In 1974, Lishon’s Inc. began naming its music and video stores PEACHES. In 1976, Lishon’s registered the trademark. By 1980, Lishon’s operated 42 stores in 20 states, not including Louisiana. Since 1975, Entertainment Repertoire Association, Inc. (ERA) (defendant) operated music and video stores in Louisiana under the name PEACHES. When Lishon’s registered the mark, ERA used the mark in seven Louisiana parishes and advertised with the mark outside these territories. When Lishon’s discovered ERA was using the PEACHES mark, Lishon’s sent a cease-and-desist letter demanding that ERA stop using the PEACHES mark in Louisiana. ERA replied that when the PEACHES mark was adopted, ERA did not know Lishon’s used the trademark. After receiving no response, ERA kept using the mark and, by 1980, had expanded to six stores in Louisiana. In 1981, Lishon’s filed for bankruptcy and sold the PEACHES trademark to Peaches Entertainment Corporation (PEC) (plaintiff). PEC brought a trademark-infringement suit against ERA seeking an injunction and damages. At the time of the lawsuit, ERA operated only one store in Orleans Parish. ERA argued that it was a junior intermediate user entitled to exclusive use of the trademark PEACHES within the territory it had established prior to the mark’s registration. The district court agreed and determined ERA’s trade territory by relying on ERA’s zone of reputation. Therefore, the district court held that at the time Lishon’s registered the mark, ERA’s use of the mark covered seven parishes in Louisiana where sales were made, even though ERA’s advertisements expanded beyond this area. However, because the district court limited ERA’s use of the mark to only two parishes within ERA’s seven-parish trade territory, ERA appealed. PEC also appealed the district court’s area restriction and argued that ERA’s use of the mark must be limited to the one store in operation at the time of the lawsuit.