Kellogg Company, Plaintiff-Appellant/cross-Appellee v. Exxon Corporation, Defendant-Appellee/cross-Appellant

OPINION

Plaintiff-Appellant Kellogg Company appeals the district court’s order granting summary judgment to Defendant-Appellee Exxon Corporation on Kellogg’s complaint alleging federal and state law claims of trademark infringement, false designation of origin, false representation, dilution, and unfair competition. Because we conclude that the district court erred in (1) holding that Kellogg had acquiesced in Exxon’s use of the challenged mark, (2) dismissing Kellogg’s dilution claim, and (3) holding that no genuine issues of fact material to Kellogg’s claim of abandonment remain for trial, we reverse the judgment of the district court and remand the case for further proceedings.

BACKGROUND

In 1952, Kellogg began using a cartoon tiger in connection with “Kellogg’s Frosted Flakes” cereal and registered its “Tony The Tiger” name and illustration in the United States Patent and Trademark Office (“PTO”). Today, Kellogg owns a number of federal trademark registrations for the name and appearance of its “Tony The Tiger” trademark; those trademark registrations cover, among other things, “cereal-derived food product to be used as a breakfast food, snack food or ingredient for making food.”

In 1959, Exxon began using a cartoon tiger to promote motor fuel products, and in 1965, Exxon registered federally its “Whimsical Tiger” for use in connection with the sale of petroleum products. Exxon used its cartoon tiger in its “Put A Tiger In Your Tank” advertising campaign, which ran between 1964 and 1968. In 1968, Kellogg acknowledged Exxon’s *565 use of its cartoon tiger when it requested Exxon not to oppose Kellogg’s application to register its “Tony The Tiger” trademark in Germany. Exxon’s “Whimsical Tiger” trademark, obtained with no opposition from Kellogg, became incontestable in 1970.

In 1972, Exxon changed its name from Standard Oil Company to Exxon Corporation and changed its primary trademarks from “Esso,” “Eneo”, and “Humble” to “Exxon.” Exxon submitted into evidence numerous newspaper and magazine articles and other promotional materials demonstrating its extensive and costly advertising campaign to promote its new “Exxon” mark using the cartoon tiger and to launch its “Energy For A Strong America” campaign, which ran in the latter half of the 1970s. For example, an article in a 1973 issue of Advertising Age called Exxon’s advertising campaign “the classic ‘name change’ campaign of all time, with approximately $100,000,000 involved in the face lift!” Harry Wayne McMahan, McMahan Picks the 100 Best TV Commercials of the Year, Advertising Age, Feb. 19, 1973.

In the early 1980s, Exxon’s advertising agency, McCann-Erickson (“McCann”), suggested that Exxon phase out the use of its cartoon tiger and begin using a live tiger, opining that the cartoon tiger was too whimsical and, hence, inappropriate in light of prevalent oil shortages. In 1981, Exxon began to adopt a new look for its gas stations, implementing a program to modernize the gas pumps and to eliminate its cartoon tiger on the pump panels. At that time, Exxon had between 16,000 and 18,000 gas stations in the United States. Over 11,000 of these gas stations were owned and operated by independent distributors (“distributor stations”), and the rest were owned and operated by Exxon (“company operated retail stores” or “CORS”) or owned by Exxon and operated by independent dealers (“dealer stations”). The modernization program to bring about this “new look” entailed removal of the cartoon tiger head design from the lower panels or “pump skirts” on its Exxon “Extra” gasoline dispensers. In a letter dated August 12, 1982, Exxon instructed its regional managers to begin phasing out their use of the cartoon tiger:

The purpose of this memo is to communicate new guidelines pertaining to the application of the Exxon Tiger and the Exxon Emblem in all advertising, point-of-sale material, Company publications, etc.

Exxon Tiger — Effective immediately, the use of the cartoon tiger is to be discontinued.

Exxon explored possible ways to protect its cartoon tiger trademark while shifting toward a live tiger. For example, a 1984 internal office memo suggested:

Since the only way to protect the Trademark is to use it, it might be wise for us to explore ways that the Cartoon Tiger can be used in marketing on a limited basis. This is not a hot item, but one that we can’t forget about and be embarrassed later.

