United States - Ninth Circuit Sets Test for U.S. Priority for Well Known Foreign Marks

In Grupo Gigante S.A. de C.V. v. Dallo & Co., Inc., the U.S. Court of Appeals for the Ninth Circuit recognized a famous foreign mark exception to the territoriality principle, the principle that use outside the United States is irrelevant to priority rights of use in the United States. The Court recognized the purposes behind the famous mark exception as avoiding the risks of consumer confusion and fraud, in this case by attempting to deceive U.S. immigrants into believing they were purchasing products from a store in their home country.

Plaintiff, Grupo Gigante S.A. de C.V. operated more than 100 grocery stores in Mexico under the name Gigante, two of which were in the city of Tijuana, Mexico near San Diego. Defendant Dallo & Co., Inc. opened a grocery store in San Diego under the name Gigante Market. The Court was required to address the “territoriality principle” under which use of a mark in another country generally does not serve to give the user trademark rights in the United States.

The Court held foreign trademark owners to a higher threshold standard in requiring that the foreign owner establish, by a preponderance of the evidence, that a substantial percentage of consumers in the relevant American market were familiar with the foreign mark, the relevant American market being where the defendant uses the allegedly infringing mark. Among the factors included in this determination were the intentional copying of a mark and whether customers initially thought they were patronizing the same firm that used the mark in the foreign country. The Grupo Gigante opinion requires a showing akin to secondary meaning in defendant’s trade area, as otherwise the test would effectively cause the exception to eclipse the territoriality rule entirely and eliminate the effect of international borders on protectability, treating foreign uses in the same way that domestic uses affect priority.

The Court remanded the case for reconsideration of the grant of summary judgment by the District Court to Grupo Gigante, in view of its substantial percentage familiarity test. However, the court also affirmed the District Court’s summary judgment determination that Grupo Gigante’s four-year delay in bringing suit for infringement bars its claim for injunctive relief against the established Dallo San Diego use of the mark. Grupo Gigante learned of the Dallos Gigante Market in mid-1995 and did not demand that it cease and desist until mid-1998, after Grupo Gigante opened its own first store in Los Angeles. The Court’s decision on the laches issue assumes that Grupo Gigante delayed in enforcing its rights, at the same time the Court remanded for further consideration of whether Grupo Gigante actually had rights in the San Diego market. The dissent focused on perceived deficiencies in the survey evidence submitted by Plaintiff as evidencing recognition in the San Diego market.