Oriental Fin. Grp., Inc. v. Coop. De Ahorro Y Crédito Oriental

• Decision Date: 18 October 2012
• Docket Number: Nos. 11–1473,11–1476.,s. 11–1473
• Citation: 698 F.3d 9
• Parties: ORIENTAL FINANCIAL GROUP, INC., Oriental Financial Services Corp., Oriental Bank and Trust, Plaintiffs, Appellants/Cross–Appellees, v. COOPERATIVA DE AHORRO Y CRÉDITO ORIENTAL, Defendant, Appellee/Cross–Appellant.
• Court: U.S. Court of Appeals — First Circuit

698 F.3d 9

ORIENTAL FINANCIAL GROUP, INC., Oriental Financial Services Corp., Oriental Bank and Trust, Plaintiffs, Appellants/Cross–Appellees,

v.COOPERATIVA DE AHORRO Y CRÉDITO ORIENTAL, Defendant, Appellee/Cross–Appellant.

Nos. 11–1473, 11–1476.

United States Court of Appeals,First Circuit.

Heard Aug. 1, 2012.

Decided Oct. 18, 2012.

Roberto C. Quiñones–Rivera, with whom Leslie Yvette Flores, and McConnell Valdes LLC, were on brief, for appellants.

James W. McCartney, with whom Jean G. Vidal Font, and Cancio, Nadal, Rivera & Diaz, P.S.C., were on brief, for appellee.

Before BOUDIN, SELYA and DYK,^* Circuit Judges.

DYK, Circuit Judge.

The parties in this case are competing financial institutions operating in Puerto Rico. Plaintiffs–Appellants/Cross–Appellants, Oriental Financial Group, Inc., Oriental Financial Services Corp., and Oriental Bank and Trust ¹ (collectively, “Oriental”), have for many years used the ORIENTAL mark in connection with the advertising, promotion, and offering of financial services in Puerto Rico. Oriental contends that beginning in or around 2009, Defendant–Appellee/Cross–Appellant, Cooperativa De Ahorro y Crédito Oriental (“Cooperativa”), used a confusingly similar mark, COOP ORIENTAL, and a confusingly similar logo containing that mark in connection with its financial business and services, in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and Puerto Rico trademark law.

Finding a likelihood of confusion, the district court ordered Cooperativa to cease all use of its new 2009 logo (which used the COOP ORIENTAL mark with an orange trade dress), but allowed Cooperativa to revert back to using its pre–2009 logo (also containing the COOP ORIENTAL mark, but with a different trade dress). On appeal, Oriental contends that the district court's injunction should have been broader to include any use of the COOP ORIENTAL mark and similar marks (even when divorced from the trade dress in the 2009 logo). Cooperativa counters that Oriental's claim for injunctive relief against the COOP ORIENTAL mark and similar marks fails on the merits because there is no likelihood of confusion and the claim is barred by laches.

We hold that Oriental's claims are not barred by laches because of the doctrine of progressive encroachment, and remand to the district court to determine whether there is a likelihood of confusion as to the COOP ORIENTAL mark and other marks and whether the injunction should be broader, as Oriental contends.

I.

Oriental first began using the ORIENTAL mark in connection with its financial services business in 1964, when Oriental's predecessor, Oriental Federal Savings, opened its first branch in the city of Humacao, located in southeastern Puerto Rico. Until the late 1980s Oriental operated six branches, each located in the southeastern region of Puerto Rico. In the early 1990s, Oriental began to expand to other regions of Puerto Rico, and by 1996, Oriental had relocated its main office from Humacao to San Juan, in northern Puerto Rico, and operated sixteen branch offices located in the metropolitan (near San Juan), eastern, and western regions of Puerto Rico. By 2009, Oriental operated 21 branches throughout Puerto Rico, and by 2010, 43.

Oriental's competitor, Cooperativa, is a non-profit credit union offering various banking services such as personal checking and savings accounts, loans, and credit products. Cooperativa first began using the mark ORIENTAL in 1966 when its full corporate name was “Cooperativa De Crédito Oriental.” ² Thus, Cooperativa began to use the COOP ORIENTAL mark after Oriental, and on appeal, it is undisputed that Oriental is the senior user entitled to trademark protection. See Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 815 (1st Cir.1987) (“The right to trademark and service mark rights is based on prior use, or the one who first uses the marks in connection with a peculiar line of business.”).

