Case Information
*2
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 *3 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.
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 *4 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. 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.
,
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 *5 6 L A Q UINTA W ORLDWIDE 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.
,
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
,
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 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.
,
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
“a colorable claim ‘arising under’ the Constitution or laws of
the United States,” so long as Congress does not clearly
indicate otherwise.
Arbaugh
,
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.”).
III
To show trademark infringement, a plaintiff must
*7
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
,
consumer confusion.
[2]
AMF, Inc. v. Sleekcraft Boats
,
(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.
,
10 L A Q UINTA W ORLDWIDE 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
.,
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.
*9
See Surfvivor Media, Inc. v. Survivor Prod.
,
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
,
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 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,
*10
Inc. v. Madacy Entm’t
,
[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.
,
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.
,
Quinta Real’s second argument regarding La Quinta’s *11 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.
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
,
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
,
L A Q UINTA W ORLDWIDE 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.
,
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
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
will be deceived.”
Network Automation
,
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 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
*14
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
,
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
trademark owner’s delay in filing suit was unreasonable and,
therefore, barred,”
Tillamook
,
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
,
Here, Quinta Real challenges the district court’s *15 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 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
,
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
,
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
,
We are concerned that the district court’s analysis does *17 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
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.
*18 [4] We order that each party bear its own costs on appeal under General Order 5.4(e).