La Quinta Worldwide LLC v. Q.R.T.M., S.A. De C.V.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
LA QUINTA WORLDWIDE LLC, No. 12-15985
Plaintiff-Appellee,
D.C. No.
v. 4:09-cv-00175-
RCC
Q.R.T.M., S.A. DE C.V., dba Quinta
Real,
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the District of Arizona
Raner C. Collins, Chief District Judge, Presiding
Argued and Submitted
May 16, 2014—San Francisco, California
Filed August 6, 2014
Before: Barry G. Silverman and Ronald M. Gould, Circuit
Judges, and Ivan L.R. Lemelle, District Judge.*
Opinion by Judge Gould
*
The Honorable Ivan L.R. Lemelle, District Judge for the U.S. District
Court for the Eastern District of Louisiana, sitting by designation.
2 LA QUINTA WORLDWIDE V. Q.R.T.M.
SUMMARY**
Trademark Law
The panel affirmed in part the district court’s judgment
after a bench trial and vacated a permanent injunction in a
trademark infringement case brought by La Quinta
Worldwide LLC (“La Quinta”) against Q.R.T.M., S.A. de
C.V. (“Quinta Real”).
The panel held that the “use in commerce” element of
Lanham Act sections 32 and 43(a) claims is not a
jurisdictional requirement, and that it had subject-matter
jurisdiction under 15 U.S.C. § 1121(a) over La Quinta’s
claims.
The panel held that the district court correctly concluded
that expansion of Quinta Real’s Mexican hotel business into
the United States would result in a likelihood of consumer
confusion with La Quinta.
The panel held that the defense of laches did not apply.
The panel concluded that the district court did not provide
a sufficient analysis balancing the equities in its decision to
grant a permanent injunction.
The panel affirmed in part as to trademark violations, but
vacated the permanent injunction and remanded in part for
further assessment of the equities.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
LA QUINTA WORLDWIDE V. Q.R.T.M. 3
COUNSEL
Richard P. Jacobson (argued), Frank J. Colucci & Janice K.
Yoon, Colucci & Umans, New York, New York, for
Defendant-Appellant.
Joseph C. Gioconda (argued) & Jonathan A. Malki, Gioconda
Law Group PLLC, New York, New York, for Plaintiff-
Appellee.
OPINION
GOULD, Circuit Judge:
Q.R.T.M., S.A. de C.V. (“Quinta Real”), appeals from the
district court’s judgment and order concluding that expansion
of Quinta Real’s Mexican hotel business into the United
States would result in a likelihood of consumer confusion
with La Quinta Worldwide, LLC (“La Quinta”). The district
court issued a permanent injunction against the use of
“Quinta Real” in association with hotels and lodging in the
United States. We have jurisdiction to hear this appeal
pursuant to 28 U.S.C. § 1291. We conclude that there is
federal subject-matter jurisdiction over the trademark claims,
and that the district court correctly found a likelihood of
confusion, but that the district court did not provide a
sufficient analysis balancing the equities in its decision to
grant a permanent injunction. We affirm in part as to
trademark violations, but vacate the permanent injunction and
remand in part requesting further assessment of the equities.
4 LA QUINTA WORLDWIDE V. Q.R.T.M.
I
Since 1968, La Quinta has operated hotels and motels in
the United States on its own and through franchise
agreements, and it has long held trademarks for “La Quinta”
in connection with “motel services.” Today there are more
than 800 La Quinta mid-tier hotels across the United States,
including more than 80 in major U.S. cities, renting 23
million rooms to hotel guests each year. About half of La
Quinta’s hotels are operated by franchisees. La Quinta’s
franchise agreements require it to provide operational
support, marketing, and training to its franchisees. La Quinta
also offers franchisees a non-compete geographic zone in
which no other La Quinta hotel will be opened, and La Quinta
agrees to ensure “that there is no misuse or infringement that
could harm franchisees’ investment in the brand,” and to
maintain and enforce quality control standards. La Quinta
spends millions of dollars each year advertising on national
television, radio, in print advertising, through direct mail and
multiple formats of internet advertising. La Quinta is often
featured in magazines, travel guidebooks, and on internet
travel sites.
