Opinion
SA-21-CV-00768-XR
2023-05-01
APPLIANCE LIQUIDATION OUTLET, LLC, Plaintiff v. AXIS SUPPLY CORPORATION, Defendants
Matthew Justin Badders, Drought, Drought, and Bobbitt, LLP, San Antonio, TX, Nicholas Adam Guinn, Gunn, Lee, Cave, PC, San Antonio, TX, for Plaintiff. Elin Isenhower, Pro Hac Vice, James G. Ruiz, Winstead PC, Austin, TX, for Defendants.
Matthew Justin Badders, Drought, Drought, and Bobbitt, LLP, San Antonio, TX, Nicholas Adam Guinn, Gunn, Lee, Cave, PC, San Antonio, TX, for Plaintiff. Elin Isenhower, Pro Hac Vice, James G. Ruiz, Winstead PC, Austin, TX, for Defendants. FINDINGS OF FACT AND CONCLUSIONS OF LAW Xavier Rodriguez, United States District Judge
On April 24, 2023, this Court held a bench trial and heard argument on the issues raised in this case.
Before this Court, Plaintiff alleged federal trademark infringement under the Lanham Act, 15 U.S.C. § 1125(a)(1)(a), as well as trademark infringement and unfair competition under the common law of Texas. Texas common law trademark and unfair competition claims present "essentially 'no difference in issues than those under federal trademark infringement actions.' " Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 235 (5th Cir. 2010). Resolution of the federal infringement claim is dispositive of these claims as well.
Findings of Fact
1. Plaintiff, Appliance Liquidation Outlet ("ALO") has owned and operated an appliance liquidation store in San Antonio for over two decades. Its store is located at 500 E. Carolina Street in downtown San Antonio, Texas. Id.; Trial Tr. 39:7.
2. Plaintiff's name, "Appliance Liquidation Outlet," is found on its business documentation, employee uniforms, store signage, merchandise, social media and advertising, and on the uniforms of local baseball teams that it sponsors. Plaintiff has also been featured in several local news stories. See generally id.
3. Plaintiff does not own a registered trademark in the name "Appliance Liquidation Outlet."
4. Defendant Axis opened a store at 2602 Fredericksburg Road, San Antonio, Texas 78201 which bears the name "Appliance Liquidation." Like Plaintiff, Defendant sells discounted commercial and residential appliances.
5. Defendant does not operate a website, although the name "Appliance Liquidation" appears outside the store on Fredericksburg Road. Id.
6. Defendant does not own a registered trademark using the name "Appliance Liquidation."
7. At trial, Plaintiff argued that its mark was protected and that Defendant's use of "Appliance Liquidation" confused Plaintiff's clients.
8. First, Plaintiff offered testimonial evidence that ALO has been continuously owned and operated for over two decades. Trial Tr. 5:20. Lauren Kuhn, one of Plaintiff's employees, testified that Plaintiff was the only discount appliance store in the area that utilized the name "Appliance Liquidation" or "Appliance Liquidation Outlet" until Defendant opened shop. Kuhn also expressed her industry opinion that other appliance retailers would not be called "appliance liquidation outlets," but instead go by their trade names. Id. at 135:3-10.
9. Plaintiff's owner Carlos Fraire also described Plaintiff's role in the San Antonio community. Id. at 5:24; id. 86:7-8. For example, Fraire stated that Plaintiff hosts car shows once per quarter. Id. at 5-6, 9. The company also encourages local artists to paint murals on the building's walls. Id. at 6. Plaintiff presented evidence that both news outlets and everyday consumers associate local art demonstrations and murals with Plaintiff's building and company. Plaintiff's Exh. 2 (hereinafter "P. Exh."); Trial Tr. 133:17. Finally, Fraire noted that Plaintiff regularly donates appliances to community shelters, supports two local baseball teams, and has received awards for its contributions to the community. Trial Tr. 13:1-9. Similarly, Plaintiff's name is oftentimes posted on various marquees to thank the company for its work. Id. at 14:20-21.
