Opinion
CIVIL NO. SA-98-CA-121-DWS.
June 16, 1998.
MEMORANDUM AND RECOMMENDATION
Plaintiff Kensington Partners ("Kensington") is a partnership that owns a large development named "Cordillera" located approximately 20 miles outside of Vail, Colorado. In addition to selling residential home sites in Cordillera, Kensington offers services related to development and sale of residential property. Also, as part of the Cordillera development, Kensington uses its service mark and trade name "Cordillera" in operating a resort hotel, spa, restaurants, country club, golf and tennis resort services. Kensington seeks to enjoin defendant Cordillera Ranch, Ltd. ("CRL") from using the name "Cordillera" in its residential development named "Cordillera Ranch," which is located approximately 20 miles outside of San Antonio, Texas. Kensington contends that CRL's use of the name "Cordillera Ranch" infringes upon Kensington's Cordillera mark under 15 U.S.C. § 1125(a) because such use is likely to confuse the public into believing that CRL's services emanate from Kensington.
Before the Court is plaintiff's motion for preliminary injunction. Docket no. 2. The Court held an extensive hearing on the motion for preliminary injunction. Because of its undue delay in protecting against the use of the Cordillera mark, Kensington has failed to show that it faces immediate and irreparable injury. The Court also believes that Kensington cannot show that it is likely to succeed on the merits because of its inability to show a likelihood of confusion between its mark and CRL's mark. As a result of Kensington's failure to satisfy these prerequisites to injunctive relief, the undersigned will recommend that the motion for preliminary injunction be denied.
Factual Background
The Court held a hearing on May 21-22, 1998, in regard to the motion for preliminary injunction. From testimony presented and the documents admitted in evidence, the Court makes the following factual findings.
1. Characteristics of Kensington's Development — "Cordillera"
Cordillera is a 7000-acre development located approximately 20 miles outside of Vail, Colorado. Cordillera consists of 1100 home sites of various sizes, 3 golf courses, a 56-room resort hotel and a country club. In order to sell real estate and golf memberships, Kensington has used the Cordillera service mark and trade name since 1989 to provide numerous services: real estate brokerage; sales and management services of resort and residential communities; real estate development services; planned community development services; residential and commercial construction services; sports facilities services; health club/spa services; resort hotel services; restaurants; golf and tennis resort services. Construction and property management services are profitable operations, but real estate development is Kensington's greatest money maker. The lodge and spa are not profitable operations for Kensington, but they are used to create an identity shield and to provide a way for people to experience the Cordillera community before buying a home site.
Kensington has actively marketed Cordillera in the United States as a premier residential community primarily for those who desire a very up-scale second home near a mountain resort area. Kensington's marketing program consists of six categories: 1) advertising, 2) public relations, 3) direct mail, 4) broker contacts, 5) internet advertising, and 6) word of mouth advertising. Since 1990, Kensington has spent over nine million dollars in marketing, with six million dollars of that being spent in the past four years. In Colorado, Kensington's advertises specific Cordillera properties, and provides specific locations and prices. In order to comply with the most restrictive state laws regarding real estate offerings, Kensington's advertisements of Cordillera in nationwide publication take an indirect approach. Such advertisements focus on Cordillera's resort, spa and golf facilities, and briefly mention that they are part of a residential development. Such ads also provide a means for getting additional information, which could include specific information about Cordillera's residential properties.
In addition to amounts paid to third parties for advertising, those figures include labor costs incurred in the operation of the hotel, spa and golf courses. Kensington includes those costs as part of its marketing expenses because it offers those services as an indirect means of encouraging visitors to buy homesites at Cordillera.
Cordillera has received substantial recognition for its facilities, which helps promote Cordillera's resort-community image. Links magazine, a national golf magazine, ranked Cordillera in 1990 as having one of the top 75 golf courses, and Rolex ranked it in the top 100. Cordillera's list of awards also includes recognition for the quality of its greens, and a silver medal from Golf magazine, another national golf magazine. Additionally, Cordillera was the location of Shell's Wonderful World of Golf, which was aired worldwide on a 1 1/2 hour program on ESPN. To a lesser extent, Cordillera has received recognition for its resort hotel, spa and restaurant facilities. In conjunction with the recognition for its golf, resort hotel, spa and restaurant facilities, Kensington used print advertisements to support the image created by such awards.
In addition to national advertising of Cordillera, Kensington uses other forms of marketing to reach its target market in Texas. Kensington has advertised in the Houston Chronicle on three occasions, with June 1996 as the most recent advertisement. Kensington maintains a list of 4000 names of prospective purchasers, 25% of which are Texas residents, that it uses for direct mail marketing. The Texas residents on the list receive mailings 8 to 12 times each year, with half of all mailings being real estate offerings. Kensington maintains broker contacts through Sotheby's, which provides Kensington with a relationship with four real estate brokerage firms in Dallas, Houston, San Antonio and Austin. Each of the four Texas Sotheby's locations receive a "fulfillment package" that provides information on specific real estate properties, and each Sotheby's agent is authorized to sell Cordillera properties as a result of the relationship between Kensington and Sotheby's. Kensington also maintains an interactive web page on the internet. Through that medium, real estate properties are offered for sale.
