ASHVILLE, Tenn. -- Consumer foods giant Kraft Foods is suing to block Cracker Barrel Old Country Stores from selling a new line of branded products in grocery stores.
Legal experts say a Kraft victory could threaten the restaurant chain's brand expansion efforts if a resolution isn't reached.
Kraft said it has sold cheese products branded "Cracker Barrel" in grocery stores for nearly 60 years, and that the Lebanon, Tenn.-based restaurant chain's planned move into grocery stores would unfairly infringe on that trademark, according to a federal lawsuit filed Thursday in Chicago.
"(The chain's) actions threaten to destroy the substantial goodwill that Kraft has created in its Cracker Barrel trademark, and to create significant confusion and cannot be permitted," the suit said.
Cracker Barrel said Friday that it is reviewing the suit but otherwise had no immediate comment.
The chain already sells various food products, such as cornbread mix and pancake syrup, under its name exclusively through its retail stores and on its website. Kraft said it never objected to the practice because of that limited availability.
That changed in November when Cracker Barrel signed a licensing agreement with John Morrell Food Group to sell Cracker Barrel-branded food products through grocers, mass merchandisers and other retail outlets.
According to applications filed with the U.S. Patent and Trademark Office, Cracker Barrel has filed for a number of product trademarks, including a range of meat products, oatmeal, muffin mix and lemonade and fruit tea.
While cheese isn't mentioned, Kraft contends the other products are complementary to cheese and would be sold in close proximity -- and to the same consumer base -- as its cheese products. Kraft says that would create confusion among consumers and damage its cheese brand.
The suit seeks to permanently block Cracker Barrel from selling any branded food items beyond its own restaurants, stores or website. Kraft also wants a judge to void the licensing deal with John Morrell.
Legal experts not involved in the case say the lawsuit poses a legitimate challenge to Cracker Barrel.
"I think this will be a serious fight," said Mark Patterson, a partner in Nashville law firm Waddey & Patterson who has practiced trademark law for 30 years. "Kraft could prevail in this case."
Yet experts believe the dispute likely will be settled, as most trademark disputes are. One potential settlement scenario could involve Kraft licensing or selling the cheese brand to Cracker Barrel. Another possibility: Cracker Barrel could agree to certain limitations on what retail food products it sells and where it sells them.
Kraft said it's willing to talk.
"Kraft hopes that this matter can be resolved without having to proceed with the litigation and has invited Cracker Barrel to propose a settlement," spokeswoman Sydney Lindner said. "If settlement talks do not go forward, the litigation will."
The case involves two large corporations of unequal size. Kraft is a multinational conglomerate with dozens of well-known brands, such as Maxwell House, Oscar Mayer and Jell-O, that generate $19 billion in annual revenues. Cracker Barrel, which operates 621 restaurants solely within the United States, reported fiscal 2012 revenues of $2.58 billion.
Despite its size, Kraft has rarely gone to court to protect its trademarks. It has filed just seven trademark-infringement lawsuits in federal court since 2002, records show.
But the food company has been on a recent push to drive growth by leveraging its brands. As part of that effort, Kraft last fall launched the first national advertising campaign for its Cracker Barrel cheese brand in more than a decade. It also created and filled a chief marketing officer position, announcing it the same day that it sued the restaurant chain.
Another potential factor: John Morrell is a subsidiary of Smithfield Foods Inc., a chief Kraft competitor.
Regardless of Kraft's motives for going to court, the suit has the potential to stop Cracker Barrel's expansion plans, another legal expert said.
"If everything goes Kraft's way, Cracker Barrel will not be bringing its brand to grocery stores -- and that would be a serious blow to Cracker Barrel's strategic plans," said Paul Kruse, a trademark attorney and partner in Nashville law firm Bone McAllester Norton.