Oriental Financial Group, Inc. v. Cooperativa De Ahorro Y Crédito Oriental , 698 F.3d 9 ( 2012 )


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  •              United States Court of Appeals
    For the First Circuit
    Nos. 11-1473, 11-1476
    ORIENTAL FINANCIAL GROUP, INC.,
    ORIENTAL FINANCIAL SERVICES CORP.,
    ORIENTAL BANK AND TRUST,
    Plaintiffs, Appellants/Cross-Appellees,
    v.
    COOPERATIVA DE AHORRO Y CRÉDITO ORIENTAL,
    Defendant, Appellee/Cross-Appellant.
    APPEALS FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF PUERTO RICO
    [Hon. José A. Fusté, U.S. District Judge]
    Before
    Boudin, Selya and Dyk,*
    Circuit Judges.
    Roberto C. Quiñones-Rivera, with whom Leslie Yvette Flores,
    and McConnell Valdes LLC, were on brief, for appellants.
    James W. McCartney, with whom Jean G. Vidal Font, and Cancio,
    Nadal, Rivera & Diaz, P.S.C., were on brief, for appellee.
    October 18, 2012
    *
    Of the Federal Circuit, sitting by designation.
    DYK,   Circuit Judge.     The    parties    in   this   case are
    competing    financial   institutions       operating   in    Puerto   Rico.
    Plaintiffs-Appellants/Cross-Appellants, Oriental Financial Group,
    Inc., Oriental Financial Services Corp., and Oriental Bank and
    Trust1 (collectively, “Oriental”), have for many years used the
    ORIENTAL mark in connection with the advertising, promotion, and
    offering of financial services in Puerto Rico.           Oriental contends
    that       beginning     in   or          around    2009,       Defendant-
    Appellee/Cross-Appellant, Cooperativa De Ahorro y Crédito Oriental
    (“Cooperativa”), used a confusingly similar mark, COOP ORIENTAL,
    and a confusingly similar logo containing that mark in connection
    with its financial business and services, in violation of Section
    43(a) of the Lanham Act, 
    15 U.S.C. § 1125
    (a), and Puerto Rico
    trademark law.
    Finding a likelihood of confusion, the district court
    ordered Cooperativa to cease all use of its new 2009 logo (which
    used the COOP ORIENTAL mark with an orange trade dress), but
    allowed Cooperativa to revert back to using its pre-2009 logo (also
    containing the COOP ORIENTAL mark, but with a different trade
    dress).     On appeal, Oriental contends that the district court’s
    injunction should have been broader to include any use of the COOP
    ORIENTAL mark and similar marks (even when divorced from the trade
    1
    Oriental Financial Services Corp. and Oriental Bank and
    Trust are subsidiaries of Oriental Financial Group, Inc.
    -2-
    dress in the 2009 logo).        Cooperativa counters that Oriental’s
    claim for injunctive relief against the COOP ORIENTAL mark and
    similar marks fails on the merits because there is no likelihood of
    confusion and the claim is barred by laches.
    We hold that Oriental’s claims are not barred by laches
    because of the doctrine of progressive encroachment, and remand to
    the district court to determine whether there is a likelihood of
    confusion as to the COOP ORIENTAL mark and other marks and whether
    the injunction should be broader, as Oriental contends.
    I.
    Oriental     first    began    using   the    ORIENTAL    mark   in
    connection with its financial services business in 1964, when
    Oriental’s predecessor, Oriental Federal Savings, opened its first
    branch in the city of Humacao, located in southeastern Puerto Rico.
    Until the late 1980s Oriental operated six branches, each located
    in the southeastern region of Puerto Rico.             In the early 1990s,
    Oriental began to expand to other regions of Puerto Rico, and by
    1996, Oriental had relocated its main office from Humacao to San
    Juan, in northern Puerto Rico, and operated sixteen branch offices
    located in the metropolitan (near San Juan), eastern, and western
    regions of Puerto Rico.        By 2009, Oriental operated 21 branches
    throughout Puerto Rico, and by 2010, 43.
    Oriental’s    competitor,      Cooperativa,    is   a    non-profit
    credit union offering various banking services such as personal
    -3-
    checking   and    savings     accounts,     loans,   and   credit    products.
    Cooperativa first began using the mark ORIENTAL in 1966 when its
    full corporate name was “Cooperativa De Crédito Oriental.”2                Thus,
    Cooperativa began to use the COOP ORIENTAL mark after Oriental, and
    on appeal, it is undisputed that Oriental is the senior user
    entitled    to     trademark       protection.           See     Volkswagenwerk
    Aktiengesellschaft v. Wheeler, 
    814 F.2d 812
    , 815 (1st Cir. 1987)
    (“The right to trademark and service mark rights is based on prior
    use, or the one who first uses the marks in connection with a
    peculiar line of business.”).
    At the time that Cooperativa first used the COOP ORIENTAL
    mark, Cooperativa’s operations were geographically limited. In
    1966, Cooperativa operated one branch (its current headquarters)
    located in Humacao.      As of 1996, it operated three branches, with
    two of those branches based in Humacao and one branch based in
    Loiza, which is in northeastern Puerto Rico.               Starting in 2008,
    Cooperativa began expanding its geographic reach by purchasing
    branches   of    other   cooperatives.       Cooperativa       purchased   three
    branches in      San   Juan   in   2008,   2009,   and   2010,   respectively.
    Additionally, in 2010, Cooperativa purchased a branch in Ponce,
    located in southern Puerto Rico.            As described in detail below,
    Cooperativa’s allegedly infringing advertising and other activity
    2
    In 1973, Cooperativa changed its name to its current
    corporate name, “Cooperativa De Ahorro y Crédito Oriental.”
    -4-
    was    limited   until   the    late    2000s.       But   consistent      with    its
    geographic expansion, in 2009, Cooperativa also began an expansive
    advertising campaign in newspapers and on television, including the
    use of advertising media not previously used by it, such as
    billboards and cable television. As a part of its new advertising
    campaign, Cooperativa also adopted a new logo using the COOP
    ORIENTAL mark.      Cooperativa’s new logo contained an orange trade
    dress similar to the orange trade dress used in Oriental’s logo.
    Additionally,      the   size    of    the    term    “COOP”     was    reduced     in
    Cooperativa’s new logo, emphasizing the term “ORIENTAL,” when
    compared to prior versions of its logo also containing the COOP
    ORIENTAL mark.
    On December 9, 2009, Oriental sent Cooperativa a cease
    and desist letter “demand[ing] that [Cooperativa] IMMEDIATELY CEASE
    AND DESIST from the unauthorized use of the ORIENTAL mark or any
    variant    or    derivative     thereof      as   part     of   its    corporate    or
    commercial name, services or the domain name of its website.” J.A.
    800.    Despite the letter, Cooperativa continued to use the COOP
    ORIENTAL mark.
    On May 21, 2010, Oriental filed suit against Cooperativa
    in the United States District Court for the District of Puerto
    Rico, asserting causes of action for, inter alia, service mark
    -5-
    infringement under the Lanham Act and Puerto                Rico law.3    In
    particular, Oriental alleged that Cooperativa’s “COOP ORIENTAL name
    is confusingly similar to [Oriental’s] ORIENTAL Marks,” and that
    Cooperativa’s “COOP ORIENTAL logo . . . is confusingly similar with
    the ORIENTAL Marks.”        J.A. 15.        Oriental thus sought to enjoin
    Cooperativa from, among other things, “directly or indirectly
    infringing any of [Oriental’s] rights in the ORIENTAL Marks . . .
    [by] use of: (i) the term ORIENTAL, including stylized depictions
    thereof; (ii) any composite trademark that includes the term
    ORIENTAL; or (iii) any composite trademark, including design marks
    and slogans,      that   comprises    the    term   ORIENTAL[.]”   J.A. 28.
    Oriental   also    sought   damages    for     Cooperativa’s   infringement.
    Cooperativa contended that Oriental’s claims were barred by laches.
    The district court held a preliminary injunction hearing
    in September 2010.       The parties agreed to convert the hearing into
    a permanent injunction hearing.             On October 20, 2010, after the
    hearing, the district court issued an Opinion and Order granting a
    limited injunction against Cooperativa.              See Oriental Fin. Grp.
    Inc. v. Cooperativa De Ahorro y Crédito Oriental (“Injunction
    Order”), 
    750 F. Supp. 2d 396
    , 401 (D.P.R. 2010). In its opinion,
    3
    Oriental   also   asserted    causes   of   action   for
    cybersquatting under the Anticybersquatting Consumer Protection
    Act, 
    15 U.S.C. § 1125
    (d); unfair competition and service mark
    dilution under the Lanham Act, 
    15 U.S.C. § 1125
    (a),(c); and unfair
    competition under Puerto Rico law, 
    P.R. Laws Ann. tit. 10, § 259
    .
    However, these claims are not involved in these appeals.
    -6-
    before addressing the merits, the court “briefly consider[ed]
    [Cooperativa’s] argument that [Oriental’s] claims are barred by
    laches.”     
    Id. at 402
    .    The court reasoned that although Oriental
    “claim[s] an exclusive right to use the term ‘Oriental’ in relation
    to financial services in Puerto Rico, . . . their submissions to
    the court indicate their view that the infringing activity began in
    2009, with Defendant’s deployment of its new logo and advertising
    campaign.”    
    Id.
       Thus, the court found “inapposite [Cooperativa’s]
    arguments     as    to   [Oriental’s]    delay   in     complaining   about
    [Cooperativa’s] use of ‘Oriental,’ which dates back to 1966, or
    ‘Coop Oriental,’ which dates back to 1995.”           
    Id.
       Accordingly, the
    district court declined to address the merits of Cooperativa’s
    laches defense.
    The court found that Oriental’s new logo infringed the
    ORIENTAL mark by creating a likelihood of confusion. 
    Id. at 404
    .
    The court also determined that Oriental suffered ongoing and
    irreparable harm because of Cooperativa’s infringement, that the
    balance of hardships favored Oriental, and that the public interest
    would be served by an injunction.         
    Id. at 405
    ; see eBay Inc. v.
    MercExchange, L.L.C., 
    547 U.S. 388
    , 391-94 (2006).                Thus, the
    district court enjoined Cooperativa from “using its new logo—in
    particular, the prominent placement of the word ‘Oriental’—and its
    new color scheme, the combination of which infringes [Oriental’s]
    -7-
    service mark under both federal and Puerto Rico law.”    Injunction
    Order, 
    750 F. Supp. 2d at 406
    .
    In contrast, the district court specifically allowed
    Cooperativa to “revert to the mark and dress it used prior to
    2009,” which included use of the COOP ORIENTAL mark, or to “adopt
    new [logos] consistent with th[e] injunction.”   
    Id.
       The district
    court did not address the likelihood of confusion posed by the COOP
    ORIENTAL mark or other similar marks, noting that it did not “find
    that [Cooperativa’s] use of ‘Oriental’ in all instances constitutes
    infringement, nor [that] . . . its use of ‘Coop Oriental’ [was] per
    se infringing.”   
    Id. at 404
    .
    The district court declined to award Oriental damages for
    Cooperativa’s infringement, noting that Oriental presented “no
    evidence of quantifiable damages,” and “[t]he controversy is now
    resolved and no discernible major future damages seem apparent.”
    