Kensington directs its marketing efforts to its target market, which ranges from the rich to very rich. In specific terms, Kensington's target market comprises those household with an annual income of $250,000 and over, with a net worth of $1 million and over. The largest age-group of buyers is the 45-55 age group, whereas the 55-65 age group is the next largest age-group.
Kensington has sold approximately 540 properties at Cordillera for a total of approximately $440 million. The average price for property in Cordillera is approximately $660,000, with the lowest priced home site at $169,000, the lowest priced home at $450,000, and the most expensive home at $2 million. There are 290 homes in Cordillera, with 30 occupied by year-round residents. Thus, approximately 90% of the homes are used as second homes. Sixty-two properties have been sold to Texas residents for a total amount over $53 million. Thus, sales to Texas residents is just over 10% of sales, with an average price per property over $800,000.00.
2. Characteristics of CRL's Development — "Cordillera Ranch"
Cordillera Ranch is a residential development that is located approximately 20 miles outside of San Antonio and is approximately 4000 acres in size. Cordillera Ranch is a new development — the first sale of a home site in the first unit of the development occurred in April 1997. By the date of the hearing, 178 of the approximately 220 properties in the first unit have already sold. The plan for the development includes seven units with approximately 800 total home sites.
Cordillera Ranch is marketed as a location that provides a classic, upscale, Hill Country lifestyle. Based on the demographics of the buyers, Cordillera Ranch is a residential community for the affluent. The prices for home sites range from $40,000 to $150,000, with the average price for a home site at $75,000. The price of the average home at Cordillera Ranch ranges from the high $200,000's to the low $300,000's. Total sales of home sites has totaled over $13.7 million in the 14-month period since the opening of Cordillera Ranch. CRL's survey of Cordillera Ranch property owners reveals the following demographics: 30% earn incomes in excess of $200,000; 18% earn incomes in excess of $350,000; 21% have a net worth in excess of $1 million; and 24% have a home valued in excess of $300,000. Ninety percent of the current property owners of Cordillera Ranch are commuters to San Antonio that have purchased their property as the site of their primary residence.
As a result of the large percentage of sales to San Antonio commuters, CRL markets its development primarily to the San Antonio area. CRL's advertisements are placed in the newspapers and magazines of San Antonio and surrounding communities. CRL has advertised regionally in newspapers serving Houston and Dallas, along with an advertisement in the southwest edition of the Wall Street Journal. Thus, some of CRL's advertisements have reached some of the same areas that Kensington targeted with its advertisements. However, CRL stopped regional advertisements when it became apparent that San Antonio commuters were the target market for property in Cordillera Ranch.
Unlike the Cordillera development, the Cordillera Ranch development plan does not include a resort hotel, spa or country club. CRL is in the process of determining if sufficient water can be obtained for irrigating a proposed golf course that may also carry the name "Cordillera." If a sufficient water source is not located, then the golf course will not be included in the development of Cordillera Ranch.
3. Cordillera Ranch Enters The Market
In May of 1996, Mr. David A. Hill, president of Cordillera Development Corporation, which is a partner of CRL, decided to name CRL's development "Cordillera Ranch." On July 15, 1996, CRL reserved its name and organized its business. In the Fall of 1996, as part of the development process, CRL showed conceptual plans to the authorities in Kendall County, where Cordillera Ranch is located. On October 15, 1996, CRL filed an application for intent to use with the U.S. Patent and Trademark Office, which provided a public record that CRL intended to use the name Cordillera Ranch for its development. That application also identified the types of business that CRL planned to engage in.
On January 9, 1997, Kensington discovered CRL's use of the name "Cordillera Ranch" by conducting an investigation regarding the use of the name "Cordillera" by a third party in conjunction with an offering of real estate services in the Vail area. On January 15, 1997, a law firm retained by Kensington sent a "cease and desist" letter to CRL. On January 24, CRL's counsel responded to the letter and sent information to Kensington. Hearing Exh. D19. On February 3, 1997, CRL's counsel wrote a second letter to Kensington's trademark counsel and indicated that it still needed information. Hearing Exh. D20. On March 5, 1997, Kensington's counsel sent information to CRL's counsel and demanded that CRL stop using the "Cordillera" mark. Hearing Exh. D21. On April 15, 1997, Kensington's counsel wrote CRL's counsel and notified them that Kensington was still waiting for a response. Hearing Exh. D22. Then, on April 23, 1997, counsel for CRL sent Kensington's counsel that CRL has used the "Cordillera" trademark and will continue do so. Hearing Exh. D23. During the hearing, that letter was repeatedly referred to as the letter that "kicked sand in Kensington's face" to put them on notice of CRL's use of the "Cordillera" name.
