Thomas Abraham v. Alpha Chi Omega ( 2012 )

Case: 12-10525 Document: 00512076232 Page: 1 Date Filed: 12/06/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 6, 2012
No. 12-10525 Lyle W. Cayce
Clerk
THOMAS KENNETH ABRAHAM, doing business as Paddle Tramps
Manufacturing Company,
Plaintiff - Appellant Cross-Appellee
v.
ALPHA CHI OMEGA; ALPHA CHI OMEGA FRATERNITY
INCORPORATED; ALPHA DELTA PI; ALPHA DELTA SORORITY
CORPORATION; ALPHA GAMMA DELTA; ET AL,
Defendants - Appellees Cross-Appellants
Appeals from the United States District Court
for the Northern District of Texas
Before JONES, GARZA, and PRADO, Circuit Judges.
GARZA, Circuit Judge:
Thomas Kenneth Abraham (“Abraham”), doing business as Paddle Tramps
Manufacturing Company (“Paddle Tramps”), appeals the district court’s order
granting a partial preliminary injunction against his use of trademarks
belonging to 32 fraternity and sorority organizations (the “Greek
Organizations”). The Greek Organizations cross-appeal the limitation on the
injunction. We AFFIRM.
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I
Abraham founded Paddle Tramps in Lubbock, Texas in 1961 as a company
that manufactured wooden paddles and decorations for fraternity and sorority
members. Paddle Tramps has always sold products bearing the names of
fraternities and sororities and has always used the names of fraternities and
sororities to advertise its products.
Abraham began selling the paddles by showing samples and taking orders
at fraternity and sorority house visits. He created the ordered products by
carving Greek letters and affixing them and other decorations onto wooden
paddles. By the late 1960s, Abraham began wholesaling the component parts
of paddles, such as wooden Greek and Roman letters and wood-carved crests, to
college bookstores or craft stores for customers to buy and assemble. Also in the
late 1960s, Abraham began distributing catalogues with fraternity and sorority
names and crests to advertise his products.
Abraham invested heavily in equipment, advertising, and employees. He
had to completely rebuild his business three times—once after a fire in 1966,
then after a tornado in 1970, and still again after another fire in Paddle
Tramps’s manufacturing plant in 1980.
In 1997, Abraham established a website for Paddle Tramps. The website
initially only advertised Paddle Tramps’s products, then in 2001 it began
allowing customers to purchase items online. At all times the website displayed
fraternity and sorority names, as well as Paddle Tramps’s products that
reproduced fraternity and sorority crests. Abraham testified Paddle Tramps
continued to sell almost exactly the same products it had been selling in the
1960s after the creation of the website in 1997.
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In 1990, 29 years after Abraham founded Paddle Tramps, the Greek
Organizations contacted him for the first time about licensing. The entity that
contacted him was called Greek Properties, and the letter invited Abraham to
join their group. Abraham did not respond. Greek Properties followed up with
another letter in 1991. It attached an application for admission into Greek
Properties, which required Abraham to sign a statement promising not use any
Greek Properties’s member organizations’s marks or terminology without
written consent. Again, Abraham did not respond. The following year, Greek
Properties sent Abraham a brochure, but never again attempted to get him to
join.
In 1995, Dan Shaver (“Shaver”) sent a letter to Abraham on behalf of
Sigma Chi threatening to sue Paddle Tramps for trademark infringement.
Abraham’s son Kyle responded, saying Paddle Tramps was not interested in
licensing Sigma Chi’s marks after continuously using Sigma Chi’s name and
crest on its products for 34 years without complaint. Over the next 13 years,
Shaver periodically sent additional letters to Abraham on behalf of an entity
called Affinity Marketing Consultants. Affinity Marketing Consultants
represented about 70 fraternities and sororities. These letters sometimes invited
Paddle Tramps to join a fraternity or sorority’s licensing program, sometimes
ordered Paddle Tramps to cease and desist, and sometimes threatened to sue.
Abraham either ignored these letters or responded by stating he refused to enter
into a licensing agreement.
In December 2007, the 32 Greek Organizations in this litigation,
represented by Affinity Marketing Consultants and Shaver, sued Abraham for
patent infringement and unfair competition in the Southern District of Florida.
