Eat Right Foods Ltd. v. Whole Foods Mkt. Servs., Inc. , 880 F.3d 1109 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
EAT RIGHT FOODS LTD., No. 15-35524
Plaintiff-Counter-Defendant-
Appellant, D.C. No.
2:13-cv-02174-
v. RSM
WHOLE FOODS MARKET, INC.,
Defendant, OPINION
and
WHOLE FOODS MARKET SERVICES,
INC.; WHOLE FOODS MARKET
PACIFIC NORTHWEST, INC.,
Defendants-Counter-Claimants-
Appellees.
Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, Chief Judge, Presiding
Argued and Submitted December 4, 2017
Seattle, Washington
Filed January 29, 2018
2 EAT RIGHT FOODS V. WHOLE FOODS
Before: Richard C. Tallman and Paul J. Watford, Circuit
Judges, and Richard F. Boulware II, * District Judge.
Opinion by Judge Tallman
SUMMARY **
Trademark
The panel vacated the district court’s grant of summary
judgment in favor of the defendant in a trademark
infringement case, affirmed the district court’s denial of the
plaintiff’s cross-motion for summary judgment, and
remanded with instructions.
Eat Right Foods, which sold “EatRight”-branded
cookies to Whole Foods for many years, alleged that Whole
Foods infringed on its trademark by selling a variety of foods
under the “EatRight America” mark.
The panel concluded that disputed material facts
establishing or defeating the affirmative defenses of laches
and acquiescence had not been resolved. As to laches, the
panel concluded that if the district court had credited Eat
Right Foods’ evidence that it waited to file suit because it
was attempting to resolve its claims against Whole Foods
without litigation, then the court might have come to a
*
The Honorable Richard F. Boulware II, United States District
Judge for the District of Nevada, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
EAT RIGHT FOODS V. WHOLE FOODS 3
different conclusion about the reasonableness of the delay.
The panel also vacated the district court’s finding that Whole
Foods suffered expectations-based prejudice. As to
acquiescence, the panel held that the flaws in the district
court’s unreasonable delay and prejudice analyses also
affected its acquiescence analysis. In addition, the district
court failed to make factual findings regarding the extent and
reasonableness of Whole Foods’ reliance on Eat Right
Foods’ actions.
COUNSEL
Mark P. Walters (argued) and Lawrence D. Graham, Lowe
Graham Jones PLLC, Seattle, Washington, for Plaintiff-
Counter-Defendant-Appellant.
Stephen P. Meleen (argued), Jered E. Matthysse, and Travis
R. Wimberly, Pirkey Barber PLLC, Austin, Texas;
Christopher Tompkins, Betts Patterson Mines, Seattle,
Washington; for Defendants-Counter-Claimants-Appellees.
OPINION
TALLMAN, Circuit Judge:
Eat Right Foods Ltd. (ERF) appeals the district court’s
summary judgment dismissal of its claims against Whole
Foods Market Services, Inc., and Whole Foods Market
Pacific Northwest, Inc. (Whole Foods). ERF, which sold
“EatRight”-branded cookies to Whole Foods for many years,
argues that its former customer infringed on its trademark by
selling a variety of foods under the “EatRight America”
mark from 2010–2013. Whole Foods argues, and the district
4 EAT RIGHT FOODS V. WHOLE FOODS
court held, that ERF’s suit is barred by the affirmative
defenses of laches and acquiescence. Because disputed
material facts establishing or defeating the defenses must be
resolved, we vacate the district court’s decision and remand
for further proceedings.
I
ERF is a New Zealand company that sells organic foods.
It has used the “EAT RIGHT” and “EATRIGHT” marks on
its food products in the United States since 2001 and 2003,
respectively. It owns registered trademarks for use of the
“EATRIGHT” mark on several classes of goods, including
certain types of snack foods.
Whole Foods Market Services, Inc., and Whole Foods
Market Pacific Northwest, Inc., are subsidiaries of Whole
Foods Market, Inc., which operates hundreds of grocery
stores throughout North America. From 2004 through 2013,
ERF sold a line of gluten-free cookies to Whole Foods.