Meanwhile, CRL began advertisements for Cordillera Ranch, followed by sales of home sites. The first advertisement for home sites in Cordillera Ranch appeared on April 1, 1997, in a magazine for a San Antonio suburb. The first contracts for the sale of such home sites were written that month, with closings that started one month later.
Kensington had no contact with CRL after the April 23 letter until Kensington filed this suit on February 12, 1998. Then, on February 17, 1998, Kensington filed its motion for preliminary injunction. By the date that Kensington filed suit, CRL had already closed on the sale of 96 properties in Cordillera Ranch. Hearing Exh. D32.
Preliminary Injunction
A party requesting a preliminary injunction must establish four criteria in order to be entitled to the requested relief:
1. A substantial likelihood that plaintiff will prevail on the merits,
2. A substantial threat that plaintiff will suffer irreparable injury if the injunction is not granted,
3. The threatened injury to plaintiff outweighs the threatened harm the injunction may do to defendants, and
4. The granting of the preliminary injunction will not disserve the public interest.Canal Auth. of Florida, v. Callaway , 489 F.2d 567, 572 (5th Cir. 1974). A preliminary injunction is an extraordinary remedy. Id . Also, the denial of a preliminary injunction is proper if the movant has failed to sufficiently establish any one of the four criteria. Black Fire Fighters Assoc. of Dallas v. City of Dallas, Tex ., 905 F.2d 63, 65 (5th Cir. 1990). Ordinarily, a preliminary injunction is fashioned to maintain the status quo between the parties. "Mandatory preliminary relief, which goes well beyond simply maintaining the status quo pendente lite, is particularly disfavored, and should not be issued unless the facts and law clearly favor the moving party." Martinez v. Mathews , 544 F.2d 1233, 1243 (5th Cir. 1976). Thus, a request for a preliminary injunction that requires action by the respondent, as opposed to prohibiting certain action, must face closer scrutiny.
Discussion
A. Likelihood of Success On The Merits
In order to obtain an injunction for trademark infringement, the movant must prove the following:
1. The name that the movant seeks to protect is eligible for protection;
2. The movant is the senior user of the mark; and
3. There is a likelihood of confusion between the movant's mark and the infringing mark that will actually cause the movant irreparable injury for which there is not adequate legal remedy.Union Nat'l Bank of Tex, Laredo, Tex. v. Union Nat'l Bank of Tex., Austin, Tex ., 909 F.2d 839, 844 (5th Cir. 1990).
1. Protectable Mark
The evidence shows that Kensington does not have a protectable mark. Kensington Management Corporation ("KMC"), which is not a party to this case, filed a Certificate Of Assumed Or Trade Name with the Secretary of State in Colorado on May 11, 1989, using the term "Cordillera" in the trade name. Hearing Exh. 17. According to Mr. Gerald Engle, Kensington's managing partner, that was the first assumed name filing regarding the use of "Cordillera" by an entity related to the Colorado development. Evidence presented at the hearing shows that Kensington and KMC entered into a Service Mark Licensing Agreement on July 22, 1988. Hearing Exh. D29. Under that agreement, however, Kensington is the licensor that: 1) warranted that it is the owner of all right, title and interest in and to the service mark "Cordillera"; and 2) granted KMC a nonexclusive license to use the "Cordillera" mark. Also, that agreement was signed by Mr. Engle, who began working for Kensington as a sales representative in 1990. On cross-examination, he admitted that the written license agreement was created after a discovery request was sent by CRL. Also, Mr. Engle stated that the written license agreement was simply to memorialize the oral license agreement between Kensington and KMC. When asked why it states that it was entered into on July 22, 1988, he stated that was the date that KMC began using the name. The written license agreement does not establish that Kensington has a protectable mark because Mr. Engle did not work for Kensington on July 22, 1988. More important, KMC filed the assumed name certificate, so KMC should have been the licensor that granted Kensington a license to use the name. Since no other evidence was presented on this issue, Kensington failed to show that it, rather than KMC, has a protectable mark.
2. Senior User
Kensington started using the name "Cordillera" several years before CRL began using the name "Cordillera Ranch." Therefore, Kensington is the senior user.