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The Florida district court dismissed the suit for improper venue. Abraham then
sued the Greek Organizations in April 2008 in the instant litigation for a
declaratory judgment that he was not infringing on their marks. The Greek
Organization asserted counterclaims for trademark infringement and unfair
competition under the Lanham Act, 15 U.S.C. § 1051 et seq., and for unfair
competition and trademark dilution under Texas state-law claims. They sought
monetary and injunctive relief.
Abraham moved for summary judgment on his affirmative defenses of
laches and acquiescence, and the Greek Organizations moved for summary
judgment on the liability portion of their substantive claims, injunctive relief,
and an accounting. The district court granted the Greek Organizations’s motion
in part, concluding Abraham infringed the Greek Organizations’s names,
insignia, and symbols, creating a likelihood of confusion among the public in
violation of the Lanham Act and Texas’s unfair competition law. Further, the
district court concluded Abraham diluted the Greek Organizations’s marks in
violation of Texas’s trademark dilution law. Abraham does not contest these
determinations on appeal. The court denied Abraham’s motion for summary
judgment on his affirmative defenses of laches and acquiescence, denied the
Greek Organizations’s counter-defense of unclean hands, and ordered a trial on
those issues.
At the end of the evidence presented at that trial, the district court denied
the parties’s motions for judgment as a matter of law. The jury returned a
special verdict finding: (1) Abraham proved his laches defense; (2) Abraham
proved his acquiescence defense with respect to one of the Greek Organizations
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(Pi Kappa Alpha); and (3) the Greek Organizations did not prove their unclean
hands counter-defense.
Abraham moved for judgment on the verdict, and the Greek Organizations
renewed their motion for judgment as a matter of law. In an unorthodox point
of error, the Greek Organizations collapsed an improper jury instruction claim
with a sufficiency of the evidence claim, arguing the jury was improperly
instructed on unclean hands and laches and no properly instructed jury would
have had a legally sufficient evidentiary basis to find Abraham established his
laches defense or had clean hands. The Greek Organizations’s motion also
asserted the issue of acquiescence should not have gone to the jury, and asked
the court to enter a permanent injunction barring Abraham’s future use of their
marks. The district court denied the Greek Organizations’s renewed motion,
finding the jury was properly instructed, the issue of acquiescence was properly
submitted to the jury, and there was sufficient evidence to support Abraham’s
laches defense and the jury’s finding of clean hands. The court granted
Abraham’s motion for judgment on the verdict, finding his laches defense
precluded the monetary relief sought by the Greek Organizations.
The court further determined laches did not bar entry of a permanent
injunction on Abraham’s future use of the Greek Organizations’s marks. The
court permanently enjoined Abraham from some future uses of the Greek
Organizations’s marks, concluding the “degree of prejudice” such an injunction
would impose on Abraham was not significant enough to bar injunctive relief.
The injunction prevents Abraham from selling or using in his advertising three
categories of the Greek Organizations’s marks: (1) the Greek letter combinations
associated with the parties to this lawsuit; (2) the full names or nicknames
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associated with the parties to this lawsuit; and (3) any crest, coat of arms, seal,
flag, badge, emblem, or slogan identifiable with any of the parties to this lawsuit,
including copies of the Greek Organizations’s crests Abraham carved out of
wood.
The injunction allows Abraham to sell and include in his advertising
decals of the Greek Organizations’s crests he purchased wholesale from licenced
vendors, as well as what Abraham calls the “double raised crest backing.” This
crest backing is carved in the shape of a given Greek Organization’s crest, upon
which Paddle Tramps affixes a licenced decal.
Abraham timely appealed the district court’s entry of a permanent
injunction based on the jury finding that he established a laches affirmative
defense, and because the laches here were particularly long, unreasonable, and
inexcusable. The Greek Organizations timely cross-appealed the district court’s
rejection of their motion for judgment as a matter of law, asserting the jury
instructions were improper and the jury findings on laches and unclean hands
are unsupported by the evidence. They also appeal the scope of the injunction,
asserting Abraham should have been enjoined from continuing to sell the double
raised crest backings in the shape of the Greek Organizations’s crests.