Quinta Real opened its first hotel in 1986 in Guadalajara,
Mexico, and today operates eight luxury hotels throughout
Mexico. Quinta Real’s hotels are considered to be some of
the most luxurious in Mexico, and the average daily room
rate is $183 per night. Quinta Real hotels offer a wide range
of amenities, and about 40% of Quinta Real’s hotel guests are
from the United States. Like La Quinta, Quinta Real has
authorized third-party websites such as Expedia.com and
Orbitz.com to promote and book reservations at its hotels.
Quinta Real is also often featured in travel guidebooks.
LA QUINTA WORLDWIDE V. Q.R.T.M. 5
Quinta Real plans to develop a luxury hotel in a major
U.S. city. In 1994, Quinta Real entered into a letter of intent
to build a hotel in San Antonio, Texas, and this letter was
publicized, although there was no indication of what the hotel
would be called. La Quinta has said that it was “unaware of
Quinta Real’s exploration of the San Antonio hotel market.”
This letter of intent came to nothing, and Quinta Real next
entered into a letter of intent in 2007 to build a hotel in
Tucson, Arizona. Although that letter also came to nothing,
Quinta Real still intends to enter the United States market.
While Quinta Real’s efforts to open a hotel in the United
States have not yet reached fruition, La Quinta, by contrast,
has already opened several hotels in Mexico.
La Quinta filed the complaint giving rise to this action in
March 2009, two years after the date of Quinta Real’s last
letter of intent. After a bench trial, the district court granted
La Quinta a permanent injunction, concluding that a
likelihood of confusion exists and that the permanent
injunction factors listed in eBay Inc. v. MercExchange,
L.L.C., 547 U.S. 388, 391 (2006), favored La Quinta. This
appeal followed. In substance Quinta Real raises four
arguments: (1) that there is no federal subject-matter
jurisdiction over this case; (2) that La Quinta’s suit is barred
by laches; (3) that no likelihood of confusion exists; and
lastly, (4) that the district court erred in granting La Quinta a
permanent injunction. We address each argument in turn.
II
Quinta Real argues that we lack subject-matter
jurisdiction because its expressions of intent to open a hotel
are not sufficient to show a “use in commerce” under the
Lanham Act. The “use in commerce” requirement that
6 LA QUINTA WORLDWIDE V. Q.R.T.M.
Quinta Real relies on is found in sections 32 and 43(a) of the
Lanham Act, which both lay out claims for infringement. We
hold that the “use in commerce” element of Lanham Act
sections 32 and 43(a) claims is not a jurisdictional
requirement, and we have subject-matter jurisdiction under
15 U.S.C. § 1121(a).
Federal jurisdiction over trademark claims is granted by
the Lanham Act, 15 U.S.C. § 1121(a), which “confers broad
jurisdictional powers upon the courts of the United States” in
conjunction with 28 U.S.C. § 1331. Steele v. Bulova Watch
Co., 344 U.S. 280, 283 (1952); see Reebok Int’l, Ltd. v.
Marnatech Enters., Inc., 970 F.2d 552 (9th Cir. 1992). The
Lanham Act grants federal subject-matter jurisdiction over
“all actions arising under this chapter, without regard to the
amount in controversy or to diversity or lack of diversity of
the citizenship of the parties.” 15 U.S.C. § 1121(a).
To understand whether this broad grant is narrowed by
other language in the Lanham Act, we turn to United States
Supreme Court precedent. The Supreme Court has
distinguished jurisdictional requirements from those required
to establish a cause of action. See Bell v. Hood, 327 U.S. 678
(1946). Under Bell,
Whether the complaint states a cause of action
on which relief could be granted is a question
of law and . . . it must be decided after and not
before the court has assumed jurisdiction over
the controversy. If the court does later
exercise its jurisdiction to determine that the
allegations in the complaint do not state a
ground for relief, then dismissal of the case
LA QUINTA WORLDWIDE V. Q.R.T.M. 7
would be on the merits, not for want of
jurisdiction.
Id. at 682 (citations and footnote omitted); see Sun Valley
Gasoline, Inc. v. Ernst Enters., Inc., 711 F.2d 138, 140 (9th
Cir. 1983). “The core holding in Bell was ‘that the
nonexistence of a cause of action was no proper basis for a
jurisdictional dismissal.’” Orff v. United States, 358 F.3d
1137, 1150 (9th Cir. 2004) (quoting Steel Co. v. Citizens for
a Better Env’t, 532 U.S. 83, 96 (1998)).