3. Likelihood of Confusion
The "likelihood of confusion" factor is the most important because infringement occurs only when there is a likelihood of confusion between the marks at issue. Sunbeam Products, Inc. v. West Bend Co ., 123 F.3d 246, 257 (5th Cir. 1997), cert. denied , ___U.S. ___, 118 S.Ct. 1795 (1998). In order to determine if a likelihood of confusion exists, the court must apply the "digits of confusion" test, which involves the weighing of the following factors:
1. Similarity of the products or services;
2. Identity of retail outlets and purchasers;
3. Identity of advertising media;
4. Strength of the movant's trademark;
5. Intent of the defendant;
6. Similarity of the trademarks;
7. Actual confusion; and
8. Degree of care employed by consumers.
Sunbeam Products, Inc ., 123 F.3d at 257. No single factor is dispositive of the likelihood of confusion. Id .
a. Similarity of The Products or Services
Cordillera offers high-end vacation property, which is complimented by Cordillera's golf and tennis facilities, country club, luxury hotel and spa. In contrast, Cordillera Ranch offers property that is used mainly for building a primary residence. Cordillera Ranch has none of the services and facilities that Cordillera maintains as a vehicle for exposing people to the Cordillera community near Vail. Also, the location of the developments provides a stark contrast — Cordillera is outside of Vail and in the heart of the Rocky Mountains, whereas Cordillera Ranch is outside of San Antonio in the Texas Hill Country. Cordillera Ranch is not located near a destination resort and its market is not persons interested in buying vacation property.
Kensington contends that there is a similarity of products that Cordillera and Cordillera Ranch offer the most expensive real estate in the markets near Vail and San Antonio, respectively. When the products or services at issue are noncompeting, as they are in this case, the relevant confusion is one of sponsorship, affiliation or connection. Elvis Presley Ent., Inc. v. Capece , 141 F.3d 188, — (5th Cir. 1998). Although Cordillera Ranch offers its properties at a relatively high price, with an average price of a home site at $75,000, no evidence was presented to show that it was the most expensive real estate among other new developments in the San Antonio area.
Even if adequate evidence was presented to show that Cordillera and Cordillera Ranch each offer the premier, highest-priced real estate in their markets, it would not establish similarity. It is the location of the respective developments that distinguishes each of them and precludes a finding of similarity. It is Cordillera's remote location in the Rockies 20 miles from a well-known, year-round destination resort that differentiates it from Cordillera Ranch's location 20 miles outside of a major city. Cordillera has a resort image and markets primarily to persons interested in vacation property. Although San Antonio draws significant tourism traffic, that does not impact sales at Cordillera Ranch as 90% of property owners are commuters, contrasted with Cordillera's 90% level of second homes.
Kensington also argued that similarity in services exists as a result of the proposed golf course at Cordillera Ranch. No similarity exists on that basis because the golf course is only in the early planning stages. Although a golf course is proposed, there was no evidence produced at the hearing to indicate that Cordillera Ranch would be marketed as a golf resort. Due to the high level of ownership by San Antonio commuters, it is unlikely that Cordillera Ranch would enter the golf resort market.
Based on these distinct characteristics, which are driven by the respective locations of the real estate developments at issue, the Court finds that it is unlikely that prospective buyers of property in Cordillera Ranch would mistakenly believe that Cordillera Ranch has some affiliation with Kensington or the Cordillera development near Vail. Thus, the similarity of products or services has not been established.
b. Identity of Retail Outlets And Purchasers
Cordillera is a destination resort for golfers and vacationers. Indeed, the national advertising of Cordillera focuses on those attributes of Cordillera. In regard to the sales of home sites in Cordillera, approximately 90% of property sales are for use as a second home. In contrast, Cordillera Ranch is not a destination resort for golfers and vacationers, and 90% of property sales are to San Antonio commuters. As to these factors, Cordillera and Cordillera Ranch are diametrically opposed.
Kensington argues, however, that the identity of purchasers is the same for both because some of the purchasers of property in Cordillera Ranch are high income earners with a high net worth. Although the survey of Cordillera Ranch property owners reveals that the wealthiest purchasers would fall into Cordillera's target market, Kensington's argument fails to recognize the type of purchase that is made at the respective developments. Cordillera mainly attracts vacation property buyers from across the nation, whereas Cordillera Ranch mainly attracts San Antonio commuters. Thus, the high level income of some of the Cordillera Ranch property owners does not create an overlap in the identity of Cordillera purchasers because the predominant use of property in each development is different.
c. Identity of Advertising Media
Cordillera advertises the particulars of its real estate through Colorado publications only, with the exception of three advertisements in the Houston Chronicle. Cordillera advertises in national publications its resort and golf facilities, and such advertisements mention that those facilities are part of a residential community. In contrast, Cordillera Ranch advertises predominantly in San Antonio-area newspapers, with some advertisements in other Texas publications. Cordillera Ranch was advertised once in a regional edition of the Wall Street Journal and was advertised a few times in the Houston Chronicle. The small, isolated instances of overlap in the use of the same advertising media is insignificant because the overlap occurred in media that is not directed at the San Antonio area, which is 90% of Cordillera Ranch's target market.