II
We review jury instructions for abuse of discretion. Garriott v. NCsoft
Corp., 661 F.3d 243, 247 (5th Cir. 2011). “A challenge to jury instructions must
demonstrate that the charge as a whole creates substantial and ineradicable
doubt whether the jury has been properly guided in its deliberations. . . . Even
if the challenger proves the instructions misguided the jury, we reverse only if
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the erroneous instruction affected the outcome of the case.” Price v. Rosiek
Const. Co., 509 F.3d 704, 708 (5th Cir. 2007).
We review de novo the district court’s denial of a motion for judgment as
a matter of law, applying the same standards as the district court. Ill. Cent. R.R.
Co. v. Guy, 682 F.3d 381, 392–93 (5th Cir. 2012). Judgment as a matter of law
is proper when “a reasonable jury would not have a legally sufficient evidentiary
basis to find for the party on that issue.” FED. R. CIV. P. 50(a). “This will only
occur if the facts and inferences point so strongly and overwhelmingly in the
movant’s favor that jurors could not reasonably have reached a contrary verdict.”
Brown v. Sudduth, 675 F.3d 472, 477 (5th Cir. 2012) (internal quotation marks
omitted). We “credit the non-moving [party’s] evidence and disregard all
evidence favorable to [the moving party] that the jury is not required to believe.
After a jury trial, [the] standard of review is especially deferential.” Id. (internal
quotation marks and citations omitted).
Lastly, we review the district court’s grant of injunctive relief for an abuse
of discretion. Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 334 (5th
Cir. 2008). “An abuse of discretion automatically inheres in an injunctive decree
if the trial court misinterpreted applicable law. . . . As with injunctive relief
generally, an equitable remedy for trademark infringement should be no broader
than necessary to prevent the deception.” Westchester Media et al. v. PRL USA
Holdings, et al., 214 F.3d 658, 671 (2000) (citations omitted).
III
The Greek Organizations appeal the entirety of the jury’s verdict. First,
they assert the district court improperly instructed the jury on laches and
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unclean hands. Second, they assert the jury’s findings on laches and unclean
hands are unsupported by sufficient evidence.
A
A laches defense cannot be asserted by a party with unclean hands
because it is equitable. See Bd. of Supervisors for La. State Univ. Agric. & Mech.
Coll. v. Smack Apparel Co., 550 F.3d 465, 490 (5th Cir. 2008). “A defendant who
intentionally infringes a trademark with the bad faith intent to capitalize on the
markholder’s good will lacks the clean hands necessary to assert the equitable
defense.” Id.The district court instructed the jury on laches as follows:
To prevail on their claim that Mr. Abraham may not
assert the laches or acquiescence defenses because he
has unclean hands, the Greek Organizations must
prove by a preponderance of the evidence that Mr.
Abraham knowingly intended to use the Greek
Organizations’ marks for the purpose of deriving benefit
from the Greek Organizations’ goodwill.
Unclean hands may be found only where the unlicensed
user “subjectively and knowingly” intended to cause
mistake or to confuse or deceive buyers. Mere
awareness of a trademark owner’s claim to the same
mark does not amount to having unclean hands nor
establishes bad intent necessary to preclude laches and
acquiescence defenses. The owner of the mark must
demonstrate that at the time the unlicensed user began
using the marks or sometime thereafter, said
unlicensed user knowingly and intentionally did so with
the bad faith intent to benefit from or capitalize on the
mark owner’s goodwill.
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In this instruction, the district court used language from Conan Properties, Inc.
v. Conans Pizza, Inc., 752 F.2d 145, 150 (5th Cir. 1985). In Conan Properties, we
held:
[T]he critical issue is whether [the infringer] was an
intentional infringer and therefore lacked the clean
hands necessary to assert the equitable defenses of
laches and acquiescence. . . . Passing off [products as
endorsed by the trademark owner] may be found only
where the defendant “subjectively and knowingly”
intended to confuse buyers. This court has recognized
that a defendant’s mere awareness of a plaintiff’s claim
to the same mark neither amounts to passing off nor
establishes the bad intent necessary to preclude the
availability of the laches defense. The plaintiff’s
burden, therefore, is heavy. To foreclose the laches and
acquiescence defenses, the plaintiff must offer
something more than mere objective evidence to
demonstrate that the defendant employed the allegedly
infringing mark with the wrongful intent of capitalizing
on its goodwill.