    Id. at 405
    .   Damages are not an issue on appeal.
    On November 18, 2010, the district court held a status
    conference with the parties during which Cooperativa submitted
    several proposed new logos for the court’s approval.    The district
    court indicated which logos were permissible by either circling or
    crossing out the proposed logos.       The district court crossed
    through every logo that used the COOP ORIENTAL mark (each of which
    no longer contained an orange trade dress), but approved nearly all
    of the logos that used only Cooperativa’s full corporate name,
    -8-
    “Cooperativa De Ahorro y Crédito Oriental.” On December 6, 2010,
    Oriental filed a motion seeking attorneys’ fees. Cooperativa and
    Oriental   settled   the   fees    issue   on    December    23,    2010,    with
    Cooperativa agreeing to pay $55,000 in fees to Oriental.
    On January 11, 2011, the district court denied Oriental’s
    motion to amend or alter the court’s injunction order, in which
    Oriental sought to broaden the district court’s injunction to
    extend to all use of the COOP ORIENTAL and COOPERATIVA ORIENTAL
    marks.   The   district    court   reasoned      that    Oriental       “presented
    evidence of    consumer    confusion   that      was    limited    to    the time
    following the 2009 overhaul of [Cooperativa’s] corporate image—that
    is, not coinciding with the use of its shortened names, which began
    in 1995,” and thus refused to “find that use infringing under
    federal trademark law.”       J.A. 505.         The district court entered
    final judgment on March 10, 2011.          Oriental timely appealed, and
    Cooperativa cross-appealed.
    II.
    Section 43(a) of the Lanham Act provides, in relevant
    part:
    Any person who, on or in connection with any goods or
    services, . . . uses in commerce any word, term, name,
    symbol, or device, or any combination thereof, . . .
    [which] is likely to cause confusion . . . as to the
    origin, sponsorship, or approval of his or her goods,
    services, or commercial activities by another person, .
    . . shall be liable in a civil action by any person who
    believes that he or she is or is likely to be damaged by
    such act.
    -9-
    
