Dorpan, S.L. v. Hotel Melia, Inc. , 728 F.3d 55 ( 2013 )

United States Court of Appeals
For the First Circuit
No. 12-1679
DORPAN, S.L.,
Plaintiff, Appellee,
v.
HOTEL MELIÁ, INC.,
Defendant, Appellant,
SOL MELIÁ, S.A.; DESARROLLADORA DEL NORTE, S. EN C., S.E.,
d/b/a GRAN MELIÁ PUERTO RICO RESORT & VILLAS,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gustavo A. Gelpí, U.S. District Judge]
Before
Torruella, Selya and Lipez,
Circuit Judges.
Jairo A. Mellado-Villarreal, with whom Roxana Aquino-Segarra,
Liza M. Delgado-González, and Mellado & Mellado-Villarreal were on
brief, for appellant.
Federico Calaf Legrand, with whom Carla Calaf García, Reichard
& Calaf, P.S.C., Angel R. Rotger Sabat, and Maymí & Rivera-
Fourquet, P.S.C. were on brief, for appellees.
August 28, 2013
LIPEZ, Circuit Judge. This trademark infringement case is a
dispute between two hotels over the right to use the mark "Meliá"
in Puerto Rico. Defendant-appellant Hotel Meliá, Inc. ("HMI") has
operated the Hotel Meliá in Ponce, Puerto Rico for more than a
century, but has never registered that mark with the United States
Patent and Trademark Office ("USPTO"). Plaintiff-appellee Dorpan
has held several registered marks using the name "Meliá" since the
late 1990s.1 In 2007, Dorpan's parent company opened a hotel
called "Gran Meliá" in Coco Beach, Puerto Rico, approximately
eighty miles from Ponce. At the close of discovery, the district
court entered summary judgment in favor of Dorpan, concluding that,
with the exception of the city of Ponce, Dorpan was entitled to
exclusive use of the Meliá mark throughout Puerto Rico.
After reviewing the record, we conclude that a reasonable
factfinder could conclude that the Hotel Meliá and Gran Meliá marks
cannot co-exist in Puerto Rico without creating an impermissible
likelihood of confusion among reasonable consumers. The district
court's decision to grant summary judgment in Dorpan's favor was
1
Appellee Sol Meliá, S.A. is a public Spanish company that
operates numerous hotels and vacation rentals around the world.
Appellees Dorpan, S.L. and Desarrolladora Del Norte, S. EN. C.,
S.E. are wholly owned subsidiaries of Sol Meliá. In its own words,
"Dorpan's principal business is to own, keep and license to Sol
Meliá, or to Sol Meliá's subsidiaries and affiliates, the trademark
portfolio the Sol Meliá hotel conglomerate uses worldwide."
Desarrolladora del Norte owns and operates the Gran Meliá Puerto
Rico on behalf of Sol Meliá. For ease of reference, we refer to
the appellees collectively as "Dorpan."
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erroneous. Thus, we vacate the district court's entry of summary
judgment and remand for further proceedings consistent with this
opinion.
I.
A. Facts
In reviewing the facts we draw all reasonable inferences in
favor of the non-moving party, HMI. Cabán Hernández v. Phillip
Morris USA, Inc., 486 F.3d 1, 8 (1st Cir. 2007). HMI is a family-
owned corporation operating a single hotel called Hotel Meliá in
Ponce, Puerto Rico.2 HMI has operated the Hotel Meliá at the same
location at 75 Cristina Street in Ponce without interruption since
at least the 1890s. All parties agree that Hotel Meliá has a long
and storied history in Ponce, having attracted over the years many
famous guests, including United States President Theodore
Roosevelt. HMI has never expanded beyond this single hotel in
Ponce, nor does it plan to. Though HMI has used the Meliá mark in
Ponce continuously for more than a century, HMI has never
registered the Meliá mark with either the Puerto Rico Department of
State or the USPTO.
Since the late 1990s, Dorpan, S.L. has held several registered
trademarks using the mark "Meliá" in connection with the hotel
2
"Meliá" is a Spanish word. It is used as a surname and
translates as "a type of plant, shrub or tree that has leaves,
flowers and drupe fruit."
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industry in the United States.3 These marks have all become
incontestible within the meaning of the Lanham Act. See Part
II.B.1, infra. Dorpan's principal business is to hold these marks
on behalf of Sol Meliá, a public Spanish company. Sol Meliá owns
and operates the largest hotel chain in Spain and the third largest
in Europe. It also operates several hotels in North America using
the Meliá mark, including at least one in Florida. Until 2007,
however, Dorpan had never used the Meliá mark in Puerto Rico.
In 2004, Sol Meliá opened an all-inclusive resort on Coco
Beach in Coco Beach, Puerto Rico called Paradisus, approximately
eighty miles from the Hotel Meliá in Ponce. This all-inclusive
business model was not successful, however. In 2007, Sol Meliá
closed the Paradisus, renovated it, and re-opened it as a luxury
beach resort called "Gran Meliá."
B. Proceedings Below
In early 2007, Dorpan filed a petition with the Puerto Rico
Department of State seeking to register the mark "Gran Meliá." HMI
was immediately concerned that having a hotel called Gran Meliá in
Puerto Rico would inevitably lead to consumer confusion and harm
its commercial interests in Hotel Meliá. HMI filed a letter with
the Puerto Rico Department of State opposing Dorpan's registration
petition and expressing concerns that Dorpan's intent to use the
3
Dorpan owns registered marks for "Sol Meliá," "Meliá
Vacation Club," "Me By Meliá," "Gran Meliá," "Meliá Hoteles," and
"Meliá Boutique Hotels," among others.