Kensington stresses that advertising is only one part of its marketing effort directed at Texas. Cordillera utilizes in direct mail to 1000 Texas residents, along with broker contacts through four Sotheby's affiliates in Texas major cities. No showing was made that there is any overlap in direct mail prospects. The broker contact with the San Antonio affiliate presumably overlaps with Cordillera Ranch's broker contacts as all real estate brokers in the San Antonio area are probably aware of the sales potential for home sites at Cordillera Ranch. Kensington's representative and managing partner, Gerald Engle, testified that the broker contacts at the Sotheby's affiliates enabled Kensington to have Cordillera brochures and other information available at such locations. That small overlap is insignificant because it is not likely that a prospective Texas buyer for vacation property near Vail would initiate the search for information on such property at the San Antonio Sotheby's affiliate. Again, the type of purchase that would be made, property for vacation use versus property to build a primary residence near San Antonio, distinguishes any remote chance of overlap. Also, Mr. Engle testified that word of mouth advertising is considered to be Kensington's most important category of marketing for Cordillera. It is highly unlikely that word of mouth advertising would create any confusion.
d. Strength of The Plaintiff's Trademark
Kensington has done no study to determine the strength of its mark in Texas. Consequently, Kensington offered no evidence to show the strength of its mark in Cordillera Ranch's target market.
CRL's expert in market research, Andrew Greenwood, conducted a name awareness survey involving 400 Texas residents that make in excess of $100,000 in annual income. Of those surveyed, only four people (1%), knew that Cordillera was the name of something in Colorado. Of those four people, only one earned in excess of $200,000 in annual income. From those results, Mr. Greenwood concluded that there is not enough awareness of Cordillera to create confusion with Cordillera Ranch.
Kensington's expert, Dr. Edward Blair, who did not conduct a survey, was critical of Mr. Greenwood's research and conclusions. Dr. Blair stated that Mr. Greenwood should have conducted a confusion survey rather than an awareness survey. It is true that Mr. Greenwood made a conclusion regarding confusion based on the level of awareness shown in the study, but he testified that there must be awareness before there is confusion. Dr. Blair did not describe the difference between an awareness survey and a confusion survey. Dr. Blair admitted that an awareness survey may be an appropriate vehicle to determine the strength of Kensington's Cordillera trademark. Dr. Blair also opined that the survey pool should have been limited to Cordillera's target market, which is $250,000 in annual income and net worth in excess of the $1 million. The Court disagrees. The motion for preliminary injunction states that the prospective purchasers are the same for each development. Also, in Amstar Corp. v. Domino's Pizza, Inc ., the Fifth Circuit opined that the appropriate survey pool should include a "fair sampling of those purchasers most likely to partake of the alleged infringer's goods and services." 615 F.2d 252, 264 (5th Cir. 1980). Thus, if Cordillera's target market would have been used, then no conclusion could be made regarding the awareness among those in Cordillera Ranch's target market of the Cordillera development in Colorado. Therefore, there is not significant awareness of Cordillera's trademark in Cordillera Ranch's target market.
To some degree, that statement in the motion is supported by the evidence adduced at the hearing. Mr. Engle testified that the target market for Cordillera's lodge consists of those persons who earn an annual income in excess of $100,000. The golf facilities and two of Cordillera's restaurants have the same target market as the lodge.
Another holding in the Amstar Corp . case provides additional guidance for determining the strength of a trademark. The Amstar Corp . case noted that strong marks have a wide scope of protection, whereas weak marks are accorded much less protection. Amstar Corp . 615 F.2d at 259. The Amstar Corp. case held that extensive third-party uses of the disputed mark at issue were entitled to great weight in the determination of whether the disputed mark was strong or weak. Id . at 260. In our case, there is evidence of substantial use of the name "Cordillera" by various businesses throughout the nation. CRL presented evidence of 33 third-party uses of the name "Cordillera," with several uses in Colorado. Hearing Exh. D24. Some of the uses of the "Cordillera" name have been in conjunction with real estate and construction services, which are some of the same types of services that Kensington offers under the "Cordillera" name. Hearing Exh. D14. Therefore, as a result of the substantial third-party use of the "Cordillera" name, the Court finds that strength of Kensington's "Cordillera" mark is weak, thus entitling it to a narrow scope of protection.
e. Intent of The Defendant
Mr. David Hill, president of Cordillera Development Corporation, which is a partner of CRL, played golf at Cordillera several times since 1995. Thus, Mr. Hill was quite aware of Cordillera before CRL began using the name "Cordillera Ranch." Mr. Hill's prior knowledge of Cordillera is not, however, dispositive of this factor. See El Chico, Inc. v. El Chico Cafe , 214 F.2d 721, 726 (5th Cir. 1954) (knowledge of a senior user's mark does not foreclose inquiry into good faith). Instead, Kensington must show that CRL adopted the Cordillera name with the intent of deriving benefit from the benefit from the reputation of Kensington. Sunbeam Products, Inc ., 123 F.3d at 258.
Mr. Hill testified that he would have reconsidered the use of the "Cordillera" name if there was confusion between Cordillera and Cordillera Ranch. He reasoned that if his target market was under the impression that the developments were similar, then it would keep away prospective buyers rather than stimulate traffic. That is the extent of the direct evidence of intent.
