Dorpan v. Hotel Meliá, Inc.

728 F.3d 55

DORPAN, S.L., Plaintiff, Appellee,

v. HOTEL MELIÁ, INC., Defendant, Appellant,Sol Meliá, S.A.; Desarrolladora Del Norte, S. En C., S.E., d/b/a Gran Meliá Puerto Rico Resort & Villas, Defendants, Appellees.

No. 12–1679.

United States Court of Appeals, First Circuit.

Aug. 28, 2013.

Jairo A. Mellado–Villarreal, with whom Roxana Aquino–Segarra, Liza M. Delgado–González, and Mellado & Mellado–Villarreal were on brief, for appellant.

Federico Calaf Legrand, with whom Carla Calaf García, Reichard & Calaf, P.S.C., Angel R. Rotger Sabat, and Maymí & Rivera–Fourquet, P.S.C. were on brief, for appellees.

Before TORRUELLA, SELYA and LIPEZ, Circuit Judges.

LIPEZ, Circuit Judge.

This trademark infringement case is a dispute between two hotels over the right to use the mark “Meliá” in Puerto Rico. Defendant-appellant Hotel Meliá, Inc. (“HMI”) has operated the Hotel Meliá in Ponce, Puerto Rico for more than a century, but has never registered that mark with the United States Patent and Trademark Office (“USPTO”). Plaintiff-appellee Dorpan has held several registered marks using the name “Meliá” since the late 1990s. ¹ In 2007, Dorpan's parent company opened a hotel called “Gran Meliá” in Coco Beach, Puerto Rico, approximately eighty miles from Ponce. At the close of discovery, the district court entered summary judgment in favor of Dorpan, concluding that, with the exception of the city of Ponce, Dorpan was entitled to exclusive use of the Meliá mark throughout Puerto Rico.

After reviewing the record, we conclude that a reasonable factfinder could conclude that the Hotel Meliá and Gran Meliá marks cannot co-exist in Puerto Rico without creating an impermissible likelihood of confusion among reasonable consumers. The district court's decision to grant summary judgment in Dorpan's favor was erroneous. Thus, we vacate the district court's entry of summary judgment and remand for further proceedings consistent with this opinion.

I.

A. Facts

In reviewing the facts we draw all reasonable inferences in favor of the non-moving party, HMI. Cabán Hernández v. Phillip Morris USA, Inc., 486 F.3d 1, 8 (1st Cir.2007). HMI is a family-owned corporation operating a single hotel called Hotel Meliá in Ponce, Puerto Rico.² HMI has operated the Hotel Meliá at the same location at 75 Cristina Street in Ponce without interruption since at least the 1890s. All parties agree that Hotel Meliá has a long and storied history in Ponce, having attracted over the years many famous guests, including United States President Theodore Roosevelt. HMI has never expanded beyond this single hotel in Ponce, nor does it plan to. Though HMI has used the Meliá mark in Ponce continuously for more than a century, HMI has never registered the Meliá mark with either the Puerto Rico Department of State or the USPTO.

Since the late 1990s, Dorpan, S.L. has held several registered trademarks using the mark “Meliá” in connection with the hotel industry in the United States.³ These marks have all become incontestible within the meaning of the Lanham Act. See Part II.B.1, infra. Dorpan's principal business is to hold these marks on behalf of Sol Meliá, a public Spanish company. Sol Meliá owns and operates the largest hotel chain in Spain and the third largest in Europe. It also operates several hotels in North America using the Meliá mark, including at least one in Florida. Until 2007, however, Dorpan had never used the Meliá mark in Puerto Rico.

In 2004, Sol Meliá opened an all-inclusive resort on Coco Beach in Coco Beach, Puerto Rico called Paradisus, approximately eighty miles from the Hotel Meliá in Ponce. This all-inclusive business model was not successful, however. In 2007, Sol Meliá closed the Paradisus, renovated it, and re-opened it as a luxury beach resort called “Gran Meliá.”

B. Proceedings Below

In early 2007, Dorpan filed a petition with the Puerto Rico Department of State seeking to register the mark “Gran Meliá.” HMI was immediately concerned that having a hotel called Gran Meliá in Puerto Rico would inevitably lead to consumer confusion and harm its commercial interests in Hotel Meliá. HMI filed a letter with the Puerto Rico Department of State opposing Dorpan's registration petition and expressing concerns that Dorpan's intent to use the Gran Meliá mark in Coco Beach would infringe on HMI's common law rights to exclusive use of the Meliá mark throughout Puerto Rico. In response, Dorpan withdrew its request to register, but continued to use the mark Gran Meliá in connection with its resort in Coco Beach.