Nutritional Excellence, LLC, is a health and nutrition
company that once did business under the name “Eat Right
America.” In late 2009, Whole Foods contracted with
Nutritional Excellence to use its patented Aggregate
Nutrient Density Index (ANDI), a “food-scoring system”
designed to communicate the nutritional value of foods to
consumers. Whole Foods’ agreement with Nutritional
Excellence allowed it to display the ANDI scores of certain
foods in its stores. Wherever an ANDI value was displayed,
EAT RIGHT FOODS V. WHOLE FOODS 5
Whole Foods was required to display the “EatRight
America” mark. 1
In early 2010, Whole Foods rolled out the ANDI system
and launched an associated health-and-wellness program
called “Health Starts Here” in all of its 289 stores. As part
of “Health Starts Here,” Whole Foods promoted Nutritional
Excellence’s “Eat Right America” diet and nutrition
program. The company issued a press release about ANDI
and “Health Starts Here” on January 20, 2010, and it featured
both initiatives prominently on its website. The ANDI logo
and the “EatRight America” mark were displayed on
promotional materials, including chalkboards outside stores
and signs inside stores. The mark also appeared alongside
the ANDI scores of a variety of foods, including bulk foods,
produce, and prepared foods.
In February or early March of 2010, ERF Managing
Director Rebecca Douglas-Clifford, traveling from New
Zealand, visited a Whole Foods store in San Francisco,
California. She noticed the “EatRight America” mark on
“books, DVDs and some promotional files,” but did not
observe the mark on any food products. 2
1
The parties’ references to the various entities and marks at issue
here are somewhat inconsistent. For the sake of clarity, we use the
phrase “EatRight America” to refer to the disputed mark that was in use
at Whole Foods, and we use capital letters to refer to registered marks.
Where we quote from the record, we use the capitalization and spacing
the parties use.
2
According to Whole Foods, the “EatRight America” mark was
used on foods throughout Whole Foods stores at this time. But Douglas-
Clifford says the purpose of her visit was to discuss pricing with a Whole
6 EAT RIGHT FOODS V. WHOLE FOODS
In March 2010, Douglas-Clifford e-mailed Whole Foods
counsel Chris Graff and stated that, “[o]n a recent trip to San
Francisco I couldn’t help but notice Whole Foods
‘America’s Healthiest Grocery Store’ positioning and their
alliance with Eat Right America . . . fantastic to see.” 3 In the
same e-mail, Douglas-Clifford asked Graff to discuss with
Whole Foods officials the possibility of “Whole Foods
purchasing our EATRIGHT brand.”
In November 2010, ERF became aware that Nutritional
Excellence principal Kevin Leville was seeking to register
the “EATRIGHT AMERICA” mark for “a variety of food
products.” Douglas-Clifford investigated and determined
that Nutritional Excellence was selling snack bars online, but
she did not discover that it had licensed use of the “EatRight
America” mark to Whole Foods. ERF opposed Leville’s
registration before the Trademark Trial and Appeal Board
(TTAB) from October 2011 through April 2013, arguing that
use of the mark would confuse consumers.
In February or March of 2011, Douglas-Clifford visited
two Whole Foods stores. This time, she noticed the
“EatRight America” mark on “a wide variety of food
products.” But it was not until the following September that
she contacted Graff to discuss what she described as Whole
Foods’ “infringement” of her company’s trademark, and
Graff told her to “look to Nutritional Excellence for a
remedy.” Douglas-Clifford instead proposed that Graff
Foods representative, so she only visited the information desk and an in-
store office and did not see the mark on food products during that visit.
3
ERF asserts that Douglas-Clifford was referring to “the non-
infringing and complementary use” of the mark she had seen on “CDs or
DVDs,” not to the use of the mark on food products, of which she was
unaware at the time.
EAT RIGHT FOODS V. WHOLE FOODS 7
“approach Whole Foods to inquire whether Whole Food[s]
would agree to purchase our rights in the brand
EATRIGHT,” and he told her he would talk to Whole Foods
and “get back to” her.
In February 2012, ERF counsel James Martin began
communicating with Graff about Whole Foods’ alleged
infringement. On April 4, 2012, ERF sent Whole Foods a
cease-and-desist letter asserting that ERF owned the rights
to the “EATRIGHT” mark and Whole Foods had been using
“a confusingly similar mark.”
On April 20, 2012, Graff responded that Whole Foods’
use of the mark was licensed by Nutritional Excellence, but
that because Whole Foods had “no desire to become
involved in a trademark dispute” with ERF, it would “agree
to cease its use of the designation Eat Right America” by the
end of the year. The first line of the e-mail read
“PRIVILEGED SETTLEMENT NEGOTIATIONS
UNDER FED. R. EVID. § 408.”
