 What-A-Burger of Virginia, Incorporated v. Whataburger, Incorporated of Corpus Christi, Texas

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 WHAT-A-BURGER OF VIRGINIA,
INCORPORATED; JACK BRANCH;
WHAT-A-BURGER OF NEWPORT NEWS,
INCORPORATED; PAUL BRANCH,
Plaintiffs-Appellees, No. 03-1517 
v.
WHATABURGER, INCORPORATED OF
CORPUS CHRISTI, TEXAS,
Defendant-Appellant. 
Appeal from the United States District Court
for the Eastern District of Virginia, at Newport News.
Rebecca Beach Smith, District Judge.
(CA-02-58-4)
Argued: October 29, 2003
Decided: February 11, 2004
Before WILKINS, Chief Judge, and TRAXLER and
DUNCAN, Circuit Judges.
Affirmed in part, reversed in part, and remanded by published opin-
ion. Judge Traxler wrote the opinion in which Judge Wilkins and
Judge Duncan joined.
COUNSEL
ARGUED: Hubert Adair Crouch, III, CROUCH & INABNETT,
L.L.P., Dallas, Texas, for Appellant. Melvin J. Radin, Norfolk, Vir-

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ginia, for Appellees. ON BRIEF: Stephen E. Story, Shepherd D.
Wainger, Kristan B. Burch, KAUFMAN & CANOLES, P.C., Nor-
folk, Virginia, for Appellant.
OPINION
TRAXLER, Circuit Judge:
This appeal presents a dispute between two hamburger restaurant
chains operating under similar versions of the name WHATABUR-
GER®, a federally-registered trademark. Appellant Whataburger,
Inc., of Corpus Christi, Texas ("Texas WAB"), a Texas corporation
with "Whataburger" franchises throughout the southern United States
and Mexico, holds the exclusive right to use the registered WHATA-
BURGER® trademark. Appellee What-A-Burger of Virginia, Inc.
("Virginia W-A-B") operates its "What-A-Burger" restaurants solely
in Virginia. Texas WAB appeals the district court’s order denying its
motion for summary judgment and granting summary judgment sua
sponte to Virginia W-A-B on the basis that Texas WAB was barred
by the equitable doctrines of laches and acquiescence from enforcing
in Virginia its exclusive right to use the WHATABURGER® mark.
For the reasons set forth below, we affirm the district court’s order to
the extent it concludes that Texas WAB is the "rightful owner" of the
mark in Virginia, but we reverse the entry of judgment against Texas
WAB and in favor of Virginia W-A-B.
I.
On September 24, 1957, Harmon Dobson, founder of the Whata-
burger restaurant chain in Texas, was issued a certificate of registra-
tion, U.S. Reg. No. 652,137, for the word mark WHATABURGER
in connection with hamburgers. Through a series of assignments,
ownership of the registered mark was acquired by WhataPartnership,
LP. In 1999, WhataPartnership and Texas WAB entered into a licens-
ing agreement that granted Texas WAB the exclusive right to use and
control the WHATABURGER® mark. Texas WAB maintains fran-
chises in Texas, Arkansas, Arizona, Florida, Louisiana, Mississippi,
New Mexico, Oklahoma and Mexico. Neither Texas WAB nor any of
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its predecessors in interest have ever opened or operated a Whatabur-
ger restaurant in Virginia.