    15 U.S.C. § 1125
    (a)(1).4 “Generally speaking, the [Lanham] Act
    proscribes   the    unauthorized   use    of    a    service    mark    when   the
    particular usage causes a likelihood of confusion with respect to
    the identity of the service provider.”              Int’l Ass’n of Machinists
    & Aerospace Workers, AFL-CIO v. Winship Green Nursing Ctr., 
    103 F.3d 196
    , 200 (1st Cir. 1996); see also Two Pesos, Inc. v. Taco
    Cabana, Inc., 
    505 U.S. 763
    , 769 (1992) (“It is, of course, . . .
    undisputed   that   liability   under     §    43(a)    [of    the   Lanham    Act]
    requires proof of the likelihood of confusion.”).
    While the district court’s overall approach to this case
    was generally both careful and correct, we conclude that the
    district court made an error that requires a remand.                 The district
    court was correct that Oriental sought injunctive relief only based
    on Cooperativa’s alleged infringing activities beginning in 2009
    (when Cooperativa combined use of the COOP ORIENTAL mark with a new
    orange trade dress similar to that used in Oriental’s logo).                   But
    to the extent that the district court concluded that Oriental did
    not challenge the COOP ORIENTAL mark divorced from the 2009 orange
    trade dress, it was incorrect.
    The record is clear that Oriental challenged not only
    Cooperativa’s use of the 2009 logo and trade dress, but also
    4
    “The Puerto Rico Trademark Act of 2009 incorporates
    elements of federal trademark law . . . . Article 26 of the Act is
    the analogue to [section 43(a) of the Lanham Act], and it similarly
    creates civil liability for infringement of service marks used in
    Puerto Rico.” Injunction Order, 
    750 F. Supp. 2d at 405
    .
    -10-
    Cooperativa’s use of the COOP ORIENTAL mark and similar marks apart
    from that trade dress.      Oriental’s complaint alleged that “[i]n or
    around 2009,” Cooperativa expanded its business to San Juan and
    “launched a new brand identity featuring the confusingly similar
    name COOP ORIENTAL in advertising and sales literature published in
    a variety of media.”      J.A. 15.         Oriental also explicitly asserted
    that   Cooperativa’s     “use   of    the    name    COOP   ORIENTAL    infringes
    [Oriental’s] ORIENTAL Marks and is likely to cause confusion,
    mistake and deception of the public as to the identity and origin
    of [Cooperativa] and its business, product and services . . . .”
    J.A. 21.      Accordingly, Oriental sought an injunction barring
    Cooperativa’s use of “the name COOP ORIENTAL or any other name
    substantially similar to the ORIENTAL Marks.”                    J.A. 22.   Thus,
    Oriental’s claims were not limited to the COOP ORIENTAL mark
    combined with the trade dress used in the 2009 logo, but were
    directed to all use of the COOP ORIENTAL mark and other confusingly
    similar    marks.      (Oriental     did    not,    and   does   not,   object   to
    Cooperativa’s use of its full corporate name.)
    Although     Oriental      clearly       asserted      a    claim    of
    infringement against Cooperativa’s use of the COOP ORIENTAL mark
    standing alone, the district court’s treatment of this claim is
    seemingly in tension.        On the one hand, the district court (1)
    apparently found that Oriental challenged only the 2009 logo and
    trade dress, (2) found that use of the COOP ORIENTAL mark was not
    -11-
    “per se infringing,” and (3) granted an injunction which permitted
    Cooperativa to “revert to the mark and dress it used prior to 2009”
    (which contained the COOP ORIENTAL mark). Injunction Order, 
    750 F. Supp. 2d at 404, 406
    .     In    an    apparent    conflict       with   these
    determinations,      in   its    post-injunction      status      conference,       the
    district court rejected Cooperativa’s use of all proposed logos
    containing the COOP ORIENTAL mark standing alone (without the 2009
    trade dress).
    Then, following the status conference, the district court
    rejected Oriental’s request that the injunction be broadened to
    include all use of the abbreviated COOP ORIENTAL mark on the ground
    that    Oriental    had   not    presented      pre-2009       evidence   of     actual
    consumer confusion relating to Cooperativa’s use of the COOP
    ORIENTAL mark. See J.A. 505.
    This ruling is contrary to the established principle that
    evidence of actual confusion is not necessary to establish a
    likelihood of confusion. Although “an absence of actual confusion,
    or a negligible amount of it, between two products after a long
    period of coexistence on the market is highly probative in showing
    that    little     likelihood      of    confusion        exists,”    Aktiebolaget
    Electrolux v. Armatron Int’l, Inc., 
    999 F.2d 1
    , 4 (1st Cir. 1993),
    “a plaintiff [suing under the Lanham Act] need only show that a
    likelihood    of    confusion     is    in    prospect;    a    showing    of    actual
    confusion is not required.”            Societe Des Produits Nestle, S.A. v.
    -12-
    Casa Helvetia, Inc., 
    982 F.2d 633
    , 640 (1st Cir. 1992) (emphasis
    added).5   Thus, contrary to the district court’s statement, the
    fact that there was no pre-2009 evidence of actual confusion is not
    dispositive of Oriental’s challenge to Cooperativa’s use of the
    COOP ORIENTAL mark (though, as we note below, this lack of pre-2009
    evidence   should    be   considered     by   the     district   court   in   its
    likelihood of confusion analysis).
    Given the district court’s treatment of this issue, we
    think that a remand is necessary to consider whether Oriental is
    entitled   to   broader     injunctive      relief.      In   addressing      that
    question, the key issue is whether the use of COOP ORIENTAL
    standing alone      would   create   a   likelihood      of   confusion.       (As
    discussed below, the likelihood of confusion issue is also raised
    with respect to other similar marks, but the record is less well
    developed as to these other marks.)
    5
    See also Venture Tape Corp. v. McGills Glass Warehouse,
    
