(CN) - A Mexican luxury hotel chain's entry into the U.S. market will likely cause consumers to confuse it with La Quinta Inns, but a permanent injunction against the move must be reconsidered, the 9th Circuit ruled Wednesday.
Although the Quinta Real hotel chain in Mexico has not yet expanded into the U.S., it has looked into doing so for many years, having entered into two failed agreements to build luxury properties in San Antonio and Tucson.
The ubiquitous La Quinta chain, which operates some 800 hotels across the country and in Mexico, sued Quinta Real in 2009 in Arizona, alleging trademark violations.
U.S. District Judge Raner Collins ruled in Tucson that Quinta Reals' plans to expand into the U.S. were likely to cause confusion among hotel-goers, and issued a permanent injunction against the Mexican company.
A three-judge appellate panel 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,'" wrote Judge Ronald Gould 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."