The Supreme Court has recently addressed in more detail
the difference between elements of a claim and jurisdictional
requirements. In Arbaugh v. Y & H Corp., 546 U.S. 500
(2006), the Supreme Court confronted a suit that the district
court had dismissed for lack of subject-matter jurisdiction.
The district court reasoned that because the plaintiff could not
show that the defendant met the 15-employee threshold
required in Title VII to bring a cause of action, the court
lacked subject-matter jurisdiction over the claims. Id. at
503–04. The Supreme Court concluded that because
(1) Congress included no employee-numerosity requirement
in the Title VII jurisdictional grant; (2) the employee-
numerosity requirement was only included in a “separate
provision that does not speak in jurisdictional terms or refer
in any way to the jurisdiction of the district courts”; and (3)
no other factor suggested that the employee-numerosity
requirement was intended to be jurisdictional, such a
requirement was not a condition for subject-matter
jurisdiction. Id. at 514–15 (internal quotation marks and
citation omitted); see also Reed Elsevier, Inc. v. Muchnik,
559 U.S. 154, 163–66 (2010); Leeson v. Transamerica Dis.
Income Plan, 671 F.3d 969 (9th Cir. 2012). Rather, federal
courts have subject-matter jurisdiction over all suits pleading
8 LA QUINTA WORLDWIDE V. Q.R.T.M.
“a colorable claim ‘arising under’ the Constitution or laws of
the United States,” so long as Congress does not clearly
indicate otherwise. Arbaugh, 546 U.S. at 513–14.
Here, the “use in commerce” element of Lanham Act
claims under sections 32 and 43(a) is not connected to the
Lanham Act’s jurisdictional grant in 15 U.S.C. § 1121(a),
which grants federal subject-matter jurisdiction without any
reference to a “use in commerce” requirement. Nothing
suggests that Congress intended that “use in commerce” be
interpreted as a jurisdictional requirement, and we conclude
that we have subject-matter jurisdiction over La Quinta’s
claims under the Lanham Act. See Arbaugh, 546 U.S. at
515–16 (“If the Legislature clearly states that a threshold
limitation on a statute’s scope shall count as jurisdictional,
then courts and litigants will be duly instructed and will not
be left to wrestle with the issue.”).1
III
To show trademark infringement, a plaintiff must
establish ownership of a trademark and a likelihood of
1
We have previously described the “use in commerce” requirement as
a “jurisdictional predicate to any law passed by Congress under the
Commerce Clause.” Bosley v. Med. Inst. v. Kremer, 403 F.3d 672, 677
(9th Cir. 2005). In that case we held that Congress was not deliberately
creating, using the “use in commerce” language, a meaning different from
the “in connection with a sale of goods or services” language used in other
parts of the Lanham Act. Id. We did not, and do not now, interpret “use
in commerce” as a requirement for federal subject-matter jurisdiction. See
Arbaugh, 546 U.S. at 510 (“Jurisdiction, this Court has observed, is a
word of many, too many, meanings.” (internal quotation marks and
citation omitted)).
LA QUINTA WORLDWIDE V. Q.R.T.M. 9
consumer confusion.2 AMF, Inc. v. Sleekcraft Boats,
599 F.2d 341, 348–49 (9th Cir. 1979), abrogated on other
grounds by Mattel, Inc. v. Walking Mountain Prods.,
353 F.3d 792 (9th Cir. 2003). When determining whether a
likelihood of confusion exists we weigh eight factors:
(1) the strength of the mark;
(2) the proximity of the goods;
(3) the similarity of the marks;
(4) evidence of actual confusion;
(5) marketing channels used;
(6) the type of goods and the degree of care
likely to be exercised by the purchaser;
(7) defendant’s intent in selecting the mark; and
(8) likelihood of expansion of the product
lines.
