Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-12-15985/USCOURTS-ca9-12-15985-0/pdf.json

Parties Involved:
La Quinta Worldwide LLC
Appellee
Q.R.T.M., S.A. de C.V.
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LA QUINTA WORLDWIDE LLC,

Plaintiff-Appellee,

v.

Q.R.T.M., S.A. DE C.V., dba Quinta

Real,

Defendant-Appellant.

No. 12-15985

D.C. No.

4:09-cv-00175-

RCC

OPINION

Appeal from the United States District Court

for the District of Arizona

Raner C. Collins, Chief District Judge, Presiding

Argued and Submitted

May 16, 2014—San Francisco, California

Filed August 6, 2014

Before: Barry G. Silverman and Ronald M. Gould, Circuit

Judges, and Ivan L.R. Lemelle, District Judge.

*

Opinion by Judge Gould

* The Honorable Ivan L.R. Lemelle, District Judge for the U.S. District

Court for the Eastern District of Louisiana, sitting by designation.

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 1 of 22
2 LA QUINTA WORLDWIDE V. Q.R.T.M.

SUMMARY**

Trademark Law

The panel affirmed in part the district court’s judgment

after a bench trial and vacated a permanent injunction in a

trademark infringement case brought by La Quinta

Worldwide LLC (“La Quinta”) against Q.R.T.M., S.A. de

C.V. (“Quinta Real”).

The panel held that the “use in commerce” element of

Lanham Act sections 32 and 43(a) claims is not a

jurisdictional requirement, and that it had subject-matter

jurisdiction under 15 U.S.C. § 1121(a) over La Quinta’s

claims.

The panel held that the district court correctly concluded

that expansion of Quinta Real’s Mexican hotel business into

the United States would result in a likelihood of consumer

confusion with La Quinta.

The panel held that the defense of laches did not apply.

The panel concluded that the district court did not provide

a sufficient analysis balancing the equities in its decision to

grant a permanent injunction.

The panel affirmed in part as to trademark violations, but

vacated the permanent injunction and remanded in part for

further assessment of the equities.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 2 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 3

COUNSEL

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 PlaintiffAppellee.

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.

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 3 of 22
4 LA QUINTA WORLDWIDE V. Q.R.T.M.

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.

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 4 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 5

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 (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

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 5 of 22
6 LA QUINTA WORLDWIDE V. Q.R.T.M.

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 (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

(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

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 6 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 7

would be on the merits, not for want of

jurisdiction.

Id. at 682 (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, 532 U.S. 83, 96 (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

(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. The Supreme Court concluded that because

(1) Congress included no employee-numerosity requirement

in the Title VII jurisdictional grant; (2) the employeenumerosity 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 (internal quotation marks and

citation omitted); see also Reed Elsevier, Inc. v. Muchnik,

559 U.S. 154, 163–66 (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

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 7 of 22
8 LA QUINTA WORLDWIDE V. Q.R.T.M.

“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.

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 (“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

 

1

 We have previously described the “use in commerce” requirement as

a “jurisdictional predicate to any law passed by Congress under the

Commerce Clause.” Bosley v. Med. Inst. v. Kremer, 403 F.3d 672, 677

(9th Cir. 2005). In that case we held that Congress was not deliberately

creating, using the “use in commerce” language, a meaning different from

the “in connection with a sale of goods or services” language used in other

parts of the Lanham Act. Id. We did not, and do not now, interpret “use

in commerce” as a requirement for federal subject-matter jurisdiction. See

Arbaugh, 546 U.S. at 510 (“Jurisdiction, this Court has observed, is a

word of many, too many, meanings.” (internal quotation marks and

citation omitted)).

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 8 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 9

consumer confusion.2 AMF, 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 (9th Cir. 2003). When determining whether a

likelihood of confusion exists we weigh eight 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’sintentinselecting themark; and

(8) likelihood of expansion of the product

lines.