A 1985 internal office memo, which listed the subject as “Trademarks,” stated:

Advertising discontinued use of the “Cartoon Tiger” in all advertising, point-of-sale material and company publications on August 12, 1982. Regions were advised at that time to do the same (see letter attached). To my knowledge, there has been no use of the “Cartoon Tiger” by advertising or [in] the areas other than the tiger head which appears on the pre-RID Trimline Exxon Extra gasoline pumps/dispensers.

We have asked McCann to explore ways that the “Cartoon Tiger” could be used to protect the mark. In reviewing possible station applications, two general areas seem to afford the most opportunities ....

This memo discussed possible strategic placement of cartoon tiger decals around the pump islands and sales rooms/kiosks. Other correspondence between Exxon’s at *566 torneys, Exxon’s marketing department, and McCann reveals Exxon’s efforts to reduce its use of the cartoon tiger while ensuring trademark protection. Exxon ultimately decided to use its cartoon tiger as a graphic display on its stations’ pump toppers. i

Many Exxon stations were slow to remove the cartoon tiger from their pumps. In late 1985 and early 1986, Exxon was using its cartoon tiger on pump toppers at approximately 2,500 gas stations. In 1987, Exxon photographed every distributor station in the United States. Thousands of photographs were taken and stored at Exxon, but most of them were destroyed in a 1994 routine file room clean-up. Based upon those photographs that remain, Exxon estimates that approximately 10% of the 11,000 distributor stations still displayed the cartoon tiger in 1987. In 1993, Exxon contractually obligated its distributors to comply with the modernization program and to convert their stations to the “new look,” threatening to remove from the Exxon chain those stations that failed to comply by April 1,1995.

Exxon submitted evidence in an effort to show that, despite its efforts to convert the look of its gas stations and shift toward the use of a live tiger, its use of the cartoon tiger throughout the 1980s was sufficient to maintain its rights in the mark. In November 1985, Exxon had renewed its federal trademark registration for its cartoon tiger; this renewal would last an additional 20 years. From 1985 to 1990, some Exxon stations used a costumed version of the cartoon tiger for appearances at grand opening events and various promotional activities. In late 1989 and again in 1993, Exxon ran a promotion called “Color to Win,” in which over one million contestants submitted entries of a cartoon tiger to hundreds of Exxon stations. In the early 1990s, Exxon used its cartoon tiger to promote the Texas State Fair. Exxon also presented evidence showing that in 1973, an Exxon distributor in Virginia placed a large statue of a cartoon tiger in front of its gas station near the highway, and the statue remains there today.

In the early 1990s, after the Exxon Valdez oil spill, Exxon changed the appearance of its cartoon tiger, making it “more endearing, warm, and friendly.” In the words of Exxon’s principal artist, “Today’s tiger is now cast in a more humanitarian role. He is polite to the elderly, plants trees for ecology and has an overall concern for the environment.” Exxon also began to expand the use of its cartoon tiger. Although Exxon had opened its first company-operated convenience store in 1984, it was not until the early 1990s that Exxon began to use its cartoon tiger to promote the sale in those stores of certain foods and beverages, such as Domino’s Pizza, Coca Cola, Pepsi Cola, Lays Potato Chips, and Dunkin Donuts. Exxon also began using its cartoon tiger to promote its own private label beverage, “Wild Tiger,” and its own private label coffee, “Bengal Traders.”

Exxon’s use of the cartoon tiger to promote food, beverages, and convenience stores increased dramatically from 1992 to 1996. In October 1992, Exxon had about eight “Tiger Mart” stores; by October 1993, there were about 68 “Tiger Mart” stores; by October 1996, there were over 265 “Tiger Mart” stores.

