Eat BBQ LLC et al v. Walters
Filing
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MEMORANDUM OPINION & ORDER: (1) The Motion for Ex Parte Temporary Restraining Order and Preliminary Injunction for Trademark Infringement 4 is GRANTED in part; (2) PENDING final resolution of this matter, Walters is prohibited from using the ST AXX and STAXX BBQ trademarks in any capacity to advertise or promote his business ventures; and (3) The parties shall have ten days to file briefs to address the necessity and amount, if appropriate, of a bond. Signed by Gregory F. VanTatenhove on 11/16/2012.(CBD)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
FRANKFORT
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EAT BBQ LLC, et al.,
Plaintiffs,
V.
THOMAS C. WALTERS,
Defendant.
Civil No. 12-71-GFVT
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MEMORANDUM OPINION
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ORDER
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When Dan Liebman and Thomas Walters decided to go in to the restaurant
business, Walters brought with him experience, a reputation as an excellent chef and an
idea. The idea was to name the new restaurants “STAXX BBQ”, a homage to the storied
Stax recording studio once located in Memphis, Tennessee.
Unfortunately, like the recording studio, the working relationship between
Liebman and Walters no longer exists. STAXX BBQ, however, does. It is located in
Frankfort, Kentucky and is owned entirely by Liebman. As for the name, Liebman owns
that too, having registered it, without objection, with the United States Patent and
Trademark Office (USPTO). Although Walters, understandably, would like to use the
name for his own catering business, as explained below, he will be presently enjoined
from doing so. 1
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On October 18, 2012, Plaintiffs filed a Motion for Ex Parte Temporary Restraining Order and Preliminary
Injunction for Trademark Infringement [R. 4.] That motion was denied in part because Plaintiffs failed to
show that given the circumstances a TRO was necessary. [R. 9.] The Court, however, reserved ruling on
whether preliminary injunctive relief was appropriate until after hearing argument from both parties. That
hearing was held on November 2, but because of the ex parte communication, Walters was also given an
opportunity to file a brief addressing the issue, which he submitted on November 6. [R. 14; R. 18.]
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I.
In the summer of 2010, Liebman approached Walters with the idea of starting a
restaurant. After a few meetings, the two agreed to move forward, and they opened their
first restaurant in Louisville, Kentucky. Each had certain assets they brought to the
business endeavor. With the help of a few investors, the financial support came solely
from Liebman, while Walters contributed years of restaurant experience, management
skills, and the idea for the STAXX name. Before joining Liebman, Walters had used the
STAXX moniker in limited circumstances, but had not initiated any process to register it
with the USPTO. The Louisville location, STAXX Roadhouse, opened in November
2010, but by August of 2011 it had closed. Prior to its failure, however, Liebman and
Walters had already opened their second location, STAXX BBQ in Frankfort, Kentucky
in May of 2011. This location is still open for business.
After adopting STAXX as the identifying mark of the restaurants, Liebman
decided to apply for protected use of the moniker in two forms, STAXX and STAXX
BBQ. Walters found out about the application process, and instead of filing an objection
with the USPTO, as is allowed under the application framework, he sent emails to
Liebman and Susan Knoll, an investor, encouraging them to add him as an owner of the
trademarks. [R. 16, at 20.] Knoll denied his request explaining that he was “not an owner
of the marks as defined by the U.S. Trademark Statute.” [Id. at 21.] Eventually, the
marks were approved by and registered with the USPTO, [R. 1-4; R. 1-5.] Plaintiffs
currently use these marks in advertisements to promote STAXX BBQ.
Contemporaneous with the trademark issue, several matters arose related to the
management and operation of the now-closed Louisville restaurant and STAXX BBQ.
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[R. 16, at 21.] When these issues could not be resolved, Liebman and Walters severed
their business ties. Walters continues to cater and provide food services, and allegedly,
he has been using the marks registered in Liebman’s name to promote and advertise his
business. [R. 4-7.] Plaintiffs became aware of this alleged infringement and brought suit
requesting injunctive relief alleging claims of trademark infringement and unfair
competition under the Lanham Act, 15 U.S.C. § 1051, et seq., as well as common-law
unfair competition and trademark infringement claims under the laws of Kentucky. [R.
1.] Filed with the Complaint, was a motion for injunctive relief wherein they seek to
prohibit Walters from continuing his use of their trademark pending ultimate resolution
of this dispute. [R. 4.]
II.
A.
Preliminary Injunctions are issued pursuant to Federal Rule of Civil Procedure 65.
The standard is well established. District courts must consider (1) whether there is a
likelihood of success on the merits of the plaintiff’s claim; (2) whether the plaintiff will
suffer irreparable harm if the injunction is not granted; (3) whether others would be
harmed by granting the injunction; and (4) whether the public good is served by issuing
the injunction. Leary v. Daeschner, 228 F.3d 729, 736 (6th Cir. 2000) (citing McPherson
v. Michigan High Sch. Athletic Ass’n, 119 F.3d 453, 459 (6th Cir. 1997) (en banc)).
