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To determine whether the famous-mark exception to the territoriality rule applies, the district court must determine whether the mark satisfies the secondary meaning test. The district court determined that it did in this case, and we agree with its persuasive analysis. But secondary meaning is not enough. In addition, where the mark has not before been used in the American market, the court must be satisfied, by a preponderance of the evidence, that a substantial percentage of consumers in the relevant American market is familiar with the foreign mark. The relevant American market is the geographic area where the defendant uses the alleged infringing mark. In making this determination, the court should consider such factors as the intentional copying of the mark by the defendant, and whether customers of the American firm are likely to think they are patronizing the same firm that uses the mark in another country. While these factors are not necessarily determinative, they are particularly relevant because they bear heavily on the risks of consumer confusion and fraud, which are the reasons for having a famous-mark exception.
The foreign user operated a large chain of grocery stores in Mexico, called "Gigante," meaning "giant" in Spanish dating back to 1962. The domestic user began operating a grocery store in San Diego in 1991, using the name "Gigante Market." In 1991, the foreign user opened stores in the U.S. All stores were called “Gigante.” After learning of the opening of the stores, the domestic user sent the foreign user a cease-and-desist letter, demanding that the foreign user stop using the name “Gigante.” The foreign user filed the present lawsuit, alleging trademark infringement under the Lanham Act. According to the foreign user, it had the superior right to the Gigante mark. The domestic user counterclaimed, asserting that it had the superior right to the mark in Southern California. The district court held that application of the "territoriality principle" did not bar the foreign user's claims because an exception to the territoriality principle applied as the foreign user had already made Gigante a well-known mark which acquired secondary meaning in Southern California by the time the domestic user began using it. The domestic user appealed.
Under the circumstances, did an exception to the territoriality principle apply as the foreign user had already made “Gigante” a well-known mark which acquired secondary meaning in Southern California?
The court of appeals vacated the district court’s ruling on finding that for the exception to the territoriality principle to apply, the foreign user had to show that the Gigante mark had acquired more than secondary meaning. According to the court, where the mark has not before been used in the American market, the court must be satisfied, by a preponderance of the evidence, that a substantial percentage of consumers in the relevant American market was familiar with the foreign mark. Furthermore, the court of appeals affirmed the application of laches to the foreign user's claim for injunctive relief on noting that the record contained no evidence that the domestic user acted in bad faith or had knowledge of the foreign user's Grupo Gigante's Mexican stores before opening its first Gigante Market in 1991.