On November 3, 1992, having learned of Exxon’s reintroduction of its cartoon tiger in Canada and Argentina, Kellogg’s trademark counsel complained about that use in a telephone conversation with an Exxon attorney and was advised that Exxon had been using its cartoon tiger in the United States as well. Kellogg immediately requested examples of such use, and on November 20, 1992, Exxon sent Kellogg a compilation of 14 examples of promotional materials appearing in the United States featuring its cartoon tiger. Not one of those examples disclosed Exxon’s use of its cartoon tiger to promote food and beverage items or its new “Tiger Mart” stores.

In 1993, Kellogg challenged Exxon’s use of the cartoon tiger in Canada, and in *567 1994, filed a lawsuit against Exxon’s Canadian affiliate. Kellogg was unsuccessful in its attempt to negotiate a global settlement in 1994 and 1995. In March 1996, Exxon published for opposition its application to the PTO to register its cartoon tiger for use with convenience stores, and Kellogg commenced opposition proceedings. On October 7, 1996, Kellogg filed suit against Exxon in the United States District Court for the Western District of Tennessee. Kellogg originally sought actual and punitive damages derived from Exxon’s use of its cartoon tiger trademark in connection with the sale of food items, as well as a preliminary and permanent injunction to prohibit Exxon’s continued use of its cartoon tiger in connection with the sale of food items on the ground that it unlawfully infringed upon and diluted Kellogg’s “Tony The Tiger” mark. Exxon moved for summary judgment on the infringement claim based on its affirmative defense of acquiescence, and for partial summary judgment on Kellogg’s claims of abandonment and progressive encroachment. The district court granted these motions and, holding that its decision rendered all remaining motions moot, dismissed Kellogg’s bad faith infringement and dilution claims. See Kellogg Co. v. Exxon Corp., 50 U.S.P.Q.2d 1499, 1507 (W.D.Tenn.1998).

Kellogg raises the following assignments of error on appeal: (1) the district court improperly granted summary judgment because Exxon presented no evidence that Kellogg acquiesced in Exxon’s use of its cartoon tiger in connection with the sale of non-petroleum products; (2) the district court improperly denied Kellogg’s progressive encroachment claim because progressive encroachment is not limited by a requirement of “direct competition” and the district court failed to consider the likelihood of confusion between the marks; (8) the district court improperly denied Kellogg’s abandonment claim because there are genuine issues of material fact with regard to whether Exxon’s use of its cartoon tiger during the 1980s was bona fide or simply a sham to protect its rights in the mark; and (4) the district court improperly dismissed Kellogg’s bad faith infringement and dilution claims as moot. In this appeal, Kellogg has abandoned its claim for damages and pursues only its claim for injunctive relief. 1

ANALYSIS

We review de novo a district court’s order granting summary judgment. See Avery v. King, 110 F.3d 12, 13 (6th Cir.1997). Summary judgment is appropriate when there exists “no genuine issue of material fact and ... the moving party is entitled to judgment as a matter of law.” Fed R. Civ. P. 56(c). “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-8, 106 S.Ct. 2505, *568 91 L.Ed.2d 202 (1986). The nonmoving party “must set forth specific facts showing that there is a genuine issue for trial” such that a jury reasonably could find for the plaintiff. Id. at 250, 106 S.Ct. 2505 (citing Fed.R.Civ.P. 56(e)). However, it is for the jury and not the judge to weigh the evidence and draw inferences from the facts. See id. at 250, 106 S.Ct. 2505. “The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255, 106 S.Ct. 2505 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)); see also Wathen v. General Electric Co., 115 F.3d 400, 403 (6th Cir.1997) (holding that when reviewing a motion for summary judgment, the district court must resolve all ambiguities and draw all factual inferences in favor of the nonmoving party).

Kellogg alleged trademark infringement against Exxon in violation of § 1114 of the Lanham Act, which states:

(1) Any person who shall, without the consent of the registrant-(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ... shall be liable in a civil action by the registrant for the remedies hereinafter provided.

15 U.S.C. § 1114(1). In Daddy’s Junky Music Stores, Inc. v. Big Daddy’s Family Music Ctr., 109 F.3d 275 (6th Cir.1997), we set forth the elements necessary to succeed on a claim of trademark infringement.

