A federal judge postponed a decision on a request by Kraft Food Groups for a temporary injunction to keep Cracker Barrel Old Country Stores Inc. products out of grocery stores until a trademark infringement lawsuit ruling.
A hearing, originally scheduled for June 12, will resume Wednesday in Northern U.S. District Court in Chicago. Time constraints caused the delay.
At the end of January, Kraft filed a lawsuit against the Lebanon-based restaurant chain in U.S. district court in Illinois citing trademark infringement. At the source of the dispute is Kraft’s line of Cracker Barrel cheese, which has been a registered trademark of Kraft since 1957.
“We’re at a standstill right now,” said Jeanne Ludington, spokesperson for Cracker Barrel Old Country Store, in March. “The parties have agreed to wait on a ruling on a temporary injunction.”
Kraft brand cheeses have been a staple in grocery stores for many years. Kraft has sold Cracker Barrel cheese since 1948, according to the U.S. Patent and Trademark Organization’s trademark database.
Cracker Barrel restaurant officials contend food products have been sold in well-marked packages to customers for decades, with no objection from Kraft.
Cracker Barrel restaurants had not entered the grocery retail realm, where Kraft products are primarily sold.
In January, however, Cracker Barrel restaurants shipped its first wave of grocery store products to 325 national grocery retailers.
Grocery sales are part of Cracker Barrel’s strategy to expand its brand beyond its 620-plus restaurants and stores. The chain has signed a licensing agreement with John Morrell & Co. for ham, bacon and other meats.
The first product shipped to grocery stores was a spiral-cut ham, emblazoned with the Cracker Barrel logo. Kraft’s trademark attorneys, who had previously thought the launch of alleged infringing products was not scheduled to begin until later in the year, scrambled to amend the original complaint less than a week after the unofficial launch.
Kraft’s amended complaint seeks permanent and immediate injunctive relief against Cracker Barrel Old Country Stores, and claims that its Cracker Barrel brand cheese “will die a thousand deaths” if the infringing products are not immediately pulled from shelves and further shipping ceased. The suit also claims that if the injunction is not granted, Kraft’s Cracker Barrel cheese brand “may not be able to be resuscitated, regardless of any monetary award.”
To date, Cracker Barrel Old Country Stores is not actually selling cheese to grocery stores under the Cracker Barrel brand, and perhaps they have no plans to at any future date.
Cracker Barrel is fighting the request, citing its outside market research expert’s study that said just 7 percent of consumers would wrongly associate Cracker Barrel-branded meats with the Kraft cheese brand. A Kraft consultant said its own study showed the confusion rate would be more like 25 percent.
Perry Clegg, a trademark attorney at Clegg Law and founder of Trademark Access said while Kraft should not have waited so long to assert its trademark registration, it was nonetheless probably wise in bringing the lawsuit if it intended to preserve its trademark registration rights for the Cracker Barrel mark.
“It is not unreasonable to think that a grocery store customer may buy cheese and ham in the same outing, and be confused when both products in their cart carry the Cracker Barrel brand name,” Clegg said.
But Kraft may be in for a fight of its own in federal court, this time as a defendant. Saputo Cheese USA Inc. hit Kraft Foods Group Inc. and a subsidiary with a lawsuit in Illinois federal court Friday, saying Kraft’s “Toppers” Velveeta cheese products infringe Saputo’s “Toppers" brand cheese mark that it has used since 1996.
Saputo raises allegations the Toppers mark, which it said has come to be associated with its cheeses, is continually being infringed by Kraft, which promotes, markets, advertises and distributes a line of Velveeta brand cheese products under the mark “Toppers.” The mark has been used by Kraft since late last year, according to the complaint.
Saputo said it has used and extensively promoted the Toppers mark in connection with cheeses for many years before Kraft began using the “identical Toppers mark.”
Meanwhile, Cracker Barrel showed strong gains for the third quarter of the fiscal year.
“Driven by strong sales, traffic and operational performance, our earnings growth for the third quarter exceeded our expectations,” said Sandra Cochran, president and chief executive officer for Cracker Barrel Old Country Store, Inc.
Recently, the company reported net income totaling $24.6 million for the quarter, a 22 percent earnings increase over the $20.1 million reported for the third quarter in 2012.
“We believe focusing on our priorities around menu initiatives, store merchandise, marketing and operations improved our operating margin and profitability during the quarter,” said Cochran.
The company also reported its diluted earnings per share increased by 19 percent over 2012.
“This performance enabled us to further enhance shareholder value by increasing our quarterly dividend by 50 percent, while we reduced our debt by $125 million.”
The company reported total revenue of $640.4 million for the quarter, representing an increase of 5.2 percent over 2012.
The company posted its sixth consecutive quarter of positive comparable traffic, restaurant sales and retail sales. Comparable store restaurant sales increased 3.1 percent, including a 2.4 increase in average check. The average menu price increase for the quarter was about 2.3 percent. Comparable retail sales increased 5.5 percent for the quarter.