Id. The factors are intended to act as “guideposts” for

determining whether a likelihood of consumer confusion

exists, and are adaptable to specific cases. Fortune Dynamic,

Inc. v. Victoria’s Secret Stores Brand Mgmt., Inc., 618 F.3d

1025, 1030 (9th Cir. 2010); see also Network Automation,

Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1151

(9th Cir. 2011). Quinta Real argues that the district court

misapplied all of the above factors. But, for the reasons that

follow, we conclude that the clear weight of the factors

2 We review for clear error the district court’s conclusion regarding the

likelihood of confusion as well as the district court’s application of the

likelihood confusion factors to the facts of the case. Interstellar Starship

Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 941 (9th Cir. 2002). We accept

the district court’s findings of fact unless they are clearly erroneous. 

Husain v. Olympic Airways, 316 F.3d 829, 835 (9th Cir. 2002), aff’d,

540 U.S. 644 (2004).

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 9 of 22
10 LA QUINTA WORLDWIDE V. Q.R.T.M.

supports the district court’s conclusion that a likelihood of

confusion exists.

1. Strength of the mark

The strength of a mark determines the level of trademark

protection it is given. Brookfield Commc’ns, Inc. v. W. Coast

Entm’t Corp., 174 F.3d 1036, 1058 (9th Cir. 1999). “The

stronger a mark—meaning the more likely it is to be

remembered and associated in the public mind with the

mark’s owner—the greater the protection it is accorded by the

trademark laws.” Id.; see One Indus., LLC v. Jim O’Neal

Distrib., Inc., 578 F.3d 1154, 1164–65 (9th Cir. 2009);

GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1207–08

(9th Cir. 2000). We determine the strength of a mark by

examining its conceptual strength—that is, where it falls in

the spectrum of marks—and the strength of the mark within

the marketplace. One Indus., 578 F.3d at 1164.

Quinta Real does not challenge the district court’s

conclusion that La Quinta’s mark is strong because it has

extensive secondary meaning and a robust commercial

presence. Instead, Quinta Real argues that because “both

parties have strong marks, confusion is not likely to occur,”

pushing against the district court’s conclusion that “[b]ecause

both marks are strong, this factor weighs in favor of La

Quinta.”

Both the district court and Quinta Real mistake this factor,

and Quinta Real’s argument is without merit. The strength of

the junior mark, here Quinta Real, is important to weighing

this factor in cases of reverse infringement. In those cases,

the issue is whether the strength of the junior user’s mark is

so significant that it may overpower the senior user’s mark. 

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 10 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 11

See Surfvivor Media, Inc. v. Survivor Prod., 406 F.3d 625,

631–32 (9th Cir. 2005); Cohn v. Petsmart, Inc., 281 F.3d 837,

840 (9th Cir. 2002); Walter v. Mattel, Inc., 210 F.3d 1108,

1111 n.2 (9th Cir. 2000). This is not a reverse infringement

case, and the district court should not have considered the

strength of Quinta Real’s mark in determining what level of

trademark protection to extend to La Quinta’s mark. As such,

the district court erred in its analysis, but it correctly

concluded that the factor weighs in favor of La Quinta

because its mark is descriptive with significant secondary

meaning and a large presence in the hotel marketplace.

2. Proximity of the Services Offered

Goods or services that are closely related are generally

more likely than unrelated goods or services to confuse the

public as to their sources. Brookfield, 174 F.3d at 1055. 

“The proximity of goods is measured bywhether the products

are: (1) complementary; (2) sold to the same class of

purchasers; and (3) similar in use and function.” Network

Automation, 638 F.3d at 1150.

The district court found that both La Quinta and Quinta

Real offer hotel services, and while they operate hotels in

different tiers of the market, “a reasonable customer could

conclude that the two hotel chains are from the same source

because some American hotels operate several different

levels of hotels under one umbrella brand.” It also noted that

“the rates of the two hotel chains overlap significantly,” and

for these reasons it concluded that the factor favors La

Quinta. Id. Quinta Real points to no evidence showing that

the district court’s conclusion regarding umbrella brands is

clearly erroneous. Even if La Quinta has no plans to expand

into the luxury hotel market, the district court reasonably

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 11 of 22
12 LA QUINTA WORLDWIDE V. Q.R.T.M.

concluded that the varying tiers of hotel service do not render

the services less related because hotel consumers frequently

encounter hotel umbrella brands, including Marriott and

Hilton.3 We agree that this factor favors La Quinta.

