391 F.3d 1088 (9th Cir. 2004), 00-57118, Grupo Gigante SA De CV v. Dallo & Co., Inc.

Docket Nº:00-57118.
Citation:391 F.3d 1088
Party Name:73 U.S.P.Q.2d 1258 GRUPO GIGANTE SA DE CV; Gigante SA De CV; Gigante Holding International, Plaintiffs-counter-defendants-Appellees, v. DALLO & CO., INC.; Michael, Dallo; Rafid Dallo; Douray Dallo; Louis Dallo; Chris Dallo, Defendants, and MD & CD LLC, Defendant-Appellant, Profile LLC, Defendant-counter-claimant-Appellant. Grupo Gigante SA De CV; G
Case Date:December 15, 2004
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 1088

391 F.3d 1088 (9th Cir. 2004)

73 U.S.P.Q.2d 1258

GRUPO GIGANTE SA DE CV; Gigante SA De CV; Gigante Holding International, Plaintiffs-counter-defendants-Appellees,


DALLO & CO., INC.; Michael, Dallo; Rafid Dallo; Douray Dallo; Louis Dallo; Chris Dallo, Defendants,


MD & CD LLC, Defendant-Appellant,

Profile LLC, Defendant-counter-claimant-Appellant.

Grupo Gigante SA De CV; Gigante SA De CV; Gigante Holding International, Plaintiffs-counter-defendants-Appellants,


Dallo & Co., Inc.; Michael Dallo; Rafid Dallo; Douray Dallo; Louis Dallo; Chris Dallo, Defendants,


MD & CD LLC, Defendant-Appellee,

Profile LLC, Defendant-counter-claimant-Appellee.

No. 00-57118.

United States Court of Appeals, Ninth Circuit

December 15, 2004

Argued and Submitted May 6, 2002

Submission Deferred May 9, 2002.

Resubmitted June 13, 2002.

Page 1089

[Copyrighted Material Omitted]

Page 1090

[Copyrighted Material Omitted]

Page 1091

Randy M. McElvain, Weston & McElvain, Los Angeles, CA, for the appellants.

Matthew A. Hodel, Paul, Hastings, Janofsky & Walker LLP, Costa Mesa, CA, for the appellees.

Appeal from the United States District Court for the Central District of California; Dean D. Pregerson, District Judge, Presiding. D.C. No. CV-99-07806-DDP-MA N.

Before: KLEINFELD and GRABER, Circuit Judges, and COLLINS, District Judge. [*]


KLEINFELD, Circuit Judge.

This is a trademark case. The contest is between a large Mexican grocery chain that has long used the mark, but not in the United States, and a small American chain that was the first to use the mark in the United States, but did so, long after the Mexican chain began using it, in a locality where shoppers were familiar with the Mexican mark.


Grupo Gigante S.A. de C.V. ("Grupo Gigante") operates a large chain of grocery stores in Mexico, called "Gigante," meaning "Giant" in Spanish. Grupo Gigante first called a store "Gigante" in Mexico City in 1962. In 1963, Grupo Gigante registered the "Gigante" mark as a trade name in Mexico, and has kept its registration current ever since. The chain was quite successful, and it had expanded into Baja California, Mexico by 1987. By 1991, Grupo Gigante had almost 100 stores in Mexico, including six in Baja, all using the mark "Gigante." Two of the Baja stores were in Tijuana, a city on the U.S.-Mexican border, just south of San Diego.

As of August 1991, Grupo Gigante had not opened any stores in the United States. That month, Michael Dallo began operating a grocery store in San Diego, using the name "Gigante Market." In October 1996, Dallo and one of his brothers, Chris Dallo, opened a second store in San Diego, also under the name Gigante Market. The Dallo brothers--who include Michael, Chris, and their two other brothers, Douray and Rafid--have since controlled the two stores through various limited liability corporations. 1

In 1995, which was after the opening of the Dallos' first store and before the opening of their second, Grupo Gigante began exploring the possibility of expanding into Southern California. It learned of the Dallos' Gigante Market in San Diego. Grupo Gigante decided against entering the California market at that time. It did nothing about the Dallos' store despite Grupo Gigante's knowledge that the Dallos were using "Gigante" in the store's name.

In 1998, Grupo Gigante decided that the time had come to enter the Southern California market. It arranged a meeting with Michael Dallo in June 1998 to discuss the Dallos' use of the name "Gigante." Grupo Gigante was unsuccessful at this meeting in its attempt to convince Dallo to stop using the "Gigante" mark. Also in June 1998, Grupo Gigante registered the

Page 1092

"Gigante" mark with the state of California. The Dallos did likewise in July 1998. Neither has registered the mark federally. 2

About one year later, in May 1999, Grupo Gigante opened its first U.S. store. That store was followed by a second later that year, and then by a third in 2000. All three stores were in the Los Angeles area. All were called "Gigante," like Grupo Gigante's Mexican stores.