Virginia W-A-B claims that Jack Branch, its founder and owner,
opened a restaurant using the name "What-A-Burger" in Newport
News, Virginia, prior to August 1, 1957, and therefore prior to the
issuance of the certificate of registration now held by Texas WAB.1
Branch moved to Richmond in 1958, where he opened another What-
A-Burger restaurant, at which point his brother Paul became the pro-
prietor of the Newport News location. From 1958 until 1989, Branch
opened several additional What-A-Burger restaurants in various Vir-
ginia locations, including Richmond, Petersburg, Chester, and Colo-
nial Heights. Virginia W-A-B was not incorporated until 1997; prior
to that time, it was operated essentially as a sole proprietorship. The
Newport News What-A-Burger proprietorship was incorporated in
1999 as a business entity separate from Virginia W-A-B.2
Virginia W-A-B and Texas WAB first became aware of each other
in 1970. A representative of Texas WAB was traveling in Virginia
and, noticing the What-A-Burger sign, stopped in one of the restau-
rants and mentioned the possibility of the Branches running the res-
taurant as a franchise of Texas WAB. The record contains a June 24,
1970, letter to Paul Branch from George Garrison, an officer of Texas
WAB, referring to the meeting and indicating that Texas WAB held
the name WHATABURGER® as a registered trademark. Garrison
suggested that Texas WAB might be willing to license Virginia W-A-
B to use its trademark, but noted that not all of the locations operated
by the Branch brothers in Virginia met the standards maintained by
Texas WAB. The letter made clear that Texas WAB expected Vir-
1The record indicates that, between 1951 and 1956, Branch helped
operate several "What-A-Burger" restaurants owned by his cousin in
South Carolina. Although his cousin’s business was the genesis of the
name What-A-Burger for Branch, Virginia W-A-B does not claim that
its first use of the name relates back to these South Carolina restaurants.
2The plaintiffs-appellees in this case include both of these corporations
— What-A-Burger of Virginia, Inc., and What-A-Burger of Newport
News, Inc. — as well as Jack and Paul Branch. For ease of reference, we
use the Virginia W-A-B designation to identify plaintiffs-appellees col-
lectively.
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ginia W-A-B to change its name unless the parties reached a licensing
agreement. The record contains a second letter, dated July 7, 1970,
from Sam Main, General Manager for Texas WAB, suggesting that
he meet with Paul Branch the following week in Richmond to discuss
the issues raised in the Garrison letter.
The record does not reflect any further contact between these busi-
nesses until 2002, more than thirty years later. By that time, Texas
WAB had expanded significantly, having opened more than 500
Whataburger restaurants across the southern United States and Mex-
ico. In a letter dated January 25, 2002, an attorney representing Texas
WAB indicated that Virginia W-A-B’s use of the name What-A-
Burger might be an infringement of Texas WAB’s registered trade-
mark; however, the letter allowed for the possibility that one of the
Branch brothers had been granted the right to use the mark at some
point in the past:
It has come to our client’s attention that you operate res-
taurants in Newport News and Colonial Heights under the
name WHAT-A-BURGER. Under ordinary circumstances,
your use of this name would constitute a direct infringement
of Whataburger, Inc.’s superior trademark rights in and to
the WHATABURGER name. Our client believes, however,
that you may be using the name pursuant to an agreement
made by and between you (or your predecessor in interest)
and our client’s founder, Harmon Dobson, or perhaps
another entity. If our client’s belief is correct, your contin-
ued use of the WHAT-A-BURGER name within your
immediate marketing area perhaps would not be deemed an
actionable infringement of our client’s rights.
J.A. 194. The letter closed with a request for "copies of any docu-
ments that purport to grant rights in the name to you (or to your pre-
decessor in interest) by Mr. Dobson or anyone else associated with
[Texas WAB]." J.A. 195.
In an effort to settle the issue of whether it could continue using
the What-A-Burger name, Virginia W-A-B filed this declaratory
judgment action, see 28 U.S.C.A. § 2201(a) (West 1994), seeking an
order declaring that Virginia W-A-B is "the rightful owner[ ] of the
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trademark or trade name What-A-Burger in the State of Virginia" and
therefore enjoys the right to "the exclusive use of [the] trademark . . .