Id. (quoting 2 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 25:1, §31:2
(1st ed. 1973)) (internal citations omitted).
The Greek Organizations assert the jury instruction was erroneous for two
reasons. First, they assert error in the explanation of “confusion” or “deception.”
Quoting Boston Professional Hockey Association, Inc. v. Dallas Cap & Emblem
Manufacturing, Inc., 510 F.2d 1004, 1012 (5th Cir. 1975) (“Professional Hockey”),
the Greek Organizations assert the “confusion or deceit requirement is met by
the fact that the defendant duplicated the protected trademarks and sold them
to the public knowing that the public would identify them as being the
[trademark holder’s] trademarks.” Id. Professional Hockey, however, is not an
unclean hands case. This quotation appears in Professional Hockey’s discussion
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of the fifth element in a trademark infringement claim under 15 U.S.C. § 1114,
which requires the infringing use to likely cause confusion, to cause mistake, or
to deceive. Id. If the confusion or deception required to make out a case of
trademark infringement were the same as the confusion or deception required
to make out an unclean hands counter-defense, then every trademark infringer
would necessarily have unclean hands. That is not so.
Second, the Greek Organizations assert the district court’s instruction
misguides the jury by stating “mere awareness” of a trademark owner’s claim to
the mark is not enough to establish unclean hands. The correct instruction,
according to the Greek Organizations, comes from the second footnote in Conan
Properties, 752 F.2d at 151 n.2: the pertinent confusion is to be inferred or
presumed if Abraham “intended to derive benefit from or capitalize” on the
marks. Again, the Greek Organizations confuse the elements of a trademark
infringement claim with the showing necessary to prove unclean hands. The
footnote in Conan Properties states “knowledge” of a trademark owner’s claim
to the mark “may give rise to a presumption that the defendant intended to
cause public confusion as to the source or sponsorship of the product or service.”
Id. at 151 n.2. The very next sentence makes clear that such a presumption does
not arise in the unclean hands analysis: “The same showing, however, does not
give rise to a presumption that the defendant intended to appropriate the
plaintiff’s goodwill from its use of the allegedly infringing mark.” Id.; see Smack
Apparel, 550 F.3d at 490. The district court did not abuse its discretion in
instructing the jury that to prove unclean hands, the Greek Organizations had
to show Abraham knowingly and intentionally infringed upon the marks with
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the bad faith intent to benefit from or capitalize on the Greek Organizations’s
goodwill by confusing or deceiving buyers.
The Greek Organizations next assert the jury’s rejection of their unclean
hands counter-defense is unsupported by the evidence because Abraham stated
at trial that his infringing products “drive the sales” of Paddle Tramps’s other
products. According to the Greek Organizations, this admission by Abraham
demonstrates he intentionally capitalized on the Greek Organizations’s goodwill.
In Smack Apparel, we affirmed the trial court’s finding of unclean hands where
the infringing apparel manufacturer “admitted that it intentionally incorporated
the [trademark owner] Universities’ color schemes and other indicia in order to
specifically call the Universities to the public’s mind, thus deriving a benefit
from the Universities’ reputation.” Smack Apparel, 550 F.3d at 490.
This case is distinguishable from Smack Apparel. Abraham introduced
evidence tending to show a lack of bad faith: Paddle Tramps helped to create the
market for fraternity and sorority paddles decades before the Greek
Organizations had a licencing program, Abraham’s intent was to service
fraternities and sororities, not to capitalize on their goodwill in bad faith, the
products are virtually the same today as they were in the 1960s, and Paddle
Tramps never passed itself off as being sponsored or endorsed by the Greek
Organizations. Given our “especially deferential” standard of review for
evidence after a jury trial, Brown, 675 F.3d at 477, we hold this evidence is
legally sufficient to allow a jury to find for Abraham on the unclean hands issue
because it supports a showing of Abraham’s lack of bad faith.
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B
“Laches is an inexcusable delay that results in prejudice to the defendant.”
Smack Apparel, 550 F.3d at 489. Laches has three elements: “(1) delay in
asserting one’s trademark rights, (2) lack of excuse for the delay, and (3) undue
prejudice to the alleged infringer caused by the delay.” Id. at 490. The Greek
Organizations assert the jury was improperly instructed on the “lack of excuse”
and “undue prejudice” elements, and there was insufficient evidence to support
the jury’s special verdict finding each of the elements satisfied.