In July 1999, after learning of the opening of Grupo Gigante's first U.S. store, the Dallos sent Grupo Gigante a cease-and-desist letter, making the same demand of Grupo Gigante that Grupo Gigante had made of them earlier: stop using the name Gigante. Grupo Gigante responded several days later by filing this lawsuit. Its claim was based on numerous federal and state theories, including trademark infringement under the Lanham Act. 3 It sought compensatory and punitive damages, a declaratory judgment that it had the superior right to the Gigante mark, and an injunction against the Dallos' use of the mark. The Dallos counterclaimed, on similar theories, asserting it had the superior right to the mark in Southern California. 4 The Dallos sought a declaratory judgment, injunctive relief, damages, and cancellation of Grupo Gigante's California registration of the mark.

The district court disposed of the case in a published decision on cross motions for summary judgment. 5 The court recognized that under the "territoriality principle," use of a mark in another country generally does not serve to give the user trademark rights in the United States. Thus, the territoriality principle suggests that the Dallos' use of the mark, which was the first in the United States, would entitle them to claim the mark. But it held that because Grupo Gigante had already made Gigante a well-known mark in Southern California by the time the Dallos began using it, an exception to the territoriality principle applied. As the district court interpreted what is known as the "famous-mark" or "well-known mark" exception to the territoriality principle, Grupo Gigante's earlier use in Mexico was sufficient to give it the superior claim to the mark in Southern California. The court held, therefore, that Grupo Gigante was entitled to a declaratory judgment that it had a valid, protectable interest in the Gigante name. Nevertheless, the court held that laches barred Grupo Gigante from enjoining the Dallos from using the mark at their two existing stores. 6 The Dallos appeal the

Page 1093

holding that Grupo Gigante has a protectable right to use the mark in Southern California. Grupo Gigante appeals the laches holding. We agree in large part with the district court's excellent opinion, but some necessary qualifications to it require a remand.


The exception for famous and well-known foreign marks

We review the summary judgment decision de novo. 7

A fundamental principle of trademark law is first in time equals first in right. But things get more complicated when to time we add considerations of place, as when one user is first in time in one place while another is first in time in a different place. The complexity swells when the two places are two different countries, as in the case at bar.

Under the principle of first in time equals first in right, priority ordinarily comes with earlier use of a mark in commerce. It is "not enough to have invented the mark first or even to have registered it first." 8 If the first-in-time principle were all that mattered, this case would end there. It is undisputed that Grupo Gigante used the mark in commerce for decades before the Dallos did. But the facts of this case implicate another well-established principle of trademark law, the "territoriality principle." The territoriality principle, as stated in a treatise, says that "[p]riority of trademark rights in the United States depends solely upon priority of use in the United States, not on priority of use anywhere in the world." 9 Earlier use in another country usually just does not count. 10 Although we have not had occasion to address this principle, it has been described by our sister circuits as "basic to trademark law," in large part because "trademark rights exist in each country solely according to that country's statutory scheme." 11 While Grupo Gigante used the mark for decades before the Dallos used it, Grupo Gigante's use was in Mexico, not in the United States. Within the San Diego area, on the northern side of the border, the Dallos were the first users of the "Gigante" mark. Thus, according to the territoriality principle, the Dallos' rights to use the mark would trump Grupo Gigante's.

Grupo Gigante does not contest the existence of the territoriality principle. But like the first-in-time, first-in-right principle, it is not absolute. The exception, as Grupo Gigante presents it, is that when foreign use of a mark achieves a certain level of fame for that mark within the United States, the territoriality principle no longer serves to deny priority to the earlier foreign user. The Dallos concede that there is such an exception, but dispute what it takes for a mark to qualify for it. Grupo Gigante would interpret the exception

Page 1094

broadly, while the Dallos would interpret it narrowly.

Grupo Gigante does not argue to this court that it used the mark in the United States in a way that qualifies for protection regardless of the territoriality principle and any exception to it. While the district court opinion suggests that Grupo Gigante made an alternative argument of this sort below, 12 its argument on appeal is limited to whether the mark has become well-known enough to overcome the territoriality principle. For example, while the statement of facts in Grupo Gigante's brief claims that Grupo Gigante engaged in advertising in Mexico that reached United States consumers, Grupo Gigante does not assert that this advertising, combined with other activities, constitutes domestic use of the mark. 13 Thus, while Grupo Gigante...

To continue reading