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Gran Meliá mark in Coco Beach would infringe on HMI's common law
rights to exclusive use of the Meliá mark throughout Puerto Rico.
In response, Dorpan withdrew its request to register, but continued
to use the mark Gran Meliá in connection with its resort in Coco
Beach.
When further discussions between HMI and Dorpan failed to
resolve their dispute, HMI filed a complaint in late 2008 against
Sol Meliá in the Superior Court of Puerto Rico, asserting that it
was the senior user of the Meliá mark,4 and that it had the sole
right to use the Meliá mark in connection with hotel and restaurant
services throughout Puerto Rico.5 Shortly thereafter, Dorpan filed
a complaint against HMI in the United States District Court for the
District of Puerto Rico, seeking a declaration that under the
Lanham Act, Dorpan had the right to use the mark Meliá throughout
4
The first party to use a mark is referred to as the "senior
user" and parties who begin to use the mark subsequently are
referred to as "junior users." See Allard Enters., Inc. v.
Advanced Programming Res., 249 F.3d 564, 572 (6th Cir. 2001).
5
HMI also argued that the doctrines of collateral estoppel
or res judicata precluded Dorpan from arguing that it had the
exclusive right to use the Meliá mark in Puerto Rico. To this end,
HMI offered evidence that HMI had won a trademark infringement
lawsuit in the 1970s against a company called Inmobiliaria Meliá of
P.R. HMI argued that Dorpan was a successor in interest to
Inmobiliaria Meliá of P.R. in such a way that they were in privity
with one another for preclusion purposes. This connection was the
subject of heated and protracted dispute throughout the district
court proceedings. The district court ultimately concluded that
there was insufficient evidence to conclude that Inmobiliaria Meliá
of P.R. was in privity with the Sol Meliá companies, and rejected
HMI's preclusion claims. HMI does not challenge this determination
on appeal.
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Puerto Rico, and that to the extent that HMI had the right to use
the Meliá mark, such right existed only in the city of Ponce.
Almost simultaneously, Dorpan removed HMI's commonwealth court
complaint to federal court, and the district court consolidated the
two cases. At the close of discovery, Dorpan moved for summary
judgment on its declaratory judgment claim.6 The district court
granted that motion, concluding that no reasonable jury could find
a likelihood of consumer confusion between Hotel Meliá and Gran
Meliá.
In its opinion, the court noted that several facts in the
record supported an inference of a likelihood of confusion, such as
the substantial similarity of the marks, the similarity of the
services offered by the two hotels, and the similar customers each
hotel sought to attract. The court also noted that HMI had put
forward some evidence of actual confusion by vendors and patrons.
Nevertheless, the court decided to give more weight to the fact
"that neither party accuse[d] the other of "subjectively attempting
to profit from the good-will earned by the other" and that the
marks were both strong in different geographic areas, Hotel Meliá's
in Ponce and Gran Meliá's internationally. Dorpan, S.L. v. Hotel
Meliá, Inc., 851 F. Supp. 2d 398, 410-11 (D.P.R. 2012). Without
6
HMI opposed Dorpan's motion for summary judgment and filed
its own motion for partial summary judgment. HMI moved for summary
judgment only on its collateral estoppel claims, however, and did
not seek summary judgment on its infringement claims.
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further explanation, the district court concluded: "[w]ith the
factors split, the court finds these two marks can co-exist within
Puerto Rico without causing substantial confusion to the reasonable
consumer." Id at 411.7
The court then turned to "defin[ing] the limits within which
each mark may be used." Id. The court concluded that HMI was
"frozen" into its location at the time that Dorpan's trademark was
registered. Because at that time HMI operated only in Ponce and
had no plans to expand, the court concluded that HMI could continue
to use the Meliá mark, but only within Ponce. Dorpan was likewise
barred from using the Meliá mark in Ponce, but was free to use the
mark throughout the rest of Puerto Rico and the United States. Id.HMI appeals, arguing that the district court erred in
concluding that no reasonable jury could conclude that the presence
of two hotels using the Meliá mark in Puerto Rico created a
likelihood of consumer confusion. In particular, HMI argues that
the district court was led astray when it incorrectly treated HMI
as the junior user of the Meliá mark rather than the senior user.
HMI also argues that this mistake led the court to consider only
7
Trademark infringement suits often involve a motion for a
preliminary injunction. In that posture, it is appropriate for the
district court to engage in factfinding based on evidence presented
at the preliminary injunction hearing. We do not have such a
situation here. As we discuss, infra, this case was before the
district court on a motion for summary judgment, and the relevant
inquiry was whether there was a genuine issue of material fact
regarding the likelihood of confusion.
-7-
evidence of "forward confusion," and to overlook the compelling
evidence submitted of "reverse confusion." See Part II.C, infra.
According to HMI, these errors caused the district court
incorrectly to infer from the evidence that HMI was not entitled to
exclusive use of the Meliá mark throughout Puerto Rico.
II.
In resolving this appeal, we review the district court's grant
of summary judgment de novo, drawing all reasonable factual
inferences in the light most favorable to the non-moving party,
HMI. Colt Def. LLC v. Bushmaster Firearms, Inc., 486 F.3d 701, 705
(1st Cir. 2007).
Before we begin our analysis of this case, we must provide a
brief overview of the relevant law on trademark infringement. We
then consider the contours of the trademark rights held by each
party –- Dorpan's rights under federal law and HMI's rights under
Commonwealth law. Finally, we evaluate the district court's
likelihood of confusion analysis.
