The U.S. Court of Appeals for the Ninth Circuit has now found that the famous-mark exception to the territoriality principle gave the owner of a famous mark superior geographical rights. While this exception was an appropriate theory of recovery, the Ninth Circuit concluded that the district court’s interpretation of this exception was too broad and would effectively eliminate the territoriality principle if adopted. Grupo Gigiante S.A. de C.V. v. Dallo & Co., Inc., 2004 U.S. App. LEXIS 25958 (Ninth Cir., Dec. 15, 2004).
The plaintiff, Grupo Gigante, operated its chain of "Gigante" grocery stores in Mexico beginning in 1962. However, the plaintiff did not expand its business into the United States until 1999, eight years after the defendant, Dallo & Co., opened its first grocery store, "Gigante Market," in San Diego. Although both parties owned California state registrations for "GIGANTE," neither party had a federal registration for the mark. Further, prior to this suit, both parties had informally attempted to stop the other’s use of the mark in Southern California.
In upholding the famous-mark exception, the Ninth Circuit acknowledged that "[c]ommerce crosses borders. In this nation of immigrants, so do people." Thus, an absolute territoriality rule without such an exception would only "promote consumer confusion and fraud."
Although no "clear threshold for just how famous a mark must be to qualify for the exception" existed, the Ninth Circuit rejected the district court’s interpretation that it should evaluate whether the foreign mark had attained secondary meaning in Southern California. By analyzing the foreign user’s rights in terms of whether it had established secondary meaning in the particular U.S. market where it sought to assert rights, the district court improperly ignored that the user’s earlier use of the mark was entirely outside the United States.
Ultimately, the Ninth Circuit held that defining this exception in terms of secondary meaning was "not enough." In cases where the foreign mark was not used in U.S. commerce, the user also must establish, by a preponderance of the evidence, that "a substantial percentage of consumers in the relevant American market are familiar with the foreign mark." (Emphasis in original). The court elaborated, noting that courts should consider factors such as intentional copying of the mark and whether consumers of the U.S. business were likely to believe that they were purchasing the goods or services of a business using the same mark in another country.
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