Trademarks

• Author: International Law Group

The Mexican company, Grupo Gigante S.A. de C.V. (Grupo Gigante). operates many "Gigante" grocery stores in Mexico. The company started in 1962, and by 1991 had almost 100 stores, two of which were located just across the border from San Diego. In 1991, Michael Dallo opened his "Gigante Market" grocery store in San Diego, and his brother Chris opened a second one in 1996.

Grupo Gigante then entered the U.S. market in 1999 by opening several stores in the Los Angeles area. Shortly thereafter, the Dallos sent Grupo Gigante a "cease and desist" letter to stop them from using the word "Gigante." To this Grupo Gigante responded by filing the present trademark action.

The district court noted that based on the "territoriality principle," the use of a mark abroad does not preserve any trademark rights in the U.S. Here, however, Grupo Gigante's use of the mark was well known in Southern California at the time when the Dallos began using it. Thus, the district court applied the "famous mark" or "well-known mark" exception to the territoriality principle and held that Grupo Gigante had a valid claim to the "Gigante" name. Nevertheless, in the court's view, laches barred Grupo Gigante from enjoining the Dallos' use of the name because it did not diligently enforce its mark. This appeal ensued. The U.S. Court of Appeals for the Ninth Circuit vacates and remands.

The Court first lays out the legal principles evoked by this case. " ... [T]he facts of this case implicate ... the 'territoriality principle.' The territoriality principle, as stated in a treatise, says that 'priority 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.' Earlier use in another country usually does not count."

"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.' 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." [Slip op. 7-8]

The Court, however, points to an exception to this...