Leelanau Cellars Loses Case on Appeal

A three judge appellate panel of the sixth circuit court of appeals ruled in favor of Chateau de Leelanau Vineyard and Winery on trademark infringement claims brought by Leelanau Wine Cellars, Ltd.  Leelanau Cellars applied with the United States Patent and Trademark Office (USPTO) for registration of the mark “Leelanau Cellars” on the principal register in 1997 based on first use of 1977.  In 1999, the Defendant began doing business as “Chateau de Leelanau Vineyard and Winery.”

Leelanau Wine Cellars claimed the exclusive use of the word “Leelanau” which is also the geographic region and county where wine is produced and bringing a federal court infringement action against Defendant for its use of Chateau de Leelanau Vineyard and Winery.

Obtain more information here:

• Read Court of Appeal’s Decision in Leelanau Wine Cellars v Black & Red.
• Read the Traverse City Record-Eagle article “Leelanau” fair game for labels.

The interesting part of this case is that Plaintiff made an argument of exclusive use of a purely geographic term “Leelanau.”  The Defendant was not using any other term in its name which potentially infringed on Plaintiff’s trademark rights.  Although there was some initial confusion at the district court, the district court ultimately dismissed Plaintiff’s claims and the matter went up to the Sixth Circuit Court of Appeals.  The Sixth Circuit correctly ruled that Leelanau Wine Cellars had not demonstrated that the use of the mark “Chateau de Leelanau Vineyard and Winery” was likely to cause confusion in the marketplace.  A key portion of the decision including the following:

Here, the similarities between “Leelanau Cellars” and “Chateau de Leelanau Vineyard and Winery” begin and end with the use of the word “Leelanau.” While the remaining words in the marks are terms often associated with wine producing, they are different words, and part of the remainder of B&R’s mark is in French. Further, B&R’s mark contains far more syllables than LWC’s. The marks are also visually dissimilar. The Chateau de Leelanau mark, which appears in italics, is accompanied by a cluster of grapes. LWC uses a number of images with its mark, which is composed of all capital letters. Many of those images depict nature scenes or ships. Despite the marks’ shared use of the word “Leelanau,” these differences are sufficiently significant to conclude that the marks are not so similar that they would produce a likelihood of confusion among purchasers. See AutoZone, Inc., 373 F.3d at 795-96 (noting that competing marks had “some visual and linguistic similarities, but ultimately their differences outnumber their similarities such that the likelihood of confusion is small”). 4. “Evidence of actual confusion is undoubtedly the best evidence of likelihood of confusion.”Id. at 798 (internal quotation marks omitted). On the issue of actual confusion, LWC, on remand from this court, produced a consumer survey conducted by Dr. Parikh at four malls throughout Michigan: two in Detroit, one in Grand Rapids, and one in Traverse City. In the study, interviewees were taken into a room and shown an advertisement for Leelanau Cellars wine. Interviewees were then asked to put the advertisement away and look at five bottles of Chardonnay, all of which originated in Michigan. The study included a “test cell” and a “control cell.” The test and control cells both contained Turner Road, St. Julian, Wilhurst, and Zafarana wines. In the test cell, the fifth wine was Chateau de Leelanau. In the control cell, the fifth wine was Bel Lago. Participants in the study were, after viewing the advertisement and the wines, asked, “Do you believe there is OR is not a bottle of wine in this display that is the same as, or comes from the same source, that is, the same winery that puts out the wine in the advertisement that you just looked at?” Of those subjected to the test cell, 64 percent responded in the affirmative to the proposed question and 54 percent identified Chateau de Leelanau as the wine they believed matched the ad. Of those who selected Chateau de Leelanau, 38 percent justified their belief on the basis of the use of the name “Leelanau” in both the Leelanau Cellars ad and on the Chateau de Leelanau bottle. Among the individuals who did not identify a match between the wine in the ad and a wine in the display, 10 percent nevertheless believed that there was a “relationship, sponsorship, or association” between the winery in the ad and the winery producing one of the bottles in the display. Eight percent of those individuals identified Chateau de Leelanau only as the associated wine. By contrast, only 31 percent of those individuals exposed to the control cell identified Bel Lago as coming from the same or a related source as Leelanau Cellars and reached that conclusion based on similarities in the labels. After adjusting her results for survey noise or guessing, Dr. Parikh concluded that, the “net confusion level” ranged between 27 percent and 31 percent. The district court permitted the admission of the Parikh study, but refused to give Parikh’s survey significant weight, citing three reasons: (1) the universe of respondents was overbroad and failed to include individuals who were potential purchasers of B&R’s wines; (2) the survey did not replicate conditions that consumers would encounter in the marketplace; and (3) the survey questions were suggestive and misleading. These were legitimate bases for declining to rely heavily on the findings of the Parikh study. The district court correctly recognized that the study failed to limit the respondent population to those persons likely to purchase defendant’s products. See Scott Fetzer Co. v. House of Vacuums, Inc., 381 F.3d 477, 487-88 (5th Cir. 2004) (stating that in a trademark infringement action where a survey is used, “the appropriate universe should include a fair sampling of those purchasers most likely to partake of the alleged infringer’s goods or services”)(internal quotation marks omitted). Although the study included adults who had or were likely to purchase a bottle of wine in the $5 to $14 price range, there was no attempt to survey only those people who would purchase moderately priced wines produced in the state of Michigan, undoubtedly a distinct group. Nor was the survey limited to wine purchasers who acquire wine through wine tasting rooms, the primary distribution source of B&R. The district court was also correct in concluding that the study failed to replicate actual market conditions. B&R sells its wines almost exclusively through its tasting rooms. Thus, it is unlikely that a purchaser of Chateau de Leelanau would find herself faced with the need to distinguish among various wines or, having walked into a B&R tasting room, erroneously believe that she was in fact at Leelanau Cellars. These deficiencies undermine the persuasiveness of the Parikh survey. Where a survey presented on the issue of actual confusion reflects methodological errors, a court may choose to limit the importance it accords the study in its likelihood of confusion analysis. See Borinquen Biscuit
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No. 06-2391Leelanau Wine Cellars v. Black & Red, et al.Page 9Corp. v. M.V. Trading Corp., 443 F.3d 112, 121 n.6 (1st Cir. 2006) (noting as to a consumer survey submitted in trademark litigation that the “small sample size and large margin of error combined to cast considerable doubt on its statistical integrity”); Ashland Oil, Inc., 1995 WL 499466 at *4 (“It is the trial court’s responsibility to determine the probative value of a consumer survey, and it is appropriate for the trial court to accord little or no weight to a defective survey.”). The district court did not err in refusing to assign the consumer study presented by LWC considerable weight in its likelihood of confusion analysis. Because of its shortcomings, the Parikh study cannot serve as dispositive proof of the likelihood of confusion. The remainder of LWC’s evidence of actual confusion amounts to anecdotal accounts of confusion, lacking in detail and primarily offered in the form of hearsay at the bench trial. For example, Robert Jacobson, the son of Michael Jacobson, testified as follows: “[O]ne of our tasting room employees came out and said to me, ‘Boy, that family that just drove away came in and said, ‘Boy, they went into Chateau de Leelanau on their way here thinking it was Leelanau Cellars. And they were really upset about it.” Jacobson also claimed that, on one occasion, the Leland Business Association erroneously believed that LWC was participating in a food and wine festival, when, in fact, B&R was participating. The district court deemed these accounts de minimis and declined to afford them substantial weight. This conclusion was not in error.