3. Similarity of the Marks

The similarity of the marks is “a critical question in the

likelihood-of-confusion analysis.” GoTo.com, 202 F.3d at

1205. To assess similarity, we compare the two marks in

terms of sight, sound, and meaning, considering the marks “as

a whole, as [they] appear in the marketplace.” M2 Software,

Inc. v. Madacy Entm’t, 421 F.3d 1073, 1082 (9th Cir. 2005)

(quotation marks and citation omitted). Generally,

similarities between the marks weigh more heavily than

differences. Sleekcraft, 599 F.2d at 351. And the amount of

similarity required to support a likelihood of confusion

declines as the services themselves become increasingly

similar. Century 21 Real Estate Corp. v. Century Life of Am.,

970 F.2d 874, 877 (Fed. Cir. 1992); Mobil Oil v. Pegasus

Petroleum, 818 F.2d 254, 258 (2d Cir. 1987); E. Remy Martin

& Co., S.A. v. Shaw-Ross Int’l Imports, Inc., 756 F.2d 1525,

1530 (11th Cir. 1985); Exxon Corp. v. Texas Motor Exch. of

Houston, Inc., 628 F.2d 500, 505 (5th Cir. 1980). Here, the

district court correctly concluded that the marks are similar

and that this factor favors La Quinta.

3 The only case Quinta Real offers to contradict the umbrella brand

theory is a district court case from New Jersey, Kinark Corp. v. Camelot,

Inc., 548 F. Supp. 429, 449 (D.N.J. 1982), which is inapposite because it

concerned travel agents and convention organizers, not ordinary hotel

consumers, and a hotel name that is inordinately common—Camelot.

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 12 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 13

Quinta Real argues that: (1) the district court erroneously

considered “Quinta” in isolation from other differentiating

elements; and (2) by opening hotels in Mexico and coexisting

with the La Quinta Resort and Club in California, La Quinta

cannot argue that the marks are overly similar. We reject

these arguments.

The district court’s conclusion that the marks are similar

is not clearly erroneous. It examined the sight, sound, and

meaning of “La Quinta” and “Quinta Real,” and reasonably

determined that the words shared a similar meaning when

translated (“country home” and “royal villa”) and an identical

dominant word: “Quinta.” See E. & J. Gallo Winery v. Gallo

Cattle Co., 967 F.2d 1280, 1292 (9th Cir. 1992) (holding that

although the mark logos were dissimilar, “it does not appear

that the district court committed clear error in relying on the

dominant element GALLO for its finding of similarity in

sight, sound and meaning”). This conclusion is supported by

the fact that the dominant words frequently appear without

anything more in the marketplace. Where both marks are

attached to such closely related services and the senior user

has a strong mark, the similarity of the words is sufficient for

this factor to weigh in favor of La Quinta.

Quinta Real’s second argument regarding La Quinta’s

expansion into Mexico does not succeed because it seeks to

equate two separate trademark protection systems operating

in different markets. While we are troubled by the

inequitable circumstances, La Quinta’s use of its mark in

Mexico does not determine whether the marks are similar or

whether La Quinta will suffer injury in the United States by

Quinta Real’s expansion into this market. As such, the

district court did not clearly err in finding the marks to be

similar.

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 13 of 22
14 LA QUINTA WORLDWIDE V. Q.R.T.M.

4. Evidence of Actual Confusion

“Evidence that use of the two marks has already led to

confusion is persuasive proof that future confusion is likely.” 

Sleekcraft, 599 F.2d at 352. However, due to “the difficulty

of garnering such evidence, the failure to prove instances of

actual confusion is not dispositive . . . . [T]his factor is

weighed heavily only when . . . the particular circumstances

indicate such evidence should have been available.” Id.; see

Brookfield, 174 F.3d at 1050 (“[D]ifficulties in gathering

evidence of actual confusion make its absence generally

unnoteworthy.”). Despite Quinta Real’s contention that the

two marks have coexisted for twenty-five years and,

therefore, evidence of actual confusion should be available,

Quinta Real and La Quinta have never both operated in the

U.S. market. Quinta Real has American customers, but it has

only offered services within Mexico. The district court

correctly concluded that a lack of actual confusion in the

United States does not weigh against La Quinta.

5. Marketing Channels Used

When examining the marketing channels used by the

competing companies, we consider where the goods or

services are sold, the sales and marketing methods employed,

and the class of purchasers exposed to the marketing efforts. 