    540 F.3d 56
    , 61-62 (1st Cir. 2008) (“While evidence of actual
    confusion is often deemed the best evidence of possible future
    confusion, proof of actual confusion is not essential to finding
    likelihood of confusion.” (quoting Borinquen Biscuit Corp. v. M.V.
    Trading Corp., 
    443 F.3d 112
    , 120 (1st Cir. 2006)) (internal
    quotation marks omitted)); Volkswagenwerk Aktiengesellschaft v.
    Wheeler, 
    814 F.2d 812
    , 818 (1st Cir. 1987) (“A showing of actual
    confusion is not essential in order to find a likelihood of
    confusion.”); Baker v. Simmons Co., 
    307 F.2d 458
    , 463 (1st Cir.
    1962) (noting that “to satisfy the standard of a likelihood of
    confusion,” “[a]ctual examples of confusion were not required”).
    -13-
    III.
    “Eight factors . . . are typically used to assess the
    likelihood of confusion: (1) the similarity of the marks; (2) the
    similarity of the goods; (3) the relationship between the parties’
    channels of trade; (4) the relationship between the parties’
    advertising;     (5)   the   classes   of    prospective   purchasers;     (6)
    evidence    of   actual   confusion;   (7)    the   defendant’s   intent   in
    adopting its mark; and (8) the strength of the plaintiff’s mark.”
    Beacon Mut. Ins. Co. v. OneBeacon Ins. Grp., 
    376 F.3d 8
    , 15 (1st
    Cir. 2004).      This court has made clear that “[t]he application of
    [the eight] factors to the record is a highly fact-intensive
    inquiry.”    The Shell Co. (P.R.) Ltd. v. Los Frailes Serv. Station,
    Inc., 
    605 F.3d 10
    , 22 (1st Cir. 2010). “A proper analysis takes
    cognizance of all eight factors but assigns no single factor
    dispositive weight.”         Peoples Fed. Sav. Bank v. People’s United
    Bank, 
    672 F.3d 1
    , 10 (1st Cir. 2012) (quoting Borinquen Biscuit
    Corp., 
    443 F.3d at 120
    ); see also Venture Tape, 
    540 F.3d at 61
     (“No
    single criterion is necessarily dispositive in [the likelihood of
    confusion] inquiry.”).
    In its injunction order, the district court appeared to
    analyze the eight factors only with respect to the 2009 logo.
    However, many of the findings made by the district court are not
    specific to the orange trade dress contained in the 2009 logo, and
    thus are equally relevant in assessing Cooperativa’s use of the
    -14-
    COOP ORIENTAL mark standing alone. For example, the district court
    weighed    the   second   (similarity      of    the     goods)   and     third
    (relationship between the parties’ channels of trade) factors in
    favor of Oriental, noting that Oriental and Cooperativa “offer many
    of the same services to some of the same geographical regions in
    Puerto Rico.”     Injunction Order, 
    750 F. Supp. 2d at 403
    .                 The
    district court similarly weighed the fourth (relationship between
    the   parties’   advertising)   and    fifth     (classes    of   prospective
    purchasers) factors in favor of Oriental, recognizing that Oriental
    and   Cooperativa    “advertise       in   the    same      newspapers,     and
    [Cooperativa] does not limit its clientele to a particular income
    level.”6   
    Id.
       Finally, as to the eighth factor (strength of the
    plaintiff’s mark), the court found (as conceded by Cooperativa)
    that Oriental’s “mark is strong in Puerto Rico.”              
    Id. at 403-04
    .
    These factual findings equally support a finding of likelihood of
    confusion with respect to the COOP ORIENTAL mark divorced from the
    2009 logo.
    In addition to these findings by the district court,
    Oriental urges that evidence with respect to other factors also
    weighs in favor of finding a likelihood of confusion.              While the
    evaluation of this evidence is for the district court in the first
    6
    Oriental contended that although Cooperativa claimed to
    serve primarily low-income customers, with its 2009 expansion,
    Cooperativa sought to cater to a larger segment of the population.
    The district court agreed with Oriental.
    -15-
    instance, we conclude that there is at least evidence in the record
    that would support Oriental’s position. Oriental points out with
    reference to the first factor (similarity of the marks) that the
    only difference between the marks is the use of the term “COOP” in
    Cooperativa’s mark.            “COOP” (short for cooperative (or in Spanish,
    cooperativa)) is merely a descriptive term.                            “[A]ddition of a
    suggestive          or    descriptive     element     [to     an   arbitrary          mark]   is
    generally         not     sufficient    to    avoid    confusion.”7             4    J.   Thomas
    McCarthy, McCarthy on Trademarks and Unfair Competition § 23:50
    (4th ed. 2012).            Moreover, the ORIENTAL mark is used as a surname
    in Oriental’s family of marks to identify businesses and services
    associated with Oriental, rendering the addition of “COOP” even
    less significant.            See J & J Snack Foods Corp. v. McDonald’s Corp.,
    