The Greek Organizations first assert the jury instruction on the lack of
excuse element was deficient because it did not explain that a trademark owner
is excused from delay in taking action against de minimis infringements. The
Greek Organizations rely on Conan Properties, a number of cases from our sister
circuits, and a leading trademark and unfair competition treatise. They rely on
a footnote in Conan Properties which states, “Since incidental and isolated
infringement may be difficult to detect and cost ineffective to halt, a plaintiff
may make a conscious business decision to prosecute only those defendants who
pose a threat to its mark.” Conan Properties, 752 F.2d at 153 n.4. This sentence,
however, is in Conan Properties’s discussion of whether the laches barred a
permanent injunction, not in a discussion of whether laches applies. Conan
Properties held laches do not necessarily bar permanent injunctive relief, id. at
153, and this footnote provides additional justification for that rule: it might not
make economic sense for a trademark owner to go after de minimis infringers,
but if a de minimis infringer begins to diminish the value of the mark more in
the future, the trademark holder should be entitled to a permanent injunction
notwithstanding the applicability of laches. Id. at 153 n.4. The Conan
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Properties discussion of de minimis infringement does not speak to whether
laches applies.
The Greek Organizations cite other sources that provide support for the
doctrine of progressive encroachment, “which allows a trademark owner to
‘tolerate de minimis or low-level infringements’ and still have the right to ‘act
promptly when a junior user either gradually edges into causing serious harm
or suddenly expands or changes its mark.’” AM Gen. Corp. v. DaimlerChrysler
Corp., 311 F.3d 796, 823 (7th Cir. 2002) (quoting 6 MCCARTHY ON TRADEMARKS
AND UNFAIR COMPETITION § 31:21 (4th ed. 2001)). The district court did,
however, instruct the jury on the doctrine of progressive encroachment over
Abraham’s objection. The district court instructed the jury:
Under the doctrine of progressive encroachment, the
trademark owner’s delay is excused where the
unlicensed user begins to use the trademark in the
market, and later modifies or intensifies its use of the
trademark to the effect that the unlicensed user
significantly impacts the trademark owner’s good will
and business reputation, so that the unlicensed user is
placed more squarely in competition with the
trademark owner. The mark owner need not sue until
the harm from the unlicensed user’s use of the mark
looms large. It is therefore the significant increase in
the scope of the unlicensed user’s business, not reliance
on the same general business model, that supports the
doctrine of progressive encroachment.
(emphasis added). In light of this instruction—which the Greek Organizations
do not appeal—and the Greek Organizations’s misplaced reliance on Conan
Properties, we hold the district court did not abuse its discretion in its
instruction to the jury on the lack-of-excuse element of laches.
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The Greek Organizations assert the evidence was insufficient to support
the jury’s finding that they lacked an excuse for their delay in bringing suit
because at all times Abraham’s infringement was de minimis. Just under 2.5%
of Paddle Tramps’s revenue derives from the sale of infringing products, and the
average royalty owed by Paddle Tramps to each of the Greek Organizations for
the past few years of infringing conduct was only $140.78 annually. There is,
however, evidence in the record to support the jury’s finding. The creation of
Paddle Tramps’s website in 1997 and the sale of infringing products directly
from that website in 2001 could be considered “an increase in the scope of the
unlicensed user’s business,” which the district court correctly instructed could
support a finding of progressive encroachment. The jury could have determined
that the intervening six years between 2001 and 2007, when the Greek
Organizations brought suit, is itself an unexcused delay sufficient to satisfy the
lack-of-excuse element of laches. See Conan Properties, 752 F.2d at 149 (finding
by jury that five-and-a-half-year unexcused delay supported finding of laches).
The jury, therefore, had a legally sufficient evidentiary basis for concluding that
the lack-of-excuse element was satisfied.