in the market areas of Richmond, Virginia; Chester, Virginia; Peters-
burg, Virginia; Newport News, Virginia; and Colonial Heights, Vir-
ginia." J.A. 9. Virginia W-A-B also sought a corollary pronouncement
from the district court that it was "not guilty of federal trademark
infringement." J.A. 10. The factual allegations supporting these
claims were as follows: that Virginia W-A-B used the mark prior to
the date of Texas WAB’s registration; that Virginia W-A-B was "un-
aware of any superior right to the [mark]" and therefore used the mark
in good faith; and that, in any event, Texas WAB "waived any right
or claim [it has] or may have had to the use of the name What-A-
Burger within the confines of the State of Virginia" because of Vir-
ginia W-A-B’s "long usage of the name What-A-Burger." J.A. 9.
Texas WAB asserted a counterclaim, seeking a declaration that it,
"by virtue of its exclusive licensing agreement with WhataPartner-
ship, is the rightful owner of the trademark or trade name WHATA-
BURGER . . . in the Commonwealth of Virginia . . . and is entitled
to . . . the exclusive use of the trademark . . . within the Common-
wealth of Virginia." J.A. 18. Texas WAB, which has never done busi-
ness in Virginia, did not allege in its counterclaim that Virginia
W-A-B had infringed on its trademark. Consequently, it sought nei-
ther to enjoin Virginia W-A-B from using the name What-A-Burger
nor to recover damages for such use. Because both parties sought a
declaration regarding exclusive ownership of the trademark in Vir-
ginia, Texas WAB moved for summary judgment on both the com-
plaint and counterclaim. Virginia W-A-B made no cross-motion for
summary judgment.
The district court assumed for analytical purposes that, under the
Lanham Act, Texas WAB’s registered mark had acquired incontest-
able status, see 15 U.S.C.A. § 1065 (West 1997 & Supp. 2003), which
serves as "conclusive evidence of the validity of the registered mark
. . . , of the registrant’s ownership of the mark, and of the registrant’s
exclusive right to use the registered mark in commerce." 15 U.S.C.A.
§ 1115(b) (West Supp. 2003).3 Virginia W-A-B does not dispute that
3Incontestable status may be obtained by fulfilling the requirements of
15 U.S.C.A. § 1065, including that the registered mark has been in con-
tinuous use for five consecutive years and is still in use in commerce. See
5 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competi-
tion § 32:142 (4th ed. 2003).
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the mark has attained incontestable status; however, that does not set-
tle the issue of which party has priority in Virginia. Although the
name suggests otherwise, an incontestable registration is subject to a
laundry list of statutory affirmative defenses. See 15 U.S.C.A.
§ 1115(b) (West 1998 & Supp. 2003). The district court considered
two of these defenses.
First, the district court considered whether Virginia W-A-B could
take advantage of what has been deemed a "limited area" exception
to the exclusive usage rights flowing from an incontestable mark. See
15 U.S.C.A. § 1115(b)(5) (West 1998); see generally 4 J. Thomas
McCarthy, McCarthy on Trademarks and Unfair Competition
§§ 26:43-26:44 (4th ed. 2003) [hereinafter McCarthy] (discussing the
"Limited Area Defense" under § 1115(b)(5)). Under section
1115(b)(5), it is possible for an alleged infringer to establish the right
to use within a limited geographical area the owner’s registered trade-
mark if the alleged infringer: (1) adopted the mark prior to the date
of registration; (2) did so "without knowledge of the registrant’s prior
use"; and (3) used the mark continuously since that time. The non-
registered user’s superior right to use the mark under § 1115(b)(5) is
limited, however, to "the area in which such continuous prior use is
proved." 15 U.S.C.A. § 1115(b)(5). The district court rejected this
limited statutory prior user defense as an option for Virginia W-A-B
based on the court’s finding that Virginia W-A-B offered insufficient
evidence that it used the mark prior to the September 24, 1957 date
of registration. See What-A-Burger of Va., Inc. v. Whataburger, Inc.,
of Corpus Christi, Texas, 256 F. Supp. 2d 476, 481 (E.D. Va. 2003).