    932 F.2d 1460
    , 1462 (Fed. Cir. 1991) (“A family of marks is a group
    of marks having a recognizable common characteristic, wherein the
    marks       are     composed   and     used    in    such    a   way     that       the   public
    associates          not    only   the     individual         marks,      but        the   common
    characteristic of the family, with the trademark owner.”).                                 Thus,
    the         first     factor      could       weigh     in       favor     of         Oriental.
    As to the sixth factor (evidence of actual confusion), as
    noted above, the district court erred to the extent that it held
    7
    The district court found that the ORIENTAL mark is “an
    arbitrary mark that merits protection under federal trademark law.”
    Injunction Order, 
    750 F. Supp. 2d at 403
    . Cooperativa does not
    challenge this finding.
    -16-
    that   an    absence      of    evidence   of    pre-2009   actual   confusion
    necessitates a finding of no likelihood of confusion.                But, even
    though not required, Oriental presented evidence of post-2009
    actual confusion arguably attributable to use of the COOP ORIENTAL
    mark standing alone.
    A supervisor at one of Oriental’s branches testified that
    several customers had attempted to cash checks bearing the name
    COOPERATIVA ORIENTAL at the Oriental branch, apparently associating
    that name with Oriental’s business.             The supervisor also testified
    that customers with Cooperativa accounts had attempted to withdraw
    or deposit money at the Oriental branch.                 A customer relations
    officer     at    a   different    Oriental     branch   also   testified    that
    customers had called an Oriental branch attempting to verify their
    accounts,        which   were   actually   held    by    Cooperativa.       These
    customers, according to the employee’s testimony, relied on the
    similarity of Oriental’s marks and the COOP ORIENTAL mark in
    assuming that Cooperativa was a subsidiary of Oriental.                 Oriental
    also presented several other examples of actual consumer confusion,
    including telephone calls by Cooperativa customers to Oriental
    branches and inquiries by Oriental customers about branches that
    actually were a part of Cooperativa.              Each of these instances of
    actual confusion appeared to be attributable to the use of the name
    COOP ORIENTAL without the logo.            Such evidence of actual customer
    -17-
    confusion could support a finding of likelihood of confusion with
    respect to use of the COOP ORIENTAL mark standing alone.
    At the same time, Cooperativa argues that Oriental’s lack
    of   pre-2009    evidence   of    actual    confusion   also   bears   on   the
    likelihood of confusion question, especially given that the COOP
    ORIENTAL mark was used by Cooperativa before 2009, and there is no
    evidence of pre-2009 confusion. As we discuss above, the absence of
    such evidence might be pertinent, though that seems unlikely given
    the very limited nature of Cooperativa’s pre-2009 activity, as
    addressed in detail below.
    Finally, as to the seventh factor (defendant’s intent in
    adopting its mark), Oriental contends that Cooperativa was aware of
    and seeks to benefit from Oriental’s reputation and recognition in
    the financial services industry by using the COOP ORIENTAL mark.
    Indeed, as Oriental points out, the district court has already
    found, based on the similarity of Cooperativa’s mark and trade
    dress, that Cooperativa “knew of and intended to benefit from
    [Oriental’s] considerable advertising efforts.”           Injunction Order,
    