When further discussions between HMI and Dorpan failed to resolve their dispute, HMI filed a complaint in late 2008 against Sol Meliá in the Superior Court of Puerto Rico, asserting that it was the senior user of the Meliá mark, ⁴ and that it had the sole right to use the Meliá mark in connection with hotel and restaurant services throughout Puerto Rico.⁵ Shortly thereafter, Dorpan filed a complaint against HMI in the United States District Court for the District of Puerto Rico, seekinga declaration that under the Lanham Act, Dorpan had the right to use the mark Meliá throughout Puerto Rico, and that to the extent that HMI had the right to use the Meliá mark, such right existed only in the city of Ponce. Almost simultaneously, Dorpan removed HMI's commonwealth court complaint to federal court, and the district court consolidated the two cases. At the close of discovery, Dorpan moved for summary judgment on its declaratory judgment claim. ⁶ The district court granted that motion, concluding that no reasonable jury could find a likelihood of consumer confusion between Hotel Meliá and Gran Meliá.

In its opinion, the court noted that several facts in the record supported an inference of a likelihood of confusion, such as the substantial similarity of the marks, the similarity of the services offered by the two hotels, and the similar customers each hotel sought to attract. The court also noted that HMI had put forward some evidence of actual confusion by vendors and patrons. Nevertheless, the court decided to give more weight to the fact “that neither party accuse[d] the other of “subjectively attempting to profit from the good-will earned by the other” and that the marks were both strong in different geographic areas, Hotel Meliá's in Ponce and Gran Meliá's internationally. Dorpan, S.L. v. Hotel Meliá, Inc., 851 F.Supp.2d 398, 410–11 (D.P.R.2012). Without further explanation, the district court concluded: “[w]ith the factors split, the court finds these two marks can co-exist within Puerto Rico without causing substantial confusion to the reasonable consumer.” Id. at 411. ⁷

The court then turned to “defin[ing] the limits within which each mark may be used.” Id. The court concluded that HMI was “frozen” into its location at the time that Dorpan's trademark was registered. Because at that time HMI operated only in Ponce and had no plans to expand, the court concluded that HMI could continue to use the Meliá mark, but only within Ponce. Dorpan was likewise barred from using the Meliá mark in Ponce, but was free to use the mark throughout the rest of Puerto Rico and the United States. Id.

HMI appeals, arguing that the district court erred in concluding that no reasonable jury could conclude that the presence of two hotels using the Meliá mark in Puerto Rico created a likelihood of consumer confusion. In particular, HMI argues that the district court was led astray when it incorrectly treated HMI as the junior user of the Meliá mark rather than the senior user. HMI also argues that this mistake led the court to consider only evidence of “forward confusion,” and to overlook the compelling evidence submitted of “reverse confusion.” See Part II.C, infra. According to HMI, these errors caused the district court incorrectly to infer from the evidence that HMI was not entitled to exclusive use of the Meliá mark throughout Puerto Rico.

II.

In resolving this appeal, we review the district court's grant of summary judgmentde novo, drawing all reasonable factual inferences in the light most favorable to the non-moving party, HMI. Colt Def. LLC v. Bushmaster Firearms, Inc., 486 F.3d 701, 705 (1st Cir.2007).

Before we begin our analysis of this case, we must provide a brief overview of the relevant law on trademark infringement. We then consider the contours of the trademark rights held by each party—Dorpan's rights under federal law and HMI's rights under Commonwealth law. Finally, we evaluate the district court's likelihood of confusion analysis.

A. The Relevant Law of Trademark Protection

A “ ‘trademark’ includes any word, name, symbol, or device ... used by a person ... to identify and distinguish his or her goods ... from those manufactured or sold by others and to indicate the source of the goods.” 15 U.S.C. § 1127.⁸ A trademark protects the right to distinguish the holder's goods or services from other goods or services that might be confused with the holder's. See I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 35 (1st Cir.1998) (noting that “[a] primary purpose of ... trademark protection is to protect that which identifies a product's source”). Prevention of confusion is thus the touchstone of trademark protection. Where there is no likelihood of confusion by the alleged infringer “there is no impairment of the interest that the trademark statute protects.” Libman Co. v. Vining Indus., Inc., 69 F.3d 1360, 1361 (7th Cir.1995).

The right to use a mark in commerce may arise under either federal law or state common law.⁹Gen. Healthcare Ltd. v. Qashat, 364 F.3d 332, 335 (1st Cir.2004). In the nineteenth and early twentieth centuries, trademark law was governed primarily by state common law. See Thrifty Rent–A–Car Sys., Inc. v. Thrift Cars, Inc., 831 F.2d 1177, 1180 (1st Cir.1987). In an attempt to provide uniformity in an age where interstate commerce was rapidly becoming the norm, Congress passed the Lanham Act in 1946, which created a federal...