Thus, the district court entered a judgment order declaring that Texas
WAB "is the rightful owner of the trademark WHATABURGER®."
Id. at 483. Virginia W-A-B has not appealed this or any other portion
of the order. As a result, the court’s conclusion that Virginia W-A-B
did not establish the limited-area prior-user defense under
§ 1115(b)(5) resolves the issue of which party has priority in the
WHATABURGER® trademark in Virginia, confirming that Texas
WAB enjoys the exclusive right to use its mark in Virginia.4
4This is essentially the only relief Texas WAB sought in its counter-
claim — simple confirmation that it was the owner of the mark with the
exclusive right of use in Virginia. Of course, we hasten to note that there
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The remaining question considered by the district court was
whether Texas WAB could enforce its ownership rights in Virginia
against Virginia W-A-B. Under the Lanham Act, the owner of a regis-
tered mark may not be able to enjoin an infringing use of its mark
where "equitable principles, including laches, estoppel, and acquies-
cence," prohibit him from doing so. 15 U.S.C.A. § 1115(b)(9) (West
Supp. 2003). The district court concluded sua sponte that Texas WAB
was barred by laches from enforcing, in Virginia at least, its exclusive
right to use and control the mark. See What-A-Burger, 256 F. Supp.
2d at 482-83. The court based its conclusion on the fact that Texas
WAB had been aware of Virginia W-A-B’s operations and use of the
name What-A-Burger since 1970 but unreasonably failed to follow up
on its original contact for more than 30 years. Moreover, the district
court reasoned that permitting Texas WAB to enforce its trademark
rights after this lengthy delay would severely prejudice Virginia
W-A-B, which continued to invest in its business and build goodwill
and customer loyalty in Virginia under the name What-A-Burger.
Similarly, the district court concluded that the doctrine of acquies-
cence precluded Texas WAB from protecting its registered trademark
in Virginia because a company "representative visited a [Virginia
W-A-B] establishment, attempted to interest the owner in a franchise,
offered advice for the improvement of [the] business, and failed to
follow up on any requests that [Virginia W-A-B] change its name."
Id. at 483.
Even though the district court concluded that Texas WAB "is the
rightful owner of the trademark WHATABURGER®," it denied
Texas WAB’s summary judgment motion because "the equitable
is a distinction between the rights that flow from ownership, and the rem-
edies — including an owner’s right to enjoin another person’s use of a
mark — that ripen only when there is a likelihood of confusion. See
Emergency One, Inc. v. American Fire Eagle Engine Co., 332 F.3d 264,
269 (4th Cir. 2003); Lone Star Steakhouse & Salon v. Alpha of Va., 43
F.3d 922, 932 (4th Cir. 1995); Armand’s Subway v. Doctor’s Assocs.,
604 F.2d 849 (4th Cir. 1979). Thus, the mere fact that a registered mark
has become incontestable does not relieve the registrant of proving
infringement prior to obtaining a remedy. See 15 U.S.C.A. § 1115(b).
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defenses as set forth in 15 U.S.C. § 1115(b)(8) bar [Texas WAB]
from asserting this right and obtaining . . . an injunction against [Vir-
ginia W-A-B] barring use of the mark, in the state of Virginia." Id.
Furthermore, the district court granted summary judgment sua sponte
in favor of Virginia W-A-B.