In July of 1996, Mr. Hill obtained a legal opinion that CRL could adopt the name "Cordillera Ranch" without infringing upon Kensington's common law trademark of "Cordillera." Hearing Exh. D33. Kensington contends that that opinion cannot serve as the basis of a finding of good faith because it assumed that Cordillera has minimal contacts in and with Texas and does not have a marketing operation in Texas. Yet, as discussed previously, Cordillera and Cordillera Ranch are not similar enough to cause confusion, the identity of the purchasers is different, and the identity of the advertising media is different.
In an attempt to show that CRL had an intent to deceive, Kensington contends that Mr. Hill's application for trademark registration indicates that he had no knowledge of anyone that had a right to use the Cordillera mark. However, the declaration that is a part of that application simply states that Mr. Hill is unaware of any other use of a mark that causes confusion. Hearing Exh. P-4. Also, Mr. Engle filed a similar application 13 months later. Hearing Exh. D-25. These applications and their supporting declarations are merely evidence of the applicants' belief. As such, they are not determinative of this issue. Upon consideration of other evidence presented at the hearing, the Court finds that CRL's use of the name "Cordillera Ranch" was not done with the intent of deriving benefit from the benefit from the reputation of Kensington.
f. Similarity of The Trademarks
Kensington's mark uses the name "Cordillera" in all capital letters with a fanciful bird design above it. CRL's mark uses the name "Cordillera" in all capital letters, with the "C" and the "A" being in large capitals and the rest in smaller capitals. Below the name "Cordillera" in CRL's mark is the word "ranch" in very small capital letters. In the middle of CRL's mark is a 5-point star within a large "C," all in a different color or contrast in order give the impression that the "C" and the star are in the background.
Kensington contends that the two marks at issue are virtually identical because the dominant portion of each mark is the term "Cordillera." Kensington also argues that the use of the descriptive term "ranch" in CRL's mark fails to distinguish it from Kensington's mark because one of the three planned communities at the Cordillera resort has been called "The Ranch at Cordillera" since 1992.
The use of the name "Cordillera" does not establish similarity, in and of itself. Also, Kensington has failed to present evidence of a logo for "The Ranch at Cordillera," so the Court is left to assume that the same logo is used throughout the Cordillera resort. Therefore, the planned community of "The Ranch at Cordillera" does not preclude the Cordillera Ranch logo from being distinguished from the Cordillera logo because Kensington's development is only called "Cordillera."
As pointed out by Kensington, the Fifth Circuit established an "eyeball test" for the similarity of design. Exxon Corp. v. Tex. Motor Exchange of Houston Inc ., 628 F.2d 500, 504 (5th Cir. 1980). Under that test, "[t]he similarity of design is determined by considering the overall impression created by the mark as a whole rather than simply comparing individual features of the marks." Id . at 504-505. Upon consideration of the marks, the Court finds that the overall impression created by the Cordillera Ranch mark, as a whole, is not similar to the Cordillera mark.
g. Actual Confusion
Mr. Gerald Engle, Kensington's managing partner, was asked by some Cordillera property owners if Kensington had anything to do with Cordillera Ranch in San Antonio. Mr. Tom Northington of Cordillera Ranch mentioned two individuals who casually expressed an awareness of Kensington's resort. The evidence at the hearing suggests that one of those two individuals was an investigator for Kensington. Those short-lived encounters are not entitled to significant weight:
Perhaps as important as the number of instances of confusion are the kinds of persons confused and the degree of confusion. "Short lived confusion or confusion of individuals casually acquainted with a business is worthy of little weight," (citation omitted) while chronic mistakes and serious confusion of actual customers are worthy of great weight.Homeowners Group, Inc. v. Home Marketing Specialists, Inc ., 931 F. 2 d 1100, 1110 (6th Cir. 1991). In its reply brief, Kensington argues that actual confusion is likely to result from the similarity of the communities and their positioning in their relative markets. As discussed previously, Cordillera is a resort community that markets property that is primarily used as vacation property, whereas Cordillera Ranch is simply a residential community that mainly attracts San Antonio commuters. Therefore, the Court finds that the evidence presented regarding confusion fails to establish a likelihood of confusion in potential buyers of property in Cordillera Ranch.
h. Degree of Care Employed By Consumers
At issue are the sales of home sites that fall into to the price category of expensive and very, very expensive. Courts recognize that there is less likelihood of consumer confusion when the product at issue is a more expensive item. Sunbeam Products, Inc ., 123 F.3d at 259 (consumers exercise higher degree of care when purchasing expensive household appliances). The degree of care is more significant when the contemplated purchase is that of an expensive home site. Homeowners Group, Inc ., 931 F.2d at 1111 (because [buying on selling one's property is likely the most significant transaction ever undertaken for most people, customers are likely to carefully select the provider of sales services). Also, the prospective buyers of the home sites at issue are most likely sophisticated individuals since they are high-income earners. Further, since 90% of the sold properties at Cordillera are not used for a primary residence, the buyers of home sites in Cordillera most likely employ a higher degree of care before purchasing. Therefore, the Court finds that there is a high degree of care employed by the prospective buyers of the home sites in Cordillera and Cordillera Ranch.
