Ninth Circuit Balances|Hotel Chains’ Claims

(CN) - The Mexican luxury hotel chain Quinta Real's proposed entry into the U.S. market could cause consumers to confuse it with La Quinta Inns, but a permanent injunction against the move must be reconsidered, the 9th Circuit ruled Wednesday.

The Quinta Real hotel chain has not yet expanded into the United States, but it has been considering it for many years, having entered into two failed agreements to build luxury properties in San Antonio and Tucson.

The ubiquitous mid-level chain La Quinta, which operates some 800 hotels across the United States and in Mexico, sued Quinta Real in 2009 in Arizona, alleging trademark violations.

After a bench trial in Tucson, U.S. District Judge Raner Collins ruled that Quinta Real's plan to expand into the United States was likely to cause confusion among hotel-goers, and issued a permanent injunction against the Mexican company.

A three-judge panel on the 9th Circuit ruled Wednesday that Collins was right about the trademark issue, but ordered a reassessment of the injunction.

"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,'" Judge Ronald Gould wrote for the unanimous panel.

"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."

The panel vacated the permanent injunction and sent the case back to Tucson for an "assessment of the significance, if any, of La Quinta's currently unrestrained competition with Quinta Real in Mexico."

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