Texas WAB appeals, arguing that the district court erroneously
relied upon the doctrines of laches and acquiescence because it is
undisputed that there has yet to be an infringing use of the mark by
Virginia W-A-B, a prerequisite for the application of either laches or
acquiescence. Texas WAB further contends that the court was obli-
gated to award it summary judgment as a result of its finding that
Texas WAB is the "rightful owner" of the mark, which Virginia
W-A-B does not appeal. For the reasons that follow, we agree with
Texas WAB.5
5Texas WAB raises two additional challenges to the district court’s
order that are worth mentioning. First, Texas WAB argues that, as a mat-
ter of law, neither laches nor acquiescence apply in the absence of a
claim of trademark infringement. Texas WAB claims that it asserted its
declaratory judgment counterclaim merely to preserve its right as a regis-
tered trademark owner to exclusive use of the mark in Virginia in the
event it ever expands there. Texas WAB argues that although an owner
who has slept on his rights may be estopped by laches from enforcing
those rights by injunction against a junior user, Texas WAB is not
attempting here to enjoin Virginia W-A-B from using the name What-A-
Burger. In other words, because Texas WAB does not seek an injunction
based on a claim of infringement by Virginia W-A-B, laches does not
apply. Because we conclude that laches and acquiescence are not appro-
priate under the facts of this case in any event, we do not need to resolve
this issue. We note, however, that a party in the position of Virginia
W-A-B — a junior user who reasonably fears litigation for infringement
— may force the issue of infringement through a declaratory judgment
action and obtain closure on its right to continue using the mark. See
Crown Drug Co. v. Revlon, Inc., 703 F.2d 240, 243 (7th Cir. 1983). It
is not inconceivable that laches could become an issue even though the
declaratory judgment defendant — the trademark owner — asserts no
counterclaim for infringement. For example, a junior user may seek a
declaration that even if it has infringed, it has the right to continue using
a particular mark because the owner has unreasonably delayed in enforc-
ing his rights. Because the declaratory judgment vehicle exists for those
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II.
A. Laches
The primary obstacle to the application of laches here is that there
was never any infringing use of the mark by Virginia W-A-B to
which Texas WAB was required to respond.6 Estoppel by laches gen-
erally applies in a trademark infringement action to preclude relief for
an owner of a mark who has unreasonably slept on his rights. See
Brittingham v. Jenkins, 914 F.2d 447, 456 (4th Cir. 1990). "[C]ourts
may apply the doctrine of estoppel by laches to deny relief to a plain-
tiff who, though having knowledge of an infringement, has, to the det-
riment of the defendant, unreasonably delayed in seeking redress."
Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 461 (4th Cir.
1996) (emphasis added). Thus, a court’s consideration of laches in the
trademark context should encompass at least these questions: "(1)
whether the owner of the mark knew of the infringing use; (2)
whether the owner’s delay in challenging the infringement of the
mark was inexcusable or unreasonable; and (3) whether the infringing
user was unduly prejudiced by the owner’s delay." Brittingham, 914
F.2d at 456. Because the Lanham Act does not include a limitations
period, courts use the doctrine of laches to address the inequities cre-
ated by a trademark owner who, despite having a colorable infringe-
ment claim, allows a competitor to develop its products around the
"who [are] uncertain of [their] rights and who desire[ ] an early adjudica-
tion thereof without having to wait until [their] adversary should decide
to bring suit," 5 McCarthy at § 32:50, we cannot say with certainty that
the doctrine of laches can never be employed in a declaratory judgment
action where the trademark owner is not seeking relief for infringement.
In light of our conclusion, we also decline to address Texas WAB’s
additional argument that the district court committed reversible error by
entering judgment in favor of Virginia W-A-B sua sponte, which
afforded Texas WAB no notice or opportunity to respond to the issue
upon which the district court’s decision ultimately turned.
6It is important to note from the outset that the mere fact that the
names are virtually identical does not alone establish that there has been
an infringing use. We elaborate on this point below, but it is a point that
bears repetition.
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mark and expand its business, only then to lower the litigation boom.
See Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813, 824 (7th Cir.
1999) (affirming district court’s application of laches where plaintiff
"permitted [defendant’s] advertising and the development of its prod-
ucts to go unchecked" and "sat idly by and chose not to challenge
[defendant’s] use of [the mark] with respect to its products"); 5
McCarthy at § 31:12 ("Laches is a good defense if plaintiff’s long
failure to exercise its legal rights has caused defendant to rely to its
detriment by building up a valuable business around its trademark.").
