La Quinta Worldwide LLC v. Q.R.T.M.

• Decision Date: 06 August 2014
• Docket Number: No. 12–15985.,12–15985.
• Citation: 762 F.3d 867
• Parties: LA QUINTA WORLDWIDE LLC, Plaintiff–Appellee, v. Q.R.T.M., S.A. DE C.V., dba Quinta Real, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

762 F.3d 867

LA QUINTA WORLDWIDE LLC, Plaintiff–Appellee,

v.Q.R.T.M., S.A. DE C.V., dba Quinta Real, Defendant–Appellant.

No. 12–15985.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted May 16, 2014.

Filed Aug. 6, 2014.

Richard P. Jacobson (argued), Frank J. Colucci & Janice K. Yoon, Colucci & Umans, New York, New York, for Defendant–Appellant.

Joseph C. Gioconda (argued) & Jonathan A. Malki, Gioconda Law Group PLLC, New York, New York, for Plaintiff–Appellee.

Appeal from the United States District Court for the District of Arizona, Raner C. Collins, Chief District Judge, Presiding. D.C. No. 4:09–cv–00175–RCC.

Before: BARRY G. SILVERMAN and RONALD M. GOULD, Circuit Judges, and IVAN L.R. LEMELLE, District Judge.^*

OPINION

GOULD, Circuit Judge:

Q.R.T.M., S.A. de C.V. (“Quinta Real”), appeals from the district court's judgment and order concluding that expansion of Quinta Real's Mexican hotel business into the United States would result in a likelihood of consumer confusion with La Quinta Worldwide, LLC (“La Quinta”). The district court issued a permanent injunction against the use of “Quinta Real” in association with hotels and lodging in the United States. We have jurisdiction to hear this appeal pursuant to 28 U.S.C. § 1291. We conclude that there is federal subject-matter jurisdiction over the trademark claims, and that the district court correctly found a likelihood of confusion, but that the district court did not provide a sufficient analysis balancing the equities in its decision to grant a permanent injunction. We affirm in part as to trademark violations, but vacate the permanent injunction and remand in part requesting further assessment of the equities.

I

Since 1968, La Quinta has operated hotels and motels in the United States on its own and through franchise agreements, and it has long held trademarks for “La Quinta” in connection with “motel services.” Today there are more than 800 La Quinta mid-tier hotels across the United States, including more than 80 in major U.S. cities, renting 23 million rooms to hotel guests each year. About half of La Quinta's hotels are operated by franchisees.La Quinta's franchise agreements require it to provide operational support, marketing, and training to its franchisees. La Quinta also offers franchisees a non-compete geographic zone in which no other La Quinta hotel will be opened, and La Quinta agrees to ensure “that there is no misuse or infringement that could harm franchisees' investment in the brand,” and to maintain and enforce quality control standards. La Quinta spends millions of dollars each year advertising on national television, radio, in print advertising, through direct mail and multiple formats of internet advertising. La Quinta is often featured in magazines, travel guidebooks, and on internet travel sites.

Quinta Real opened its first hotel in 1986 in Guadalajara, Mexico, and today operates eight luxury hotels throughout Mexico. Quinta Real's hotels are considered to be some of the most luxurious in Mexico, and the average daily room rate is $183 per night. Quinta Real hotels offer a wide range of amenities, and about 40% of Quinta Real's hotel guests are from the United States. Like La Quinta, Quinta Real has authorized third-party websites such as Expedia.com and Orbitz.com to promote and book reservations at its hotels. Quinta Real is also often featured in travel guidebooks.

Quinta Real plans to develop a luxury hotel in a major U.S. city. In 1994, Quinta Real entered into a letter of intent to build a hotel in San Antonio, Texas, and this letter was publicized, although there was no indication of what the hotel would be called. La Quinta has said that it was “unaware of Quinta Real's exploration of the San Antonio hotel market.” This letter of intent came to nothing, and Quinta Real next entered into a letter of intent in 2007 to build a hotel in Tucson, Arizona. Although that letter also came to nothing, Quinta Real still intends to enter the United States market. While Quinta Real's efforts to open a hotel in the United States have not yet reached fruition, La Quinta, by contrast, has already opened several hotels in Mexico.

La Quinta filed the complaint giving rise to this action in March 2009, two years after the date of Quinta Real's last letter of intent. After a bench trial, the district court granted La Quinta a permanent injunction, concluding that a likelihood of confusion exists and that the permanent injunction factors listed in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006), favored La Quinta. This appeal followed. In substance Quinta Real raises four arguments: (1) that there is no federal subject-matter jurisdiction over this case; (2) that La Quinta's suit is barred by laches; (3) that no likelihood of confusion exists; and lastly, (4) that the district court erred in granting La Quinta a permanent injunction. We address each argument in turn.