The Greek Organizations next assert the district court’s jury instruction
on the undue influence element of laches confused the test for acquiescence with
the test for laches. The district court, however, correctly instructed the jury that
the elements of laches are (1) delay, (2) lack of excuse, and (3) undue prejudice
and the elements of acquiescence are (1) assurances, (2) reliance, and (3) undue
prejudice. Though the instructions on undue prejudice for each equitable
defense are similar, they are not identical. On the undue prejudice element of
laches, the district court instructed the jury:
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An unlicensed user is unduly prejudiced when, in
reliance on the trademark owner’s unexcused delay in
filing suit, he or she makes major business investments
or expansions that depend on the use of the marks;
these investments and expansions would suffer
appreciable loss if the marks were enforced; and this
loss would not have been incurred had the trademark
owner enforced his rights earlier. The amount of
prejudice suffered by the unlicensed user in a given
case may vary with the length of the delay; that is, the
longer the period of delay, the more likely it is that
undue prejudice has occurred. The period of delay
begins when the trademark owner knew or should have
known of the unlicensed user’s use of the marks and
ends when the trademark owner files suit against the
unlicensed user. Therefore, to determine whether Mr.
Abraham has been unduly prejudiced by the Greek
Organizations’ delay, you must consider what business
investments and expansions Mr. Abraham made
between the time the Greek Organizations knew or
should have known of his use of their marks and the
time they filed suit against him.
The Greek Organizations contend the instructions should have asked
whether an injunction would “destroy[] the investment in the capital,” quoting
Elvis Presley Enter., Inc. v. Capece, 141 F.3d 188, 206 (5th Cir. 1998)). In Elvis
Presley, we held no undue prejudice was shown where changing the name of the
infringer defendant’s nightclub would not have destroyed the investment of
capital in that nightclub. Elvis Presley, 141 F.3d at 206. Even the Greek
Organizations, however, do not assert that destruction of the investment of
capital is the definitive test. Rather, they assert the question should be whether
the infringer would suffer losses that would have been avoided had the
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trademark owner not delayed. This test is in line with the discussion of undue
prejudice in a leading treatise:
[P]rejudice encompasses actions by the defendant that
it would not have taken or consequences it would not
have suffered had the plaintiff brought suit
promptly. . . . 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.
6 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 31:12 (4th ed. 2001).
The district court did not abuse its discretion in its jury instruction on undue
prejudice as its instruction tracks this test.
The Greek Organizations also contend the jury’s finding of undue prejudice
is not supported by the evidence. This is a close question. The Greek
Organizations compare this case to a case from a sister circuit, University of
Pittsburgh v. Champion Products, Inc., 686 F.2d 1040 (3d Cir. 1982). The
University of Pittsburgh sued Champion for manufacturing shirts and other
apparel on which Champion printed the university’s logo and other marks. Id.
at 1043. The Third Circuit held Champion did not suffer undue prejudice due
to the university’s delay in bringing suit:
Pitt is only one of approximately 10,000 schools and
colleges whose names or designs [Champion] imprint[s]
on soft goods. . . . Champion built its physical plant, art
department and sales force in order to design, produce
and market soft goods with marks and designs of every
kind. . . . The only tangible investments in Pitt’s
designs, per se, are the screen stencils used for
imprinting the designs—which are produced in
quantity, used for no more than a few dozen shirts, and
then destroyed.
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Id. at 1048. The Greek Organizations assert that like in Champion Products,
the infringing items sold by Paddle Tramps make up a small percentage of
Paddle Tramps’s overall sales, and the investments in equipment made by
Paddle Tramps can be used—and indeed are mostly used—for producing non-
infringing products. Thus, they assert Paddle Tramps would suffer no undue
prejudice if it were enjoined from selling infringing products.
Though this case is similar to Champion Products, Paddle Tramps
ultimately marshaled legally sufficient evidence at trial to support the jury’s
finding of undue prejudice. Abraham testified he rebuilt the business three
times—twice after fires and once after a tornado—and he would not have done
so had he known the Greek Organizations would later sue him to enforce their
trademarks. The rebuilding required investments of millions of dollars into
equipment, advertising, and employee salaries. In addition, Abraham testified
the infringing products, while perhaps a small percentage of his total sales, drive
the sale of his non-infringing products because without them customers might
choose to purchase the component parts to their paddles somewhere else. This
is sufficient for a jury to find the sale of the infringing products would have a
greater effect on total sales than in Champion Products. Therefore, the test for
undue prejudice is met: had the Greek Organizations brought suit earlier,
Abraham may not have rebuilt his business after the fires or tornado and may
not have invested millions of dollars into the business. Furthermore, Abraham
relies on the small percentage of sales of infringing products to drive his other
sales. Therefore, the district court correctly denied the Greek Organizations’s
motion for judgment as a matter of law.