4. Conclusion: No Likelihood of Success On The Merits
Kensington has failed to show that it has a protectable mark. Also, based on the analysis of the digits of confusion, the Court finds that Kensington has failed to establish the likelihood of confusion between its mark and CRL's mark. Therefore, Kensington cannot show that it is likely to succeed on the merits of this case.
B. Irreparable Injury
In this case, the issue of delay in bringing suit is critical to the determination of whether Kensington faces irreparable injury from CRL's activities. Delay in bringing suit may preclude a finding of irreparable injury, which would then preclude the granting of preliminary injunctive relief. Tough Traveler, Ltd v. Outbound Products , 60 F.3d 964, 968 (2nd Cir. 1995). Delay in bringing suit undercuts the sense of urgency that ordinarily accompanies a motion for preliminary injunctive relief, unless the movant was unaware of the alleged infringement or the movant made a good faith effort to investigate the alleged infringement. Id . Although delay in moving for injunctive relief may preclude the granting of preliminary injunctive relief, it does not preclude the ultimate relief requested. Id .
The evidence shows that, on October 15, 1996, CRL filed with the U.S. Patent and Trademark Office an application showing its intent to use the name "Cordillera" in lines of business similar to Kensington's. It was not until January 9, 1997, that Kensington learned of CRL. By January of 1997, Cordillera Ranch had not been advertised and no home sites had been sold. On January 15, 1997, Kensington sent CRL a cease and desist letter, which started a series of written communications between the two companies. Those communications ended when CRL sent Kensington a letter dated April 23, 1997, wherein CRL admitted that it had used the name "Cordillera Ranch" and will continue to use the name. Kensington next made contact with CRL when Kensington filed this suit on February 12, 1998, which was followed by Kensington's motion for preliminary injunction on February 17, 1998. The Court must determine if the ten-month delay between the April 23, 1997 letter from CRL and the filing of the motion for injunctive relief precludes a finding of irreparable harm.
By the time that CRL had sent Kensington the April 23, 1997 letter, CRL had advertised Cordillera Ranch several times in San Antonio-area publications. Hearing Exh. D40. Also, CRL had entered into several contracts in April 1997 for the sale of home sites, with closing dates as early as the following month. Hearing Exh. D32. Starting at the end of April, CRL instituted a flood of advertising for Cordillera Ranch. The greatest amount of advertisements were placed in San Antonio-area publications, with 572 advertisements placed from April 7, 1997, through the filing date of this case, February 12, 1998. CRL placed 244 advertisements of Cordillera Ranch in the Houston Chronicle from April 25, 1997, through February 4, 1998. Hearing Exh. D35. CRL placed 79 advertisements of Cordillera Ranch in the Dallas Morning News from April 26, 1997, through August 6, 1997. Hearing Exh. D36.
Kensington contends that it was diligent in filing this suit. Michael Gilliland, an attorney that Kensington retained to do most of their legal work, testified that this case could not have been filed any sooner. Mr. Gilliland testified that the investigation into CRL's use of the name "Cordillera" proceeded slowly because the April 23 letter from CRL did not provide evidence of CRL's use of the name. Amazingly, Mr. Gilliland did not consider CRL's admission to be evidence of CRL's use of the name "Cordillera."
Shortly after he received the April 23 letter from CRL, Mr. Gilliland directed a New York patent firm to order an investigation into CRL's use of the "Cordillera" name. In July 1997, he hired a Texas law firm in regard to this case even though he still had "no evidence" of CRL's use of the name. In August 1997, the investigation conducted on behalf of the New York patent firm revealed no evidence of use of the name "Cordillera" by CRL. By the first week of August 1997, in addition to the admission from CRL, substantial evidence existed to prove that CRL was using the name "Cordillera." During the 3 1/2 month period between the last week of April 1997, and the first week of August 1997, CRL placed 79, 77, and 87 advertisements of Cordillera Ranch in the Dallas, Houston and San Antonio newspapers, respectively. Also during that period, closings took place on 28 sales of Cordillera Ranch home sites, which became public record at the point that the real estate documents were filed with the county in which Cordillera Ranch is located.