Graff and Martin corresponded or spoke on the phone
about the matter multiple times in April and June 2012.
They discussed different options for resolving the dispute,
including the possibility of Whole Foods funding ERF’s
legal battle against Nutritional Excellence or acquiring
ERF’s brand. Martin followed up with Graff in July and
August.
On September 26, 2012, Martin sent Graff a letter
reiterating ERF’s objection to Whole Foods’ use of
“EatRight America” and stating that despite Whole Foods’
assurances that the mark was no longer in use, it was
“continuing to be used widely in Whole Foods stores.” The
letter requested that Whole Foods “give serious
consideration to acquisition of the EATRIGHT brand,” or
8 EAT RIGHT FOODS V. WHOLE FOODS
“confirm that it will immediately cease all use of the
infringing” mark.
On October 9, 2012, Graff told Martin via e-mail that
Whole Foods was “not interested in pursuing a possible
acquisition of your client’s EATRIGHT brand at this time.”
In November and December 2012, Douglas-Clifford
corresponded with Whole Foods’ Vice President of Business
Development “regarding a potential brand purchase as a way
to resolve outstanding infringement claims.” In January
2013, Martin sent Graff a letter requesting that Whole Foods
confirm that it had ceased using the “EatRight America”
mark in stores. The next month, Graff repeated that Whole
Foods was “not interested in pursuing” an acquisition of
ERF’s brand and that any claims ERF had regarding the
mark should be directed at Nutritional Excellence.
In April 2013, ERF and Leville reached a settlement
agreement under which Leville agreed to abandon his
application for registration of the mark “EATRIGHT
AMERICA” in the classes in which ERF’s “EATRIGHT”
mark was already registered. However, he would be
permitted to use the mark “EAT RIGHT AMERICA,” with
“EAT RIGHT” spelled as two words.
The next month, ERF sent Whole Foods a letter stating
that “[n]ow that [ERF] has successfully enforced [its] rights
in the ‘EATRIGHT’ brand with respect to” Leville and
Nutritional Excellence, it was “the appropriate time to
resolve the outstanding issues with Whole Foods.” It
asserted that ERF had “lost substantial business” due to
Whole Foods’ actions and asked Whole Foods “to account
for the damage and enter into negotiations for a final
settlement of this dispute.”
EAT RIGHT FOODS V. WHOLE FOODS 9
In December 2013, ERF brought suit alleging trademark
infringement, false designation of origin, and unfair
competition claims against Whole Foods in the Western
District of Washington. Whole Foods moved for summary
judgment, asserting the affirmative defenses of laches and
acquiescence. ERF cross-moved for summary judgment.
The district court granted Whole Foods’ motion and
denied ERF’s cross-motion for summary judgment. It found
that ERF “knew, or in the exercise of reasonable diligence,
should have known,” that Whole Foods was using the
“EatRight America” mark “in late 2009/early 2010,” but that
ERF allowed and even encouraged Whole Foods to use the
mark for years. Therefore, it found that ERF’s claim was
barred by both laches and acquiescence. ERF timely
appealed. We have jurisdiction pursuant to 28 U.S.C.
§ 1291.
II
We apply a hybrid standard of review to grants of
summary judgment on the basis of laches. In re Beaty,
306 F.3d 914, 921 (9th Cir. 2002). “[C]ertain aspects of the
district court’s decision” are reviewed de novo, including
“[w]hether laches is available as a potential defense to a
particular kind of action” and “whether the district court
inappropriately resolved any disputed material facts in
reaching its decision.” Id. at 920–21 (quotation omitted).
But “the application of the laches doctrine to the facts” is
reviewed for abuse of discretion. Id. at 921; see also Internet
Specialties W. v. Milon-Digiorgio Enters., Inc., 559 F.3d
985, 991 (9th Cir. 2009).
The application of the doctrine of acquiescence “is
within the discretion of the trial court and also is reviewed
for abuse of discretion.” Seller Agency Council, Inc. v.
10 EAT RIGHT FOODS V. WHOLE FOODS
Kennedy Ctr. for Real Estate Educ., Inc., 621 F.3d 981, 986
(9th Cir. 2010).