A. The Relevant Law of Trademark Protection
A "'trademark' includes any word, name, symbol, or device
. . . used by a person . . . to identify and distinguish his or her
goods . . . from those manufactured or sold by others and to
indicate the source of the goods." 15 U.S.C. § 1127.8 A trademark
8
In this opinion, we use the terms "trademark" and "mark" to
include both trademarks and service marks. "Trademarks serve to
identify and distinguish goods; service marks perform the same
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protects the right to distinguish the holder's goods or services
from other goods or services that might be confused with the
holder's. See I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 35
(1st Cir. 1998) (noting that "[a] primary purpose of . . .
trademark protection is to protect that which identifies a
product's source"). Prevention of confusion is thus the touchstone
of trademark protection. Where there is no likelihood of confusion
by the alleged infringer "there is no impairment of the interest
that the trademark statute protects." Libman Co. v. Vining Indus.,
Inc., 69 F.3d 1360, 1361 (7th Cir. 1995).
The right to use a mark in commerce may arise under either
federal law or state common law.9 Gen. Healthcare Ltd. v. Qashat,
364 F.3d 332, 335 (1st Cir. 2004). In the nineteenth and early
twentieth centuries, trademark law was governed primarily by state
common law. See Thrifty Rent-a-Car Sys., Inc. v. Thrift Cars,
Inc., 831 F.2d 1177, 1180 (1st Cir. 1987). In an attempt to
function for services." Bost. Duck Tours, LP v. Super Duck Tours,
LLC, 531 F.3d 1, 12 n.8 (1st Cir. 2008); see also 15 U.S.C. § 1127.
In the infringement context, the analysis is identical for both
types of marks and the terms may thus be used interchangeably. See
Tana v. Dantanna's, 611 F.3d 767, 772 n.3 (11th Cir. 2010);
see also Star Fin. Servs., Inc. v. AASTAR Mortg. Corp., 89 F.3d 5,
9 (1st Cir. 1996) (noting that the same test applies for
infringement in both the trademark and service mark contexts).
9
Unlike the related fields of patent and copyright law, the
Constitution does not grant Congress the express authority to
establish laws governing trademarks. See U.S. Const. art. I, § 8.
Thus to regulate trademarks, Congress must rely on its power to
regulate interstate and foreign commerce. See Bos. Duck Tours, 531
F.3d at 11 n.7.
-9-
provide uniformity in an age where interstate commerce was rapidly
becoming the norm, Congress passed the Lanham Act in 1946, which
created a federal statutory framework to protect trademarks
throughout the United States. See 15 U.S.C. §§ 1051-1129. Under
the Act, users of trademarks may apply to register those marks with
the USPTO. See id. § 1051. Such federal registration "serves as
constructive notice to the public of the registrant's ownership of
the mark." In re Int'l Flavors & Fragrances Inc., 183 F.3d 1361,
1367 (Fed. Cir. 1999); see also Peaches Entm't Corp. v. Entm't
Repertoire Assocs., Inc., 62 F.3d 690, 692 (5th Cir. 1995) ("The
basic scheme that creates rights under the Lanham Act is a national
registration system.").
The Lanham Act did not supplant the state common law of
trademarks, however. Cf. In re Spirits Int'l, N.V., 563 F.3d 1347,
1354 (Fed. Cir. 2009) (noting that "[t]he Lanham Act was designed
to codify, not change, the common law in this area"). Trademark
users may still gain state law rights to use a trademark either
through registration with a state government or through use in that
state. In fact, Section 15 of the Lanham Act grants federally
registered marks the right to exclusive use of the mark only
insofar as they do not conflict with any pre-existing rights
acquired under state law. See 15 U.S.C. § 1065.
B. The Trademark Rights Held by the Parties
The crux of the dispute in this case is that both parties
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claim to hold the exclusive right to use the Meliá mark in Puerto
Rico. Dorpan claims that it has the exclusive right to use the
Meliá mark in Puerto Rico under federal law. HMI claims that it
has the exclusive right to use the Meliá mark in Puerto Rico under
Puerto Rico law. We discuss the contours of the rights held by
each party in turn.
1. Dorpan's Rights Under the Lanham Act
Dorpan argues that HMI can have no claim to exclusive use of
the Meliá mark in Puerto Rico because Dorpan holds the federal
registration for the Meliá mark and that registration has become
"incontestible" within the meaning of the Lanham Act.
Incontestibility is a status created by Section 15 of the Lanham
Act, which provides that once a mark has been registered and in
continuous use for five consecutive years without an adverse ruling
against the holder, the registrant may file an affidavit of
inconstestibility with the USPTO. See 15 U.S.C. § 1065; see also
Borinquen Biscuit Corp. v. M.V. Trading Corp. 443 F.3d 112, 117 n.3
(1st Cir. 2006).
Dorpan is correct that incontestibility creates a presumption
that the holder of the mark is entitled to exclusive use of the
mark throughout the United States. See Thrifty Rent-A-Car Sys.,
831 F.2d at 1180 (citing Giant Foods, Inc. v. Nation's Foodservice,
Inc., 710 F.2d 1565, 1568 (Fed. Cir. 1983)); see also 15 U.S.C. §
1065. Indeed, a plaintiff who holds an incontestible registered
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mark is generally entitled to a preliminary injunction enjoining an
allegedly infringing party. See Pyrodyne Corp. v. Pyrotronics
Corp., 847 F.2d 1398, 1402 (9th Cir. 1988) (cited in Williams v.
Jones, 11 F.3d 247, 256 n.13 (1st Cir. 1993)).
In this case, however, Dorpan's reliance on the undisputed
incontestibility of its marks is misplaced. HMI does not seek to
cancel, contest, or otherwise challenge Dorpan's registration.