The touchstone of liability under § 1114 is whether the defendant’s use of the disputed mark is likely to cause confusion among consumers regarding the origin of the goods offered by the parties. When determining whether a likelihood of confusion exists, a court must examine and weigh the following eight factors:

1. strength of the senior mark;

2. relatedness of the goods or services;

3. similarity of the marks;

4. evidence of actual confusion;

5. marketing channels used;

6. likely degree of purchaser care;

7. the intent of defendant in selecting the mark; and

8. likelihood of expansion of the product lines.

When applying these factors to a given case, a court must remember that these factors imply no mathematical precision, but are simply a guide to help determine whether confusion is likely. They are also interrelated in effect. Each case presents its own complex set of circumstances and not all of these factors may be particularly helpful in any given case. But a thorough and analytical treatment must nevertheless be attempted. The ultimate question remains whether relevant consumers are likely to believe that the products or services offered by the parties are affiliated in some way.

Id. at 280 (internal quotation marks, citations, and alterations omitted). Thus, crucial to any trademark infringement claim is the plaintiffs ability to show a likelihood of confusion on some fundamental level.

A. Laches, Acquiescence and Progressive Encroachment

In its motion for summary judgment, Exxon asserted the affirmative defenses of laches and acquiescence. Although laches precludes a plaintiff from recovering damages, it does not bar injunctive relief. See TWM Mfg. Co., Inc. v. Dura Corp., 592 F.2d 346, 349-50 (6th Cir.1979) (“Laches alone does not foreclose a plaintiffs right in an infringement action to an injunction and damages after the filing of the suit. Only by proving the elements of estoppel may a defendant defeat such prospective relief.”); Tandy Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 366 n. 2 (6th Cir.1985) (same). Be *569 cause Kellogg withdrew its claim for actual and punitive damages, seeking injunctive relief only, the district court properly determined that laches was inapplicable and that Exxon must prove acquiescence.

Acquiescence, like laches, requires a “finding of conduct on the plaintiffs part that amounted to an assurance to the defendant, express or implied, that plaintiff would not assert his trademark rights against the defendant.” Elvis Presley Enter., Inc., v. Elvisly Yours, Inc., 936 F.2d 889, 894 (6th Cir.1991) (quoting Sweetheart Plastics, Inc. v. Detroit Forming, Inc., 743 F.2d 1039, 1046 (4th Cir. 1984)). Although both laches and acquiescence require proof that the party seeking to enforce its trademark rights has unreasonably delayed pursuing litigation and, as a result, materially prejudiced the alleged infringer, acquiescence requires more. See Elvis, 936 F.2d at 894 (holding that with acquiescence, “more is necessary than the ordinary requirement of showing unreasonable delay and prejudice to the defendant”); Tandy, 769 F.2d at 366 n. 2 (“To deny injunctive relief in trademark litigation, ... some affirmative conduct in the nature of an estoppel, or conduct amounting to Virtual abandonment,’ is necessary.”) (internal citations omitted); Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 462 (4th Cir.1996) (“Although the doctrines of acquiescence and laches, in the context of trademark law, both connote consent by the owner to an infringing use of his mark, acquiescence implies active consent, while laches implies a merely passive consent.”); SCI Sys., Inc. v. Solidstate Controls, Inc., 748 F.Supp. 1257, 1262 (S.D.Ohio 1990) (same).

In University of Pittsburgh v. Champion Prod., Inc., 686 F.2d 1040, 1044-45 (3d Cir.1982), a decision relied upon by this Court in Tandy, the Third Circuit recognized that although mere delay by an injured party in bringing suit would not bar injunctive relief, “there is that narrow class of cases where the plaintiffs delay has been so outrageous, unreasonable and inexcusable as to constitute a virtual abandonment of its right.” (citing Anheuser-Busch, Inc. v. DuBois Brewing Co., 175 F.2d 370, 374 (3d Cir.1949) (“Mere delay by the injured party in bringing suit would not bar injunctive relief. This doctrine, however, has its limits; for example, had there been a lapse of a hundred years or more, we think it highly dubious that any court of equity would grant injunctive relief against even a fraudulent infringer.”)).