III
The affirmative defense of laches “is an equitable time
limitation on a party’s right to bring suit, which is derived
from the maxim that those who sleep on their rights, lose
them.” Miller v. Glenn Miller Prod., Inc., 454 F.3d 975, 997
(9th Cir. 2006) (per curiam) (citations and internal quotation
marks omitted). Finding that laches bars a trademark claim
is appropriate where “the trademark holder knowingly
allowed the infringing mark to be used without objection for
a lengthy period of time.” GoTo.com, Inc. v. Walt Disney
Co., 202 F.3d 1199, 1209 (9th Cir. 2000) (quoting Brookfield
Commc’ns., Inc. v. W. Coast Ent. Corp., 174 F.3d 1036,
1061 (9th Cir. 1999)).
Although laches is distinct from a statute of limitation,
we make laches determinations “with reference to the
limitations period for the analogous action at law.” Jarrow
Formulas Inc. v. Nutrition Now Inc., 304 F.3d 829, 835–36
(9th Cir. 2002). “If the plaintiff filed within that period,
there is a strong presumption against laches. If the plaintiff
filed outside that period, the presumption is reversed.”
Tillamook Country Smoker, Inc. v. Tillamook Cty. Creamery
Ass’n, 465 F.3d 1102, 1108 (9th Cir. 2006). Here, the parties
agree that the most analogous limitation period is
Washington’s three-year statute of limitation for trade name
infringement. See Wash. Rev. Code Ann. § 4.16.080(2).
To establish that laches bars a claim, a defendant must
“prove both an unreasonable delay by the plaintiff and
prejudice to itself.” Evergreen Safety Council v. RSA
Network Inc., 697 F.3d 1221, 1226 (9th Cir. 2012) (quotation
EAT RIGHT FOODS V. WHOLE FOODS 11
omitted). We address each prong of the laches analysis in
turn.
A
Determining whether a delay was unreasonable requires
answering two questions: how long was the delay, and what
was the reason for it? Jarrow, 304 F.3d at 838.
1
To measure the length of a delay, we start the clock
“when the plaintiff knew (or should have known) of the
allegedly infringing conduct,” and we stop it when “the
lawsuit in which the defendant seeks to invoke the laches
defense” is initiated. Evergreen, 697 F.3d at 1226. ERF
filed suit on December 3, 2013. Thus, if it knew or should
have known of Whole Foods’ alleged infringement prior to
December of 2010, the presumption is that laches applies.
The district court made conflicting statements about
when ERF should have known about Whole Foods’ alleged
infringement. Early in its order granting summary judgment,
it stated that “the record demonstrates actual or constructive
knowledge of the alleged infringement in early 2010.” But
later it wrote that ERF “knew or, in the exercise of
reasonable diligence, should have known that Defendants
were using the allegedly infringed trademark in late
2009/early 2010.”
Whole Foods rightly acknowledges that the district court
erred in finding that ERF should have known of the alleged
infringement in late 2009. Whole Foods did not begin using
the “EatRight America” mark in stores until January 20,
2010, so there was no infringement for ERF to be aware of
in late 2009. However, the evidence could support a finding
12 EAT RIGHT FOODS V. WHOLE FOODS
that ERF should have known about Whole Foods’ use of the
mark before December 2010.
ERF insists that it did not have actual knowledge of
Whole Foods’ alleged infringement until early 2011, but
constructive knowledge is enough to start the laches
evaluation period. See, e.g., Internet Specialties, 559 F.3d at
990. On multiple occasions, we have held that laches barred
an otherwise meritorious trademark or copyright claim
because the plaintiff had constructive knowledge of
potentially infringing activity outside the limitation period.
See, e.g., Evergreen, 697 F.3d at 1227 (“The fact that [the
plaintiff] had the [defendant’s] draft manual in his
possession in 1999, regardless of whether he actually read it,
demonstrates that he should have known of the infringement
[then].”); Miller, 454 F.3d at 999 (holding that plaintiffs had
constructive knowledge of infringement where they were
shareholders in the defendants’ organization, the defendants
had “openly sold merchandise bearing the . . . mark” at
performances for years, and one of the plaintiffs had
attended performances where such merchandise was sold);
E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir.
1983) (“Because plaintiff and defendant advertised in the
same magazines and exhibited at the same trade fairs,
plaintiff had ample opportunity to discover defendant’s
activities before defendant developed a substantial
business.”).