Sleekcraft, 599 F.2d at 353. The district court concluded that

this factor weighed in favor of La Quinta because the

marketing efforts of La Quinta and Quinta Real “converge

with third-party internet travel sites and guidebooks.” This

conclusion is supported by evidence in the record showing

that both La Quinta and Quinta Real use internet travel sites

such as Expedia.com and Orbitz.com to reach consumers, as

well as placements in travel guidebooks. The use of identical

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 14 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 15

third-partytravel sites is particularlylikely to cause confusion

because “it allows for [the] competing marks to be

encountered at the same time, on the same screen.” 

Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165, 1174 (9th

Cir. 2007) (quoting GoTo.com, 202 F.3d at 1207); see

Network Automation, 638 F.3d at 1149. The district court

correctly concluded that this factor favors La Quinta.

6. Type of Services and Degree of Care

Under this factor we look at the type of good or service

offered and the degree of care one would expect from “the

average buyer exercising ordinary caution.” Sleekcraft,

599 F.2d at 353. The district court found that 70% of Quinta

Real’s guests are business travelers who rely on others to

make their reservations and that on average guests stay at

Quinta Real hotels for 2.4 nights and spend $439 per stay on

their rooms. Combined with the overlapping marketing

channels and room rates, the district court concluded that this

factor favors La Quinta. That most of Quinta Real’s guests

are business travelers who stay only a short amount of time

at the hotel and spend a relatively modest sum supports the

district court’s conclusion that this factor favors La Quinta,

and we find no error on the part of the district court. Cf.

Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1393 (9th

Cir. 1993) (concluding that consumers would exercise a high

degree of care when purchasing ad buys for $2,400 to

$16,000).

7. Quinta Real’s Intent in Selecting the Mark

“When the alleged infringer knowingly adopts a mark

similar to another’s, reviewing courts presume that the

defendant can accomplish his purpose: that is, that the public

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 15 of 22
16 LA QUINTA WORLDWIDE V. Q.R.T.M.

will be deceived.” Network Automation, 638 F.3d at 1153

(quoting Sleekcraft, 599 F.2d at 354). The district court erred

in concluding that this factor favors La Quinta. Despite

finding that Quinta Real adopted its name without knowledge

of La Quinta and that Quinta Real had not exercised bad faith

in trying to enter the U.S. market under that name, the district

court concluded that the factor weighed against Quinta Real

because it could use another name in the United States

without prejudice. But the district court’s factual findings,

that Quinta Real could use another name without prejudice,

would only be relevant here in crafting a remedy. See

Sleekcraft, 599 F.2d at 354 (“Good faith is less probative of

the likelihood of confusion, yet may be given considerable

weight in fashioning a remedy.”). However, because this

factor, when properly considered, is neutral, the district

court’s error in this respect is not so significant as to disturb

its conclusion that a likelihood of confusion exists.

8. Zone of Expansion

When there is “a strong possibility that either party may

expand his business to compete with the other,” this factor

weighs in favor of finding “that the present use is infringing.” 

Sleekcraft, 599 F.2d at 354 (internal quotation marks and

citation omitted). Although La Quinta has no plans to expand

into luxury hotels and Quinta Real has no plans to expand

into mid-tier hotels, the district court found that “[a] hotel in

the United States competes with all the other hotels on its

corner, regardless of rating or services offered.” A weakness

in Quinta Real’s appellate challenge on this point is that this

finding of fact is not clearly erroneous. La Quinta submitted

witness testimony supporting this broad concept of

competition and the testimony was admitted in evidence. 

Quinta Real gave no contrary evidence to support its assertion

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 16 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 17

that “[e]ven if Quinta Real were to open a hotel in the same

metropolitan area as La Quinta, the hotels still would not

compete for the same consumers.” Because the record

supports the conclusion that proximate hotels compete with

each other regardless of tier and Quinta Real has definite

plans to expand into major U.S. cities, the district court did

not err in concluding that this factor favors La Quinta.

The weight of the factors supports the district court’s

conclusion that a likelihood of confusion exists. No factor

supports Quinta Real, and only two factors appear neutral in

this analysis. We conclude that the district court correctly

found a likelihood of confusion.