Implicit in a finding of laches or acquiescence is the presumption that an underlying claim for infringement existed at the time at which we begin to measure the plaintiffs delay. 2 In Brittingham v. Jenkins, 914 F.2d 447 (4th Cir.1990), the Fourth Circuit held:

While the operation of laches depends upon the particular facts and circumstances of each case, the following factors ordinarily should be considered: (1) whether the owner of the mark knew of the infringing use; (2) whether the owner’s delay in challenging the infringement of the mark was inexcusable or unreasonable; and (3) whether the infringing user was unduly prejudiced by the owner’s delay.

Id. at 456. In Sara Lee, the Fourth Circuit recognized that a laches analysis “assumes the existence of an infringement for an extended period prior to the commencement of litigation.” 81 F.3d at 462 (relying on Brittingham and holding that “to the extent that a plaintiffs prior knowledge may give rise to the defense of estoppel by laches, such knowledge must be of a preexisting, infringing use of a mark.”). In other words, when a defendant charged with trademark infringement avails itself of an acquiescence defense, we must presume the existence of some underlying infringement to which the plaintiff acquiesced, and any delay attributable to the *570 plaintiff must be measured from the time at which the plaintiff knew or should have known that this infringement had ripened into a provable claim. See Kason Indus., Inc. v. Component Hardware Group, 120 F.3d 1199, 1206 (11th Cir.1997) (“[D]elay is to be measured from the time at which the plaintiff knows or should know she has a provable claim for infringement.”); Gasser Chair Co. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 777 (Fed.Cir.1995) (holding that the trigger for delay begins when the plaintiff’s “right ripens into one entitled to protection”) (citation omitted).

Potential plaintiffs in trademark infringement cases steer a hazardous course between the Scylla of laches and acquiescence and the Charybdis of premature litigation. The Fourth Circuit articulated this quandary as follows:

From the time that [defendant] Kayser-Roth first introduced its Leg Looks (R) products, [plaintiff] Sara Lee has been on the horns of a dilemma: If [the trademark owner] waits for substantial injury and evidence of actual confusion, it may be faced with a laches defense. If it rushes immediately into litigation, it may have little or no evidence of actual confusion and real commercial damage, may appear at a psychological disadvantage as “shooting from the hip” and may even face a counterclaim for overly aggressive use of litigation.

Sara Lee, 81 F.3d at 462 (internal quotation marks and citation omitted) (third alteration in original). This common predicament has given rise to the doctrine of progressive encroachment.

Progressive encroachment is relevant in assessing whether laches or acquiescence may be used to bar a plaintiffs trademark claim; it applies in cases where the defendant has engaged in some infringing use of its trademark' — at least enough of an infringing use so that it may attempt to avail itself of a laches or acquiescence defense— but the plaintiff does not bring suit right away because the nature of defendant’s infringement is such that the plaintiffs claim has yet to ripen into one sufficiently colorable to justify litigation.

In Kason, the Eleventh Circuit addressed a plaintiffs progressive encroachment claim in the context of a defendant’s laches defense, explaining the relationship between the two doctrines as follows:

Though courts typically discuss encroachment as an excuse for delay, a close examination of ... cases reveals that the doctrine significantly overlaps the courts’ inquiry into when delay begins. In AmBrit, for example, this court measured delay from the point where the plaintiff knew the defendant was manufacturing the allegedly infringing product, but we considered the plaintiffs reasonable explanation for failing to sue immediately.

Kason, 120 F.3d at 1206 (citing AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1546 (11th Cir.1986)). The plaintiff in Kason was a manufacturer and distributor of commercial refrigeration and food services hardware, and the defendant produced and marketed nearly identical hardware. See id. at 1201. Both parties competed in two markets: the original equipment manufacturer’s market (OEMs) and the replacement parts distribution markets. See id. However, with regard to some particular parts, the plaintiff alleged that the defendant had been competing only in one market and had slowly encroached upon the other market — that is, the market in which plaintiff had been competing. See id. at 1201-2. Kason held that “where a defendant begins use of a trademark or trade dress in the market, and then directs its marketing or manufacturing efforts such that it is placed more squarely in competition with the plaintiff, the plaintiffs delay is excused.” Id. at 1205.