    750 F. Supp. 2d at 403
    .          A similar inference might also be drawn
    based upon Cooperativa’s use of the COOP ORIENTAL mark standing
    alone.
    In short, the district court has already found that some
    of the eight factors support a finding of likelihood of confusion.
    As   to   the   others,   Oriental    has   presented   evidence   that,    if
    -18-
    credited, could also weigh in favor of finding a likelihood of
    confusion based upon use of the COOP ORIENTAL mark on its own.
    However, we have warned that “this court on appeal will not
    undertake to find the facts or to lay down rulings on specific
    issues . . . , but will remand the case to the court below for
    final disposition on the evidence.”         Munoz v. Porto Rico Ry. Light
    & Power Co., 
    83 F.2d 262
    , 270 (1st Cir. 1936). Accordingly, we
    remand to the district court to determine whether Cooperativa’s use
    of the COOP ORIENTAL mark creates a likelihood of confusion,
    entitling Oriental to broader injunctive relief.
    We note that Oriental also challenges Cooperativa’s use
    of the COOPERATIVA ORIENTAL mark and other potentially infringing
    marks.     It does not appear that the district court has made any
    findings regarding these allegedly infringing marks. On remand the
    district    court   should    also   consider   whether   the   COOPERATIVA
    ORIENTAL mark (and other potentially infringing usages of the
    ORIENTAL mark) poses a likelihood of confusion. This consideration
    does not include evaluation of Cooperativa’s full corporate name,
    which Oriental concedes is non-infringing.
    IV.
    We   turn   now   to   Cooperativa’s   cross-appeal.     While
    Cooperativa asserts the defense of laches as a cross-appeal, it is
    in reality offering another ground for affirming the judgment of
    the district court.      Cooperativa does not challenge the judgment
    -19-
    entered by the district court, enjoining it from use of the 2009
    logo and trade dress, but rather urges that the judgment be
    affirmed.       And Cooperativa is clear that it no longer seeks to use
    the new logo adopted in 2009, and it has fully complied with the
    district court’s injunction.          Cooperativa contends only that the
    expanded injunction sought by Oriental is barred by the doctrine of
    laches because the COOP ORIENTAL mark and earlier variations               were
    used       by   Cooperativa   as   early   as   1995,   but   such   use   went
    unchallenged by Oriental.
    “Laches . . . is an equitable doctrine which penalizes a
    litigant for negligent or wilful failure to assert his rights . .
    . .”   Valmor Prods. Co. v. Standard Prods. Corp., 
    464 F.2d 200
    , 204
    (1st Cir. 1972).         Although the circuits vary somewhat in their
    interpretations as to when the laches defense can operate to bar
    injunctive relief, the defense is now generally accepted whether
    asserted as a defense to an injunction or damages, and we agree
    that the defense is available in some circumstances to defend
    against an injunction.8 We need not address those circumstances in
    8
    “The argument that laches is never a defense to an
    injunction, no matter what the equities, has been asserted and
    rejected in several cases.” 6 McCarthy, supra, § 31:6 n.2.
    The general rule of the circuits, as quoted with approval
    by Professor McCarthy, has been that “‘mere delay’ will not, by
    itself, bar a plaintiff’s suit, but there must be some element of
    estoppel, such as reliance by the defendant. . . . All this means,
    however, is that a balancing of the equities is required, which
    would be the case with any principle of equity.” 6 Id. § 31:6
    (quoting Saratoga Vichy Spring Co. v. Lehmann, 
    625 F.2d 1037
    , 1040
    (2d Cir. 1980)). This view is corroborated by a majority of the
    -20-
    detail because, as will be seen, we conclude that the defense is
    not available here.
    circuits. See, e.g., Ray Commc’ns, Inc. v. Clear Channel Broad.,
    Inc., 
    673 F.3d 294
    , 307 (4th Cir. 2012) (noting that “laches may
    act as a bar to both monetary and injunctive relief under certain
    circumstances,” such as where aggravating factors cause the balance
    of the equities to strongly favor the defendant (emphasis in
    original));   Univ. of Pitt. v. Champion Prods., Inc., 
    686 F.2d 1040
    , 1045 (3d Cir. 1982) (noting that cases can “give rise to
    affirmative rights in the defendant as a result of detrimental
    reliance” under a laches theory, but that cases involving “mere
    delay” will not bar prospective injunctive relief); Prudential Ins.
    Co. v. Gibraltar Fin. Corp., 
    694 F.2d 1150
    , 1152 n.1 (9th Cir.
    1982) (noting that that “[t]here is a wealth of authority in other
    circuits that laches can bar injunctive relief” and citing several
    cases where the balancing of the equities favored the defendant);
    Armco, Inc. v. Armco Burglar Alarm Co., Inc., 
    693 F.2d 1155
    , 1161
    n.14, 1161-62 (5th Cir. 1982) (noting that “[t]here is no doubt
    that laches may defeat claims for injunctive relief” and
    considering the equitable factors involved in the laches defense);
    Saratoga Vichy Spring Co., 
    625 F.2d at 1040
     (noting that a
    balancing of the equities beyond “mere delay” is needed to bar the
    plaintiff’s prayer for injunctive relief under a laches theory);
    Seven-Up Co. v. O-So-Grape Co., 
    283 F.2d 103
    , 106 (7th Cir. 1960)
    ("Laches does not necessarily constitute a conclusive and automatic
    bar to injunctive relief in trademark actions. However, in many
    instances, the delay may be so prolonged and inexcusable that it
    would be inequitable to permit the plaintiff to seek injunctive
    relief as to future activities.").
    Currently only the Sixth Circuit has suggested that
    laches cannot be a defense to injunctive relief. Kellogg Co. v.
    Exxon Corp., 
    209 F.3d 562
    , 568 (6th Cir. 2000) (“Although laches
    precludes a plaintiff from recovering damages, it does not bar
    injunctive relief.”). McCarthy suggests that “a careful reading of
    [this case] reveals either that such language was dictum, that [the
    case was] lacking the traditional elements of an estoppel by laches
    or that [it] was merely referring to ‘delay’ per se.” 6 McCarthy,
    supra, § 31:6. Indeed, Kellogg acknowledges that ‘there is that
    narrow class of cases where the plaintiff’s delay has been so
    outrageous, unreasonable and inexcusable as to constitute a virtual
    abandonment of its right.’” 
    209 F.3d at 569
     (quoting Univ. Of
    Pitt., 
    686 F.2d at 1044
    ).
    -21-
    “Laches requires proof of (1) lack of diligence by the
    party against whom the defense is asserted, and (2) prejudice to
    the party asserting the defense.”            Museum of Fine Arts, Bos. v.
    Seger-Thomschitz, 
    623 F.3d 1
    , 10 n.9 (1st Cir. 2010) (quoting
    Costello v. United States, 
    365 U.S. 265
    , 282 (1961)).                However,
    laches applies only where the plaintiff knew or should have known
    of the infringing conduct. See Valmor Prods., 
    464 F.2d at 204
    ; see
    also What-A-Burger of Va., Inc. v. Whataburger, Inc. of Corpus
    Christi, Tex., 
    357 F.3d 441
    , 450 (4th Cir. 2004) ("Instead of
    focusing on when the trademark owner first knew that another party
    was using its mark, the court should be trying to determine the
    time at which the use became infringing and the time at which the
    owner should have known it . . . ."); ProFitness Physical Therapy
    Ctr. v. Pro-Fit Orthopedic & Sports Physical Therapy P.C., 
    314 F.3d 62
    , 70 (2d Cir. 2002) (“[A] plaintiff should not be obligated to
    sue until its right to protection has ripened such that plaintiff
    knew or should have known . . . that plaintiff had a provable
    infringement claim against defendant.”).
    Oriental    contends   that   Cooperativa’s   laches    defense
    should   be    rejected    both   because:    (1)   Cooperativa   failed   to
    establish that Oriental had actual or constructive knowledge of
    Cooperativa’s use of the COOP ORIENTAL mark prior to 2009, and (2)
    Cooperativa failed to establish prejudice. We need not resolve
    these questions — which involve factual disputes between the
    -22-
    parties — for we conclude now that, even if both knowledge and
    prejudice were established — the laches defense is barred by the
    doctrine of progressive encroachment.
    As the Sixth Circuit noted in Kellogg, “Progressive
    encroachment is an offensive countermeasure to the affirmative
    defense[]   of   laches    .     .    .    ;     upon   a   finding   of   progressive
    encroachment,      the   delay       upon      which    [laches     is]    premised   is
    excused.”   Kellogg Co. v. Exxon Corp., 
    209 F.3d 562
    , 571 (6th Cir.
    2000). There is general agreement in other circuits that the
    doctrine of “progressive encroachment” can bar the defense of
    laches, and that “a trademark owner is not forced by the rule of
    laches to sue” where the doctrine applies. 6 McCarthy, supra, §
    31:20; see Roederer v. J. Garcia Carrion, S.A., 
    569 F.3d 855
    , 859-
    60 (8th Cir. 2009); Tillamook Country Smoker, Inc. v. Tillamook
    Cnty.   Creamery    Ass’n,     
    465 F.3d 1102
    ,     1110   (9th    Cir.   2006);
    ProFitness Physical Therapy, 
    314 F.3d at 69-70
    ; Chattanoga Mfg.,
    Inc. v. Nike, Inc., 
    301 F.3d 789
    , 794 (7th Cir. 2002); Kellogg, 
    209 F.3d at 570-73
    ; Kason Indus., Inc. v. Component Hardware Grp.,
    Inc., 
    120 F.3d 1199
    , 1205-06 (11th Cir. 1997).                     We join our sister
    circuits in holding that the doctrine of progressive encroachment
    can bar the laches defense in a trademark case, and we conclude
    that, based on the undisputed facts, this doctrine is applicable
    here.
    -23-
    As a general rule the progressive encroachment doctrine
    requires    proof   that   (1)   during   the    period   of    the   delay   the
    plaintiff could reasonably conclude that it should not bring suit
    to challenge the allegedly infringing activity; (2) the defendant
    materially altered its infringing activities; and (3) suit was not
    unreasonably delayed after the alteration in infringing activity.
    See generally 6 McCarthy, supra, § 31:20.              Here, satisfaction of
    the second and third requirements are not open to serious dispute.
    The second requirement “turns . . . 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.”       Kellogg, 
    209 F.3d at 573
     (emphasis added).
    Put succinctly, we ask “whether [the] defendant, after beginning
    its use of the mark, redirected its business so that it more
    squarely    competed   with      plaintiff     and    thereby   increased     the
    likelihood of public confusion of the marks.”             ProFitness Physical
    Therapy, 
    314 F.3d at 70
     (emphasis added); Kason Indus., 120 F.3d at
    1205; see also Tillamook Country Smoker, 465 F.3d at 1110 (“To
    establish progressive encroachment, [a plaintiff] . . . ha[s] to
    show that [the defendant] ‘expand[ed] its business into different
    regions or into different markets.’” (quoting Grupo Gigante SA De
    CV v. Dallo & Co., Inc., 
    391 F.3d 1088
    , 1103 (9th Cir. 2004)
    (emphasis    added))).     Increases      in    the    allegedly      infringing
    advertising are also pertinent.
    -24-
    During     the    period      from     2008     to    2010,    Cooperativa
    materially   altered       the   reach    of    both     its    operations     and   its
    allegedly infringing advertising. As to its operations, Cooperativa
    operated only three branches in the mid to late 1990s, and these
    branches were located almost exclusively within Humacao. At that
    time, Cooperativa had no presence in San Juan. Oriental, meanwhile,
    was operating several branches throughout the northern, eastern,
    and western regions of Puerto Rico, with its main office in San
    Juan. It was not until 2008 that Cooperativa began to expand its
    business into San Juan, acquiring three San Juan branches by 2010.
    So too in 2009, Cooperativa expanded its advertising
    efforts to reach more consumers throughout Puerto Rico using the
    allegedly infringing mark.         Rather than primarily advertising its
    products and services in local publications as it had done in the
    past, Cooperativa used much more expansive efforts to advertise its
    services   using     the    allegedly      infringing          mark,     and   included
    billboards, cable television, and athletic sponsorship in those
    efforts.     There    is    no   dispute       that    Cooperativa       expanded    its
    business from a regional to an island-wide business and expanded
    its allegedly infringing activity “such that it [was] placed more
    squarely in competition with the plaintiff.”9
    9
    As the McCarthy treatise notes, changes in the mark can
    also support a finding of progressive encroachment: specifically,
    “[c]hanges in the quality or quantity of the allegedly infringing
    use can often excuse delay in suing.” See 6 McCarthy, supra, §
    31:20.   McCarthy notes that, “[f]or example, where defendant
    -25-
    As to the third requirement, there is no doubt that
    Oriental brought suit shortly after these changes occurred. The
    complaint   was   filed   on    May   21,     2010,   which    was   just   after
    Cooperativa   began   redirecting       its    operations     and    advertising
    efforts in 2008 and 2009, respectively. There is not even a
    contention that Oriental unreasonably delayed bringing suit after
    Cooperativa   began   its      corporate     expansion   and    increased     its
    advertising activities.
    The primary dispute in this case concerns the first
    requirement. This prong of the test asks first whether the right to
    relief was uncertain at an earlier time as to justify delay in
    incorporated   as   ‘Ever-Ready   Fluorescent   Company,’   selling
    electrical products under other marks, and 27 years later in 1971
    began selling high-intensity lamps and bulbs with the trademark
    ‘Ever-Ready’ on them, the court found that Union Carbide’s suit
    filed in 1971 was timely.” 6 Id. (citing Union Carbide Corp. v.
    Ever-Ready, Inc., 
    531 F.2d 366
     (7th Cir. 1976)). This view has been
    adopted by some circuits. See, e.g., Mead Johnson & Co. v. Baby’s
    Formula Svc., Inc., 
    402 F.2d 19
     (5th Cir. 1968)(holding that, where
    the defendant used a non-infringing mark for years and then changed
    the mark to an infringing use, the years of non-infringing use are
    not counted towards laches); Indep. Nail & Packing Co. v.
    Stronghold Screw Prods., Inc., 
    205 F.2d 921
     (7th Cir. 1953)
    (rejecting laches defense under the doctrine of progressive
    encroachment where plaintiff knew that the defendant was making a
    minimal use of an infringing mark but did not sue until the
    defendant changed its corporate name to include the infringing
    mark); O. & W. Thum Co. v. Dickinson, 
    245 F. 609
    , 623 (6th Cir.
    1917) (rejecting laches defense under progressive encroachment
    theory where plaintiff “took definite action” after the defendant
    had made “radical and apparently permanent changes in [its]
    trademark and trade dress”).
    Changes in the mark here cannot support a progressive
    encroachment finding because Oriental seeks to invoke the doctrine
    of progressive encroachment not as to the changed mark, but as to
    the earlier COOP ORIENTAL mark and similar marks.
    -26-
    bringing suit; that is, the defendant’s activities did not present
    a clear case of infringement. Thus, the progressive encroachment
    doctrine allows the plaintiff to “wait[] until the ‘likelihood of
    confusion looms large’ to bring the action.”                   See, e.g., Kellogg,
    