Id. The factors are intended to act as “guideposts” for
determining whether a likelihood of consumer confusion
exists, and are adaptable to specific cases. Fortune Dynamic,
Inc. v. Victoria’s Secret Stores Brand Mgmt., Inc., 618 F.3d
1025, 1030 (9th Cir. 2010); see also Network Automation,
Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1151
(9th Cir. 2011). Quinta Real argues that the district court
misapplied all of the above factors. But, for the reasons that
follow, we conclude that the clear weight of the factors
2
We review for clear error the district court’s conclusion regarding the
likelihood of confusion as well as the district court’s application of the
likelihood confusion factors to the facts of the case. Interstellar Starship
Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 941 (9th Cir. 2002). We accept
the district court’s findings of fact unless they are clearly erroneous.
Husain v. Olympic Airways, 316 F.3d 829, 835 (9th Cir. 2002), aff’d,
540 U.S. 644 (2004).
10 LA QUINTA WORLDWIDE V. Q.R.T.M.
supports the district court’s conclusion that a likelihood of
confusion exists.
1. Strength of the mark
The strength of a mark determines the level of trademark
protection it is given. Brookfield Commc’ns, Inc. v. W. Coast
Entm’t Corp., 174 F.3d 1036, 1058 (9th Cir. 1999). “The
stronger a mark—meaning the more likely it is to be
remembered and associated in the public mind with the
mark’s owner—the greater the protection it is accorded by the
trademark laws.” Id.; see One Indus., LLC v. Jim O’Neal
Distrib., Inc., 578 F.3d 1154, 1164–65 (9th Cir. 2009);
GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1207–08
(9th Cir. 2000). We determine the strength of a mark by
examining its conceptual strength—that is, where it falls in
the spectrum of marks—and the strength of the mark within
the marketplace. One Indus., 578 F.3d at 1164.
Quinta Real does not challenge the district court’s
conclusion that La Quinta’s mark is strong because it has
extensive secondary meaning and a robust commercial
presence. Instead, Quinta Real argues that because “both
parties have strong marks, confusion is not likely to occur,”
pushing against the district court’s conclusion that “[b]ecause
both marks are strong, this factor weighs in favor of La
Quinta.”
Both the district court and Quinta Real mistake this factor,
and Quinta Real’s argument is without merit. The strength of
the junior mark, here Quinta Real, is important to weighing
this factor in cases of reverse infringement. In those cases,
the issue is whether the strength of the junior user’s mark is
so significant that it may overpower the senior user’s mark.
LA QUINTA WORLDWIDE V. Q.R.T.M. 11
See Surfvivor Media, Inc. v. Survivor Prod., 406 F.3d 625,
631–32 (9th Cir. 2005); Cohn v. Petsmart, Inc., 281 F.3d 837,
840 (9th Cir. 2002); Walter v. Mattel, Inc., 210 F.3d 1108,
1111 n.2 (9th Cir. 2000). This is not a reverse infringement
case, and the district court should not have considered the
strength of Quinta Real’s mark in determining what level of
trademark protection to extend to La Quinta’s mark. As such,
the district court erred in its analysis, but it correctly
concluded that the factor weighs in favor of La Quinta
because its mark is descriptive with significant secondary
meaning and a large presence in the hotel marketplace.
2. Proximity of the Services Offered
Goods or services that are closely related are generally
more likely than unrelated goods or services to confuse the
public as to their sources. Brookfield, 174 F.3d at 1055.
“The proximity of goods is measured by whether the products
are: (1) complementary; (2) sold to the same class of
purchasers; and (3) similar in use and function.” Network
Automation, 638 F.3d at 1150.
The district court found that both La Quinta and Quinta
Real offer hotel services, and while they operate hotels in
different tiers of the market, “a reasonable customer could
conclude that the two hotel chains are from the same source
because some American hotels operate several different
levels of hotels under one umbrella brand.” It also noted that
“the rates of the two hotel chains overlap significantly,” and
for these reasons it concluded that the factor favors La
Quinta. Id. Quinta Real points to no evidence showing that
the district court’s conclusion regarding umbrella brands is
clearly erroneous. Even if La Quinta has no plans to expand
into the luxury hotel market, the district court reasonably
12 LA QUINTA WORLDWIDE V. Q.R.T.M.
concluded that the varying tiers of hotel service do not render
the services less related because hotel consumers frequently
encounter hotel umbrella brands, including Marriott and
Hilton.3 We agree that this factor favors La Quinta.