These stories lack the details necessary to establish actual confusion and are sufficiently few in number that they do little to support LWC’s claim of actual confusion. See Champions Golf Club, Inc., 78 F.3d at 1120 (“[F]our incidents is not a considerable quantum of evidence of actual confusion, and minimal or isolated instances of actual confusion are, obviously, less probative than a showing of substantial actual confusion.”).5. Courts consider the respective marketing channels of the parties to a trademark infringement action to determine “how and to whom the respective goods or services of the parties are sold.”Gen. Motors Corp. v. Keystone Auto. Indus., Inc., 453 F.3d 351, 357 (6th Cir. 2006) (internal quotation marks omitted). There is less likelihood of confusion where the goods are sold through different avenues. See id. There is very limited overlap between the distribution channels B&R and LWC utilize. B&R sells approximately 85 percent of its wine through its tasting rooms. Indeed, Kurtz testified that B&R wine almost “never leaves our tasting room.” B&R does not sell to major retail operations. LWC, by contrast, sells 25 to 30 percent of its wines through its tasting rooms and the remaining 70to 75 percent through retail stores like Sam’s Club or Meijer’s. Thus, despite their operation within a common geographical area, Chateau de Leelanau and LWC are sold, for the most part, in entirely distinct environments. This factor suggests a lesser likelihood of purchaser confusion. 6. In assessing the degree of purchaser care, courts typically use a “typical buyer exercising ordinary caution” standard. Daddy’s Junky Music Stores, Inc., 109 F.3d at 285. When potential buyers possess special expertise or are sophisticated purchasers of the goods at issue, a higher standard is appropriate, and the likelihood of confusion decreases. Id. Similarly, purchasers of more expensive products are more likely to exercise care, thus reducing the possibility of confusion. Id. LWC’s argument on the issue of consumer care is that the wines at issue are relatively inexpensive and not unusual. Thus, purchasers of the parties’ wines are typically making impulse buys and not exercising caution in selecting a wine. LWC is correct that the price of the wines a tissue–less than $20 per bottle–suggests that potential buyers might exercise less care in selecting a wine. Moreover, to the extent that Leelanau Cellars and Chateau de Leelanau are distributed in
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No. 06-2391Leelanau Wine Cellars v. Black & Red, et al.Page 10the same environments, it is likely the case that buyers exercise comparatively little care in selection and the likelihood of confusion is accordingly somewhat higher. However, the district court correctly noted that much of B&R’s wine is sold through its tasting rooms, not retail channels. A purchase through a tasting room–often involving the process of tasting and comparing various types of wine–is a more deliberative process and would imply a greater level of consumer care in selection. One could accordingly assume that the likelihood of confusion would be reduced if not eliminated in such an environment. The Sixth Circuit has explained that the purchaser care factor “often will depend upon its relationship with the other seven factors.” Id. For instance, where marks are sufficiently similar, even a knowledgeable purchaser might incorrectly assume that he is purchasing the product of another party. Id. at 286; Induct-O-Matic Corp., 747 F.2d at 364-65. In the instant case, however, the marks are not sufficiently similar that a careful purchaser, seeking out wine from B&R’s tasting room, would incorrectly assume that it was in fact purchasing wine from LWC. 7. The intent of the defendant in a trademark action is relevant because “purposeful copying indicates that the alleged infringer . . . believes that his copying may divert some business from the senior user.” Daddy’s Junky Music Stores, Inc., 109 F.3d at 286. Kurtz testified that B&R did not select its name in an attempt to benefit to LWC’s detriment. Smart explained that she and Kurtz originally selected the name “Le Couer de Leelanau,” or “the heart of Leelanau” in French, because of their winery’s location in the Leelanau Peninsula, “where . . . the heart of Leelanau would be, right in the . . . upper center,” and, because they believed the use of the word “le couer” was clever in light of Kurtz’s work as a cardiologist. Kurtz and Smart decided to change the name after hearing it repeatedly mispronounced as “liquor” or “leaker” or “looker.” Smart rejected the suggestion that the change was made with an eye toward creating confusion with LWC’s mark or capitalizing on LWC’s name recognition. Kurtz similarly denied any intent to attempt to take advantage of LWC’s prominence among Leelanau Peninsula wineries. In support of its claim of intentional misuse, LWC points to Smart’s testimony that B&R knew that LWC “existed as a winery on the Leelanau Peninsula.” In light of this evidence, the district court did not erroneously conclude that B&R did not select its name in the hope of creating confusion with LWC’s mark. Although Kurtz and Smart’s awareness of LWC might, under different circumstances, demonstrate wrongful intent, see id., their express denials of an effort to profit improperly from LWC’s name recognition undermines this suggestion. LWC, for its part, makes no attempt to challenge B&R’s representation that the name Chateau de Leelanau was chosen for both geographic and personal reasons and had nothing to do with an attempt to take advantage of LWC’s name recognition. Intent “is an issue whose resolution may benefit only the cause of the senior user, not of an alleged infringer.” Id. at 287. Thus, this factor, although of no use to LWC, similarly does not accrue to B&W’s benefit.8.A strong likelihood that the alleged infringer will expand its business to compete with a senior user will contribute to a finding of a violation. Id. Leelanau has conceded that this factor is not relevant to the present analysis. We agree that this record does not support any claim that B&R plans to increase the scale of its business and decline to weigh this factor in our analysis. Having considered the foregoing factors, we conclude that LWC has not demonstrated that B&R’s use of the mark “Chateau de Leelanau Vineyard and Winery” is likely to create an actionable
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No. 06-2391Leelanau Wine Cellars v. Black & Red, et al.Page 11likelihood of confusion. The district court correctly entered judgment on B&R’s favor on that ground. III. LWC also brought a Lanham Act claim for unfair competition under 15 U.S.C. § 1125.Because the success of an action under this section requires a showing that an alleged infringer’s actions create a likelihood of confusion, the resolution of LWC’s trademark infringement claim under § 1114 disposes of this claim. See Champions Golf Club, 78 F.3d at 1123. LWC’s state law claims for common law unfair competition and under the Michigan Consumer Protection Act fail for the same reason. See Mich. Comp. Laws § 445.903(1)(a) (including among “unfair, unconscionable, or deceptive” trade practices “[c]ausing a probability of confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services”);Goscicki v. Custom Brass & Copper Specialties, Inc., 229 F. Supp. 2d 743, 756 (E.D. Mich. 2002)(stating that applicable standard under Michigan common law for unfair competition claim “is the same as the tests for federal trademark infringement and federal unfair competition”). IV. For the foregoing reasons, we affirm the judgment of the district court.