II

Quinta Real argues that we lack subject-matter jurisdiction because its expressions of intent to open a hotel are not sufficient to show a “use in commerce” under the Lanham Act. The “use in commerce” requirement that Quinta Real relies on is found in sections 32 and 43(a) of the Lanham Act, which both lay out claims for infringement. We hold that the “use in commerce” element of Lanham Act sections 32 and 43(a) claims is not a jurisdictional requirement, and we have subject-matter jurisdiction under 15 U.S.C. § 1121(a).

Federal jurisdiction over trademark claims is granted by the Lanham Act, 15 U.S.C. § 1121(a), which “confers broad jurisdictional powers upon the courts of the United States” in conjunction with 28 U.S.C. § 1331. Steele v. Bulova Watch Co., 344 U.S. 280, 283, 73 S.Ct. 252, 97 L.Ed. 319 (1952); see Reebok Int'l, Ltd. v. Marnatech Enters., Inc., 970 F.2d 552 (9th Cir.1992). The Lanham Act grants federal subject-matter jurisdiction over “all actions arising under this chapter, without regard to the amount in controversy or to diversity or lack of diversity of the citizenship of the parties.” 15 U.S.C. § 1121(a).

To understand whether this broad grant is narrowed by other language in the Lanham Act, we turn to United States Supreme Court precedent. The Supreme Court has distinguished jurisdictional requirements from those required to establish a cause of action. See Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946). Under Bell,

Whether the complaint states a cause of action on which relief could be granted is a question of law and ... it must be decided after and not before the court has assumed jurisdiction over the controversy. If the court does later exercise its jurisdiction to determine that the allegations in the complaint do not state a ground for relief, then dismissal of the case would be on the merits, not for want of jurisdiction.

Id. at 682, 66 S.Ct. 773 (citations and footnote omitted); see Sun Valley Gasoline, Inc. v. Ernst Enters., Inc., 711 F.2d 138, 140 (9th Cir.1983). “The core holding in Bell was ‘that the nonexistence of a cause of action was no proper basis for a jurisdictional dismissal.’ ” Orff v. United States, 358 F.3d 1137, 1150 (9th Cir.2004) (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 96, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)).

The Supreme Court has recently addressed in more detail the difference between elements of a claim and jurisdictional requirements. In Arbaugh v. Y & H Corp., 546 U.S. 500, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006), the Supreme Court confronted a suit that the district court had dismissed for lack of subject-matter jurisdiction. The district court reasoned that because the plaintiff could not show that the defendant met the 15–employee threshold required in Title VII to bring a cause of action, the court lacked subject-matter jurisdiction over the claims. Id. at 503–04, 126 S.Ct. 1235. The Supreme Court concluded that because (1) Congress included no employee-numerosity requirement in the Title VII jurisdictional grant; (2) the employee-numerosity requirement was only included in a “separate provision that does not speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts”; and (3) no other factor suggested that the employee-numerosity requirement was intended to be jurisdictional, such a requirement was not a condition for subject-matter jurisdiction. Id. at 514–15, 126 S.Ct. 1235 (internal quotation marks and citation omitted); see also Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 163–66, 130 S.Ct. 1237, 176 L.Ed.2d 18 (2010); Leeson v. Transamerica Dis. Income Plan, 671 F.3d 969 (9th Cir.2012). Rather, federal courts have subject-matter jurisdiction over all suits pleading “a colorable claim ‘arising under’ the Constitution or laws of the United States,” so long as Congress does not clearly indicate otherwise. Arbaugh, 546 U.S. at 513–14, 126 S.Ct. 1235.

Here, the “use in commerce” element of Lanham Act claims under sections 32 and 43(a) is not connected to the Lanham Act's jurisdictional grant in 15 U.S.C. § 1121(a), which grants federal subject-matter jurisdiction without any reference to a “use in commerce” requirement. Nothing suggests that Congress intended that “use in commerce” be interpreted as a jurisdictional requirement, and we conclude that we have subject-matter jurisdiction over La Quinta's claims under the Lanham Act. See Arbaugh, 546 U.S. at 515–16, 126 S.Ct. 1235 (“If the Legislature clearly states that a threshold limitation on a statute's scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue.”).¹

III

To show trademark infringement, a plaintiff must establish ownership of a trademark and a likelihood of consumer confusion. ²AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 348–49 (9th Cir.1979), abrogated on other grounds by Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792 (...