ALBERTSONS BATTLES FOR RIGHTS TO 'LUCKY' NAME

ELLIOT ZWIEBACH

SAN FRANCISCO - The battle for Lucky has been joined in Northern California.

The question now is, who will be enjoined from using the Lucky name going forward?

On one side of the dispute is Boise, Idaho-based Albertsons, which reintroduced the Lucky banner two weeks ago - as part of a newspaper and radio campaign and on its website - a day after a federal judge refused to issue a temporary restraining order against Grocery Outlet for using the Lucky logo on a store, ruling that Albertsons had abandoned the name through lack of use for a period exceeding three years.

On the other side is Grocery Outlet, the Berkeley, Calif.-based chain that won the right to continue using the Lucky name when Albertsons' request for the TRO was turned down, pending a preliminary injunction hearing.

Grocery Outlet countersued Albertsons in U.S. District Court here last week, claiming trademark infringement and unfair competition and charging that Albertsons' use of the Lucky name in its advertising was "malicious, fraudulent, deliberate, willful, intentional and in bad faith," according to the complaint.

The complaint said Grocery Outlet wants to use the Lucky trademark without interference and asks the court to "promptly resolve this controversy and establish that it is not infringing any protectable rights of, or unfairly competing with, [Albertsons]."

Grocery Outlet is also seeking treble damages and asking for an accounting "to determine defendants' profits resulting from [its] activities and that such profits be paid over to Grocery Outlet," along with attorneys' fees.

In an interview with SN, Peter Craigie, the attorney hired by Grocery Outlet in the trademark suit, said, "Albertsons hasn't used the Lucky name in six years and now it's trying to resurrect it. It started using it in ads the day after the TRO, and it popped up on its website the same day. But you can't resurrect something after it's been abandoned."

An Albertsons spokeswoman told SN the company "will vigorously defend our right to use our famous Lucky brand."

Following the temporary restraining order, the judge scheduled a preliminary injunction hearing for April 28; that hearing has now been postponed for two months, until June 30, at the request of Albertsons' attorneys, Craigie said, and he anticipates Grocery Outlet's countercomplaint will be heard by the judge at the same time.

The Lucky name has a long history of positive connotations for California consumers, observers in the state told SN.

"The Lucky name stood for something in California," said Jonathan Ziegler, a Santa Barbara-based analyst with Dutton Associates, El Dorado Hills, Calif. "Lucky used everyday low pricing as a point of differentiation. It didn't rely on promotions to draw traffic but on building a brand based on the reliability of its EDLP formula, and as such it operated a little differently from everyone else, which is exactly how you want to position yourself."

When Albertsons converted the Lucky stores in California to the Albertsons banner in 1999, Ziegler said he thought it made sense for Albertsons to operate all its stores under a single name as it became a national chain. "In retrospect, though, after it retained the Jewel and Acme names [that it acquired from American Stores] and kept the Shaw's name when it acquired that chain, that proved to me it should have kept the Lucky name because it stood for something," he said.

Jack Brown, chairman and chief executive officer of Stater Bros. Markets, Colton, Calif., said the Lucky name "meant something to consumers in Southern California from the 1950s through the mid-1990s. It was a good name that represented value and price, and a lot of consumers liked it.

"It was running an everyday-low-price operation before anyone else moved into that niche, and its ads were consistent, with the same items in the same place every week. However, it did begin to shift a bit in the mid-1990s away from value to more of a gourmet image."

Bob Tiernan, president and chief operating officer of Grocery Outlet, called the sudden use by Albertsons of the Lucky name "a huge farce. The judge's order rejecting the TRO came down on a Tuesday, and Albertsons began running radio ads in the Bay Area on Wednesday."

Those ads, which incorporated the Lucky logo, re-introduced "3's a Crowd" - a program used by Lucky while it was still part of American Stores Co., prior to its acquisition by Albertsons in 1998; that program promises to open a new checkstand if more than three shoppers are waiting in any one line.

Tiernan said the Lucky name also reappeared on the Albertsons website the same day, alongside the chain's other banners, including Jewel, Acme, Shaw's, Bristol Farms and Super Saver. "Our IT people were able to determine that the Lucky name was not posted until Wednesday, the day after the court hearing," he told SN.

During that hearing, the only evidence Albertsons presented to the judge to prove it still used the Lucky name were handles on some shopping carts with the logo on it, the attorney, Craigie, told SN.

He said he argued in court that Albertsons had abandoned the Lucky name by not using it for more than three years - the legal time frame in which his research indicated a trademark had to be used or be considered abandoned.

SN obtained a copy of a memo last week that was purportedly sent by Jim Perkins, regional vice president of Albertsons' Northern California Store Support Center, asking store directors and staff members to look for "documents, signs or other items displaying the Lucky name. The company needs this information because a competitor may be trying to use the Lucky name. Because Albertsons owns the name, we would like to protect [it]."

The memo asked employees to "check your supply closet for any old forms or new forms that we still use. If a photograph is used, please note time, place and who took the picture. In addition, note approximately how long the logo has existed at that location."

Albertsons officials declined comment on the memo.

The face-off between Albertsons and Grocery Outlet began on April 1 when Grocery Outlet, a chain of 125 bargain warehouse stores, converted a unit in Rocklin, Calif., to a new neighborhood-oriented format and called it Lucky. Rocklin is located approximately 15 miles north of Sacramento.