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IV
Abraham challenges the injunction entered by the district court. He
asserts injunctive relief is unavailable where a trademark owner’s laches was
long, unreasonable, and inexcusable. He asserts he should be permitted to
continue selling his infringing products and using the Greek Organizations’s
names, insignia, and symbols in advertisements. The Greek Organizations also
challenge the injunction entered by the district court, asserting it was not
sufficiently comprehensive by permitting the sale of Abraham’s double raised
crest backings.
A
“A finding of laches alone ordinarily will not bar . . . injunctive relief,
although it typically will foreclose a demand for an accounting or damages.”
Conan Properties, 752 F.2d at 152. This is because “courts construe [a
trademark owner’s] unreasonable delay to imply consent to the [infringer’s]
conduct, which amounts to nothing more than a revocable license; the license is
revoked once the plaintiff objects to the [infringer’s] infringement.” Id. (citing
Menendez v. Holt, 128 U.S. 514 (1888)). We have stated, “There is no doubt that
laches may defeat claims for injunctive relief as well as claims for an
accounting.” Armco, Inc. v. Armco Burglar Alarm Co., Inc., 693 F.2d 1155, 1161
n.14 (5th Cir. 1982).
In Conan Properties, we reversed an injunction barring infringing
restaurant owners from continuing to use the name “Conans” for their
restaurants in the Austin, Texas area. Conan Properties, 752 F.2d at 152. We
stated, “The jury’s affirmative finding of acquiescence establishes the reliance
necessary to preclude the issuance of an injunction.” Id. We upheld the
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injunction barring the use of the infringing mark outside the Austin geographic
area:
An injunction against future infringement in a
particular locale when laches and acquiescence have
been found, as in this case, is properly denied if the
plaintiff’s delay or other conduct either induced reliance
on the defendant’s part or will result in substantial
prejudice to the defendant if the plaintiff is permitted
to enforce its rights in the trademark. Whether
phrased as ‘reliance’ or ‘prejudice’, the effect is the
same—the defendant has done something it otherwise
would not have done absent the plaintiff’s conduct.
The result is different, however, when the asserted
future infringement would occur in a geographical area
other than the one in which the plaintiff waived its
right to protect its mark. In the new geographical area
where the defendant has not yet expanded its business,
the defendant is hard pressed to demonstrate how it
could have relied to its detriment upon the plaintiff’s
inactivity or other conduct. Stated simply, the
defendant at best can show only that the plaintiff
acquiesced or unreasonably delayed in protecting its
mark in the local area. . . . In this case we conclude
that Conans has made sufficient showings of reliance
and prejudice in the Austin area to justify denying an
injunction, but has failed to offer any evidence, let alone
carry its burden of demonstrating that it would be
prejudiced if barred from infringing on [the plaintiff’s]
mark in any area other than Austin.
Id. at 153. Therefore, a finding of laches or acquiescence may bar injunctive
relief if the trademark owner conducted itself in a way that induced the
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infringer’s reliance or if an injunction would result in “substantial prejudice” to
the infringer. Id.1
The district court found that “courts consistently focus on the degree of
prejudice the defendant would suffer in the event the infringing use is enjoined,”
citing Conan Properties, 752 F.2d at 153. Champion Products held the
injunction “must depend upon the degree to which Pitt’s delay may have
prejudiced Champion.” Champion Products, 686 F.2d at 1046. The district
court’s “degree of prejudice to the infringer” test is very close to both this
Champion Products test and Conan Properties’s “substantial prejudice” test.
Abraham objects to the district court’s “degree of prejudice” test because
he claims it puts the burden on him to show why an injunction should not issue
on particular infringing conduct. A leading treatise states, “All that must be
proven to establish liability and the need for an injunction against infringement
is the likelihood of confusion—injury is presumed.” 5 MCCARTHY ON
TRADEMARKS AND UNFAIR COMPETITION § 30:2 (4th ed. 2001). In other words,
once trademark infringement is shown, which Abraham does not dispute on
appeal, the burden should be on Abraham to show why his conduct should not
be enjoined. Therefore, the district court did not abuse its discretion by relying
on Conan Properties to use the “degree of prejudice” test in fashioning injunctive
relief.2
1
We recognize Conan Properties addressed prejudice in geographic areas rather than
prejudice resulting from different types of infringing products, but Conan Properties still holds
the propriety of an injunction turns on prejudice to the infringer. Id.
