Kraft Cheese Wins Round One in Cracker Barrel Lawsuit

CHICAGOA federal judge has preliminarily enjoined Cracker Barrel Old Country Store, Inc. from selling products in retail or wholesale trade under the Cracker Barrel name other than through its traditional channels.

Robert Gettleman, a U.S. District Judge, on Monday issued the preliminary injunction after he found that Kraft Foods Group Brands LLC is likely to succeed on claims that allege unfair competition and trademark infringement.

Northfield, Ill.-based Kraft Foods has sold more than $1 billion of cheese products under the Cracker Barrel name for nearly 60 years in grocery stores, supermarkets and other retailers, according to a lawsuit the company filed against Cracker Barrel Old Country Store (Cracker Barrel or CBOCS).

Kraft Foods filed a lawsuit after John Morrell & Co., which has intervened in the case, contracted with Cracker Barrel to sell meat products in grocery stores under the CBOCS name.

Gettleman, the federal judge, found consumers could be confused by the two trade marks, diluting Kraft's mark and stripping the company of the ability to control its brand's reputation.

"A consumer who views the Kraft mark briefly in the dairy section of the grocery store and subsequently views the CBOCS mark briefly in the deli or meat section of the same store may not distinguish between the two brands," he wrote.

In a statement to The Tennessean, Lebanon, Tenn.-based Cracker Barrel revealed it is considering a potential appeal of the preliminary injunction.

"We continue to stand firm in our belief of the merits of our case. We are convinced the marketplace understands and recognizes the differences in the Cracker Barrel Old County Store brand and Kraft's Cracker Barrel cheese," Cracker Barrel said in the statement.

The Kraft trademark dates back to 1957, well before CBOCS opened a restaurant or store or used the Cracker Barrel name, Gettleman pointed out. The first Cracker Barrel restaurant opened in 1969. The judge recognized the strength of the Kraft name, citing annual sales of more than $130 million and a presence in more than 16,000 stores.

Kraft was ordered to post a $5 million to bond to protect the defendants in the event it was later determined they were wrongfully enjoined. But Gettleman found the preliminary injunction would not harm Cracker Barrel's primary operations. John Morrell had only sold spiral hams in a limited capacity, which had not resulted in any canceled contracts or purchase orders, the judge said.

"Although John Morrell may have invested resources in developing this line of products, the damage done by an injunction would not outweigh the potential damage to Kraft," Gettleman wrote.

In November 2012, Cracker Barrel and John Morrell Food Groupa Smithfield Foods Companyannounced a multi-year licensing agreement to expand such Cracker Barrel foods as bacon, ham and lunch meats to various retail outlets, including grocery and club stores as well as mass merchandisers. Cracker Barrel said the deal could potentially contribute to its profitability in future years and increase the visibility of its brand outside its stores.

On Jan. 31, 2013, Kraft filed suit against Cracker Barrel. The complaint alleged the planned agreement with John Morrell would "cause massive consumer confusion", injure its "goodwill and reputation and unfairly and unlawfully wrest from Kraft control over its Cracker Barrel trademark and reputation."

Cracker Barrel disputes that customers will be confused by the two brands, noting for instance the distance between the refrigerated meat and the dairy cases.

The case is Kraft Food Group Brands LLC v. Cracker Barrel Old Country Store, Inc. and CBOCS Properties, Inc., No. 13c0780, in the U.S. District Court for the Northern District of Illinois, Eastern Division.