    209 F.3d at 570-71
     (quoting Sara Lee Corp. v. Kayser-Roth Corp., 
    81 F.3d 455
    , 462 (4th Cir. 1996)); Profitness Physical Therapy, 
    314 F.3d at 67
     (same).           This is so because “the plaintiff [should have]
    some latitude in the timing of its bringing suit” where the
    infringement has not become clearly actionable. Kellogg, 
    209 F.3d at 570
    .     This test requires the court to perform a likelihood of
    confusion analysis, “determin[ing] . . . whether and when any
    likelihood of confusion may have ripened into a claim.” 
    Id. at 571
    (quoting Kason Indus., 120 F.3d at 1206-07 (emphasis added)).
    Alternatively, the inquiry under the first prong is
    whether the earlier infringement (in this case, the pre-2009
    infringement), even if actionable, was so small in scope that a
    reasonable trademark owner could conclude that an infringement suit
    was not     worth      the    costs of     bringing    suit.    Specifically,     the
    “trademark     owner         need   not   sue    in   the   face   of   de   minimis
    infringement by the junior user.” Tillamook Country Smoker, 465
    F.3d at 1110 (emphasis in original); see also Grupo Gigante, 
    391 F.3d at 1103
     (“The [progressive encroachment] doctrine allows a
    plaintiff    to     delay      when   a   defendant     engages    in   de   minimis
    infringement      at    first,      but   then   gradually     encroaches    on   the
    -27-
    plaintiff’s market.”); AM Gen. Corp. v. DaimlerChrysler Corp., 
    311 F.3d 796
    , 823 (7th Cir. 2002)(noting that a trademark owner can
    “‘tolerate de minimis or low level infringements’ and still have
    the right to ‘act promptly’”)(quoting 6 McCarthy, supra, § 31:21));
    6 McCarthy, supra, § 31:20 (noting that progressive encroachment
    does not require the trademark owner to sue immediately for a “low
    level infringement”).
    We    agree   that   the   progressive    encroachment     doctrine
    allows an infringement plaintiff to tolerate de minimis or low-
    level infringements prior to bringing suit (assuming that the other
    requirements of the doctrine are satisfied). Here, we conclude that
    any potential pre-2009 infringement relating to Cooperativa’s use
    of the COOP ORIENTAL marks was de minimis. Although Cooperativa
    produced some evidence of advertisements from between 1995 and 1998
    that   used     the   COOP   ORIENTAL    mark,    all   but    one   of    these
    advertisements were from a single newspaper in the Humacao region,
    and the one exception appeared in another regional newspaper. And
    although Cooperativa also provided evidence that it ran a handful
    of national television advertisements in 1997, there is no evidence
    that   these    advertisements    used   the     allegedly    infringing    COOP
    ORIENTAL mark, as opposed to Cooperativa’s full corporate name.
    Further, although the COOP ORIENTAL mark may have appeared in
    Cooperativa’s logo since 1996, Cooperativa did not furnish any
    evidence from between 1999 and 2009 demonstrating how or in what
    -28-
    degree this logo was disseminated in Puerto Rico. Indeed, there are
    no advertisements of any sort from Cooperativa in the record dated
    between 1999 and 2009. Finally, although Cooperativa provides
    evidence that it registered the domain name www.cooporiental.com in
    2004, and such a domain had the potential to reach a wide audience,
    Cooperativa failed to provide evidence that either (1) the website
    was   consistently    active    since   2004   (indeed,    record   evidence
    indicates that the site was still under construction in 2010); or
    (2) the website was frequented by its customers or other users —
    specifically, Cooperativa furnished no evidence of hit counts or
    other indicators or website traffic. Given the national scope of
    Oriental’s business, the limited geographic scope of Cooperativa’s
    business, and the limited scope of the allegedly infringing uses,
    we conclude that the allegedly infringing activity was de minimis
    before 2009 and that the doctrine of progressive encroachment
    applies. Thus, it was reasonable as a matter of law for Oriental to
    delay bringing suit against Cooperativa with respect to the COOP
    ORIENTAL mark and similar marks.
    Based     on   the   undisputed     facts,     the   doctrine   of
    progressive encroachment defeats the laches defense asserted by
    Cooperativa. On remand, Cooperativa’s laches defense is precluded.
    V.
    For the foregoing reasons, we vacate the district court’s
    judgment to the extent that the district court found that Oriental
    -29-
    did not assert claims of infringement based on Cooperativa’s use of
    the COOP ORIENTAL mark and similar marks.       We remand to the
    district court to determine whether the COOP ORIENTAL mark and
    similar marks create a likelihood of confusion, and to fashion an
    appropriate injunction if a likelihood of confusion is established.
    Affirmed-in-part; Vacated-in-part; and Remanded.
    Costs to neither party.
    -30-
    