The district court determined that the first requirement for applying
laches was met by the fact that Texas WAB knew about Virginia
W-A-B no later than 1970, and therefore "learned of the infringement
thirty-two years ago." What-A-Burger, 256 F. Supp. 2d at 482. Texas
WAB points out that it did not assert a counterclaim for infringement
because it did not have, and never has had, an actionable infringement
claim against Virginia W-A-B. Texas WAB questions how it could
have unreasonably delayed "in asserting a right or claim" that it has
never had the ability to assert. Kason Indus., Inc. v. Component Hard-
ware Group, Inc., 120 F.3d 1199, 1203 (11th Cir. 1997) (fundamental
to laches is inexcusable "delay in asserting a right or claim"). Indeed,
the key question, for purposes of estoppel by laches, is not simply
whether there has been some delay, but whether that delay was unrea-
sonable. See Sara Lee, 81 F.3d at 461; Brittingham, 914 F.2d at 456.
Logic dictates that "unreasonable delay" does not include any period
of time before the owner is able to pursue a claim for infringement
— otherwise, a trademark owner could be punished for not bringing
a claim he had no right to bring. For this reason, we have recognized
that laches "assumes the existence of an infringement for an extended
period prior to the commencement of litigation." See Sara Lee, 81
F.3d at 462.
Thus, regardless of when the trademark owner initially discovers
the use of a similar mark, action against the infringing user is not nec-
essary until, in light of the circumstances, the "right to protection
ha[s] clearly ripened." Id.; see 5 McCarthy at § 31:19 ("[O]ne cannot
be guilty of laches until his right ripens into one entitled to protection.
For only then can his torpor be deemed inexcusable." (internal quota-
tion marks omitted) (alteration in original)). Instead of focusing on
when the trademark owner first knew that another party was using its
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mark, the court should be trying to determine the time at which the
use became infringing and the time at which the owner should have
known it: "[T]o the extent that a plaintiff’s prior knowledge may give
rise to the defense of estoppel by laches, such knowledge must be of
a pre-existing, infringing use of a mark." Sara Lee, 81 F.3d at 462;
see Brittingham, 914 F.2d at 456 (explaining that, in determining
whether laches applies, a court should ordinarily consider "whether
the owner of the mark knew of the infringing use" (emphasis added)).
Accordingly, "unreasonable delay" begins at "the time at which the
[trademark owner] knows or should know she has a provable claim
for infringement." Kason Indus., 120 F.3d at 1206; see Kellogg Co.
v. Exxon Corp., 209 F.3d 562, 569 (6th Cir. 2000) ("Implicit in a find-
ing of laches . . . is the presumption that an underlying claim for
infringement existed at the time at which we begin to measure the
plaintiff’s delay."). The owner’s mere knowledge that he might have
an infringement claim at some future date is not sufficient to trigger
the period of unreasonable delay required for estoppel by laches. See
Profitness Phys. Therapy Ctr. v. Pro-Fit Orthopedic & Sports Phys.
Therapy, 314 F.3d 62, 70 (2d Cir. 2002) ("[A] plaintiff should not be
obligated to sue until its right to protection has ripened such that
plaintiff knew or should have known, not simply that defendant was
using the potentially offending mark, but that plaintiff had a provable
infringement claim against defendant.").
The district court, therefore, mistakenly measured the period of
delay from Texas WAB’s first knowledge of Virginia W-A-B’s use
of the mark without considering whether such use of the mark was an
infringing use that required action by Texas WAB. Mere use of a
mark that is similar or even identical to a registered trademark does
not a fortiori establish infringement. The "keystone of infringement"
is "the likelihood of confusion." Sara Lee, 81 F.3d at 462 (internal
quotation marks omitted); see 15 U.S.C.A. § 1114(1)(a) and (b) (West
1997 & Supp. 2003) (infringement of a registered mark requires use
that "is likely to cause confusion, or to cause mistake, or to deceive").