3. Similarity of the Marks
The similarity of the marks is “a critical question in the
likelihood-of-confusion analysis.” GoTo.com, 202 F.3d at
1205. To assess similarity, we compare the two marks in
terms of sight, sound, and meaning, considering the marks “as
a whole, as [they] appear in the marketplace.” M2 Software,
Inc. v. Madacy Entm’t, 421 F.3d 1073, 1082 (9th Cir. 2005)
(quotation marks and citation omitted). Generally,
similarities between the marks weigh more heavily than
differences. Sleekcraft, 599 F.2d at 351. And the amount of
similarity required to support a likelihood of confusion
declines as the services themselves become increasingly
similar. Century 21 Real Estate Corp. v. Century Life of Am.,
970 F.2d 874, 877 (Fed. Cir. 1992); Mobil Oil v. Pegasus
Petroleum, 818 F.2d 254, 258 (2d Cir. 1987); E. Remy Martin
& Co., S.A. v. Shaw-Ross Int’l Imports, Inc., 756 F.2d 1525,
1530 (11th Cir. 1985); Exxon Corp. v. Texas Motor Exch. of
Houston, Inc., 628 F.2d 500, 505 (5th Cir. 1980). Here, the
district court correctly concluded that the marks are similar
and that this factor favors La Quinta.
3
The only case Quinta Real offers to contradict the umbrella brand
theory is a district court case from New Jersey, Kinark Corp. v. Camelot,
Inc., 548 F. Supp. 429, 449 (D.N.J. 1982), which is inapposite because it
concerned travel agents and convention organizers, not ordinary hotel
consumers, and a hotel name that is inordinately common—Camelot.
LA QUINTA WORLDWIDE V. Q.R.T.M. 13
Quinta Real argues that: (1) the district court erroneously
considered “Quinta” in isolation from other differentiating
elements; and (2) by opening hotels in Mexico and coexisting
with the La Quinta Resort and Club in California, La Quinta
cannot argue that the marks are overly similar. We reject
these arguments.
The district court’s conclusion that the marks are similar
is not clearly erroneous. It examined the sight, sound, and
meaning of “La Quinta” and “Quinta Real,” and reasonably
determined that the words shared a similar meaning when
translated (“country home” and “royal villa”) and an identical
dominant word: “Quinta.” See E. & J. Gallo Winery v. Gallo
Cattle Co., 967 F.2d 1280, 1292 (9th Cir. 1992) (holding that
although the mark logos were dissimilar, “it does not appear
that the district court committed clear error in relying on the
dominant element GALLO for its finding of similarity in
sight, sound and meaning”). This conclusion is supported by
the fact that the dominant words frequently appear without
anything more in the marketplace. Where both marks are
attached to such closely related services and the senior user
has a strong mark, the similarity of the words is sufficient for
this factor to weigh in favor of La Quinta.
Quinta Real’s second argument regarding La Quinta’s
expansion into Mexico does not succeed because it seeks to
equate two separate trademark protection systems operating
in different markets. While we are troubled by the
inequitable circumstances, La Quinta’s use of its mark in
Mexico does not determine whether the marks are similar or
whether La Quinta will suffer injury in the United States by
Quinta Real’s expansion into this market. As such, the
district court did not clearly err in finding the marks to be
similar.
14 LA QUINTA WORLDWIDE V. Q.R.T.M.
4. Evidence of Actual Confusion
“Evidence that use of the two marks has already led to
confusion is persuasive proof that future confusion is likely.”
Sleekcraft, 599 F.2d at 352. However, due to “the difficulty
of garnering such evidence, the failure to prove instances of
actual confusion is not dispositive . . . . [T]his factor is
weighed heavily only when . . . the particular circumstances
indicate such evidence should have been available.” Id.; see
Brookfield, 174 F.3d at 1050 (“[D]ifficulties in gathering
evidence of actual confusion make its absence generally
unnoteworthy.”). Despite Quinta Real’s contention that the
two marks have coexisted for twenty-five years and,
therefore, evidence of actual confusion should be available,
Quinta Real and La Quinta have never both operated in the
U.S. market. Quinta Real has American customers, but it has
only offered services within Mexico. The district court
correctly concluded that a lack of actual confusion in the
United States does not weigh against La Quinta.