Here, ERF had an ongoing business relationship with
Whole Foods, which publicized its “Health Starts Here”
campaign and the “Eat Right America” nutrition program in
a press release and on its website in January 2010. ERF’s
managing director visited a Whole Foods store in February
or early March 2010, when the “EatRight America” mark
was displayed throughout stores. Although she testified that
EAT RIGHT FOODS V. WHOLE FOODS 13
she did not see the mark used on food products, she admits
that she saw it on “books, DVDs and some promotional
files.” And she clearly understood that “EatRight America”
wasn’t just the title of a book or DVD, because she
referenced Whole Foods’ “alliance with Eat Right America”
and the Eat Right America “campaign[]” in e-mails to Whole
Foods personnel. On March 22, 2010, she urged Whole
Foods to order more of her cookies in conjunction with the
campaign.
Furthermore, by November 2010, Douglas-Clifford was
unquestionably aware of Nutritional Excellence’s attempts
to register the “EATRIGHT AMERICA” mark, and she
knew Nutritional Excellence had a relationship with Whole
Foods. When asked during sworn testimony when she “first
put together” that the “EatRight America” mark was being
used at Whole Foods beyond books and DVDs, Douglas-
Clifford said she first “saw it with [her] own eyes” in early
2011, but she “saw a connection” when she discovered
Nutritional Excellence’s trademark application in “late
2010.” Shortly thereafter, she was asked whether she
“believe[d] [her] brand was possibly being damaged” in
November of 2010 when “Eat Right branded products [were
being] sold to Whole Foods Market by both sides,” and she
answered, “yes.”
On this record, it was not an abuse of discretion for the
district court to rule that ERF had constructive knowledge of
Whole Foods’ alleged infringement prior to December 2010.
Therefore, the presumption is that laches applies. See
Tillamook, 465 F.3d at 1108. But that presumption may be
rebutted if ERF can show that its delay in suing was
nonetheless reasonable.
2
14 EAT RIGHT FOODS V. WHOLE FOODS
To determine whether a delay is reasonable, we “look to
the cause of the delay.” Evergreen, 697 F.3d at 1227.
Reasonable justifications for a delay include exhausting
remedies through administrative processes, evaluating and
preparing complicated claims, and determining “whether the
scope of proposed infringement will justify the cost of
litigation.” Id. (quoting Danjaq LLC v. Sony Corp., 263 F.3d
942, 954 (9th Cir. 2001)). “[D]elay is impermissible,” on
the other hand, “when its purpose or effect is to capitalize on
the value of the alleged infringer’s labor by determining
whether the infringing conduct will be profitable.” Id.ERF argues that any delay on its part should be excused
because it waited until December 2013 to file suit because it
was trying to settle its claims against Whole Foods without
litigation. Whole Foods argues that ERF was “attempt[ing]
to cash in on [its] trademark registrations and sell its brand
to a larger company, not to settle a dispute.”
The district court agreed with Whole Foods. It
understandably determined that ERF delayed filing suit “in
an effort to foster an amicable relationship such that
Defendants would purchase Plaintiff’s brand” and that
“[s]uch delay is not reasonable.” In doing so, however, it
seems to have violated the cardinal rule of summary
judgment: that disputed issues of material fact must be
resolved in favor of the non-moving party. 4 See Tolan v.
Cotton, 134 S. Ct. 1861, 1866–68 (2014) (per curiam).
4
This principle applies even where, as here, the parties filed cross-
motions for summary judgment. See Brunozzi v. Cable Commc’ns Inc.,
851 F.3d 990, 995 (9th Cir. 2017). In those situations, “we review each
motion . . . separately, giving the nonmoving party for each motion the
benefit of all reasonable inferences.” Id. (quoting Ctr. for Bio-Ethical
EAT RIGHT FOODS V. WHOLE FOODS 15
Although the application of the laches doctrine to the
facts is at the discretion of the trial judge, when it comes to
determining what those facts are, the usual summary
judgment standards apply. See Beaty, 306 F.3d at 920–21;
Jarrow, 304 F.3d at 833–34; Hot Wax, Inc. v. Turtle Wax,
Inc., 191 F.3d 813, 819 (7th Cir. 1999); Nat’l Ass’n of Gov’t
Emps. v. City Pub. Serv. Bd. of San Antonio, Tex., 40 F.3d
698, 707–08 (5th Cir. 1994) (“[A]lthough the district court
had discretion to grant laches on motion for summary
judgment, it did not have discretion to circumvent the
requirements of Rule 56(c) by resolving genuinely disputed
issues of fact material to laches.”).
Summary judgment should be granted where the
evidence shows that “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a); see Anderson v.