10. Plaintiff also provided evidence that the Bexar County consumer associates the phrase "Appliance Liquidation" with Appliance Liquidation Outlet.
11. For example, Fraire testified that when Defendant's store opened on Fredericksburg Road, bearing a large white sign with red letters reading "Appliance Liquidation," he received calls from friends and family congratulating him for opening a second location. Id. at 17:9.
12. Similarly, Kuhn testified that she regularly receives phone calls from consumers who saw ads on social media for "Appliance Liquidation" and called Plaintiff believing Plaintiff was responsible for these ads. Id. at 114:7-12; see also P. Exh. 2. Kuhn documented these calls on a physical call log which reflected customer calls from 2021 through 2023. The log reflects hundreds of calls. Id.
Kuhn explained that she frequently receives calls from customers asking about deals posted on OfferUp and Facebook marketplace (which Plaintiff does not use), holiday discounts (the type of which Plaintiff does not offer), and products that Plaintiff does not sell. Trial Tr. 142:3-10. Kuhn further stated that customers oftentimes ask to return merchandise at Plaintiff's store that they purchased at Defendant's, believing the stores to be part of the same franchise. Id. at 146:10. Customers have also asked Plaintiff to perform on warranties listed on Defendant's purchase receipts. Id. 148:11-13.
At trial, Plaintiff sought to introduce the call logs depicting calls from 2021 through the week before trial. P. Exh. 2. This log reflected customer calls about advertisements posted to social media sites, including OfferUp and Facebook Marketplace. Kuhn testified that several ads included the phrase "Appliance Liquidation" on them and that customers believed Plaintiff was responsible for posting the ads. This Court admitted the logs for the time period through June 2022, but took notice that all calls from June 2022 through April 2023 supported Plaintiff's proposition that customer confusion existed up until the beginning of trial.
13. Furthermore, Plaintiff presented several Google Reviews left on its own company page and purporting to review "Appliance Liquidation" but referenced Defendant's location and product supply. P. Exh. 8-9. Interestingly, Plaintiff's witnesses also testified to one instance where law enforcement officers came to its store trying to locate the owners of "Appliance Liquidation." Trial Tr. 150:15-22. When Plaintiff explained that the stores were not related, the officers left. Id.
Kimberly Fraire testified that she read Plaintiff's Google Reviews and noted several characteristics of comments intended for Defendant's company but posted on Plaintiff's site. For example, reviews describing products like vinyl flooring or barbeque pits (which Plaintiff does not offer) or referencing a "dark" warehouse on Fredericksburg Road (when Plaintiff's building has numerous windows and lights and is located on Carolina Street) were likely intended for Defendant's company, not Plaintiff's. Trial. Tr. 109-110.
14. Although Defendant cross-examined Plaintiff's witnesses and utilized several demonstratives—including a live demonstration of the OfferUp website and Plaintiff's trademark application for its composite mark—Defendant did not move to introduce any exhibits.
Conclusions of Law
15. This Court finds that "Appliance Liquidation Outlet" is a descriptive mark protected by federal law and the common law of Texas within Bexar County. Plaintiff has also met the four-part test justifying a permanent injunction.
Whether a mark is descriptive or generic is a question of fact, left to the factfinder. Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 234 (5th Cir. 2010) ("Whether a mark is inherently distinctive and whether it has acquired secondary meaning are questions of fact.").
16. A trademark is any word, name, symbol, device—or any combination thereof—used by a person to identify and distinguish that person's goods from those of others and to indicate the source of the goods. 15 U.S.C. § 1127. Unregistered trademarks can be valid and provide the trademark owner with the exclusive right to use that mark so long as the plaintiff "establish[es] ownership in a legally protectible mark, and . . . show[s] infringement by demonstrating a likelihood of confusion." Amazing Spaces, 608 F.3d at 235-36.
17. To receive protection, the mark must be distinctive. A distinctive trademark is either inherently distinctive or has acquired secondary meaning. Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205, 210-211, 120 S.Ct. 1339, 146 L.Ed.2d 182 (2000) (citing Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992)).