5. Marketing Channels Used
When examining the marketing channels used by the
competing companies, we consider where the goods or
services are sold, the sales and marketing methods employed,
and the class of purchasers exposed to the marketing efforts.
Sleekcraft, 599 F.2d at 353. The district court concluded that
this factor weighed in favor of La Quinta because the
marketing efforts of La Quinta and Quinta Real “converge
with third-party internet travel sites and guidebooks.” This
conclusion is supported by evidence in the record showing
that both La Quinta and Quinta Real use internet travel sites
such as Expedia.com and Orbitz.com to reach consumers, as
well as placements in travel guidebooks. The use of identical
LA QUINTA WORLDWIDE V. Q.R.T.M. 15
third-party travel sites is particularly likely to cause confusion
because “it allows for [the] competing marks to be
encountered at the same time, on the same screen.”
Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165, 1174 (9th
Cir. 2007) (quoting GoTo.com, 202 F.3d at 1207); see
Network Automation, 638 F.3d at 1149. The district court
correctly concluded that this factor favors La Quinta.
6. Type of Services and Degree of Care
Under this factor we look at the type of good or service
offered and the degree of care one would expect from “the
average buyer exercising ordinary caution.” Sleekcraft,
599 F.2d at 353. The district court found that 70% of Quinta
Real’s guests are business travelers who rely on others to
make their reservations and that on average guests stay at
Quinta Real hotels for 2.4 nights and spend $439 per stay on
their rooms. Combined with the overlapping marketing
channels and room rates, the district court concluded that this
factor favors La Quinta. That most of Quinta Real’s guests
are business travelers who stay only a short amount of time
at the hotel and spend a relatively modest sum supports the
district court’s conclusion that this factor favors La Quinta,
and we find no error on the part of the district court. Cf.
Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1393 (9th
Cir. 1993) (concluding that consumers would exercise a high
degree of care when purchasing ad buys for $2,400 to
$16,000).
7. Quinta Real’s Intent in Selecting the Mark
“When the alleged infringer knowingly adopts a mark
similar to another’s, reviewing courts presume that the
defendant can accomplish his purpose: that is, that the public
16 LA QUINTA WORLDWIDE V. Q.R.T.M.
will be deceived.” Network Automation, 638 F.3d at 1153
(quoting Sleekcraft, 599 F.2d at 354). The district court erred
in concluding that this factor favors La Quinta. Despite
finding that Quinta Real adopted its name without knowledge
of La Quinta and that Quinta Real had not exercised bad faith
in trying to enter the U.S. market under that name, the district
court concluded that the factor weighed against Quinta Real
because it could use another name in the United States
without prejudice. But the district court’s factual findings,
that Quinta Real could use another name without prejudice,
would only be relevant here in crafting a remedy. See
Sleekcraft, 599 F.2d at 354 (“Good faith is less probative of
the likelihood of confusion, yet may be given considerable
weight in fashioning a remedy.”). However, because this
factor, when properly considered, is neutral, the district
court’s error in this respect is not so significant as to disturb
its conclusion that a likelihood of confusion exists.
8. Zone of Expansion
When there is “a strong possibility that either party may
expand his business to compete with the other,” this factor
weighs in favor of finding “that the present use is infringing.”
Sleekcraft, 599 F.2d at 354 (internal quotation marks and
citation omitted). Although La Quinta has no plans to expand
into luxury hotels and Quinta Real has no plans to expand
into mid-tier hotels, the district court found that “[a] hotel in
the United States competes with all the other hotels on its
corner, regardless of rating or services offered.” A weakness
in Quinta Real’s appellate challenge on this point is that this
finding of fact is not clearly erroneous. La Quinta submitted
witness testimony supporting this broad concept of
competition and the testimony was admitted in evidence.
Quinta Real gave no contrary evidence to support its assertion
LA QUINTA WORLDWIDE V. Q.R.T.M. 17
that “[e]ven if Quinta Real were to open a hotel in the same
metropolitan area as La Quinta, the hotels still would not
compete for the same consumers.” Because the record
supports the conclusion that proximate hotels compete with
each other regardless of tier and Quinta Real has definite
plans to expand into major U.S. cities, the district court did
not err in concluding that this factor favors La Quinta.
