Opinion
Case No. 86 C 8695
March 13, 2003
MEMORANDUM OPINION AND ORDER
The Court previously granted defendant Cacique's motion to modify a permanent injunction entered in 1988 by the late Judge Nicholas Bua. VV Food Prods., Inc. v. Cacique Cheese Co, No. 86 C 8695, 2003 WL 255235 (N.D.Ill. Feb. 4, 2003). The Court requested additional briefs regarding the content of the modification. Id. at *11. The Court now considers the parties' proposals.
BACKGROUND
Plaintiff VV Food Products, Inc. and Cacique are both purveyors of Mexican-style cheeses. The present case has its origins in a 1986 dispute about the use of the words "Rancherito" and "Ranchero" as trademarks for a type of Mexican cheese called "queso fresco." Familiarity with the Court's previous opinion is presumed; we discuss the history of this case briefly, only to provide context for the issues we now consider.
A. The 1988 Injunction
In the mid-1960s, VV began using "Rancherito" as a trademark for queso fresco in the Chicago area and obtained an Illinois trademark registration. In the mid-1970s, Cacique began operations in California and adopted the name "Ranchero" for its own queso fresco. In 1981, Cacique obtained a federal registration for its Ranchero mark. In 1986, VV applied for federal registration of its Rancherito trademark but was denied based on Cacique's prior registration of Ranchero. VV sued Cacique for trademark infringement; Cacique coutnerclaimed.
Following a trial, Judge Bua determined that Cacique held a valid federal registration but also found that VV had certain rights as a prior user. VV Food Products, Inc. v. Cacique Cheese Co., Inc., 683 F. Supp. 662 (N.D.Ill. 1988). The court consequently enjoined Cacique from using the Ranchero trademark in those states where VV had established common law rights to "exclusive use" based on "prior market penetration" — Illinois, Indiana, Michigan, and Wisconsin. Id. at 667, 669. The court likewise enjoined VV from using its Rancherito mark outside those four states because Cacique had "superior rights" there by virtue of its federal registration. Id. at 669.
B. This Court's Previous Ruling
The parties have lived under the injunction for almost fifteen years. Cacique sells its Ranchero-brand queso fresco in forty-six states; in Illinois, Indiana, Michigan, and Wisconsin, Cacique sells a queso fresco under the label "Cacique Queso Fresco." In May 2002, Cacique moved for a modification of the injunction to permit Cacique to advertise its Ranchero-brand queso fresco — its best selling product — in national media. The 1988 injunction prevented Cacique from advertising Ranchero products nationally because any such advertisements would incidentally air in the four-state area where Cacique is prohibited from using and advertising products bearing its Ranchero mark. Following an evidentiary hearing, the Court determined that "a significant change in circumstances warrant[ed]" modification of the injunction. Rufo v. Inmates of the Suffolk County Jail, 502 U.S. 367, 383 (1992). The Court found that three "changed factual conditions [made Cacique's] compliance . . . substantially more onerous," id. at 384, and rendered the prospective application of the injunction inequitable, Fed.R.Civ.Pro. 60(b)(5): the dispersion of Cacique's core customer base S the Latino community S into new, unexpected geographical markets; the advent of national, Spanish-language network media; and the targeting of Latino consumers by general-market cheese manufacturers such as Kraft. As we stated in our previous opinion:
The growth of the Latino population has made it an attractive target for general-market cheese purveyors; these companies now attempt to interest the Latino consumer in their non-traditional cheese products as replacements for Cacique's traditional cheeses. Cacique submits that it must compete on the same footing as these companies in order to maintain and grow its market share.
With the advent of Spanish-language national media, such companies are able to reach Latino consumers regardless of where they are located. And, as the evidence has established, they are dispersed throughout the country to a degree that was unexpected in 1988. Yet Cacique is enjoined from exploiting this same medium and is therefore at a competitive disadvantage in the forty-six states where the injunction was never intended to hamper its activities and in which it has superior trademark rights.
VV, 2003 WL 255235, at *8. Because the 1988 injunction limits Cacique's ability to reach its newly dispersed customer base — while its competitors can exploit new media to target the Latino consumer — we determined that Cacique stood to lose market share in the forty-six states where its rights are superior to VV's. The Court concluded:
Because the continued prospective operation of the injunction hampers Cacique's legitimate pursuits outside the four-state area, the injunction has become unfair to Cacique in a way that it was not, and was not intended to be, in 1988. As such, the injunction's continued operation is not merely inconvenient but rather works an inequity on Cacique.Id. at *9. The Court therefore ruled that the 1988 injunction would be modified to permit Cacique to advertise on Spanish-language network television.