Liberty Lobby Inc., 477 U.S. 242, 247 (1986). A material
fact is one “that might affect the outcome of the suit under
the governing law.” Anderson, 477 U.S. at 248. On
summary judgment, “the judge’s function is not himself to
weigh the evidence and determine the truth of the matter but
to determine whether there is a genuine issue for trial.” Id.
at 249. While making that determination, the judge must
view the evidence in the light most favorable to the non-
moving party and make all reasonable inferences in favor of
that party. Tolan, 134 S. Ct. at 1866–68.
Here, Whole Foods asserts that “at no point prior to
[ERF] filing suit in December 2013 were [ERF] and Whole
Foods engaged in settlement talks.” But ERF presented
evidence that it delayed filing suit because it was trying to
Reform, Inc. v. Los Angeles Cty. Sheriff Dep’t, 533 F.3d 780, 786 (9th
Cir. 2008)).
16 EAT RIGHT FOODS V. WHOLE FOODS
clarify its rights in the “EATRIGHT” mark and to resolve its
claims against Whole Foods, one suggested resolution being
an acquisition of its brand by Whole Foods.
According to the record, ERF began opposition
proceedings against Leville before the TTAB in October
2011. In April 2012, ERF sent Whole Foods a cease-and-
desist letter asserting that its use of the “EatRight America”
mark was infringing and demanding that Whole Foods stop
using the mark “on or in connection with food products.”
Throughout 2012, ERF’s and Whole Foods’ lawyers
communicated about the alleged infringement, and they
discussed several ways of resolving ERF’s complaints,
including Whole Foods funding ERF’s opposition
proceeding against Leville or Whole Foods acquiring ERF’s
brand. Communications from both parties were marked as
“PRIVILEGED SETTLEMENT NEGOTIATIONS” or
“CONFIDENTIAL SETTLEMENT COMMUNICATION[S].”
In April 2013, ERF settled its opposition proceeding
against Leville. The next month, it sent Whole Foods a letter
claiming that it had “lost substantial business” due to Whole
Foods’ use of the “EatRight America” mark and demanding
that Whole Foods “account for the damage and enter into
negotiations for a final settlement of this dispute.”
If the district court had credited ERF’s evidence that it
waited to file suit because it was attempting to resolve its
claims against Whole Foods without litigation, it might have
come to a different conclusion about the reasonableness of
the delay. We have previously held that laches did not bar a
claim where a plaintiff waited two years to file suit because
“during that period the parties were actively seeking to
resolve [the] matter out of court.” Toyota Motor Sales,
U.S.A. v. Tabari, 610 F.3d 1171, 1183 (9th Cir. 2010); see
EAT RIGHT FOODS V. WHOLE FOODS 17
also Restatement (Third) of Unfair Competition § 31, cmt. c
(Am. Law Inst. 2017) (“[R]easonable time consumed in
objecting to the use and awaiting the defendant’s response
will not contribute to a finding of laches.”). Similarly, here,
the district court could determine that it was reasonable for
ERF to “attempt to avoid the expense and inconvenience of
a lawsuit” by pursuing alternatives to litigation and filing
suit only after it was clear that Whole Foods was not
amenable to such alternatives. See Tabari, 610 F.3d at 1183.
Whether ERF was trying to settle its claims with Whole
Foods is a question of material fact because it goes to the
reason for—and therefore the reasonableness of—ERF’s
delay. See Anderson, 477 U.S. at 248. If the delay was
reasonable, laches does not bar ERF’s suit.
By concluding, despite the evidence recounted above,
that ERF delayed merely because it was trying to sell its
brand, the district court impermissibly resolved a disputed
question of material fact in favor of the moving party.
Therefore, we vacate the district court’s reasonableness
finding and remand for further proceedings. On remand, the
court should reevaluate the evidence in the light most
favorable to the non-moving party—i.e., as if ERF delayed
filing suit because it was trying to settle its claims against
Whole Foods. The district court could still determine that
the delay was unreasonable, but the court must proceed from
the premise that ERF’s account of why it waited to file suit
is true.
We note also that because there are disputed issues of
material fact, the district court did not abuse its discretion by
denying ERF’s cross-motion for summary judgment.
Therefore, the district court’s decision on that issue is
affirmed.