Mr. Gilliland testified that he was the "point-man" for investigating Kensington's claim, and that it was difficult to investigate because they did not know, at the time, where Cordillera Ranch is located. Mr. Gilliland's explanation is implausible because of the number of advertisements for Cordillera Ranch that CRL placed in three major newspapers, along with the information that was made a part of the county records regarding Cordillera Ranch. Mr. Gilliland's explanation is undermined by his admission that no one contacted CRL to ask for the location of Cordillera Ranch. Indeed, after the April 23 letter, Kensington officials had made no contact with CRL until February 1998. Mr. Gilliland could not explain what efforts were taken on behalf of the New York law firm to investigate this claim. Instead, he said he directed them to conduct an investigation and did nothing else, which is apparent given the notice that CRL provided Kensington. It would, however, have been difficult for Mr. Gilliland to explain that the investigation on behalf of the New York patent firm was performed diligently because an investigation performed on behalf of the Texas law firm hired in July of 1997, revealed in August 1997, evidence of CRL's use of the name "Cordillera."
Even after Kensington received that information in August 1997, no timely action was taken to prosecute its claim. In September 1997, Kensington obtained further evidence of CRL's use of the name "Cordillera" when Mr. Gerald Engle, Kensington's managing partner, was sent a copy of an advertisement for Cordillera Ranch by a Cordillera property owner. Yet, it was not until October 1997 that Kensington officials began to retrieve records from storage to put together the documentation they believed was necessary to file suit. Mr. Gilliland explained that this case would have been filed earlier, but their counsel had a death in the family in December. It was Kensington's inaction after April rather than December than indicates that they did not diligently prosecute their claim.
The delay exhibited by Kensington in protecting against the use of the "Cordillera" mark by a third party has been repeated in a different case. The evidence at the hearing revealed that the name Cordillera is being used in a residential development in California under the name "Cordillera Redlands." On April 14, 1998, Kensington filed suit for trademark infringement in federal court in the Central District of California. Hearing Exh. D-13. On April 30, 1998, after the grand opening of "Cordillera Redlands," Kensington filed a notice of dismissal without prejudice in that case. Hearing Exh. D-14. Mr. Gilliland explained that they would not have received an injunction from the judge that was assigned the case, so they dismissed and refiled in Colorado two weeks later. However, Kensington did not move for a preliminary injunction in that case. Despite their reasons for forum shopping, it is clear that Kensington did not diligently protect against the use of the "Cordillera" mark in that case. It should have filed for an injunction before the grand opening instead of engaging in forum shopping after the grand opening.
Based on these factors, the Court makes a credibility determination against Mr. Gilliland because of his implausible explanations for Kensington's delay in prosecution of its claim. The Court also finds that, based on Kensington's delay discussed above, Kensington does not face an irreparable injury as a result of the continued sales of property in Cordillera Ranch.
C. Balance of The Equities
It appears to the Court that the balance of the equities in this case favor the denial of the request for injunctive relief. Kensington does not face immediate, irreparable injury. Kensington's delay in prosecuting its claim negatively reflects on its severity of its injury. Kensington's delay also undermines its need for immediate relief. In cases such as this, where the movant seeks a mandatory injunction, the movant's burden is greater. Granting the requested relief would impose a tremendous burden upon CRL because it would be forced to change the name of its development rather than maintain the status quo until this case is completed. It would require CRL to completely change its business without a final resolution of this case. That burden seems too great compared to the burden on Kensington, especially in light of Kensington's failure to show a likelihood of confusion between Cordillera and Cordillera Ranch.
D. The Public Interest
Kensington argues that, in trademark cases, the public interest is subsumed within the merits of the claim. Since Kensington has failed to show that it is likely to succeed on the merits of its claim, entry of a preliminary injunction would disserve the public interest.
RECOMMENDATION
It is, therefore, the recommendation of the Magistrate Judge that Kensington's motion for preliminary injunction be DENIED.
Instructions for Service and Notice of Right to Appeal/Object
The United States District Clerk shall serve a copy of this Memorandum and Recommendation on all parties either (1) by certified mail, return receipt requested, or (2) by facsimile if authorization to do so is on file with the Clerk. Pursuant to Title 28 U.S.C. § 636(b)(1) and Rule 72(b), Fed.R.Civ.P., any party who desires to object to this report must serve and file written objections to the Memorandum and Recommendation within 10 days after being served with a copy unless this time period is modified by the district court. A party filing objections must specifically identify those findings, conclusions or recommendations to which objections are being made and the basis for such objections; the district court need not consider frivolous, conclusive or general objections. Such party shall file the objections with the clerk of the court, and serve the objections on all other parties and the magistrate judge . A party's failure to file written objections to the proposed findings, conclusions and recommendations contained in this report shall bar the party from a de novo determination by the district court. See Thomas v. Arn , 474 U.S. 140, 150, 106 S.Ct. 466, 472, 88 L.Ed.2d 435 (1985). Additionally, any failure to file written objections to the proposed findings, conclusions and recommendation contained in this Memorandum and Recommendation within 10 days after being served with a copy shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the district court. Douglass v. United Services Automobile Association , 79 F.3d 1415, 1428 (5th Cir. 1996).