Rather, HMI claims that, as the undisputed senior user in Puerto
Rico, the rights granted to Dorpan under federal law are limited by
the rights HMI acquired under Puerto Rico law before Dorpan's mark
became incontestible.
HMI's argument is often called a "Section 15 defense." At the
same time that Section 15 of the Lanham Act creates
incontestibility, it explicitly limits the incontestible right of
a federal trademark holder
to the extent, if any, to which the use of a mark
registered on the principal register infringes a valid
right acquired under the law of any State or Territory by
use of a mark or trade name continuing from a date prior
to the date of registration under this chapter of such
registered mark.
15 U.S.C. § 1065; see also Qashat, 364 F.3d at 334 n.4 (noting that
the incontestibility of a federally registered mark is limited in
"situations in which a valid common law owner has established a
date of use prior to that of the registered mark"). In other
words, "[t]he territorial rights of a holder of a federally
registered trademark are always subject to any superior common law
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rights acquired by another party through actual use prior to the
registrant's constructive use." Allard Enter., Inc. v. Advanced
Programming Res., Inc., 249 F.3d 564, 572 (6th Cir. 2001).
Because the parties agree that HMI is the senior user of the
Meliá mark in Puerto Rico, the rights conveyed to Dorpan under the
Lanham Act are limited by the extent of any rights HMI acquired
under Puerto Rico law before Dorpan's federal registration became
incontestible. Hence, before we can determine the contours of
Dorpan's rights under federal law, we must determine the rights
held by HMI under Puerto Rico law. See Advance Stores Co. v.
Refinishing Specialities, Inc., 188 F.3d 408, 411-12 (6th Cir.
1999) (extent of pre-existing common law trademark is determined by
reference to state law).10
2. HMI's Rights Under Puerto Rico Law
HMI has never registered its mark with the Puerto Rico
10
There is some authority suggesting that the extent to which
a pre-existing unregistered state law trademark limits rights
conferred under the Lanham Act is a question that should be
determined by federal common law rather than state law. See, e.g.,
Natural Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383,
1397-1400 (3d Cir. 1985) (determining the rights of an unregistered
senior user against registered junior user without reference to
state law). We think that this approach cannot be reconciled with
the plain language of Section 15 of the Lanham Act, which limits
the rights conferred on a federal registrant insofar as the
registrant's use interferes with "a valid right acquired under the
law of any State or Territory." 15 U.S.C. § 1065 (emphasis added).
At the same time, the common law of most jurisdictions, including
Puerto Rico, seems to be essentially identical to federal common
law. Thus, in practice, the choice of law in this context seems to
be a distinction without a difference.
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Department of State. Like most U.S. jurisdictions, however, Puerto
Rico law protects both registered and unregistered marks. See P.R.
Laws Ann. tit. 10, § 223a (stating that "[T]he right to use a mark"
can be acquired through either "use of the mark in commerce" or
registration); Arribas & Assocs. v. Am. Home Prods. Corp., P.R.
Offic. Trans., 2005 WL 2290286 (P.R. 2005) ("Our Marks Act []
combines the rights born of use with the rights that arise from the
registration." (citation omitted) (internal quotation marks
omitted)). The senior unregistered user of a mark in Puerto Rico
does not automatically acquire a Commonwealth-wide right to use the
mark. Rather, the senior unregistered user is entitled to
exclusive use of the mark in the area where "he currently do[es]
business." Posadas de P.R. Assocs. v. Sands Hotel & Casino, Inc.,
P.R. Offic. Trans., 1992 WL 754912 (P.R. 1992); see also Colgate-
Palmolive Co. v. Mistolin de P.R., Inc., 17 P.R. Offic. Trans 376,
391-92 (P.R. 1986) ("The territorial extent of trademark rights is
coextensive with the territorial extent of its use.").
Thus, in this case, HMI is entitled, under Commonwealth law,
to the exclusive use of the Meliá mark in the area where HMI "does
business" using the Meliá mark.11 In this context, the geographic
11
Because Dorpan's federal registration of the Meliá mark in
the late 1990s "puts all would-be users of the mark (or a
confusingly similar mark) on constructive notice of the mark,"
Thrifty Rent-a-Car Sys., Inc. v. Thrift Cars, Inc., 831 F.2d 1177,
1180 (1st Cir. 1987) (citing 15 U.S.C. § 1072), HMI's trade
territory is technically frozen at the extent it had reached at the
time of Dorpan's registration. Neither party, however, argues that
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area in which an unregistered trademark is "in use" is defined as
the area in which the use of similar mark would create a likelihood
of confusion. See 5 J. McCarthy, McCarthy on Trademarks & Unfair
Competition § 26:27 (4th ed. 2011) ("The touchstone of the
determination of a trade area is likelihood of confusion.")
(internal quotation marks omitted); William Jay Gross, Comment, The
Territorial Scope of Trademark Rights, 44 U. Miami L. Rev. 1075,
1078 (1990) ("Th[e] inquiry into the territorial scope of trademark
rights is primarily a determination of the geographical area in
which there exists a likelihood of confusion between the trademarks
of the legitimate user and the infringing user." (citation omitted)
(quotation marks omitted)). Thus, in this case, the inquiry into
the geographic scope of HMI's pre-existing common law trademark
rights and the likelihood of confusion analysis are one and the
same. In other words, if Dorpan's use of a similar mark in Coco
Beach creates a likelihood of confusion with HMI's mark, then HMI's
trade area extends at least as far as Coco Beach and Dorpan's use
infringes on that right. Likewise, if Dorpan's mark does not
create a likelihood of confusion with HMI's, then HMI's trade area
is considerably smaller and Dorpan is entitled to a declaratory
judgment of non-infringement. See 5 McCarthy, § 26:27 ("A trade
area is the area in which people have associated a service mark
HMI has changed its trade area since Dorpan registered the Meliá
marks, so in this case this principle is irrelevant.