Although the district court observed that "the use of the names What-
A-Burger and Whataburger is confusing," 256 F. Supp. 2d at 484,
similarity of the conflicting names is but one of many factors relevant
to a determination of whether the concurrent use of the marks creates
a likelihood of confusion. An informed analysis of whether the likeli-
hood of confusion exists cannot rest solely upon a "side-by-side"
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comparison of the marks without regard to the marketplace in which
they are used. Meridian Mut. Ins. Co. v. Meridian Ins. Group, Inc.,
128 F.3d 1111, 1115 (7th Cir. 1997) ("[W]hen the public does not
encounter the two marks together, it is inappropriate to focus on
minor stylistic differences to determine if confusion is likely."). Usu-
ally, a court should consider a number of factors relating to the way
in which the competing marks operate in the workplace. See Pizzeria
Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir. 1984) (providing
a non-exclusive list of seven factors). For example, courts have con-
sidered "the similarity in scope of the parties’ geographic markets" in
deciding whether a likelihood of confusion exists. Kellogg, 209 F.3d
at 572; see Profitness Therapy, 314 F.3d at 69-70 (comparing the ter-
ritorial markets in which the parties operated); Thomas & Betts Corp.
v. Panduit Corp., 138 F.3d 277, 296 (7th Cir. 1998) (considering "the
area and manner of concurrent use" of the trademarks). Another con-
sideration when "the goods or services are sold in different territories"
is "the extent to which the senior user’s designation is known in the
junior user’s territory." 3 McCarthy at § 23:19. The fact that Texas
WAB and Virginia W-A-B operate in separate territorial markets —
and that Texas WAB professes no plans to enter the Virginia market
— raises significant doubt that Virginia W-A-B’s use of the mark
creates the "likelihood of confusion" required for infringement.7
In Sara Lee, we explained that a trademark owner "has no obliga-
tion to sue," i.e., his right to protection has not ripened, "until the like-
lihood of confusion looms large." Sara Lee, 81 F.3d at 462 (internal
7We do not mean to suggest that the likelihood of confusion analysis
begins and ends with geographical territories, particularly when "the rep-
utation of the senior user’s mark has been carried into a trade area prior
to the junior user’s adoption and use," 4 McCarthy at § 26:18, which is
not uncommon in cyberspace. Nevertheless, the nature of the product is
significant in determining whether the consuming public is likely to be
confused, and geography has a significant impact on this analysis with
respect to consumers who frequent establishments operated by Virginia
W-A-B. There is no evidence — nor can we imagine any — that con-
sumers are currently likely to be confused about whether the burgers
served by Virginia W-A-B come from Texas or Virginia. By contrast,
there might be great confusion generated by someone who erects a rep-
lica of a McDonald’s restaurant in a geographically remote area and
begins serving similar food.
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quotation marks omitted). Unlike this appeal, Sara Lee presented a
"progressive encroachment" fact pattern, wherein the defendant — the
infringing user — "either gradually edges closer and closer in trade-
mark similarity or product line operations or else escalates its volume
or scale of operations so as to create a higher profile." 5 McCarthy
at § 31:18. The question in such a case is this: at what point does the
defendant’s expansion create a sufficient likelihood of confusion to
trigger the registered owner’s obligation to sue? In the progressive
encroachment context, a requirement obligating the owner to sue at
the first sign of a potentially infringing use "would foster meritless lit-
igation." Profitness Therapy, 314 F.3d at 70. The owner would likely
be "rushe[d] immediately into litigation . . . [with] little or no evi-
dence of actual confusion and real commercial damage." Sara Lee, 81
F.3d at 462 (internal quotation marks omitted).