Document Info

Docket Number: 11-1473, 11-1476

Citation Numbers: 698 F.3d 9, 105 U.S.P.Q. 2d (BNA) 1128, 2012 U.S. App. LEXIS 21791, 2012 WL 5073529

Judges: Boudin, Selya, Dyk

Filed Date: 10/18/2012

Precedential Status: Precedential

Modified Date: 10/19/2024

Authorities (30)

Oriental Financial Group Inc. v. Cooperativa De Ahorro Y ... , 750 F. Supp. 2d 396 ( 2010 )

Valmor Products Company v. Standard Products Corporation , 464 F.2d 200 ( 1972 )

Independent Nail & Packing Co., Inc. v. Stronghold Screw ... , 205 F.2d 921 ( 1953 )

abraham-abe-baker-as-an-individual-and-also-dba-simmonds-upholstering , 307 F.2d 458 ( 1962 )

Am General Corporation and General Motors Corporation v. ... , 311 F.3d 796 ( 2002 )

Union Carbide Corporation v. Ever-Ready Incorporated, a ... , 531 F.2d 366 ( 1976 )

Munoz v. Porto Rico Ry. Light & Power Co. , 83 F.2d 262 ( 1936 )

University of Pittsburgh, a Non Profit Corporation v. ... , 686 F.2d 1040 ( 1982 )

Volkswagenwerk Aktiengesellschaft v. Kenneth G. Wheeler , 814 F.2d 812 ( 1987 )

Costello v. United States , 81 S. Ct. 534 ( 1961 )

Armco, Inc. v. Armco Burglar Alarm Co., Inc. , 693 F.2d 1155 ( 1982 )

Kellogg Company, Plaintiff-Appellant/cross-Appellee v. ... , 209 F.3d 562 ( 2000 )

Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc. , 982 F.2d 633 ( 1992 )

Borinquen Biscuit Corp. v. M v. Trading Corp. , 443 F.3d 112 ( 2006 )

Chattanoga Manufacturing, Inc., Cross-Appellee v. Nike, Inc.... , 301 F.3d 789 ( 2002 )

Shell Co. v. Los Frailes Service Station, Inc. , 605 F.3d 10 ( 2010 )

Mead Johnson & Company v. Baby's Formula Service, Inc. , 14 A.L.R. Fed. 334 ( 1968 )

Seven-Up Company v. O-So-Grape Co., Seven-Up Company v. O-... , 283 F.2d 103 ( 1960 )

Museum of Fine Arts, Boston v. Seger-Thomschitz , 623 F.3d 1 ( 2010 )

Roederer v. J. Garcia Carrion, S.A. , 569 F.3d 855 ( 2009 )

View All Authorities »