Grupo Gigante SA De CV v. Dallo & Co., Inc.
391 F.3d 1088 (2004)
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Rule of Law:
To gain priority rights in a U.S. market without prior domestic use, a foreign trademark owner must prove more than just secondary meaning under the 'famous mark' exception. The owner must also show that a substantial percentage of consumers in the relevant U.S. market is familiar with the foreign mark.
Facts:
- In 1962, Grupo Gigante S.A. de C.V. ('Grupo Gigante') began operating a chain of 'Gigante' grocery stores in Mexico and registered the mark there in 1963.
- By 1987, Grupo Gigante expanded its stores into Baja California, Mexico, including two stores in Tijuana, a city bordering San Diego, California.
- In August 1991, Michael Dallo, who was not affiliated with Grupo Gigante, began operating a grocery store in San Diego named 'Gigante Market.'
- In 1995, Grupo Gigante learned of the Dallos' store but took no action to stop their use of the name.
- In October 1996, the Dallos opened a second 'Gigante Market' in San Diego.
- In June 1998, Grupo Gigante unsuccessfully met with Michael Dallo to persuade him to stop using the 'Gigante' mark.
- In May 1999, Grupo Gigante opened its first U.S. store in Los Angeles, using the 'Gigante' name.
Procedural Posture:
- Grupo Gigante filed a lawsuit against the Dallos in the U.S. District Court for the Central District of California for trademark infringement and other claims.
- The Dallos counterclaimed, asserting they had the superior right to the 'Gigante' mark in Southern California.
- On cross-motions for summary judgment, the district court held that Grupo Gigante had a protectable interest in the mark under the 'famous mark' exception because the mark had achieved secondary meaning in San Diego.
- However, the district court also ruled that the doctrine of laches barred Grupo Gigante from enjoining the Dallos' use of the mark at their two existing stores.
- The Dallos, as appellants, appealed the district court's famous mark ruling to the U.S. Court of Appeals for the Ninth Circuit.
- Grupo Gigante, as appellee and cross-appellant, appealed the district court's laches ruling.
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Issue:
Does a foreign trademark that has achieved secondary meaning in a U.S. market, but not a higher level of fame, qualify for the 'famous mark' exception to the territoriality principle, thereby giving it priority over the first domestic user of the mark?
Opinions:
Majority - Judge Kleinfeld
No. For the famous mark exception to the territoriality principle to apply, a foreign mark must not only have achieved secondary meaning but must also be known to a substantial percentage of consumers in the relevant U.S. market. The court formally adopted the 'famous mark' exception, reasoning that an absolute territoriality rule would promote consumer confusion and fraud, especially in a nation of immigrants. However, equating the exception with the 'secondary meaning' test used for domestic disputes would effectively eliminate the territoriality principle. Therefore, the court established a higher, two-part standard: the foreign user must prove both secondary meaning and that a substantial percentage of consumers in the relevant geographic market is familiar with the mark. The case was remanded for the district court to apply this new, heightened test.
Concurring - Judge Graber
Yes, I concur with the majority's conclusion that a heightened standard is required, but I would hold that the evidence presented by Grupo Gigante is already insufficient as a matter of law to meet this new standard. The survey evidence relied upon was flawed because it was drawn from a narrowly defined population (Spanish-speaking shoppers who bought Mexican-style food) rather than the general grocery-shopping public of San Diego. Furthermore, even within that narrow sample, the 20-22% awareness level from before 1991 is not a 'substantial percentage.' I would suggest that a standard requiring familiarity among a majority of the defendant's potential customers is more appropriate to justify ousting a senior domestic user from the market.
Analysis:
This is a landmark case as it is the first U.S. Circuit Court decision to formally recognize and define the 'famous mark' exception to the long-standing territoriality principle in trademark law. The court's creation of a two-part test requiring more than mere secondary meaning preserves the core of the territoriality principle while carving out a narrow path for foreign brands to protect their marks in the U.S. without prior use. This decision establishes a significant new precedent, setting a high evidentiary bar for foreign entities and providing greater certainty for domestic businesses that are the first to use a mark within the United States. The heightened 'substantial percentage' standard will be the central issue in future cases of this nature.