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with a particular business such that they would likely be confused
by someone else's unauthorized use of the mark." (internal
quotation marks omitted)).
Consequently, both the extent of HMI's rights under Puerto
Rico law and Dorpan's rights under federal law turn on the same
question: Does Dorpan's use of the Meliá mark in Puerto Rico
create an impermissible likelihood of consumer confusion?
C. Likelihood of Confusion and the Pignons Factors
Likelihood of confusion is a question of fact. In this appeal
from a grant of summary judgment, we review de novo whether the
record presents a genuine issue of material fact as to likelihood
of confusion. See Sports Auth., Inc. v. Prime Hospitality Corp.,
89 F.3d 955, 960 (2d Cir. 1996) (noting that in the infringement
context summary judgment is appropriate only where no reasonable
trier of fact could conclude that confusion is likely).
Not all conceivable forms of confusion are relevant to
trademark infringement. "Confusion is relevant when it exists in
the minds of persons in a position to influence the purchasing
decision or persons whose confusion presents a significant risk to
the sales, goodwill, or reputation of the trademark owner." Beacon
Mut. Ins. Co. v. OneBeacon Ins. Grp., 376 F.3d 8, 10 (1st Cir.
2004); see also Lang v. Ret. Living Publ'g Co., 949 F.2d 576, 583
(2d Cir. 1991) (noting that confusion in the relevant sense means
confusion that "could inflict commercial injury in the form of
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either a diversion of sales, damage to goodwill, or loss of control
over reputation"). Trademark confusion is occasionally discussed
in terms of two different "types" of confusion. See DeCosta v.
Viacom Int'l, Inc., 981 F.2d 602, 607-08 (1st Cir. 1992). The
first, and most common, is "ordinary" or "forward" confusion, which
occurs, for example, when a weaker junior user attempts to
impermissibly bootstrap its product by free-riding on the senior
user's goodwill and brand loyalty. In a forward confusion
situation, reasonable consumers may mistakenly purchase the junior
user's product believing they have purchased the senior user's.
See id. at 607-08; see also Attrezzi, 436 F.3d at 38 (noting that
"ordinary" or "forward" confusion occurs where "the claimant
asserts that the infringer is diverting the claimant's customers
and free-riding on the claimant's reputation and goodwill").
The second is "reverse confusion," which occurs, for example,
when a senior unregistered user is overwhelmed by a more
commercially powerful junior user, causing the senior user to lose
control over its brand and its goodwill. Id. at 38-39. In a
reverse confusion scenario, a reasonable consumer might assume that
the junior user and the senior user's product shared the same
source, thereby imputing any negative experiences with the junior
user's product or services to the senior user. See DeCosta, 981
F.2d at 608; see also Visible Sys. Corp. v. Unisys Corp., 551 F.3d
65, 74 (1st Cir. 2008) ("In a reverse confusion case, the focus is
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on the relative strengths of the marks so as to gauge the ability
of the junior user's mark to overcome the senior user's mark.").12
In determining whether likelihood of confusion exists in a
particular case, we consider the eight factors laid out in Pignons
S.A. de Mecanique de Precision v. Polaroid Corp., 657 F.2d 482, 487
(1st Cir. 1981) ("Pignons factors"):
(1) the similarity of the marks; (2) the similarity of
the goods (or, in a service mark case, the services); (3)
the relationship between the parties' channels of trade;
(4) the juxtaposition of their advertising; (5) the
classes of prospective purchasers; (6) the evidence of
actual confusion; (7) the defendant's intent in adopting
its allegedly infringing mark; and (8) the strength of
the plaintiff's mark.
Int'l Ass'n of Machinists & Aerospace Workers, AFL-CIO v. Winship
Green Nursing Ctr., 103 F.3d 196, 201 (1st Cir. 1996).13
12
In its brief before us on appeal, Dorpan argues that HMI
has waived any reverse confusion argument it might have. This
argument is misguided. "Reverse confusion" is not a separate legal
claim requiring separate pleading. Rather, it is a descriptive
term referring to certain circumstances that can give rise to a
likelihood of confusion in a trademark infringement suit. HMI has
argued from the beginning that it is the senior unregistered user
and that Dorpan's more powerful international brand has caused
consumers to believe mistakenly that the two marks are related,
thus causing HMI to lose control over its goodwill and reputation.
Whether or not HMI called this a "reverse confusion" theory before
the district court is irrelevant.
13
As discussed supra, we consider the likelihood of confusion
here in order to define the scope of HMI's unregistered trademark
rights under Puerto Rico law. Thus, Puerto Rico law, not federal
common law, technically governs our likelihood of confusion
analysis. However, because Puerto Rico law uses the same standard
for likelihood of confusion as that developed under federal common
law, we use the case law developed under both bodies of law
interchangeably. Compare Pignons S.A. de Mecanique de Precision v.
Polaroid Corp., 657 F.2d 482, 487 (1st Cir. 1981), with Posadas de
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We review the evidence pertinent to the Pignons factors de
novo, considering the evidence offered to support each factor
individually before considering whether, taking the factors
together, no reasonable factfinder could conclude that Dorpan's use
of the Meliá mark in Coco Beach creates a likelihood of confusion.
See Astra Pharm. Prods., Inc. v. Beckman Instruments, Inc., 718
F.2d 1201, 1205 (1st Cir. 1983) ("No one factor is necessarily
determinative, but each must be considered."). Given this de novo
standard of review, we do our own assessment of the summary
judgment record before turning to the district court's assessment
of that record.