DISCUSSION
In its previous order, the Court asked the parties to brief two proposed limitations that VV raised in its original response to Cacique's motion. VV proposed that were the Court to modify the injunction, we should require Ranchero network ads to include a disclaimer indicating that Ranchero products are not available in the four-state area and should preclude Cacique from advertising the Ranchero and Cacique brands together in the same ad.
In addition to discussing these two limitations, the parties raise additional matters. Cacique asks the Court to modify the injunction to permit Cacique to advertise not only on Spanish-language television networks, but also on Spanish-language radio networks and on English-language national media. VV replies that Cacique's national advertising of Ranchero products should be limited to Spanish-language television, and it proposes that Cacique be required to block out Ranchero ads wherever possible in the four-state area.
A. Legal Standard
Once a party seeking to modify an injunction has established that a significant change in circumstances warrants modification, that party has the additional burden of establishing that the proposed modification is "suitably tailored to the changed circumstance" predicating the modification. Rufo, 502 U.S. at 393.
B. Spanish-Language Radio and English-Language Media
In its motion to modify the injunction, Cacique requested permission to advertise Ranchero products on national media. Our analysis of the parties' arguments and evidence led the Court to conclude that a modification to allow advertising on Spanish-language network television was appropriate under the legal standard for modification annunciated by the Supreme Court in Rufo v. Inmates of the Suffolk County Jail, supra. Cacique now specifically asks the Court to modify the injunction in a manner that does not limit its network advertising of Ranchero products to Spanish-language television. Namely, it requests permission to advertise nationally on Spanish-language radio and English-language media. Cacique has not, however, met its burden of establishing that such an expansive modification is suitably tailored to the changed circumstances it has successfully established. Cacique introduced evidence that national, Spanish-language network radio is of recent vintage. Enrique Perez, the senior vice-president of sales for Radio Unica — the first such network in the United States — testified that Radio Unica has only been in existence since 1998. Perez Dep. at 56. The availability of this medium is thus certainly a change since 1988. However, whereas Cacique convincingly established that it could not mount a national advertising campaign on Spanish-language television while excluding the four-state area, see VV, 2003 WL 255235, at *8, it has presented no such evidence in the case of Spanish-language radio. Far from establishing that local spot insertions are not possible in the four-state area, Perez testified that he did not know whether Radio Unica affiliates are able to perform insertions. Perez Dep. at 53. Similarly, Cacique did not establish that it cannot structure a network radio campaign that avoids the four-state area; when asked whether such an arrangement is possible, Perez replied that he did not know. Id. at 54. In fact, Perez testified that regional campaigns may be possible. Id. at 35. Because Cacique has not established that it cannot exploit Spanish-language radio networks without violating the injunction, the advent of this new medium is not a changed circumstance that warrants modification. Consequently, a modification to permit such advertising would not be suitably tailored.
A local spot advertisement is an ad that is broadcast only in a particular city or market. Spots are accomplished through "insertion," whereby a network's local affiliate inserts a commercial different from the one being broadcast over the network feed. Insertion is only possible in those markets where a network's affiliate has the capability to perform an insertion. In this case, the question is whether Cacique can conduct a national Ranchero radio campaign that, through local insertions of Cacique-brand commercials to "cover" the network ads, would avoid the four states.
Cacique has likewise not met its evidentiary burden with respect to English-language media. Though English-language network advertising existed in 1988, Cacique maintains that "the fact that Cacique might someday need to use it to compete effectively in its 46-state market was unforeseen at the time of trial. Then, Cacique's customers were not geographically dispersed, and no one was using English-language networks to advertise Mexican heritage cheese." Def.'s Proposed Inj. Language at 6. While Cacique maintains that Spanish-language television "is the best way to advertise today," id., Cacique foresees a potential need to advertise on English-language media in the future.