Because the doctrines of laches and acquiescence must assume some underlying infringement, we recognize progressive encroachment as simply giving the plaintiff some latitude in the timing of its bringing suit, that is, waiting until the “likelihood of *571 confusion looms large” to bring the action. Sara Lee, 81 F.3d at 462 (quoting Thomas McCaRthy, McCaethy on Trademarks and Unfair Competition, § 31.06[2][a] (3d ed.1995), renumbered as § 31.19 (4th ed.1997)); see also O. & W. Thum Co. v. Dickinson, 245 F. 609, 623 (6th Cir.1917) (recognizing that progressive encroachment is “a course [that] does not tend to arouse hostile action until it is fully developed”). Progressive encroachment is an offensive countermeasure to the affirmative defenses of laches and acquiescence; upon a finding of progressive encroachment, the delay upon which those defenses are premised is excused. In other words, progressive encroachment allows the plaintiff to demonstrate that although it might have been justified in bringing suit earlier but did not, certain factors now exist that have prompted it to do so.

The Kason Court, like many courts before it, recognized that implicit in a progressive encroachment analysis is an inquiry into the likelihood of confusion between the parties’ marks.

The district court should have evaluated under the progressive encroachment theory the point at which Kason could have demonstrated likelihood of confusion in its primary (either OEM or replacement) market.... It is not clear when Kason determined there was a likelihood of confusion in either market to file a claim for dress infringement. Thus, the district court on remand must view the merits of Kason’s claims of trade dress infringement for each product in terms of the market involved. It must determine ivhether there is a difference betioeen the two markets material to the infringement claim, and whether and when any likelihood of confusion might have ripened into a claim. We deem all of these facts not only relevant to the merits of Kason’s claims, but also relevant to the equitable doctrine of laches and when, if at all, Kason legally could have asserted a provable claim of trade dress infringement. On the record submitted, without further explication by the district court, we cannot say as a matter of law that laches bars any claim.

Kason, 120 F.3d at 1206-07 (emphasis added).

In SCI Systems, 748 F.Supp. at 1257, the district court also was faced with a progressive encroachment claim countering a laches defense. There, the plaintiff provided a variety of electrical and electronic goods, including electrical power supplies and engineering services, and the defendant manufactured and sold electrical power control equipment. See id. at 1259. The plaintiff admitted that it had been aware of defendant’s trademark and product since 1969, but claimed that the defendant had “only recently departed from the business practices which had allowed the parties to co-exist peaceably for many years, and that defendant has only recently encroached on plaintiffs rights.” Id. at 1262. The plaintiff presented evidence showing that the defendant made certain changes to its mark, making it more similar in appearance to plaintiffs mark. See id. at 1262-63.

[I]t was not until the 1980’s when defendant entered into the data processing market, of which plaintiff had been a part for many years, by offering uninter-ruptible power supplies specially designed for use with data processing equipment ... that actual confusion between the companies developed. It was not until this time, plaintiff contends, that the defendant changed its color scheme and its trademark presentation significantly which brought its usage of the mark “SCI” much closer to plaintiffs use.

Id. at 1262 (emphasis added).

The SCI Court recognized that under a progressive encroachment analysis, changes to a trademark and entry into the same marketing area can defeat a claim of laches. See id. at 1262. Because the defendant in SCI had “expanded its line and entered into new marketing areas[, and] *572 ... changed the appearance of its mark through presentation changes in design and color,” the SCI Court, without addressing the merits of the underlying dispute or whether defendant was within its rights to make such changes, reversed the district court’s grant of summary judgment in favor of the defendant on the defense of laches. Id. at 1263.

In Prudential Ins. Co. v. Gibraltar Fin. Corp., 694 F.2d 1150, 1154 (9th Cir.1982), a decision largely relied upon by the SCI Court, the plaintiff was a general insurance provider, and the defendant was a savings and loan association with insurance sales comprising less than 0.3% of its business. See id. at 1155. Relying on a number of progressive encroachment cases, the Prudential Court stated:

These cases all rely on the principle that if the junior user of a mark moves into direct competition with the senior user, selling the same “product” through the same channels and causing actual market confusion, laches is no defense. Gibraltar has not moved into direct competition with Prudential as contemplated in these cases. Gibraltar and Prudential do not offer the same services to any substantial extent and there is no evidence that actual confusion of their services has occurred.