Because the likelihood of confusion analysis is a particularly
fact-intensive one, resolving this issue on summary judgment is
disfavored. See Bos. Athletic Ass'n v. Sullivan, 867 F.2d 22, 24
(1st Cir. 1989) (noting that "'infringement and unfair competition
cases often present factual issues that render summary judgment
P.R. Assocs. Inc. v. Sands Hotel & Casino, Inc., P.R. Offic.
Trans., 1992 WL 754912 (P.R. 1992):
[T]here is no specific rule for determining the
existence of a likelihood of confusion between two
products or services. This is a relative concept,
determined according to the circumstances of each
particular case, based upon the balancing of caselaw
factors or tests, some of which are: the similarity of
the two marks; similarity of the goods or services;
strength or distinctiveness of the mark; the intent of
the junior user in adopting the service mark; and
evidence of actual confusion.
-19-
inappropriate'" (quoting Kazmaier v. Wooten, 761 F.2d 46, 48-49
(1st Cir. 1985)); see also Rearden LLC v. Rearden Commerce, Inc.,
683 F.3d 1190, 1219 (9th Cir. 2012) ("[D]istrict courts should
grant summary judgment motions regarding the likelihood of
confusion sparingly, as careful assessment of the pertinent factors
that go into determining likelihood of confusion usually requires
a full record." (citation omitted) (internal quotation marks
omitted)); AHP Subsidiary Holding Co. v. Stuart Hale Co., 1 F.3d
611, 616 (7th Cir. 1993) ("[A] motion for summary judgment in
trademark infringement cases must be approached with great
caution."); Country Floors, Inc. v. P'ship Composed of Gepner &
Ford, 930 F.2d 1056, 1063 (3d Cir. 1991) (noting that in the
likelihood of confusion context "summary judgments are the
exception"). The Pignons factors are meant to be a guide, not a
mechanistic formula. See Winship Green, 103 F.3d at 201.
1. Similarity of the Marks
The marks "Hotel Meliá" and "Gran Meliá" are essentially
identical for trademark purposes because both marks have the word
"Meliá" as their most salient word. See Bos. Duck Tours, LP v.
Super Duck Tours, LLC, 531 F.3d 1, 34 (1st Cir. 2008) (DiClerico,
J., concurring) ("[I]f the most dominant feature of both marks is
the same or similar, then that similarity may cause confusion.");
Beacon Mut., 376 F.3d at 18 (concluding that a reasonable
factfinder could conclude that the mark "Beacon Mutual Insurance
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Company" was substantially similar to "OneBeacon Insurance Group"
because they shared "Beacon" as their "most salient" word). No
reasonable factfinder could conclude otherwise.
2. Similarity of Services and Customers
Undisputed evidence indicates that Hotel Meliá and Gran Meliá
are large, full-service hotels operating in Puerto Rico. Dorpan
attempts to distinguish the services offered by Gran Meliá from
those offered by Hotel Meliá by emphasizing that Gran Meliá is a
"beach resort" while Hotel Meliá is a "historic, urban hotel." The
evidence Dorpan offers to support this argument –- for example,
that Hotel Meliá's pool is smaller than Gran Meliá's –- is weak.
Each hotel may offer some auxiliary services and amenities not
offered by the other, but there is substantial overlap in the core
services offered by each hotel. Thus, a reasonable factfinder
would be compelled to infer from the undisputed facts that the
hotels offer substantially similar services to substantially
similar customers –- overnight, upscale lodgings to tourists and
short-term visitors to Puerto Rico.
3. Similarity of Advertising and Channels of Trade
The two hotels advertise and solicit customers in
substantially similar manners. Both parties attend trade shows,
develop relationships with travel agents, advertise directly to
consumers, and accept reservations through Internet booking sites
like Orbitz. Because Dorpan has not directed us to any facts in
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the record suggesting the contrary, we conclude that a reasonable
factfinder would be compelled to conclude that the hotels use
similar advertising methods and conduct business through similar
channels of trade.
4. Actual Confusion
HMI argues that Dorpan's use of the Gran Meliá mark in Puerto
Rico has led to actual confusion. In support of this argument, HMI
points to several pieces of evidence in the record.14 First, HMI's
manager Raúl Albors Meliá testified in his deposition that a
wholesaler at a trade show had noticed that he represented Hotel
Meliá and approached him to discuss the beach at Gran Meliá.15
14
Dorpan makes hearsay objections to much of the evidence HMI
cites in support of its argument. Dorpan failed to make these
objections before the district court, however. They are thus
waived. See United States v. DeSimone, 488 F.3d 561, 580 n.11 (1st
Cir. 2007) (noting that failing to raise a hearsay objection before
the district court constitutes waiver). Moreover, much (if not
all) of the objected-to evidence was not admitted for the truth of
the matter asserted, and accordingly is not hearsay. See Fed. R.
Evid. 801(c).
15
There is a dispute between the parties as to whether this
portion of Albors Meliá's testimony was properly part of the record
before the district court. At this remove, the precise travel of
this evidence is difficult to discern. This particular portion of
Albors Meliá's deposition was originally submitted as an attachment
to HMI's Supplemental Motion in Opposition to Gran Meliá's Motion
for Summary Judgment, which the original district court judge
struck from the record without explanation. After the case was
transferred to a new district judge, that judge directed the
parties to "submit in hard copy their respective dispositive
motions" to him. HMI claims that it submitted the deposition
evidence and it was accepted. Indeed, from the district court's
discussion of the evidence in its opinion, it appears that the
district court deemed the evidence properly submitted.