However, a modification permitting Cacique to advertise Ranchero products on national, English-language media is not suitably tailored to the changed circumstances Cacique has previously established. The three changed factual conditions upon which Cacique relied in moving for modification all related to Cacique's need to advertise in Spanish. First, Cacique stressed that the Latino population that is newly dispersed is Spanish-speaking; Cacique has submitted throughout these proceedings that it needs to conduct Spanish-language advertising to reach this consumer. Gilbert de Cardenas, Jr., president of Cacique Distributors, U.S., even testified that Cacique did not consider advertising a certain Cacique-brand campaign on English-language networks because "we target Hispanic consumers that are predominantly Spanish-speaking. Those networks do not cater to that group." De Cardenas Dep. at 96. All the evidence Cacique presented with respect to its need to reach the Latino population was similarly focused on Spanish-language media, sometimes to the exclusion of English-language media. See, e.g., Report of Kathy Gregory at 1 ("Today, more Spanish-speaking consumers are found in much larger numbers and in more geographically diverse markets than was generally foreseen in 1988."); id. at 2 ("The best way to advertise to Spanish-speaking consumers in the U.S. is with Spanish-language advertising."); id., Ex. 2 (Cheskin, Hispanic Advertising Impact and Shopping Study 3 (1996) ("Spanish language television advertising seems to have twice the impact of English language advertising among the Spanish Dominant Hispanics interviewed.")); id., Ex. 4 ( Roslow Research Group, Spanish v. English Advertising Effectiveness Among Hispanics 4 (2000) ("[A]dvertising to Hispanics in Spanish is significantly more effective than advertising to Hispanics in English.")). The second changed condition was itself the advent of Spanish-language network media.
The third changed condition was new competition from general-market cheese manufacturers who attempt to lure the Latino consumer with substitutes for traditionally Latino cheeses. Cacique has submitted that it "must be able to use the same network media" as do these companies who "are now using network, Spanish-language advertising in the emerging Hispanic markets." Def.'s Post-Hearing Br. at 6 (emphasis added). What emerges from these changed circumstances — and from the manner Cacique has presented them — is the need to advertise in Spanish. This being the case, Cacique has failed to establish that a modification permitting English-language network advertising is suitably tailored to these changed conditions.
Moreover, Cacique has made no effort to demonstrate the impossibility, or even difficulty, of exploiting English-language media while avoiding the four-state area. The Court has scoured the record yet has failed to find any evidence on this point. To the contrary, the record contains a suggestion that the limitations that exist on Spanish-language television networks may not apply in the English-media context: Cacique's expert witness Kathy Gregory, a specialist in Spanish-language media consulting, submits that, unlike Spanish-language networks, "ABC, NBC, and CBS now have established regional advertising programs (in which an advertisement is run only on the network's affiliates in one of five defined geographic regions)." Report of Kathy Gregory at 3. Thus there is at least some evidence that regional campaigns are possible and no evidence to suggest that the four states cannot be avoided.
Because Cacique has submitted no evidence that it cannot exploit English-language media without violating the injunction, Cacique's potential need to conduct English-language network advertising at some time in the future does not warrant modification.
C. Disclaimer
VV proposes that national Ranchero ads be required to include a disclaimer stating that Ranchero products are not available in the four-state area. Cacique maintains that the rule in the Seventh Circuit is that a disclaimer is not required where, as here, the goods bearing confusingly similar trademarks are not both available to the same consumer. Def.'s Proposed Inj. Language at 3. The Court's research reveals no such rule. It is true that the Seventh Circuit and other courts have voiced doubt about the effectiveness of disclaimers as a remedy for consumer confusion, but such reservations are usually expressed in the context of the court's rejecting a disclaimer as insufficient to cure infringing use. E.g., Int'l Kennel Club, Inc. v. Mighty Star, Inc., 846 F.2d 1079, 1093 (7th Cir. 1988).
Though the effectiveness of disclaimers in reducing or eliminating consumer confusion is debatable, compare id., with Berghoff Rest. Co. v. Louis W. Berghoff, Inc., 499 F.2d 1183 (7th Cir. 1974) (upholding injunction preventing defendant from using infringing mark without disclaimer), and Flavor Corp. of Am. v. Kemin Indus., Inc., 503 F.2d 729 (8th Cir. 1974), VV's request does not seem unreasonable under the circumstances of this case. A disclaimer may reduce or prevent confusion by making clear to consumers in the four-state area that the Ranchero products they see advertised are unavailable in their market. If, as Cacique maintains, the disclaimer does not effectively reduce confusion because consumers generally ignore disclaimers, Storck v. Nabisco, Inc., 59 F.3d 616, 619 (7th Cir. 1995), consumers will at least be no worse off, and Cacique will not be harmed.
We are not persuaded by Cacique's suggestion that a disclaimer in this case may "cause more confusion than it prevents." Def.'s Proposed Inj. Language at 3 (emphasis in original). There is no evidence to support this speculation.