At the time that Cooperativa first used the COOP ORIENTAL mark, Cooperativa's operations were geographically limited. In 1966, Cooperativa operated one branch (its current headquarters) located in Humacao. As of 1996, it operated three branches, with two of those branches based in Humacao and one branch based in Loiza, which is in northeastern Puerto Rico. Starting in 2008, Cooperativa began expanding its geographic reach by purchasing branches of other cooperatives. Cooperativa purchased three branches in San Juan in 2008, 2009, and 2010, respectively. Additionally, in 2010, Cooperativa purchased a branch in Ponce, located in southern Puerto Rico. As described in detail below, Cooperativa's allegedly infringing advertising and other activity was limited until the late 2000s. But consistent with its geographic expansion, in 2009, Cooperativa also began an expansive advertising campaign in newspapers and on television, including the use of advertising media not previously used by it, such as billboards and cable television. As a part of its new advertising campaign, Cooperativa also adopted a new logo using the COOP ORIENTAL mark. Cooperativa's new logo contained an orange trade dress similar to the orange trade dress used in Oriental's logo. Additionally, the size of the term “COOP” was reduced in Cooperativa's new logo, emphasizing the term “ORIENTAL,” when compared to prior versions of its logo also containing the COOP ORIENTAL mark.

On December 9, 2009, Oriental sent Cooperativa a cease and desist letter “demand[ing] that [Cooperativa] IMMEDIATELY CEASE AND DESIST from the unauthorized use of the ORIENTAL mark or any variant or derivative thereof as part of its corporate or commercial name, services or the domain name of its website.” J.A. 800. Despite the letter, Cooperativa continued to use the COOP ORIENTAL mark.

On May 21, 2010, Oriental filed suit against Cooperativa in the United States District Court for the District of Puerto Rico, asserting causes of action for, inter alia, service mark infringement under the Lanham Act and Puerto Rico law. ³ In particular, Oriental alleged that Cooperativa's “COOP ORIENTAL name is confusingly similar to [Oriental's] ORIENTAL Marks,” and that Cooperativa's “COOP ORIENTAL logo ... is confusingly similar with the ORIENTAL Marks.” J.A. 15. Oriental thus sought to enjoin Cooperativa from, among other things, “directly or indirectly infringing any of [Oriental's] rights in the ORIENTAL Marks ... [by] use of: (i) the term ORIENTAL, including stylized depictions thereof; (ii) any composite trademark that includes the term ORIENTAL; or (iii) any composite trademark, including design marks and slogans, that comprises the term ORIENTAL[.]” J.A. 28. Oriental also sought damages for Cooperativa's infringement. Cooperativa contended that Oriental's claims were barred by laches.

The district court held a preliminary injunction hearing in September 2010. The parties agreed to convert the hearing into a permanent injunction hearing. On October 20, 2010, after the hearing, the district court issued an Opinion and Order granting a limited injunction against Cooperativa. SeeOriental Fin. Grp. Inc. v. Cooperativa De Ahorra y Crédito Oriental (“ Injunction Order ”), 750 F.Supp.2d 396, 401 (D.P.R.2010). In its opinion, before addressing the merits, the court “briefly consider[ed] [Cooperativa's] argument that [Oriental's] claims are barred by laches.” Id. at 402. The court reasoned that although Oriental “claim[s] an exclusive right to use the term ‘Oriental’ in relation to financial services in Puerto Rico, ... their submissions to the court indicate their view that the infringing activity began in 2009, with Defendant's deployment of its new logo and advertising campaign.” Id. Thus, the court found “inapposite [Cooperativa's] arguments as to [Oriental's] delay in complaining about [Cooperativa's] use of ‘Oriental,’ which dates back to 1966, or ‘Coop Oriental,’ which dates back to 1995.” Id. Accordingly, the district court declined to address the merits of Cooperativa's laches defense.

The court found that Oriental's new logo infringed the ORIENTAL mark by creating a likelihood of confusion. Id. at 404. The court also determined that Oriental suffered ongoing and irreparable harm because of Cooperativa's infringement, that the balance of hardships favored Oriental, and that the public interest would be served by an injunction. Id. at 405; see eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391–94, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006). Thus, the district court enjoined Cooperativa from “using its new logo—in particular, the prominent placement of the word ‘Oriental’—and its new color scheme, the combination of which infringes [Oriental's] service mark under both federal and Puerto Rico law.” Injunction Order, 750 F.Supp.2d at 406.

In contrast, the district court specifically allowed Cooperativa to “revert to the mark and dress it used prior to 2009,” which included use of the COOP ORIENTAL mark, or to “adopt new [logos] consistent with th[e] injunction.” Id. The district court did not address the likelihood of confusion posed by the COOP ORIENTAL mark or other similar marks, noting that it did not “find that [Cooperativa's] use of ‘Oriental’ in all instances constitutes infringement, nor [that] ... its use of ‘Coop Oriental’ [was] per se infringing.” Id. at 404.

The district court declined to award Oriental damages for Cooperativa's infringement, noting that Oriental presented “no evidence of quantifiable damages,” and “[t]he controversy is now resolved and no discernible major future damages seem apparent.” Id. at 405. Damages are not an issue on appeal.

On November 18, 2010, the district court held a status conference with the parties during which Cooperativa submitted several proposed new logos for the court's approval. The district court indicated which logos were permissible by either circling or crossing out the proposed logos. The district court crossed through every logo that used...