Specifically, the district court noted that HMI "put forth some
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Second, Albors Meliá testified that guests had occasionally thought
that Hotel Meliá was associated with Gran Meliá. Third, Albors
Meliá testified that Domino's Pizza mistakenly attempted to deliver
a pizza to HMI that was intended for Gran Meliá. Fourth, HMI
introduced a notice of claim letter from the Fajardo office of the
Puerto Rico Department of Labor notifying HMI that a laid-off
employee had sought benefits, and HMI's subsequent reply stating
that the employee had never been employed at Hotel Meliá. HMI
suggests that because the letter came from the Fajardo office,
which is close to Gran Meliá, rather than the Ponce office, it was
probably intended for Gran Meliá.
Though HMI's evidence supporting an inference of actual
confusion is not overwhelming, evidence of actual confusion in this
context does not need to be overwhelming to give rise to a
reasonable inference of confusion. Indeed, "even a few incidents"
of actual confusion are "highly probative of the likelihood of
confusion." Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 720
(3d Cir. 2004) (citation omitted) (internal quotation marks
omitted); see also Sports Auth., 89 F.3d at 964 (concluding that on
evidence of confusion by vendors." Other than this portion of
Albors Meliá's testimony, there seems to be no evidence in the
record of confusion by vendors. In any event, Dorpan did not
object to the re-submission below. Any objection it may have had
is waived. See DiMarco-Zappa v. Cabanillas, 238 F.3d 25, 34 (1st
Cir. 2001) ("This Court has repeatedly warned litigants that
'arguments not made initially to the district court cannot be
raised on appeal.'" (citation omitted)).
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the actual confusion prong "evidence of misdirected phone calls
between [plaintiff's] stores and [defendant's] restaurants, and
especially the evidence that customers have believed there to be a
connection between the restaurants and stores, is sufficient to
create a genuine issue of fact on this factor"). As such, we think
a reasonable jury could conclude that HMI has demonstrated at least
some level of actual confusion.
5. Dorpan's Intent
There is no evidence from which a reasonable factfinder could
infer that Dorpan decided to use the mark Meliá in order to cause
market confusion or with an intent to exploit Hotel Meliá's
reputation and goodwill.
6. Strength of the Marks
In evaluating the strength of a mark, we consider "its
tendency to identify the goods sold under the mark as emanating
from a particular [] source." Eli Lilly & Co. v. Natural Answers,
Inc., 233 F.3d 456, 464 (7th Cir. 2000) (citation omitted)
(internal quotation marks omitted). "[W]e typically evaluate a
mark's strength primarily on the basis of its commercial strength,
analyzing such factors as 'the length of time a mark has been used
and the relative renown in its field; the strength of the mark in
plaintiff's field of business; and the plaintiff's action in
promoting the mark.'" Bos. Duck Tours, 531 F.3d at 16 n.14
(quoting Equine Techs., Inc. v. Equitechnology, Inc., 68 F.3d 542,
-24-
547 (1st Cir. 1995)).
Here, the parties have developed relatively little evidence
from which a factfinder could draw inferences about the relative
strength of the marks and their tendency to create confusion. It
is undisputed that HMI has operated Hotel Meliá in the center of
the second largest city in Puerto Rico for more than one hundred
years. Indeed, the Hotel Meliá name was sufficiently well-known
even a century ago to attract famous guests like President
Roosevelt. Likewise, neither party disputes that Dorpan and the
Sol Meliá family of hotels has significant international brand
recognition and far greater financial resources than HMI.
In our view, there are genuine issues of material fact on the
respective strength of the competing marks. That is, evidence in
the record suggests that both marks have certain strengths, and the
relevant question at trial will be whether their relative strengths
contribute to consumer confusion. For example, a reasonable jury
could conclude that Dorpan will be able to use its greater
financial strength to flood the market with advertising, thereby
causing HMI to lose control over its brand and reputation. At the
same time, a reasonable jury could conclude that Hotel Meliá was so
strongly associated with historic downtown Ponce that consumers
were unlikely to associate it with a hotel in Coco Beach.
7. Balancing the Factors
With one exception, the district court's conclusions about the
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individual Pignons factors were identical to our own. Like us, the
district court concluded that a reasonable jury would be compelled
to conclude that at least six Pignons factors supported HMI's
claims of confusion: 1) the marks were similar; 2) the customers
were similar; 3) the services offered were similar; 4) the
advertising methods were similar; 5) the channels of trade were
similar; and 6) there was at least some evidence of actual
confusion. The district court also concluded that there was no
evidence from which a reasonable jury could find that Dorpan had
acted in bad faith. The only factor on which the district court
reached a different conclusion than we do is the strength of the
marks. The district court concluded that a reasonable jury would
be compelled to infer that HMI's mark was only strong within Ponce,
while Dorpan had a strong international mark.
The court then offered this dispositive balancing analysis:
With the factors split, the court finds these two
marks can co-exist within Puerto Rico without causing
substantial confusion to the reasonable consumer.
However, the court must define the limits within which
each mark may be used. HMI's use was frozen at the time
[Dorpan] acquired the trademark on December 30, 1997. On
this date, HMI's use of the Meliá mark is frozen. As of
this date, HMI operated one hotel in Ponce, Puerto Rico.
HMI had no plans to expand its business at that time and
had been operating in that location for the previous
eighty to one hundred years. These facts demonstrate HMI
was in continuous operation within Ponce, long before the
registration of Gran Meliá by Dorpan. Therefore, the
court finds HMI may continue to use the Meliá name within
Ponce, Puerto Rico, but must refrain from using the Meliá
name in any future business ventures outside of Ponce.
Conversely, [Dorpan] is barred from extending its
services into Ponce, but may use its trademarks
-26-
throughout the rest of the island and the U.S.