18. Whether a mark is distinctive is typically determined by its place on the spectrum outlined in Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4 (2d Cir. 1976) (identifying "suggestive," "arbitrary," "fanciful," "descriptive," and "generic" marks). See also Wal-Mart Stores, 529 U.S. at 210, 120 S.Ct. 1339 (approving of the Abercrombie test).
19. "Suggestive," "arbitrary," and "fanciful" marks are inherently distinctive. Id. This Court previously ruled that Plaintiff's mark did not fall into these categories and, thus, was not inherently distinctive.
20. Descriptive marks identify a "characteristic or quality of an article or service, such as its color, odor, function, dimensions, or ingredients." Nola Spice Designs, L.L.C. v. Haydel Enterprises, Inc., 783 F.3d 527, 539 (5th Cir. 2015). Descriptive marks may be protected if they have acquired secondary meaning. Amazing Spaces, 608 F.3d at 241-42. "Secondary meaning occurs when, in the minds of the public, the primary significance of a mark is to identify the source of the product rather than the product itself." Bd. of Supervisors for Louisiana State University Agr. & Mech. Coll. v. Smack Apparel, 550 F.3d 465, 476 (5th Cir. 2008).
21. Generic marks are those that "name [ ] a particular genus or class of which an individual article or service is but a member." Nola Spice Designs, 783 F.3d at 538.
22. Whether a mark is generic or descriptive turns on whether "consumers in fact perceive that term as the name of a class or, instead, as a term capable of distinguishing among members of the class." United States Pat. & Trademark Off. v. Booking.com B. V., — U.S. —, 140 S. Ct. 2298, 2300, 207 L.Ed.2d 738 (2020) (finding "Booking.com" was not generic because consumers did "not in fact perceive the term 'Booking.com' as a class of online hotel-reservation services, but instead associated it with a specific business). "[T]he question is, 'What do the buyers understand by the word for whose use the parties are contending?" Nola Spice Designs, 783 F.3d at 537.
Historically, the courts in this circuit have first evaluated whether a mark was descriptive or generic and, second, whether the mark had acquired secondary meaning. These steps appear to have been consolidated into a single inquiry following the Supreme Court's decision in United States Pat. & Trademark Off. v. Booking.com B. V., — U.S. —, 140 S. Ct. 2298, 2300, 207 L.Ed.2d 738 (2020). Compare Booking.com, 140 S. Ct. at 2300 (holding that whether a term is generic "depends on whether consumers in fact perceive that term as the name of a class or, instead, as a term capable of distinguishing among members of the class") with Amazing Spaces, 608 F.3d ("Secondary meaning occurs when, in the minds of the public, the primary significance of a mark is to identify the source of the product rather than the product itself.").
23. This Court finds that Plaintiff's mark is descriptive and has acquired secondary meaning within Bexar County so that "Appliance Liquidation" is associated with Plaintiff's company.
24. Separately, the individual words "appliance," "liquidation," and "outlet" may be generic. However, the "distinctiveness inquiry trains on the term's meaning as a whole, not its parts in isolation," Booking.com B. V., 140 S. Ct. at 2304, and Plaintiff offered considerable evidence that the Bexar County consumer associates the phrases "Appliance Liquidation" and "Appliance Liquidation Outlet" with its store.
25. For example, Defendant posted ads on social media sites that Plaintiff did not use, such as OfferUp and Facebook Marketplace. Defendant's ads sometimes included the phrase "Appliance Liquidation" in the body of the ad to indicate the merchant. Time and again, customers viewed these ads and flocked to Plaintiff's store seeking more information about the product.
At trial, Plaintiff presented OfferUp ad(s), some of which stated "Appliance Liquidation" in the advertisement. During cross-examination, Defendant insinuated that Plaintiff could not prove that Defendant posted these ads. However, this Court takes notice of the fact that the ad(s) stated "Appliance Liquidation" and that Defendant did not refute that it posted these ads.
