Grupo Gigante SA De CV v. Dallo & Co.
391 F.3d 1088 (2004)
Rule of Law:
The famous-mark exception to the territoriality principle in trademark law requires an earlier foreign user to demonstrate not only that its mark has achieved secondary meaning in the relevant American market, but also that a substantial percentage of consumers in that market are familiar with the foreign mark.
Facts:
- Grupo Gigante S.A. de C.V. (Grupo Gigante) began operating grocery stores under the name 'Gigante' in Mexico City in 1962, registering the mark as a trade name in Mexico in 1963.
- By 1991, Grupo Gigante had expanded to almost 100 stores in Mexico, including six in Baja California, with two in Tijuana on the U.S.-Mexican border.
- In August 1991, Michael Dallo began operating a grocery store in San Diego, California, using the name 'Gigante Market,' marking the first use of the name in the United States.
- Grupo Gigante learned of the Dallos' San Diego store in 1995 while exploring U.S. expansion but decided against entering the California market at that time and took no action against the Dallos.
- Michael Dallo and his brother, Chris Dallo, opened a second 'Gigante Market' in San Diego in October 1996.
- In June 1998, Grupo Gigante, having decided to enter the Southern California market, met with Michael Dallo to discuss the use of the name 'Gigante,' but Dallo was unwilling to stop using the mark.
- Grupo Gigante registered the 'Gigante' mark with the state of California in June 1998, and the Dallos did likewise in July 1998.
- In May 1999, Grupo Gigante opened its first U.S. store in the Los Angeles area, followed by two more stores in 1999 and 2000, all under the 'Gigante' name.
Procedural Posture:
- Grupo Gigante filed a lawsuit against the Dallos, asserting numerous federal and state claims including trademark infringement under the Lanham Act, seeking compensatory and punitive damages, a declaratory judgment of superior rights, and an injunction.
- The Dallos counterclaimed, asserting their own superior rights to the mark in Southern California under similar theories, seeking a declaratory judgment, injunctive relief, damages, and cancellation of Grupo Gigante's California registration.
- The United States District Court for the Central District of California disposed of the case on cross-motions for summary judgment.
- The District Court held that Grupo Gigante was entitled to a declaratory judgment that it had a valid, protectable interest in the 'Gigante' name based on the famous-mark exception.
- However, the District Court also held that the doctrine of laches barred Grupo Gigante from enjoining the Dallos from using the mark at their two existing stores.
- The Dallos appealed the District Court's holding that Grupo Gigante had a protectable right to use the mark in Southern California.
- Grupo Gigante appealed the District Court's laches holding.
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Issue:
Does the famous-mark exception to the territoriality principle in trademark law require an earlier foreign user to show more than merely secondary meaning in the relevant American market to establish priority over a first domestic user?
Opinions:
Majority - Kleinfeld, Circuit Judge
Yes, the famous-mark exception to the territoriality principle in trademark law requires an earlier foreign user to demonstrate more than merely secondary meaning in the relevant American market to establish priority over a first domestic user. The court affirmed the 'territoriality principle,' which dictates that U.S. trademark rights depend on U.S. use, not foreign use. However, it recognized a 'famous-mark exception' to prevent consumer confusion and fraud, citing Vaudable v. Montmartre, Inc. The court clarified that while secondary meaning (where the mark identifies the source, not just the product) is necessary to determine a mark's distinctiveness and geographic scope domestically (under the Tea Rose-Rectanus doctrine), it is not sufficient for the famous-mark exception. To rely solely on secondary meaning for foreign marks would effectively eliminate the territoriality principle, which is fundamental to trademark law and arguably supported by the Paris Convention. Therefore, in addition to secondary meaning, the court must find by a preponderance of the evidence that a substantial percentage of consumers in the relevant American market are familiar with the foreign mark, considering factors like intentional copying by the defendant and whether customers believe they are patronizing the same foreign firm. The court affirmed the district court's dismissal of Grupo Gigante’s claims under the Paris Convention, noting it does not create separate federal causes of action, and rejected the argument that California law disregards the territoriality principle. Furthermore, the court upheld the district court's finding that Grupo Gigante's claim for injunctive relief against the Dallos' two existing stores was barred by laches due to Grupo Gigante's four-year delay in enforcement after learning of the Dallos' use, noting the Dallos' good faith and prejudice from building their business during the delay.
Concurring - Graber, Circuit Judge
Yes, I concur that the famous-mark exception requires a higher level of 'fame' or recognition than that required to establish secondary meaning. While agreeing with the majority's heightened standard, I believe the survey evidence presented by Grupo Gigante thus far is insufficient as a matter of law to establish that their mark is famous or well-known. The survey population was too narrowly defined, focusing on Spanish-speaking individuals who recently purchased Mexican-style food, rather than the general grocery-shopping public, which makes it an unreliable indicator of widespread familiarity. This is comparable to problematic surveys dismissed in cases like Avery Dennison Corp. v. Sumpton. Moreover, a 20-22% awareness level among this limited demographic before the Dallos' entry does not constitute a 'significant' or 'substantial' percentage for the general market. I would adopt a stricter standard, suggesting that a foreign mark should not be categorized as 'famous' for this exception unless it is known to a majority (more than 50%) of the defendant’s potential customers. This stringent standard is necessary when granting trademark protection to a mark never used in the United States, especially when it would displace a domestic first user. Therefore, I would hold that Grupo Gigante's current evidence does not meet the standard, and the case should proceed to trial unless a considerably expanded record is presented.
Analysis:
This case significantly clarifies the 'famous-mark exception' to the territoriality principle in U.S. trademark law, establishing a stricter, dual-pronged test for foreign trademark owners seeking protection against domestic first users. By requiring both secondary meaning and substantial consumer familiarity, the court attempts to balance the protection of established foreign brands against the fundamental principle of first-in-time, first-in-right for domestic commerce. The ruling emphasizes the independent nature of trademark rights across national borders while still providing a mechanism to combat consumer confusion and fraud regarding highly recognized foreign marks. Future litigation will likely focus on defining the precise thresholds for 'substantial percentage' and the scope of the 'relevant American market,' as well as the methodology for proving such familiarity, particularly through consumer surveys.