Id. at 1154 (emphasis added) (citing Chandon Champagne Corp. v. San Marino Wine Corp., 335 F.2d 531, 535 (2nd Cir.1964); Standard Oil Co. v. Standard Oil Co., 252 F.2d 65 (10th Cir.1958); Independent Nail & Packing Co. v. Stronghold Screw Products, Inc., 205 F.2d 921, 927 (7th Cir.1953); Miss Universe, Inc. v. Patricelli, 271 F.Supp. 104, 110 (D.Conn.1967)).

Kason, SCI and Prudential, however, do not stand for the proposition that direct competition of identical products in identical markets is required for a finding of progressive encroachment. For example, in Independent Nail & Packing, 205 F.2d at 923, the plaintiff was a manufacturer of nails, and registered its “Stronghold Nails” trademark in 1938. Shortly thereafter, the defendant, a manufacturer of screws, nuts, and bolts, began using the name “Stronghold” in the design of a bolt and washer displayed on its business forms and catalogs; also displayed on these items was the company’s name, Manufacturers Screw Products. See id. at 923-24. The plaintiff was aware of defendant’s use of the name “Stronghold” on its business forms as early as 1941. See id. at 924, 927. In 1946, the defendant changed its name from Manufacturers Screw Products to Stronghold Screw Products, and the plaintiff filed suit in 1948. See id. The district court held that the plaintiff was barred by laches because it knew of defendant’s infringing use of its trademark as early as 1940 or 1941 and did not bring suit until 1948. See id. The Seventh Circuit reversed the district court under a theory of progressive encroachment, stating:

Prior to 1946 there was no confusion among prospective customers that had come to the attention of plaintiffs officers. It was defendant’s incorporation of the word “Stronghold” into its business name that caused most of the confusion. Defendant’s course was “progressive * * * encroachment” and “such a course does not tend to arouse hostile action until it is fully developed.”

Independent Nail & Packing, 205 F.2d at 927 (emphasis added) (citing O. & W. Thum, 245 F. at 623). In determining whether, for purposes of the defendant’s laches defense, the plaintiff had unreasonably delayed in filing suit, the court did not consider the period prior to the defendant’s incorporation of the word “Stronghold” into its business name, when there was little likelihood of confusion. Rather, the court determined when the likelihood of confusion began to loom large, considering such factors as the similarity in scope of the parties’ geographic markets, the degree to which the parties contacted the same prospective customers and appealed to the same general users’ market, and the interchangeability of the products the par *573 ties sold; the court calculated the reasonableness of the plaintiffs delay from that point. The court’s finding of progressive encroachment was not dependent upon a finding of direct competition between identical products; rather the progressive encroachment finding involved a recognition that the defendant’s increasing use of the challenged word was not actionable until it actually caused a likelihood of confusion.

It is clear from all of these cases that the progressive encroachment analysis turns not on the single question of direct competition, but rather, on the likelihood of confusion resulting from the defendant’s moving into the same or similar market area and placing itself more squarely in competition with the plaintiff. This approach is consistent with the principle that the touchstone of liability for trademark infringement is the likelihood of confusion, not direct competition of identical products. Although direct competition of identical products certainly would make it easier for a plaintiff to show a likelihood of confusion, this factor alone is not dispositive of progressive encroachment. In evaluating a plaintiffs claim of progressive encroachment, a court must perform a likelihood of confusion analysis, informed by factors such as whether the defendant has brought itself more squarely into competition with the plaintiff, whether the defendant has made changes to its mark over the years so that it more closely resembles plaintiffs mark, whether the parties market to the same customers or area, and whether the parties sell products interchangeable in use.

In the case before us here, the district court held both that Kellogg had acquiesced in Exxon’s use of the cartoon ti