IV

Quinta Real argues that the defense of laches applies, and

that the period in which La Quinta could file a claim has

expired. The defense of laches “can defeat an otherwise valid

claim under the Lanham Act.” Tillamook Country Smoker,

Inc. v. Tillamook Cnty. Creamery Ass’n, 465 F.3d 1102, 1108

(9th Cir. 2006).

We analyze the laches defense with a two-step process. 

First, we determine whether the limitations period for laches

has expired. If the period has not expired before suit was

filed, there is a strong presumption against the laches defense. 

Id. That presumption is reversed if the laches period expired

before the suit was filed. Id. We review de novo whether a

laches defense is available to a defendant. Id. at 1109; In re

Beaty, 306 F.3d 914, 920 (9th Cir. 2002). Second, if the

laches period expired before suit was filed, we apply the

factors listed in E-Systems, Inc. v. Monitek, Inc., 720 F.2d

604, 607 (9th Cir. 1983), to determine whether “the

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 17 of 22
18 LA QUINTA WORLDWIDE V. Q.R.T.M.

trademark owner’s delay in filing suit was unreasonable and,

therefore, barred,” Tillamook, 465 F.3d at 1108. We review

the district court’s application of the E-Systems factors to the

particular facts of the case for abuse of discretion. Tillamook,

465 F.3d at 1109; Beaty, 306 F.3d at 920.

The district court concluded that even if the laches period

had run under the first step of analysis, the E-Systems factors

do not favor barring La Quinta’s suit. We agree. To prove

that a delay in filing was unwarranted, the party asserting a

laches defense must show that the following six factors weigh

in its favor:

(1) strength and value of trademark rights

asserted; (2) plaintiff's diligence in enforcing

mark; (3) harm to senior user if relief denied;

(4) good faith ignorance by junior user;

(5) competition between senior and junior

users; and (6) extent of harm suffered by

junior user because of senior user's delay.

E-Systems, 720 F.2d at 607; see also Tillamook, 465 F.3d at

1108. To benefit from this equitable defense, “[t]he party

asserting laches must demonstrate that it has ‘suffered

prejudice as a result of plaintiff’s unreasonable delay in filing

suit.’” Tillamook, 465 F.3d at 1108 (quoting Jarrow

Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th

Cir. 2002)).

Here, Quinta Real challenges the district court’s

assessment of several of the above factors. However, the

only prejudice Quinta Real claims is that “the court’s ruling

has harmed Quinta Real because it cannot exercise the right

to open a hotel in the United States under its strong and

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 18 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 19

reputable brand, while, at the same time, La Quinta freely

establishes hotels under its name in Mexico.” Contrary to

Quinta Real’s assertion, the question is not whether the

district court’s ruling prejudiced Quinta Real, but rather

whether La Quinta’s alleged “unreasonable delay in filing

suit” did so. Quinta Real gives no evidence that the period of

delay, which is the time between the two letters of interest,

resulted in prejudice to its efforts to open a hotel in the

United States. The district court found this absence of

prejudice to be the most important factor in its analysis. 

Further, the district reasonably concluded, following its

likelihood of confusion analysis, (1) that the La Quinta mark

is strong and valuable; (2) that La Quinta had been diligent in

enforcing its rights; (3) that the two marks will compete with

each other in the United States with significant harm to La

Quinta, the senior user; and (4) that Quinta Real knew of La

Quinta’s presence in the United States before it began

exploring the possibility of opening a hotel in a major U.S.

city. We affirm the district court’s denial of Quinta Real’s

laches defense.

V

Finally, Quinta Real argues that the district court erred in

entering a permanent injunction in favor of La Quinta. We

review the district court’s decision to grant a permanent

injunction for abuse of discretion. Interstellar, 304 F.3d at

941. “If the district court ‘identified and applied the correct

legal rule to the relief requested,’ we will reverse only if the

court’s decision ‘resulted from a factual finding that was

illogical, implausible, or without support in inferences that

may be drawn from the facts in the record.’” Herb Reed

Enters., LLC v. Florida Entm’t Mgmt., Inc., 736 F.3d 1239,

1247 (9th Cir. 2013) (quoting United States v. Hinkson,

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 19 of 22
20 LA QUINTA WORLDWIDE V. Q.R.T.M.