Of interest is the lower courts ruling, affirmed on appeal, t
hat the consumer survey conducted by Plaintiff which was designed to show a likelihood of confusion was lacking is several regards.  In this regard, the district court had ruled as follows:

The district court permitted the admission of the Parikh study, but refused to give Parikh’s survey significant weight, citing three reasons: (1) the universe of respondents was overbroad and failed to include individuals who were potential purchasers of B&R’s wines; (2) the survey did not replicate conditions that consumers would encounter in the marketplace; and (3) the survey questions were suggestive and misleading. These were legitimate bases for declining to rely heavily on the findings of the Parikh study. The district court correctly recognized that the study failed to limit the respondent population to those persons likely to purchase defendant’s products. See Scott Fetzer Co. v. House of Vacuums, Inc., 381 F.3d 477, 487-88 (5th Cir. 2004) (stating that in a trademark infringement action where a survey is used, “the appropriate universe should include a fair sampling of those purchasers most likely to partake of the alleged infringer’s goods or services”)(internal quotation marks omitted).

The court of appeals affirmed the district court’s limited use of the consumer survey noting:

These deficiencies undermine the persuasiveness of the Parikh survey. Where a survey presented on the issue of actual confusion reflects methodological errors, a court may choose to limit the importance it accords the study in its likelihood of confusion analysis. See Borinquen Biscuit Corp. v. M.V. Trading Corp., 443 F.3d 112, 121 n.6 (1st Cir. 2006) (noting as to a consumer survey submitted in trademark litigation that the “small sample size and large margin of error combined to cast considerable doubt on its statistical integrity”); Ashland Oil, Inc., 1995 WL 499466 at *4 (“It is the trial court’s responsibility to determine the probative value of a consumer survey, and it is appropriate for the trial court to accord little or no weight to a defective survey.”).

The court of appeals went on to note that there was de minimis anecdotal evidence to establish actual confusion and/or a likelihood of confusion. 

In my opinion, both the district court and court of appeals went into a more detailed analysis than necessary under the circumstances.  Normally, the trademark office would require a registrant to disclaim exclusive use of a geographic term such as “Leelanau.” Because there were no other words in the allegedly infringing name, this was a flimsy case from the beginning.  It is hard to imagine a trademark attorney recommending that the matter be pursued in the first instance.  My guess is that well in excess of $70,000.00 was paid in attorney’s fees to prosecute Plaintiff’s trademark claims which never stood any real chance of succeeding.