Finnegan's monthly review of essential decisions, key developments, evolving trends in trademark law, and more.

December 2012 Issue

Civil Cases

Oriental Fin. Grp., Inc. v. Cooperativa de Ahorro y Crédito Oriental,
698 F.3d 9 (1st Cir. Oct. 18, 2012)


Oriental Financial Group, Inc. (“Oriental”), a financial-services institution in Puerto Rico, appealed a decision from the U.S. District Court for the District of Puerto Rico challenging the scope of an injunction against Puerto Rico-based competitor Cooperativa de Ahorro y Crédito Oriental (“Cooperativa”), a nonprofit credit union offering various personal banking and checking services.  Oriental initiated its action against Cooperativa in May 2010, asserting Lanham Act claims for service-mark infringement and alleging that Cooperativa’s COOP ORIENTAL name was confusingly similar to Oriental’s ORIENTAL marks. 

Oriental commenced use of its ORIENTAL mark for financial services in 1964 in the southeastern region of Puerto Rico, and in 1996 relocated its main offices to San Juan in northern Puerto Rico where it expanded into forty-three branches by 2010.  Cooperativa began operating in 1966 and first used its COOP ORIENTAL mark in 1995.  From 1995 through 1996, Cooperativa operated a single branch in the northeastern region of Puerto Rico.  In 2009, Cooperativa expanded its reach to San Juan and launched a substantial advertising campaign in newspapers and on television and billboards throughout Puerto Rico.  As part of its new advertising campaign, Cooperativa adopted a new COOP ORIENTAL logo featuring an orange trade dress allegedly similar to Oriental’s logo, and emphasizing the term ORIENTAL over the term COOP. 

Cooperativa defended against Oriental’s preliminary injunction motion, contending that Oriental’s claims were barred by laches based on over forty years of coexistence.  Following an evidentiary hearing, the district court rejected Cooperativa’s laches defense, contending that the infringement commenced in 2009 upon its adoption of the new logo and trade dress.  Finding no likelihood of confusion between Cooperativa’s former logo and mark based upon the absence of actual confusion, it ruled that the permanent injunction would only apply to post-2009 infringing activity, and allowed Cooperativa to revert to the mark and trade dress it used prior to 2009 or to adopt new logos consistent with the injunction. 

On appeal, the First Circuit reversed the district court’s order allowing Cooperativa to resume using its old COOP ORIENTAL mark, and found as a matter of first impression that the doctrine of progressive encroachment could apply to preclude Cooperativa’s affirmative defense of laches.  The First Circuit remanded the case to the district court to determine whether there was a likelihood of confusion between the pre-2009 versions of the COOP ORIENTAL mark used by Cooperativa, and whether the scope of the injunction needed to be broadened to cover such marks.

The First Circuit focused its review on whether Cooperativa’s affirmative defense of laches had any merit with respect to the expanded injunction sought by Oriental.  While the First Circuit acknowledged there were factual disputes as to whether Oriental had actual or constructive knowledge of Cooperativa’s use of the COOP ORIENTAL mark prior to 2009, and whether Cooperativa could establish detrimental reliance or prejudice, it found that even if both these elements were present, the doctrine of progressive encroachment could still bar Cooperativa’s laches defense. 

The appeals court analyzed all three elements of progressive encroachment, namely, (1) whether during the period of delay it was reasonable for plaintiff to conclude it should not have brought suit to challenge the infringing activity; (2) whether the defendant materially altered its infringing activities; and (3) whether the suit was unreasonably delayed after the alteration in the infringing activity.  In analyzing the first element, the appeals court found that Cooperativa’s pre-2009 infringement was de minimis, namely, so small in scope that it was reasonable for Oriental to conclude that a suit was not worth the cost of litigation.  Under the second element, the First Circuit found that Cooperativa materially altered the reach of its operations in 2009 by expanding beyond a single region in Puerto Rico to San Juan and other regions where Oriental was already operating, and by significantly expanding its advertising campaign to include television as well as print ads statewide.  Under the third element, the First Circuit concluded that Oriental did not delay in bringing the present suit because it was filed shortly after Cooperativa expanded its activities throughout Puerto Rico.  The First Circuit thus held that on remand Cooperativa’s laches defense would not be heard, and the scope of the injunction needed to be reconsidered by the district court.

The First Circuit recognizes that the doctrine of progressive encroachment allows an infringement plaintiff to tolerate de minimis or low-level infringement prior to bringing suit, sets forth the test for progressive encroachment, and provides a helpful roadmap for how it may be used as an offensive countermeasure by plaintiffs in trademark-infringement actions to preclude the affirmative defense of laches.