The weight of the factors supports the district court’s
conclusion that a likelihood of confusion exists. No factor
supports Quinta Real, and only two factors appear neutral in
this analysis. We conclude that the district court correctly
found a likelihood of confusion.
IV
Quinta Real argues that the defense of laches applies, and
that the period in which La Quinta could file a claim has
expired. The defense of laches “can defeat an otherwise valid
claim under the Lanham Act.” Tillamook Country Smoker,
Inc. v. Tillamook Cnty. Creamery Ass’n, 465 F.3d 1102, 1108
(9th Cir. 2006).
We analyze the laches defense with a two-step process.
First, we determine whether the limitations period for laches
has expired. If the period has not expired before suit was
filed, there is a strong presumption against the laches defense.
Id. That presumption is reversed if the laches period expired
before the suit was filed. Id. We review de novo whether a
laches defense is available to a defendant. Id. at 1109; In re
Beaty, 306 F.3d 914, 920 (9th Cir. 2002). Second, if the
laches period expired before suit was filed, we apply the
factors listed in E-Systems, Inc. v. Monitek, Inc., 720 F.2d
604, 607 (9th Cir. 1983), to determine whether “the
18 LA QUINTA WORLDWIDE V. Q.R.T.M.
trademark owner’s delay in filing suit was unreasonable and,
therefore, barred,” Tillamook, 465 F.3d at 1108. We review
the district court’s application of the E-Systems factors to the
particular facts of the case for abuse of discretion. Tillamook,
465 F.3d at 1109; Beaty, 306 F.3d at 920.
The district court concluded that even if the laches period
had run under the first step of analysis, the E-Systems factors
do not favor barring La Quinta’s suit. We agree. To prove
that a delay in filing was unwarranted, the party asserting a
laches defense must show that the following six factors weigh
in its favor:
(1) strength and value of trademark rights
asserted; (2) plaintiff's diligence in enforcing
mark; (3) harm to senior user if relief denied;
(4) good faith ignorance by junior user;
(5) competition between senior and junior
users; and (6) extent of harm suffered by
junior user because of senior user's delay.
E-Systems, 720 F.2d at 607; see also Tillamook, 465 F.3d at
1108. To benefit from this equitable defense, “[t]he party
asserting laches must demonstrate that it has ‘suffered
prejudice as a result of plaintiff’s unreasonable delay in filing
suit.’” Tillamook, 465 F.3d at 1108 (quoting Jarrow
Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th
Cir. 2002)).
Here, Quinta Real challenges the district court’s
assessment of several of the above factors. However, the
only prejudice Quinta Real claims is that “the court’s ruling
has harmed Quinta Real because it cannot exercise the right
to open a hotel in the United States under its strong and
LA QUINTA WORLDWIDE V. Q.R.T.M. 19
reputable brand, while, at the same time, La Quinta freely
establishes hotels under its name in Mexico.” Contrary to
Quinta Real’s assertion, the question is not whether the
district court’s ruling prejudiced Quinta Real, but rather
whether La Quinta’s alleged “unreasonable delay in filing
suit” did so. Quinta Real gives no evidence that the period of
delay, which is the time between the two letters of interest,
resulted in prejudice to its efforts to open a hotel in the
United States. The district court found this absence of
prejudice to be the most important factor in its analysis.
Further, the district reasonably concluded, following its
likelihood of confusion analysis, (1) that the La Quinta mark
is strong and valuable; (2) that La Quinta had been diligent in
enforcing its rights; (3) that the two marks will compete with
each other in the United States with significant harm to La
Quinta, the senior user; and (4) that Quinta Real knew of La
Quinta’s presence in the United States before it began
exploring the possibility of opening a hotel in a major U.S.
city. We affirm the district court’s denial of Quinta Real’s
laches defense.
V
Finally, Quinta Real argues that the district court erred in
entering a permanent injunction in favor of La Quinta. We
review the district court’s decision to grant a permanent
injunction for abuse of discretion. Interstellar, 304 F.3d at
941. “If the district court ‘identified and applied the correct
legal rule to the relief requested,’ we will reverse only if the
court’s decision ‘resulted from a factual finding that was
illogical, implausible, or without support in inferences that
may be drawn from the facts in the record.’” Herb Reed
Enters., LLC v. Florida Entm’t Mgmt., Inc., 736 F.3d 1239,
1247 (9th Cir. 2013) (quoting United States v. Hinkson,
20 LA QUINTA WORLDWIDE V. Q.R.T.M.
585 F.3d 1247, 1263 (9th Cir. 2009) (en banc)). We “must
consider whether the [district court’s] decision was based on
a consideration of the relevant factors and whether there has
been a clear error of judgment.” DISH Network Corp. v.