Dorpan, S.L., 851 F. Supp. 2d at 411 (citations omitted).
There are a number of errors in the district court's analysis.
First, the district court gave too little weight to evidence of
actual confusion. In the past, we have noted that once the party
alleging infringement has put forward evidence of actual confusion,
the alleged infringer is left "fighting an uphill battle in arguing
that no reasonable factfinder could find a substantial likelihood
of confusion. Evidence of actual confusion is often considered the
most persuasive evidence of likelihood of confusion because past
confusion is frequently a strong indicator of future confusion."
Beacon Mut., 376 F.3d at 18; see also Country Floors, 930 F.2d at
1064 (noting that "actual confusion usually implies a likelihood of
confusion").
Second, even without evidence of actual confusion, evidence of
the substantial similarity between the marks, services, customers,
and advertising might be sufficient in itself to create at least a
reasonable inference of a substantial likelihood of confusion
between the two hotels. Many courts have found that a triable
issue of confusion exists where two companies use marks that are
somewhat similar but not identical. See, e.g., AHP Subsidiary
Holding Co., 1 F.3d at 617 (finding confusion was triable issue in
dispute between two cooking sprays, one called "PAM" and one called
"Pan-Lite"). Others have found that a likelihood of confusion
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exists when companies use identical marks in different industries.
See, e.g., Sports Auth., 89 F.3d at 962 (finding likelihood of
confusion was a triable issue in dispute between a sporting goods
store and a restaurant that both used the mark "Sports Authority").
The situation in this case involves an even greater likelihood of
confusion. Two hotels are using a nearly identical mark to sell
nearly identical services in a relatively small geographic area.
Third, the district court gave far too much weight to its
conclusion that Dorpan had not acted in bad faith. We have noted
that the lack of intent on the alleged infringer's part to create
confusion is not particularly useful in the ultimate determination
of likelihood of confusion and "may not outweigh other factors that
suggest a likelihood of confusion." I.P. Lund Trading ApS, 163
F.3d at 44 (noting that "little weight should be given" to a
finding that the alleged infringer had not acted with bad faith);
see also Star Fin. Servs., Inc. v. AASTAR Mortg. Corp., 89 F.3d 5,
11 (1st Cir. 1996) (noting that "[e]vidence of bad intent . . .
[is] potentially probative of likelihood of confusion . . . [but]
'a finding of good faith is no answer if likelihood of confusion is
otherwise established'" (quoting President & Trs. of Colby Coll. v.
Colby Coll.-N.H., 508 F.2d 804, 811-12 (1st Cir. 1975))).
Fourth, the district court's emphasis on the physical locale
of the marks is largely beside the point. While the district court
is correct that "HMI's use of the Meliá mark is frozen" at its 1997
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extent, see supra note 11, the district court was incorrect to
equate the use of the mark with the location of the hotel. The
relevant inquiry here is the area in which the mark is in use in
commerce. For hotels, that area is usually a much larger area than
the city in which the hotel operates. Unlike many companies, such
as retail outlets and professional services, that rely on service
marks and have a local customer base, hotels seek to attract
customers physically distant from the point of service. See 5
McCarthy, § 26:30 ("The trade area for services such as hotels,
motels, and restaurants may be very large since purchasers are
ambulatory and on the move. They may carry the reputation of the
mark thousands of miles away from the actual outlet."). Customers
of upscale hotels typically do not live in the area where the hotel
is located. The reputation of an upscale hotel that has been
attracting guests for more than a century is unlikely to be limited
only to the city where it is located.
Finally, the district court took an impermissibly narrow view
of confusion when considering the evidence offered about mark
strength. Indeed, in holding that HMI "must refrain from using the
Meliá name in any future business ventures outside of Ponce" while
Dorpan "is barred from extending its services into Ponce," the
district court appears to have inappropriately equated confusion
with diversion of sales, overlooking the fact that trademark law
also seeks to protect mark holders from commercial injury involving
-29-
damage to the holder's goodwill and control over its reputation.
Beacon Mut., 376 F.3d at 10. In other words, the issue here is not
simply whether the likelihood of confusion might lead customers to
book a room in one hotel when intending to book a room at the
other. It is also relevant that a reasonable consumer's mistaken
beliefs about the relationship between the two hotels could cause
an injury to HMI's goodwill and reputation. For example, a
reasonable factfinder could conclude that HMI has a valid concern
that customers traveling to Puerto Rico who have had a bad
experience at Gran Meliá, might impute that bad experience to Hotel
Meliá when booking a subsequent trip or influencing others
traveling to Puerto Rico. See I.P. Lund Trading ApS, 163 F.3d at
35 (noting that trademark protection protects "that which
identifies a product's source").
Given these errors in the district court's analysis of the
likelihood of confusion, we must vacate its summary judgment ruling
and remand for further proceedings. On this record, there are
genuine issues of material fact on the likelihood of confusion.
Though we conclude that there is sufficient evidence to create
such issues of fact, we note that the record in this case is
sparse, particularly given the fact-intensive nature of the
inquiry. The evidence is especially sparse on the question of how
the two hotels market their services and how the respective
strength of their marks in the competitive hotel marketplace
-30-
affects the perception of potential consumers about the hotels and
their decision to use their services. On remand, whether discovery
should be reopened as the parties prepare for trial is a question
we leave to the discretion of the district court.
III.
For the reasons set forth, we vacate the district court's
entry of summary judgment for Dorpan on its declaratory judgment
action seeking a declaration of non-infringement and remand for
further proceedings consistent with this opinion. The district
court's judgment on HMI's collateral estoppel claim is not affected
by this decision. Costs to appellant.
So ordered.
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