18 EAT RIGHT FOODS V. WHOLE FOODS
B
Even where a defendant establishes that a plaintiff
delayed unreasonably in filing suit, laches will not bar a
claim unless that delay prejudiced the defendant. Grand
Canyon Trust v. Tucson Elec. Power Co., 391 F.3d 979, 988
(9th Cir. 2004). Two types of prejudice can give rise to
laches: expectations-based prejudice and evidentiary
prejudice.
1
Expectations-based prejudice exists where “a defendant
‘took actions or suffered consequences that it would not
have, had the plaintiff brought suit promptly.’” Evergreen,
697 F.3d at 1227 (quoting Danjaq, 263 F.3d at 955). A
defendant can establish prejudice by demonstrating that
during the plaintiff’s delay, “it invested money to expand its
business or entered into business transactions based on [its]
presumed rights” in a disputed mark. Miller, 454 F.3d at
999. The defendant “may also prove prejudice if as a result
of entering into such business transactions . . . it may incur
liability for damages.” Id. at 1000; see also Whittaker Corp.
v. Execuair Corp., 736 F.2d 1341, 1347 (9th Cir. 1984).
Establishing undue prejudice requires that the defendant
show “at least some reliance on the absence of a lawsuit.”
Seller Agency, 621 F.3d at 989.
The district court found that Whole Foods established
expectations-based prejudice because “[d]uring the time
period in question, Whole Foods invested a significant
amount of time and money in, and heavily promoted, the
ANDI® food-scoring system and Eat Right America diet
and nutritional programs at its stores.” It cited evidence
showing that Whole Foods paid employees involved with the
ANDI program salaries of almost $1.6 million and that
EAT RIGHT FOODS V. WHOLE FOODS 19
Whole Foods opened more than fifty new stores, all of which
“trained employees on the food-scoring system and Eat
Right America programs, and generated, printed, and
displayed signage promoting and explaining the scores and
programs.”
This type of evidence can support a finding of
expectations-based prejudice. See Miller, 454 F.3d at 1000.
However, the prejudice inquiry is concerned with actions a
defendant took during the plaintiff’s delay in bringing suit—
not all the actions it took in relation to the use of a mark. See
id. at 999 (“[Defendant] must also demonstrate that it has
been prejudiced by the delay.”) (emphasis added); see also
Whittaker, 736 F.2d at 1347 (finding prejudice where a
defendant incurred potential liability because of the
plaintiff’s “failure to take prompt action”). Thus, only
expenditures made after a plaintiff “knew or should have
known about the potential claim” will support a finding of
expectations-based prejudice. See Kling v. Hallmark Cards
Inc., 225 F.3d 1030, 1036 (9th Cir. 2000).
Here, the district court treated “the time period in
question” as 2009–2012, even though Whole Foods did not
start using the “EatRight America” mark in stores until
January 20, 2010. As noted above, the district court found
that ERF should have known about Whole Foods’ alleged
infringement “in late 2009/early 2010.” And Whole Foods’
evidence regarding spending associated with the “EatRight
America” mark covers 2009–2012. It does not differentiate
in any way between expenditures made before and after
Whole Foods actually started using the mark in stores. Thus,
the evidence the district court relied on to find expectations-
based prejudice included actions Whole Foods took before
the mark was even in stores, and certainly before ERF could
have filed suit.
20 EAT RIGHT FOODS V. WHOLE FOODS
“A district court abuses its discretion if it . . . rests its
decision on a clearly erroneous finding of material fact.” Jeff
D. v. Otter, 643 F.3d 278, 283 (9th Cir. 2011) (quotation
omitted). The district court’s finding that ERF should have
known of Whole Foods’ alleged infringement in late 2009
was clearly erroneous. Its finding that Whole Foods suffered
expectations-based prejudice rests on that error. Therefore,
we vacate the district court’s prejudice finding and remand
for further factfinding. On remand, the evidence of
expectations-based prejudice it considers must be limited to
actions Whole Foods took during the period that ERF
delayed filing suit.
2
Evidentiary prejudice exists where a plaintiff’s delay has
led to “lost, stale, or degraded evidence, or witnesses whose
memories have faded, or who have died.” Evergreen,
697 F.3d at 1227 (quoting Danjaq, 263 F.3d at 955).
The district court made no findings with regard to
evidentiary prejudice. Whole Foods insists that it did suffer
evidentiary prejudice and suggests that we affirm the district
court’s laches finding on this ground. Whole Foods
presented evidence that its employees could not remember
the names of individuals who worked on the 2009 licensing
agreement with Nutritional Excellence, that Whole Foods’
“‘main point of contact’ for the agreement had since moved
on” from the company, and that “ANDI and Eat Right
America signage was removed and is no longer accessible.”