F.C.C., 653 F.3d 771, 776 (9th Cir. 2011) (quoting Sports
Form, Inc. v. United Press Int’l, Inc., 686 F.2d 750 (9th Cir.
1982)); see Rishell v. Jane Phillips Episcopal Mem’l Med.
Ctr., 94 F.3d 1407 (10th Cir. 1996) (“[An appellate court]
must consider whether the decision maker failed to consider
a relevant factor . . . .”) (quoting Kickapoo Tribe v. Babbitt,
43 F.3d 1491, 1497 (D.C. Cir. 1995) (internal quotation
marks omitted)).
Trademark law gives federal courts the “power to grant
injunctions, according to the principles of equity and upon
such terms as the court may deem reasonable . . . .”
15 U.S.C. § 1116; see Perfumebay, 506 F.3d at 1177.
Following those principles, a permanent injunction may be
entered where the plaintiff shows: “(1) that it has suffered an
irreparable injury; (2) that remedies available at law, such as
monetary damages, are inadequate to compensate for that
injury; (3) that, considering the balance of the hardships
between the plaintiff and defendant, a remedy in equity is
warranted; and (4) that the public interest would not be
disserved by a permanent injunction.” eBay, 547 U.S. at 391;
see Herb Reed, 736 F.3d at 1248–50 (applying eBay factors
to trademark law); Reno Air Racing Ass’n, Inc. v. McCord,
452 F.3d 1126, 1137 n.11 (9th Cir. 2006).
While “[t]he decision to grant or deny permanent
injunctive relief is an act of equitable discretion by the district
court,” the “traditional principles of equity” demand a fair
weighing of the factors listed above, taking into account the
unique circumstances of each case. eBay, 547 U.S. at 391,
LA QUINTA WORLDWIDE V. Q.R.T.M. 21
394; see DISH Network, 653 F.3d at 776; see generally
1 Dobbs Law of Remedies § 2.9 (2d ed. 1993); 11A Wright
& Miller, Fed. Prac. & Proc. Civ. § 2942 (3d ed. 1998). It is
important to consider the totality of circumstances bearing on
whether a permanent injunction is appropriate equitable
relief.
We are concerned that the district court’s analysis does
not discuss a fact we think relevant to weighing the equities
in this case: That a permanent injunction in favor of La
Quinta here would bar Quinta Real from opening a hotel in
the United States under its own name, while at the same time
La Quinta would remain free to open hotels and do business
in Mexico as “La Quinta.” We do not decide that this fact is
determinative and we express no opinion on whether the
district court should issue a permanent injunction after having
taken account of all the relevant facts. But to our thinking
this consideration is pertinent to whether a permanent
injunction here against Quinta Real operating through its
name in the United States is fair and equitable relief in light
of the La Quinta hotel operations in Mexico. The omission
of this consideration from the district court’s analysis leaves
us uncertain whether the district court considered all relevant
factors in assessing the balance of hardships. Accordingly,
we vacate the permanent injunction and remand to the district
court on an open record for reconsideration, which shall
include the district court’s assessment of the significance, if
any, of La Quinta’s currently unrestrained competition with
Quinta Real in Mexico.
VI
We conclude that the district court correctly found federal
subject-matter jurisdiction over this suit, that the laches
22 LA QUINTA WORLDWIDE V. Q.R.T.M.
defense is not available to Quinta Real, and that the district
court did not abuse its discretion in finding a likelihood of
confusion. We vacate the permanent injunction and remand
on an open record for further analysis of the propriety of a
permanent injunction consistent with this opinion. The
district court may conduct whatever further proceedings it
thinks helpful, including, if necessary, taking additional
evidence and the making of factual findings pertinent to its
decision on permanent injunction.
AFFIRMED IN PART; VACATED AND
REMANDED IN PART.4
4
We order that each party bear its own costs on appeal under General
Order 5.4(e).