La Quinta and Quinta Real hotel trademark fight is sent back to district court

Posted
by John Chapman

Q.R.T.M., S.A. de C.V. operates eight luxury “Quinta Real” hotels throughout Mexico. The company has plans to develop a Quinta Real hotel in a major U.S. city. La Quinta, the well-known U.S. hotel chain, does not like those plans. In 2009, La Quinta sued Quinta Real for trademark infringement, seeking an injunction barring Quinta Real from operating hotels in the U.S.

Following a bench trial, a U.S District Court in Arizona ruled in favor of La Quinta. The district judge ruled that Quinta Real’s plan to expand into the United States was likely to cause confusion among hotel-goers, and issued a permanent injunction against the Mexican company. Quinta Real appealed.

The Ninth Circuit has now affirmed as to the finding of trademark infringement but reversed as to the permanent injunction. La Quinta Worldwide LLC v. Q.R.T.M., S.A. de C.V., No. 12–15985 (9th Cir. August 06, 2014). The court of appeals remanded the case back to the district court for further analysis of the propriety of a permanent injunction under the facts. In particular, the Ninth Circuit held that the trial court failed to consider the fact that La Quinta is already operating hotels in Mexico when determining whether it is “fair and equitable” to a permanently enjoin Quinta Real from operating hotels in the U.S.

The Ninth Circuit agreed with the district court that La Quinta had established its claim of trademark infringement. To show trademark infringement, a plaintiff must establish ownership of a trademark and a likelihood of consumer confusion. When determining whether a likelihood of confusion exists courts 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.

After balancing the factors, the Court of Appeals agreed that La Quinta had established a likelihood of consumer confusion.

In arguing against infringement, Quinta Real repeatedly emphasized the fact that La Quinta was already operating hotels in Mexico. For example, Quinta Real argued that La Quinta should not allowed to argue that the marks are overly similar because the two companies are both operating hotels and coexisting in Mexico. The court of appeals rejected the argument because “it seeks to equate two separate trademark protection systems operating in different markets. “ Id. The court noted:

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.

Id.

Similarly, when arguing that La Quinta’s claim should be barred because La Quinta waited too long to bring it, Quinta Real argued 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.” The Ninth Circuit rejected this argument because it did not establish that any such prejudice was caused by La Quinta’s delay in asserting U.S. trademark rights.

However, in the end, the Ninth Circuit did accept an important argument regarding La Quinta’s hotels in Mexico. The court of appeals reversed the district’s court’s permanent injunction.

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. 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.”

See, eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). Traditional principles of equity demand a fair weighing of the factors listed above, taking into account the unique circumstances of each case.

In deciding to remand the case for further analysis, the Ninth Circuit explained:

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.

La Quinta Worldwide LLC v. Q.R.T.M., S.A. de C.V., No. 12–15985.

The Ninth Circuit thus vacated the permanent injunction and remanded the case for further analysis by the district court of the propriety of a permanent injunction. The court of appeals noted that 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.

Intellectual Property Law and Heygood, Orr & Pearson

At Heygood, Orr & Pearson, our attorneys have handled numerous trademark and patent matters including prosecuting claims for infringement. Our lawyers have handled claims brought by a large local company for infringement of its rail car patent, claims by a local inventor for infringement of her patent for a childcare product and claims by an Israeli company against a Fortune 500 company for infringement of its wireless technology patent. Our firm has also represented a client suing a large American pharmaceutical company for interfering with his patent rights to liposome technology. We are also currently handling a large trademark dispute for an international businessman engaged in the diamond and jewelry business.

Our attorneys are capable of litigating trademark and patent infringement claims throughout the country. In addition, firm attorney John “Jay” Pate is licensed to prosecute patents before the U.S. Patent and Trademark Office.

Beyond our specific experience in the field of intellectual property, our ability to prosecute trademark and patent infringement cases is aided by our extensive trial experience in general. While technical knowledge and familiarity with patent rules and intellectual property law is a must for attorneys handling infringement claims, there is no substitute for courtroom experience. At Heygood, Orr & Pearson, our seasoned litigators have the experience to take even the most complex case and explain it in terms a jury can understand. We have a track record of proven success representing businesses large and small. Several of our trial lawyers are board certified* and many of them have been selected as Super Lawyers in the State of Texas for several years in a row.** Our firm is AV-rated, the highest legal and ethical ranking available from the leading law firm ranking service, Martindale-Hubbell.

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* Michael Heygood, James Craig Orr, Jr. and Eric Pearson are all Board Certified in Personal Injury Trial Law — Texas Board of Legal Specialization.

** Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.