DORPAN, S.L., Plaintiff, Appellee, v. HOTEL MELIA, INC., Defendant, Appellant, Sol Melia, S.A.; Desarrolladora Del Norte, S. En C., S.E., d/b/a Gran Melia Puerto Rico Resort & Villas, Defendants, Appellees.
No. 12-1679
United States Court of Appeals, First Circuit.
Aug. 28, 2013.
728 F.3d 55
Federico Calaf Legrand, with whom Carla Calaf Garcia, Reichard & Calaf, P.S.C., Angel R. Rotger Sabat, and Maymi & Rivera-Fourquet, P.S.C. were on brief, for appellees.
Before TORRUELLA, SELYA and LIPEZ, Circuit Judges.
LIPEZ, Circuit Judge.
This trademark infringement case is a dispute between two hotels over the right to use the mark “Melia” in Puerto Rico. Defendant-appellant Hotel Melia, Inc. (“HMI“) has operated the Hotel Melia 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 “Melia” since the late 1990s.1 In 2007, Dorpan‘s parent company opened a hotel called “Gran Melia” 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 Melia mark throughout Puerto Rico.
After reviewing the record, we conclude that a reasonable factfinder could conclude that the Hotel Melia and Gran Melia 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 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 nonmoving party, HMI. Caban Hernandez 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 Melia in Ponce, Puerto Rico.2 HMI has operated the Hotel Melia at the same location at 75 Cristina Street in Ponce without interruption since at least the 1890s. All parties agree that Hotel Melia 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
Since the late 1990s, Dorpan, S.L. has held several registered trademarks using the mark “Melia” in connection with the hotel 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 Melia, a public Spanish company. Sol Melia 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 Melia mark, including at least one in Florida. Until 2007, however, Dorpan had never used the Melia mark in Puerto Rico.
In 2004, Sol Melia opened an all-inclusive resort on Coco Beach in Coco Beach, Puerto Rico called Paradisus, approximately eighty miles from the Hotel Melia in Ponce. This all-inclusive business model was not successful, however. In 2007, Sol Melia closed the Paradisus, renovated it, and re-opened it as a luxury beach resort called “Gran Melia.”
B. Proceedings Below
In early 2007, Dorpan filed a petition with the Puerto Rico Department of State seeking to register the mark “Gran Melia.” HMI was immediately concerned that having a hotel called Gran Melia in Puerto Rico would inevitably lead to consumer confusion and harm its commercial interests in Hotel Melia. 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 Gran Melia mark in Coco Beach would infringe on HMI‘s common law rights to exclusive use of the Melia mark throughout Puerto Rico. In response, Dorpan withdrew its request to register, but continued to use the mark Gran Melia 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 Melia in the Superior Court of Puerto Rico, asserting that it was the senior user of the Melia mark,4 and that it had the sole right to use the Melia 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, seek-
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 Melia‘s in Ponce and Gran Melia‘s internationally. Dorpan, S.L. v. Hotel Melia, Inc., 851 F.Supp.2d 398, 410-11 (D.P.R.2012). Without 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 Melia mark, but only within Ponce. Dorpan was likewise barred from using the Melia 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 Melia 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 Melia mark rather than the senior user. HMI also argues that this mistake led the court to consider only 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 Melia mark throughout Puerto Rico.
II.
In resolving this appeal, we review the district court‘s grant of summary judg-
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.”
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 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
B. The Trademark Rights Held by the Parties
The crux of the dispute in this case is that both parties claim to hold the exclusive right to use the Melia mark in Puerto Rico. Dorpan claims that it has the exclusive right to use the Melia mark in Puerto Rico under federal law. HMI claims that it has the exclusive right to use the Melia 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 Melia mark in Puerto Rico because Dorpan holds the federal registration for the Melia 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 incontestibility with the USPTO. See
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 Food, Inc. v. Nation‘s Foodservice, Inc., 710 F.2d 1565, 1568 (Fed.Cir.1983)); see also
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.
Because the parties agree that HMI is the senior user of the Melia 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 Specialties, 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 Department of State. Like most U.S. jurisdictions, however, Puerto Rico law protects both registered and unregistered marks. See
Thus, in this case, HMI is entitled, under Commonwealth law, to the exclusive use of the Melia mark in the area where HMI “does business” using the Melia mark.11 In this context, the geographic
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 Melia 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 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
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 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“):
- the similarity of the marks;
- the similarity of the goods (or, in a service mark case, the services);
- the relationship between the parties’ channels of trade;
- the juxtaposition of their advertising;
- the classes of prospective purchasers;
- the evidence of actual confusion;
- the defendant‘s intent in adopting its allegedly infringing mark; and
- 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
We review the evidence pertinent to the Pignons factors de novo, considering the evidence offered to support each factor
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 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 Melia” and “Gran Melia” are essentially identical for trademark purposes because both marks have the word “Melia” as their most salient word. See Bos. Duck Tours, 531 F.3d at 34 (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 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 Melia and Gran Melia are large, full-service hotels operating in Puerto Rico. Dorpan attempts to distinguish the services offered by Gran Melia from those offered by Hotel Melia by emphasizing that Gran Melia is a “beach resort” while Hotel Melia is a “historic, urban hotel.” The evidence Dorpan offers to support this argument — for example, that Hotel Melia‘s pool is smaller than Gran Melia‘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.
4. Actual Confusion
HMI argues that Dorpan‘s use of the Gran Melia 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 Raul Albors Melia testified in his deposition that a wholesaler at a trade show had noticed that he represented Hotel Melia and approached him to discuss the beach at Gran Melia.15 Second, Albors Melia testified that guests had occasionally thought that Hotel Melia was associated with Gran Melia. Third, Albors Melia testified that Domino‘s Pizza mistakenly at-
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 the actual confusion prong “evidence of misdirected phone calls be-
5. Dorpan‘s Intent
There is no evidence from which a reasonable factfinder could infer that Dorpan decided to use the mark Melia in order to cause market confusion or with an intent to exploit Hotel Melia‘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, 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 Melia in the center of the second largest city in Puerto Rico for more than one hundred years. Indeed, the Hotel Melia 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 Melia 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 Melia 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 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 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 Melia 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 Melia by Dorpan. Therefore, the court finds HMI may continue to use the Melia name within Ponce, Puerto Rico, but must refrain from using the Melia name in any future business ventures outside of Ponce. Conversely, [Dorpan] is barred from extending its services into Ponce, but may use its trademarks 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
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 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 Melia mark is frozen” at its 1997 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
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 affects the
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.