Evidence indicated that Defendant's advertisements lacked any customer contact information so that when consumers searched "Appliance Liquidation" on the internet, Plaintiff's store appeared at the top of their search results. At several points Defendant attempted to argue that any customer confusion was Plaintiff's fault because Plaintiff paid for Google advertising. This Court is not persuaded by this argument. Plaintiff cannot be faulted for its advertising strategy, especially when Defendant's advertisements and in-person sales strategy oftentimes left its customers without a telephone number or customer service representative. It seems clear that Defendant's name coupled with its complete lack of service infrastructure confused customers and herded them to Plaintiff's doorstep where Plaintiff was left to deal with any fallout.
26. The association between Plaintiff and Defendant was not limited to online shoppers. Indeed, evidence indicates that customers who purchased items at Defendant's store later traveled to Plaintiff's warehouse to return products or ask about warranties. This indicates that consumers perceived "Appliance Liquidation" as connected to Plaintiff's store and its mark "Appliance Liquidation Outlet."
27. Therefore, the evidence at trial shows that the Bexar County consumer associates the phrase "Appliance Liquidation" with Plaintiff's mark, "Appliance Liquidation Outlet." See Booking.com, 140 S. Ct. at 2300 (concluding that even "generic.com" could be eligible for trademark protection, depending on the consumer perspective); Nola Spice Designs, 783 F.3d at 537.
28. Successful trademarks suits must also show a likelihood of confusion. Amazing Spaces, 608 F.3d at 235-36. Plaintiff's evidence that consumers associate "Appliance Liquidation Outlet" with "Appliance Liquidation" also supports this Court's finding that Defendant's name caused actual confusion among consumers. Additionally, Plaintiff presented a log of customer calls, Google Reviews, and client testimony indicating instances of actual confusion. See P. Exh. 2-3; Trial Tr. 105-110 (Kimberly Fraire testifying that Google Reviews often indicate the reviewer intended to comment on Defendant's store); id. 180-190 (testimony of customer Bradley Flume). This evidence demonstrates that multiple Bexar County consumers were confused by Defendant's business and believed it to be part-and-parcel of Plaintiff's.
29. In conclusion, Plaintiff has succeeded on its claim for federal trademark infringement under the Lanham Act, 15 U.S.C. § 1125(a)(1)(a). Because Texas common law claims for trademark infringement and unfair competition utilize the same standards, these claims succeed as well.
Remedy
30. Plaintiff seeks monetary damages in the amount of $55,000, attorney's fees, and costs, as well as a permanent injunction enjoining Defendant from using "Appliance Liquidation" in its name.
31. Plaintiff cannot recover monetary damages because it failed to itemize its damages in accordance with its obligations under Federal Rule of Civil Procedure 26(a)(1)(iii) (requiring disclosure of "a computation of each category of damages claimed by the disclosing party . . . including materials bearing on the nature and extent of injuries suffered"). Plaintiff also failed to provide—in discovery or at trial—any evidence of actual damages. At trial, Plaintiff vaguely referenced loss of employee hours attributed to addressing customer confusion but failed to quantify those hours. This form of relief is waived.
32. Plaintiff also seeks a permanent injunction enjoining Defendant from using its mark in the Bexar County area.
33. Prevailing plaintiffs are entitled to injunctive relief under the Lanham Act in appropriate circumstances. 15 U.S.C. § 1116; SPFM, L.P. v. Felix, No. SA-16-CV-00179-XR, 2016 WL 5854286, at *6 (W.D. Tex. Oct. 5, 2016). To receive a permanent injunction, Plaintiff must demonstrate (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006); Abraham v. Alpha Chi Omega, 708 F.3d 614 (5th Cir. 2013) (same).
34. First, plaintiffs seeking a permanent injunction are entitled to a rebuttable presumption of irreparable harm once the court has found that a defendant violated the Lanham Act. 15 U.S.C. § 1116(a). As explained above, Plaintiff has successfully proved its case of trademark infringement and is thus entitled to the rebuttable presumption that it has suffered irreparable harm.