Cacique says that if a disclaimer is required, it should take the form of a notification to consumers that, in the four states, Ranchero products are available under the Cacique brand. The Court rejects this proposal. As VV maintains, such language would not constitute a disclaimer. Rather, it would violate the injunction by permitting Cacique to advise consumers that they can, in fact, obtain Ranchero products in the four-state area, only under a different name. This would scarcely be distinguishable from the "offering for sale" that is forbidden by the injunction. See Permanent Injunction Order of June 1, 1988.
VV proposes a visible disclaimer, stating that the disclaimer should "include an asterisk, appear in a font color and size that can be easily read by consumers, and appear throughout the duration of the commercial." Pl.'s Proposed Limitations at 4. Weighing the equities in this case, however, the Court does not find that such an intrusive disclaimer is required here. Cacique's rights to the Ranchero trademark are superior to VV's in forty-six states by virtue of its federal registration, which Cacique obtained in good faith. VV, 683 F. Supp. at 666. As we stated previously, because Cacique remains enjoined from selling Ranchero products within the four-state area, VV will not lose queso fresco sales to Cacique's Ranchero. VV, 2003 WL 255235, at *9. VV will therefore remain sheltered from the harm that was addressed by the 1988 injunction. Id. at *9-*10. With VV's Rancherito market thus protected, the value of a disclaimer lies in informing the consumer in the four-state area that the Ranchero product being advertised is not available for her consumption. Such a disclaimer may reduce a consumer's confusion and potential annoyance at not finding the product in her grocery store. This objective can be adequately accomplished by means of a voiceover. A voiceover is sufficient to convey the basic information that a product is unavailable and also has the virtue of not being an intrusive fixture of the commercial, something that might annoy the consumer in the forty-six states where Cacique's rights to the Ranchero mark are superior. The Court's modification of the injunction will therefore require Cacique to include a voiceover disclaimer to the effect that the Ranchero product appearing in the commercial is not available in Illinois, Indiana, Michigan, or Wisconsin.
D. Ranchero and Cacique Brands in the Same Ad
VV also proposes that Cacique be prohibited from advertising Ranchero and Cacique-brand products in the same advertisement. VV contends that advertising both brands together is tantamount to informing consumers in the four-state area that they can obtain Ranchero products under the Cacique label. If true, this would violate the injunction's prohibition against Cacique's offering of Ranchero products for sale in those markets. However, the Court disagrees with VV's premise. Without a product substitution notification, which the Court has rejected, the consumer will not be given reason to think that Ranchero-brand products are identical to Cacique-brand products. Also, the very purpose of the disclaimer that VV requests is to make clear in the consumer's mind that Ranchero-brand products are simply unavailable in the four-state area.
Moreover, the Court previously found that Cacique's desire to exploit its Ranchero-brand queso fresco to promote its other products was a legitimate business pursuit that was being hampered in the forty-six states where its rights to the Ranchero trademark are superior to VV's. VV, 2003 WL 255235, at *8. VV has advanced no argument that overcomes the Court's determination that under the present circumstances it is inequitable to deprive Cacique of the use of its best selling product as a promotional tool.
E. Cover-Ups Where Available
In addition to briefing the two above issues, VV proposes for the first time that Cacique be required to block out Ranchero ads wherever possible within the four-state area. This would be accomplished through local spot insertions. See fn. 1, supra. Although the Spanish-language television networks in several of the markets in the four-state area do not have affiliates with local insertion capabilities, VV asks that Cacique be required to block out Ranchero ads in those markets where they do. VV states "the 1988 injunction should not be modified in respect to markets where Cacique can conduct network advertising and still comply with the 1988 injunction, due to the presence of local insertion capabilities." Pl.'s Proposed Limitations at 4.
This request comes too late in the day. It should have been made in VV's brief opposing Cacique's motion to modify the injunction, at the hearing itself, or in VV's post-hearing brief. Because the request was not made at the appropriate time, VV has waived the right to make it now. The Court did not reopen briefing to permit the parties to raise new issues. This proposed limitation is therefore denied.
CONCLUSION
For the foregoing reasons, the Court orders that the 1988 injunction be modified to include the following amendment:
This order does not preclude Cacique from advertising its Ranchero-brand products on national, Spanish-language television networks. Any such advertisement that may incidentally be seen in Illinois, Indiana, Michigan, or Wisconsin must contain a disclaimer, in the form of a voiceover, stating, in Spanish, that the Ranchero product appearing in the commercial is not available in Illinois, Indiana, Michigan, or Wisconsin.