U.S. District Judge Charles Breyer at a hearing in San Francisco declined to issue a temporary restraining order that would have barred the recently opened Uptown Joe's from using that name.
Breyer also instructed lawyers for the two restaurants to meet for mediation before a federal magistrate.
Original Joe's opened at 144 Taylor St. in San Francisco's Tenderloin neighborhood in 1937 and offered Italian comfort food served by tuxedo-clad waiters. Its signature dish was Joe's Special, made with eggs, onion, hamburger and spinach.
The restaurant shut down after a kitchen fire in 2007. Co-owner Marie Duggan, the daughter of the restaurant founder Tony Rodine, said the family hopes to reopen it next year and that the location has not yet been determined.
Uptown Joe's opened Nov. 11 in the Hotel Majestic at 1500 Sutter St. in lower Pacific Heights.
The Duggan family's trademark infringement lawsuit alleges that a representative of the hotel initially inquired about either reopening Original Joe's at the hotel or recreating it under the name of Uptown Joe's, allegedly with similar food and targeting the same customers.
The Duggan family refused both proposals, the lawsuit said.
Uptown Joe's attorney Kirk Freeman said outside of court that Joe is the first name of Joe Pinsonneault, whose Pinsonneault Holdings LLC owns the new restaurant.
Freeman said, "The name Joe's was not selected to create confusion with Original Joe's or to trade on its goodwill."