleekcraft[4] factors weighed in favor of finding a likelihood of infringement.

  1. Similarity of the Marks and Dress: There were enough similarities between the marks and dress—including a sketched buffalo in neutral tones, images of a buffalo on the front of the label, a smaller buffalo on the neck of the bottle, and gold/white lettering—to create a genuine disputed issue of material fact.
  2. Proximity of the Goods: Even though the products at issue were different types of alcohol, Fetzer explicitly drew a connection between its 1000 Stories wine and bourbon drinkers.
  3. Strength of the Mark: The conceptual strength of Sazerac’s marks was undisputed, and Sazerac created a genuine issue as to commercial strength through number of sales, years of continuous use, advertising expenditures, and social media following.
  4. Defendant’s Intent in Selecting the Mark: Fetzer claimed that Bianchetti was inspired to use the buffalo by a National Geographic magazine article and that the higher-ups at Fetzer had no knowledge of Sazerac or the Buffalo Trace brand. But this story was undermined by Fetzer’s internal documents, which evidenced a marketing strategy whereby Fetzer specifically targeted Sazerac accounts for sales of 1000 Stories wine.
  5. Evidence of Actual Confusion: While the Court agreed that Sazerac’s expert survey suffered from some “technical inadequacies,” this went to the weight of the survey, not its admissibility.
  6. Marketing Channels Used: The parties marketed in the same magazines and at the same events.
  7. Likelihood of Expansion into other Markets: Although bourbon and wine producers may not compete directly for the same consumers, the Court found that they occupy the same marketing and promotional space.
  8. Degree of Care Exercised by Purchasers of Defendant’s Product: Even though Fetzer’s consumers may be discerning, the use of the buffalo mark paired with an association to bourbon was deemed likely to mislead consumers to assume a marketing or sponsorship arrangement between the parties.

Third, even though there existed a disputed issue of material fact with respect to likelihood of confusion between Sazerac’s and Fetzer’s marks, the Court nonetheless dismissed Sazerac’s claims for monetary damages[5] due to its excessive delay in disclosing a different method to prove damages. In its initial disclosures, Sazerac represented that it would disclose an expert to prove damages, but ultimately failed to do so. And instead of amending its initial disclosures, Sazerac waited until after fact discovery closed to disclose a damages calculation based on third-party licensing agreements. The Court explained that while Sazerac produced some licensing agreements in discovery, Fetzer was not alerted that these agreements were material to damages, and, Fetzer reasonably assumed Sazerac would not be seeking damages for trademark infringement after it failed to disclose an expert. Thus, because Fetzer would be unfairly prejudiced were Sazerac allowed to alter its damages strategy this late in the game, the Court precluded Sazerac from recovering monetary damages.

There was one “silver lining” to the Court’s rulings for Sazerac. Judge Orrick left open the door for Sazerac to recover attorney’s fees, as Fetzer could still be found to have acted maliciously, fraudulently, deliberately, or willfully.  Still, even with that potential for recovery, this case serves as a reminder that trademark infringement plaintiffs need to take care in adequately disclosing all potential avenues for recovery during discovery, lest they be foreclosed from pursuing all of their previously-available options.

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[1] Trade dress protects aspects of the total image of a product that cannot be registered.

[2] There are two types of trade dress, product packaging and product design.  Product packaging trade dress is protectable if it is inherently distinctive or has acquired secondary meaning, while product design trade dress is protectable only if it has acquired secondary meaning, as product design cannot be inherently distinctive.

[3] Sazerac failed to present evidence that the ordinary consumer necessarily imagines the Buffalo Trace brand when presented with an American buffalo on an alcoholic beverage container.

[4] AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979).

[5] The Lanham Act provides multiple avenues for recovery, including defendant’s profits, plaintiff’s damages, treble damages, and attorney’s fees.