La Quinta operates approximately 800 hotels in the United States and most are under franchise agreements. Quinta Real is considered a “luxury” hotel chain in Mexico and has established 8 hotels in Mexico. Quinta Real has published two letters of intent, one in 1994 and one in 2007, to expand into the United States. There has been no actual development of Quinta Real hotels in the United States, but Quinta Real still has plans to expand into the United States market.
La Quinta filed a complaint in March 2009. The district court granted La Quinta a permanent injunction following a bench trial. The permanent injunction was granted because the court found that a likelihood of confusion exists and the factors considered when issuing a permanent injunction favored La Quinta. Quinta Real appealed arguing (1) there is no federal subject –matter jurisdiction, (2) La Quinta’s suit is barred by laches, (3) there is no likelihood of confusion and (4) the district court erred by granting a permanent injunction.
Federal Subject Matter Jurisdiction
Quinta Real argued that its “letters of intent” do not amount to a “use in commerce” under the Lanham Act. The court held that the “use in commerce” portion is not a jurisdictional requirement and thus concluded that it had proper jurisdiction, holding “the use in commerce element…is not connected to the Lanham Act’s jurisdictional grant…which grants federal subject-matter jurisdiction without any reference to a use in commerce requirement.”
Likelihood of Confusion
To determine if a likelihood of confusion exists, a court weighs the following factors:
(1) the strength of the mark;
(2) the proximity of the goods;
(3) the similarity of the marks;
(4) evidence of actual confusion;
(5) marketing channels used;
(6) the type of goods and the degree of care likely to be exercised by the purchaser;
(7) defendant’s intent in selecting the mark; and
(8) likelihood of expansion of the product lines.
The Court of Appeals held that the analysis of the district court was flawed, but it came to the correct conclusion—that there would be a likelihood of confusion of the two marks stating that La Quinta’s mark is “descriptive with significant secondary meaning and a large presence in the hotel marketplace.” The Court of Appeals also held that both parties offer hotel services and a “reasonable customer could conclude that the two hotel chains are from the same source,” the marks are similar, that a lack of actual confusion did not weigh against La Quinta, both parties used internet travel sites for marketing, the type of services and customers were the same, it was neutral regarding Quinta Real’s intent to select the mark, and that hotels that expand within proximity of other hotels directly compete with each other. When analyzing these factors the court found that no factor supported Quinta Real and only two were deemed “neutral.”
Next, the Court of Appeals held that Quinta Real was not prejudiced by La Quinta’s delay in filing suit, thereby striking down Quinta Real’s laches argument. However, the Court of Appeals did reverse and remand to the district court the issue of whether issuing a permanent injunction was appropriate due to the absence of the district court’s analysis regarding whether it is equitable considering that La Quinta can freely establish more hotels, yet Quinta Real is denied the same in the United States.