The Court recognizes that the Fifth Circuit has declined to address "whether a court may presume irreparable injury upon finding a likelihood of confusion in a trademark case, a difficult question considering the Supreme Court's opinion in eBay." Paulsson Geophysical Servs., Inc. v. Sigmar, 529 F.3d 303, 313 (5th Cir. 2008). Notwithstanding the statutory presumption, this Court finds it clear that Plaintiff faces irreparable harm.
35. Furthermore, the Fifth Circuit has found irreparable harm when there is a substantial threat to the plaintiff's goodwill and value of the mark. Paulsson Geophysical Servs., Inc. v. Sigmar, 529 F.3d 303, 313 (5th Cir. 2008). Plaintiff clearly established a name for itself in the community as a provider of quality, discounted appliances. This is evidenced by the news features, awards, and evidence of repeat customers presented at trial. In contrast, evidence indicates that Defendant's customers are frequently disappointed with its products and/or customer service and that those customers regularly direct their dissatisfaction towards Plaintiff via phone calls and online reviews. Thus, the perceived relationship between the companies has likely harmed Plaintiff's goodwill in the community and will continue to harm Plaintiff's business if Defendant is allowed to continue using the mark.
36. Second, monetary damages would not ameliorate Plaintiff's injuries. Plaintiff cannot be properly compensated for the decrease in its goodwill, which is inherently difficult to quantify. "Injunctions are especially appropriate where the damage to plaintiff cannot be . . . adequately '[ ] undone by monetary remedies.") Flowserve Corp. v. Hallmark Pump Co., No. 4:09-CV-0675, 2011 WL 1527951, at *10 (S.D. Tex. Apr. 20, 2011) (citing Paulsson, 529 F.3d at 313). Nor can Plaintiff be certain that Defendant will cease using its mark absent an injunction.
37. Third, the continued threat to Plaintiff's business outweighs any consequential harm to Defendant. The evidence made it clear that Defendant will face little to no cost by the injunction. For example, Defendant will face no costs associated with advertising because it admittedly does not advertise its store. Furthermore, any loss of brand recognition is inconsequential because the brand was clearly associated with Plaintiff's mark. Moreover, although Defendant will need to rename its store, Defendant claims that it has already done so. Finally, this Court notes that Plaintiff approached Defendant nearly two years ago and put Defendant on notice of Plaintiff's mark. Thus, Defendant knew that its name was in jeopardy and thereby assumed the risk of foreseeable hardship by continuing to use Plaintiff's mark.
38. Finally, an injunction would serve the public interest by upholding Plaintiff's rights under the Lanham Act and restraining infringement in the manner prescribed by the statute. See Quantum Fitness Corp. v. Quantum LifeStyle Ctrs., L.L.C., 83 F.Supp.2d 810, 832 (S.D. Tex. 1999) ("The public interest is always served by requiring compliance with Congressional statutes such as the Lanham Act and by enjoining the use of infringing marks."); Am. Rice, Inc. v. Ar. Rice Growers Coop. Ass'n, 532 F. Supp. 1376, 1389 (S.D. Tex. 1982) ("[T]he public interest is served by enjoining unfair trade practices which occur within that commerce subject to the lawful regulation of Congress, thus upholding the purposes of the Lanham Act.") (citing Steele v. Bulova Watch Co., 344 U.S. 280, 283-87, 73 S.Ct. 252, 97 L.Ed. 319 (1952)). Plaintiff has shown it is entitled to injunctive relief based on Defendant's violations of the Lanham Act.
39. The Court thus grants Plaintiff's request for an injunction and orders Defendant to cease utilizing Plaintiff's protected mark. Defendant is permanently enjoined from continuing to infringe upon Plaintiff's trademarked work in the manner specified in the forthcoming final judgment which is narrowly tailored to remedy Plaintiff's specific harms. See FED. R. CIV. P. 65(d).
CONCLUSION
Plaintiff holds a protected right in its mark "Appliance Liquidation" and "Appliance Liquidation Outlet" within Bexar County, Texas. Defendant is permanently enjoined from utilizing this mark in the manner outlined in the forthcoming judgment.
It is so ORDERED.