585 F.3d 1247, 1263 (9th Cir. 2009) (en banc)). We “must

consider whether the [district court’s] decision was based on

a consideration of the relevant factors and whether there has

been a clear error of judgment.” DISH Network Corp. v.

F.C.C., 653 F.3d 771, 776 (9th Cir. 2011) (quoting Sports

Form, Inc. v. United Press Int’l, Inc., 686 F.2d 750 (9th Cir.

1982)); see Rishell v. Jane Phillips Episcopal Mem’l Med.

Ctr., 94 F.3d 1407 (10th Cir. 1996) (“[An appellate court]

must consider whether the decision maker failed to consider

a relevant factor . . . .”) (quoting Kickapoo Tribe v. Babbitt,

43 F.3d 1491, 1497 (D.C. Cir. 1995) (internal quotation

marks omitted)).

Trademark law gives federal courts the “power to grant

injunctions, according to the principles of equity and upon

such terms as the court may deem reasonable . . . .” 

15 U.S.C. § 1116; see Perfumebay, 506 F.3d at 1177. 

Following those principles, a permanent injunction may be

entered where the plaintiff shows: “(1) that it has suffered an

irreparable injury; (2) that remedies available at law, such as

monetary damages, are inadequate to compensate for that

injury; (3) that, considering the balance of the hardships

between the plaintiff and defendant, a remedy in equity is

warranted; and (4) that the public interest would not be

disserved by a permanent injunction.” eBay, 547 U.S. at 391;

see Herb Reed, 736 F.3d at 1248–50 (applying eBay factors

to trademark law); Reno Air Racing Ass’n, Inc. v. McCord,

452 F.3d 1126, 1137 n.11 (9th Cir. 2006).

While “[t]he decision to grant or deny permanent

injunctive relief is an act of equitable discretion by the district

court,” the “traditional principles of equity” demand a fair

weighing of the factors listed above, taking into account the

unique circumstances of each case. eBay, 547 U.S. at 391,

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 20 of 22
LA QUINTA WORLDWIDE V. Q.R.T.M. 21

394; see DISH Network, 653 F.3d at 776; see generally

1 Dobbs Law of Remedies § 2.9 (2d ed. 1993); 11A Wright

& Miller, Fed. Prac. & Proc. Civ. § 2942 (3d ed. 1998). It is

important to consider the totality of circumstances bearing on

whether a permanent injunction is appropriate equitable

relief.

We are concerned that the district court’s analysis does

not discuss a fact we think relevant to weighing the equities

in this case: That a permanent injunction in favor of La

Quinta here would bar Quinta Real from opening a hotel in

the United States under its own name, while at the same time

La Quinta would remain free to open hotels and do business

in Mexico as “La Quinta.” We do not decide that this fact is

determinative and we express no opinion on whether the

district court should issue a permanent injunction after having

taken account of all the relevant facts. But to our thinking

this consideration is pertinent to whether a permanent

injunction here against Quinta Real operating through its

name in the United States is fair and equitable relief in light

of the La Quinta hotel operations in Mexico. The omission

of this consideration from the district court’s analysis leaves

us uncertain whether the district court considered all relevant

factors in assessing the balance of hardships. Accordingly,

we vacate the permanent injunction and remand to the district

court on an open record for reconsideration, which shall

include the district court’s assessment of the significance, if

any, of La Quinta’s currently unrestrained competition with

Quinta Real in Mexico.

VI

We conclude that district court correctly found federal

subject-matter jurisdiction over this suit, that the laches

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 21 of 22
22 LA QUINTA WORLDWIDE V. Q.R.T.M.

defense is not available to Quinta Real, and that the district

court did not abuse its discretion in finding a likelihood of

confusion. We vacate the permanent injunction and remand

on an open record for further analysis of the propriety of a

permanent injunction consistent with this opinion. The

district court may conduct whatever further proceedings it

thinks helpful, including, if necessary, taking additional

evidence and the making of factual findings pertinent to its

decision on permanent injunction.

AFFIRMED IN PART; VACATED AND

REMANDED IN PART.4

4 We order that each party bear its own costs on appeal under General

Order 5.4(e).

 Case: 12-15985, 08/06/2014, ID: 9194944, DktEntry: 32-1, Page 22 of 22