By Jerry Meek
Claims for trademark or service mark infringement are usually brought pursuant to the Lanham Act, 15 U.S.C. § 1051 et. seq. But that Act contains no statute of limitations. So when infringement occurs, how long do you have to seek redress?
Some Courts – including the Fourth Circuit – draw on the statute of limitations of analogous state laws to determine the applicable statute of limitations. See PBM Products, LLC v. Mead Johnson & Co., 639 F.3d 111 (4th Cir. 2011). As a result, claims based upon infringing activity that occurred outside of the State’s analogous statute of limitations will be barred. This means that, for statute of limitations purposes, the time limit will often vary based upon state law.
But, as illustrated in a recent First Circuit decision, other Courts determine the applicable time limit by applying the equitable doctrine of laches, either in lieu of the State’s analogous statute of limitations or to supplement that statute of limitations. In Oriental Financial Group, Inc. v. Cooperativa de Ahorro y Crédito Oriental, 11-1473, 11-1476 (1st Cir. Oct. 18, 2012), the plaintiff and defendant were competing financial institutions, providing services in Puerto Rico. The plaintiff began using the mark “ORIENTAL” in connection with its services in 1964. The defendant first began using the term “oriental” as part of its corporate name in 1966 and adopted the mark “COOP ORIENTAL” (or some variation thereof) in 1995.
In 2009, the plaintiff sent a cease and desist letter to the defendant, demanding that it cease the use of the ORIENTAL mark. When litigation ensued, the defendant argued – in part – that the injunction sought by the plaintiff against the defendant’s use of the ORIENTAL mark was barred by the doctrine of laches.
As the Court noted, “[l]aches . . . is an equitable doctrine which penalizes a litigant for negligent or willful failure to assert his rights. . . .” Id. It requires proof of: “(1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense.” Id. Laches only applies, however, “where the plaintiff knew or should have known of the infringing conduct.” Id.
The First Circuit held that, regardless of whether these elements of a laches defense can be shown, the defense itself is barred by the doctrine of progressive encroachment. The “progressive encroachment doctrine requires proof that (1) during the period of the delay the plaintiff could reasonably conclude that it should not bring suit to challenge the allegedly infringing activity; (2) the defendant materially altered its infringing activities; and (3) suit was not unreasonably delayed after the alteration in infringing activity.”
As to the second element, the Court found that between 2008 and 2010 (when the plaintiff filed suit), the defendant “materially altered the reach of both its operations and its allegedly infringing advertising. “ Specifically, the defendant’s activities expanded geographically to encompass more regions in Puerto Rico. The defendant also expanded its advertising efforts in 2009, reaching far more consumers. As a result, the defendant grew from a “regional to an island-wide business” more “squarely in competition with the plaintiff.” As to the third element, the Court noted that the plaintiff filed suit “shortly after these changes occurred.”
Finally, the Court considered the first element – whether the plaintiff could have reasonably concluded that it should not bring suit. Obviously, the plaintiff could not have been expected to file suit until it had a claim. The test, therefore, is “whether and when any likelihood of confusion may have ripened into a claim.” The Court found that any pre-2009 infringement was de minimis and thus “it was reasonable as a matter of law for [the plaintiff] to delay bringing suit.”
The doctrine of laches is premised on the idea that it would be inequitable for a party to simply sleep on its rights. That is, in the context of trademark or service mark infringement, a senior user should not be allowed to wait, while a junior user spends money and time developing a mark and expanding its business based on that mark, only to later act to prevent the mark’s use. In addition, since infringement actions are designed to protect consumers by eliminating confusion in the marketplace, allowing infringement to unnecessarily persist undermines free market mechanisms.
But, as the doctrine of progressive encroachment suggests, the policy rationale underlying the doctrine of laches can sometimes be trumped by the need to protect senior users who, through no fault of their own, were caught off-guard by a junior user’s expanded use of the mark.