In this case, of course, if anyone is expanding the scope of its oper-
ations, it is the registered owner rather than the junior user. The prin-
ciples underlying our decision in Sara Lee, however, are controlling
here: (1) delay is measured from the time at which the owner knew
of an infringing use sufficient to require legal action; and (2) legal
action is not required until there is a real likelihood of confusion.
Even if Texas WAB sought to enjoin Virginia W-A-B from operating
its establishments in Virginia under the name What-A-Burger, it
would not be able to do so on this record. Although "a senior federal
registrant has superior priority" which extends nationwide, "there is
no likely confusion for a court to enjoin unless and until the senior
user shows a likelihood of entry into the junior user’s trade territory."
4 McCarthy at § 26:33. "[T]he injunctive remedy does not ripen until
the registrant shows a likelihood of entry" into the territory in ques-
tion. Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc., 43
F.3d 922, 932 (4th Cir. 1995) (second emphasis added); see Armand’s
Subway, Inc. v. Doctor’s Assocs., Inc., 604 F.2d 849, 849-50 (4th Cir.
1979) (explaining that even though the owner of a registered trade-
mark has an exclusive right of use that enjoys nationwide protection,
"the protection is only potential in areas where the registrant in fact
does not do business" and that "[a] competing user could use the mark
there until the registrant extended its business to the area"). In such
a scenario, "a likelihood of confusion flows directly from the proof
of likelihood of entry by the registrant." 4 McCarthy at § 26:34.
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There is nothing in this case to indicate a likelihood of entry into
the local Virginia market by Texas WAB (in fact, Texas WAB specif-
ically disavows any such intention) or that the likelihood of confusion
otherwise looms large, triggering the obligation for Texas WAB to
initiate an action for trademark infringement. And, of course, the dis-
trict court made no finding of an infringing use upon which to base
its application of laches. Accordingly, we conclude that there was no
unreasonable delay that would prevent Texas WAB from asserting its
counterclaim for declaratory relief, and the application of laches was
inappropriate.
B. Acquiescence
As an additional basis for estopping Texas WAB from pursuing
declaratory relief in its counterclaim, the district court held that Texas
WAB acquiesced in the use of the What-A-Burger designation.
Acquiescence is the active counterpart to laches, a doctrine based on
passive consent. Both doctrines "connote consent by the owner to an
infringing use of his mark," but "acquiescence implies active con-
sent." Sara Lee, 81 F.3d at 462. Under this doctrine, which is encom-
passed within 15 U.S.C.A. § 1115(b)(9), "[a]n infringement action
may be barred . . . where the owner of the trademark, by conveying
to the defendant through affirmative word or deed, expressly or
impliedly consents to the infringement." Sara Lee, 81 F.3d at 462.
Our analysis here need not be extended. As with laches, acquiescence
assumes a "preexisting infringement" that "requires that the trademark
owner knowingly consent — albeit actively — to the defendant’s
infringing use of the mark." Id. at 463; see also Kellog, 209 F.3d at
569 ("Implicit in a finding of . . . acquiescence is the presumption that
an underlying claim for infringement existed . . . ."). As explained
above, we perceive nothing in the record to suggest an infringing use
by Virginia W-A-B to which Texas WAB actively consented.
III.
In accordance with the foregoing, we affirm the portion of the dis-
trict court’s order that recognizes Texas WAB as the rightful owner
of the trademark WHATABURGER. We reverse the entry of sum-
mary judgment for Virginia W-A-B and remand for entry of judgment
in favor of Texas WAB on its claim for declaratory judgment. Finally,
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we note that part of the relief sought by Virginia W-A-B was a decla-
ration that it had not infringed on Texas WAB’s registered trademark.
In light of our opinion, and as Texas WAB acknowledges, there has
been no infringement of its mark, the district court’s order on remand
should reflect that Virginia W-A-B has not infringed on the trademark
at issue in this case.
AFFIRMED IN PART, REVERSED IN PART
AND REMANDED
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