2
Although Conan Properties and Champion Products used somewhat different
language, the “degree of prejudice” test comes within the sound discretion of the district court,
which we do not disturb.
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B
The district court applied its degree of prejudice test to Abraham’s use of
the Greek Organizations’s names and insignia in its advertising and to
Abraham’s sale of wood-carved replicas of the Greek Organizations’s names,
crests and identifiable objects, as well as the sale of the double raised crest
backings. The court reasoned Abraham could easily continue to advertise all of
his products without using the Greek Organizations’s names and insignia. He
could, for example, use the names and insignia of fraternities and sororities that
do not have licensing programs. He could use fictional names. In addition, the
court rejected Abraham’s request to avoid a ban by including disclaimers. The
district court further enjoined Abraham’s sale of objects containing the Greek
Organizations’s full names, those objects copied from the Greek Organizations’s
crest or insignia, and wood reproductions of their crests. The only product the
district court did not enjoin Abraham from selling was the double raised crest
backings. With respect to that particular product, the district court determined
the potential prejudice to Abraham is comparable with the prejudice to the
defendants in Conan Properties, who had invested considerably in their business
due to the trademark owner’s delay.
The district court did not abuse its discretion in crafting an injunction to
balance the equities. See Taco Cabana Int’l v. Two Pesos, Inc., 932 F.2d 1113,
1127 (5th Cir. 1991) (holding district court has “considerable discretion in
fashioning an appropriate remedy for infringement”). The injunction prevents
Abraham from selling products that make up less than 2.44% of his total sales.
This will not put Abraham out of business. The infringing item Abraham can
continue to sell, the double raised crest backing, is the product Abraham
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contended drove his sales of other non-infringing products—the only item that
if enjoined from selling, would cause Abraham substantial prejudice.
Moreover, the district court did not abuse its discretion by not ordering
disclaimers in lieu of a ban. Abraham relies on Westchester Media v. PRL USA
Holdings, Inc., 214 F.3d 658 (5th Cir. 2000) to assert requiring disclaimers is
preferable. Unlike in Westchester Media, the district court here did not
“misinterpret applicable law,” so an abuse of discretion does not “automatically
inhere[.]” Westchester Media, 214 F.3d at 671. In that case, we determined the
magistrate judge “unduly discounted the First Amendment interests impaired
by the injunction[.]” Id. Therefore, an abuse of discretion automatically inhered,
and we reviewed the injunction with that in mind. Here, however, the district
court did not misapply the law, so our review is limited to an abuse of discretion
standard.
In Westchester Media, we determined the First Amendment interests of
the trademark infringer counseled against an outright ban. Id. (“Where the
allegedly infringing speech is at least partly literary or artistic . . . and not solely
a commercial appropriation of another’s mark, the preferred course is to
accommodate trademark remedies with First Amendment interests.”). That is
clearly not our case here, as Abraham does not suggest his use of the Greek
Organizations’s marks is “expressive to an appreciable degree[.]” Id. See also
Better Bus. Bureau of Metro. Houston v. Med. Dirs., Inc., et al., 681 F.2d 397, 404
(1982) (finding First Amendment commercial speech interests favor requiring
disclaimers over outright ban). Abraham asserts factors besides First
Amendment interests do counsel in favor of disclaimer and are present here,
such as laches and acquicense. The district court determined a proper balance
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of the equities favors a ban despite the presence of these factors. Whether we
would have made the exact same conclusion in the first instance is irrelevant
because the district court applied the law correctly. The determination is
reasonable, and we hold the district court did not abuse its discretion in
fashioning this remedy.
The Greek Organizations assert they deserve a comprehensive injunction
that covers the double raised crest backing. As we have discussed, however, the
district court properly balanced the equities in resolving this dispute and did not
abuse its discretion in fashioning injunctive relief.
V
For these reasons, we AFFIRM.
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