However, Whole Foods itself is responsible for
removing the signs, which were taken out of stores after
litigation was reasonably foreseeable. Whole Foods asserts
only that its “main point of contact” has moved on from the
company, not that he or she is unavailable to testify. See
EAT RIGHT FOODS V. WHOLE FOODS 21
Fowler v. Blue Bell, Inc., 596 F.2d 1276, 1279 (5th Cir.
1979) (“The mere assertion that these persons are not
presently with the company is insufficient to support a
finding of prejudice. [The defendant] must also show that
they are unavailable to testify.”). And it has failed to “state
exactly what particular prejudice it [would] suffer[] from the
absence of” the witnesses and evidence it claims are
unavailable. See Beaty, 306 F.3d at 928 (quoting Meyers v.
Asics Corp., 974 F.2d 1304, 1308 (Fed. Cir. 1992)).
Because the record evidence of evidentiary prejudice is
thin, the application of the laches doctrine is within the
discretion of the district court, id. at 921, and the district
court made no findings whatsoever on the matter, we decline
to affirm the district court’s prejudice finding on the
alternative ground of evidentiary prejudice.
IV
While laches bars suits by those who have passively slept
on their rights, the doctrine of acquiescence “limits a party’s
right to bring suit following an affirmative act by word or
deed by the party that conveys implied consent [to use of a
mark] to another.” Seller Agency, 621 F.3d at 988.
Establishing acquiescence requires a defendant to show that
“(1) the senior user actively represented that it would not
assert a right or a claim; (2) the delay between the active
representation and assertion of the right or claim was not
excusable; and (3) the delay caused the defendant undue
prejudice.” Id. at 989.
Because acquiescence has two elements in common with
laches, the flaws in the district court’s unreasonable delay
and prejudice analyses also affect its acquiescence analysis.
Those issues alone would be enough for us to vacate the
acquiescence finding and remand for further proceedings.
22 EAT RIGHT FOODS V. WHOLE FOODS
And there is an additional problem. Acquiescence is
distinct from laches because it requires an affirmative
representation by the plaintiff that it will not assert a claim.
Id. But the prejudice analysis is slightly different as well:
“in the case of laches, undue prejudice requires at least some
reliance on the absence of a lawsuit. Relatedly, prejudice in
the context of acquiescence inherently must involve reliance
on the senior user’s affirmative act or deed, and such reliance
must be reasonable.” Id. at 989–90 (internal citations
omitted). When evaluating the reasonableness of any
reliance, “a district court must examine both the content of
the affirmative act and the context in which that act was
performed.” Id. at 990.
In Seller Agency, we vacated and remanded a finding of
acquiescence because although the district court referred to
the proper elements of acquiescence, it “did not make factual
findings either as to the scope of Appellants’ active
representations or as to the extent and reasonableness of
Appellees’ reliance on those representations.” Id.Similarly, here, the district court described the elements
of acquiescence correctly, but did not make the necessary
factual findings. It did find that ERF’s actions between
March 2010 and April 2012 constituted “affirmative conduct
by Plaintiff inducing Whole Foods to believe that it was
welcome, even encouraged, to engage in the Eat Right
America campaign.” But it did not make factual findings
regarding “the extent and reasonableness” of Whole Foods’
reliance on those actions. Instead, it conflated reliance with
prejudice, stating that ERF’s “conduct prejudiced
Defendants. Thus, the Court concludes that Defendants
relied on Plaintiff’s conduct to its detriment.”
Under Seller Agency, the existence of prejudice does not
in and of itself establish reliance. See id. Reliance is a
EAT RIGHT FOODS V. WHOLE FOODS 23
separate but necessary component of the prejudice analysis,
and the district court must determine whether the defendant
relied on the plaintiff’s active representations, to what extent
it relied on those representations, and whether that reliance
was reasonable. See id. That analysis is missing here.
Therefore, we vacate the district court’s acquiescence
finding and remand for further proceedings. If the district
court determines on remand that ERF delayed unreasonably
in filing suit and this delay prejudiced Whole Foods, it must
consider the extent and reasonableness of Whole Foods’
reliance on ERF’s affirmative representations before it
reaches a finding on acquiescence.
Each party shall bear its own costs.
AFFIRMED in part; VACATED in part; and
REMANDED with instructions.