“These factors are to be balanced against one another and should not be considered
prerequisites to the grant of a preliminary injunction.” Id. (citing United Food &
Commercial Workers Union, Local 1099 v. Southwest Ohio Reg’l Transit Auth., 163 F.3d
341, 347 (6th Cir. 1998).
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B.
1.
Plaintiffs are likely to prevail on their trademark infringement claims pursuant to
the Lanham Act, which protects the trademark rights of businesses and individuals. See
15 U.S.C. § 1114. To establish likelihood of success on the merits of a trademark
infringement claim under the Lanham Act or under Kentucky common law, Plaintiffs
must show a likelihood of confusion. See WSM, Inc. v. Tennessee Sales Co., 709 F.2d
1084 at 1086 (6th Cir.1983); see also Champions Golf Club, Inc. v. The Champions Golf
Club, Inc., 78 F.3d 1111, 1121 (6th Circ. 1996); Maker’s Mark Distillery, Inc. v. Diageo
North American, Inc., 703 F.Supp.2d 671, 688 n.17 (W.D. Ky. 2010); Winchester
Federal Savings Bank v. Winchester Bank, Inc., 359 F.Supp.2d 561, 564 (E.D. Ky. 2004).
Several factors should be considered in determining whether Walters’ use of the
trademarks will confuse consumers. Those factors include: (1) the similarity of the
trademark; (2) the similarity of the goods or products being offered; (3) the strength of
Plaintiffs’ trademarks; (4) the marketing channels used; (5) the evidence of actual
confusion; (6) the likely degree of care exhibited by the purchaser; (7) the likelihood of
expansion of the product lines; and (8) Walters’ intent in selecting his mark. Tumblebus
Inc. v. Cranmer, 399 F.3d 754 (6th Cir. 2005); Daddy’s Junky Music Stores, Inc. v. Big
Daddy’s Family Music Ctr., 109 F.3d 275, 280 (6th Cir. 1997).
If any circumstance is to create likelihood of confusion then this is it.
Determining the similarity of a trademark requires this Court to ask “whether the trade
mark will be confusing to the public when singly presented.” Wynn Oil Co. v. Thomas,
839 F.2d 1183, 1186 (6th Cir. 1988) (citing Beer Nuts, Inc. v. Clover Club Foods Co.,
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711 F.2d 934, 941 (10th Cir. 1983)). How similar are these marks? They are identical,
and because the marks are the same, potential consumers could very well think that
Walters and STAXX are the same company, and thus may unintentionally buy Walters’
product instead of Plaintiffs’.
Next, the Court considers the strength of the mark. “A mark is strong if it is
highly distinctive, i.e., if the public readily accepts it as the hallmark of a particular
source; it can become so because it is unique, because it has been the subject of wide and
intensive advertisement, or because of a combination of both.” Frisch’s Restaurant, Inc.
v. Elby’s Big Boy, 670 F.3d 642, 647 (6th Cir. 1982). According to Plaintiffs, their
service marks are “highly distinctive and unique, and are renowned in the Frankfort and
central Kentucky area.” [R. 4.] Walters has offered nothing to refute this assertion, and
the Court can find nothing in the record to suggest otherwise.
This leads to the next question: are Plaintiffs and Walters using the same channels
of commerce? By using advertisements with the STAXX BBQ marks to solicit business
through email communication, Walters is indeed using the same marketing channels used
by STAXX BBQ. [R. 4-7.] He is intentionally placing the “staxxbbq” email address on
his promotional materials impliedly suggesting that he is an agent of STAXX BBQ. [R.
4-7.] Further, he is advertising and competing for the same customers and events as
Plaintiffs. [Id.; R. 4-2, at 2.] Such occurrences show that Walters has used the same
marketing channels to promote his services. But cf., Homeowners Group, Inc. v. Home
Marketing Specialists, Inc., 931 F.2d 1100, 1110 (6th Cir. 1991) (“dissimilarities between
the predominant customers of a plaintiff’s and defendant’s goods or services lessens the
possibility of confusion, mistake, or deception.”).
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Walters’ use of the same channels of commerce has not resulted in potential
confusion, but has instead precipitated actual confusion. During the hearing, Liebman
recounted hearing from a lady, an existing customer, who had received an email with
promotional materials from Walters. The email included the “STAXX BBQ” trademark,
and the “staxxbbq@gmail” email address. The lady was confused, however, about the
source of the email because Liebman’s name and business contact information were
absent from the materials. This one anecdote provides evidence of actual confusion
resulting from the use of the same channels of commerce, and “is undoubtedly the best
evidence of likelihood of confusion.” AutoZone, Inc. v. Tandy Corp., 373 F.3d 786, 798
(6th Cir. 2004) (quoting Wynn, 839 F.2d at 1188).
Given that the same channels of commerce are used, could this affect potential
expansion? “Inasmuch as a trademark owner is afforded greater protection against
services that directly compete or are in the same channels of trade, a ‘strong possibility’
that either party will expand his business to compete with the other or be marketed to the
same consumers will weigh in favor of finding that the present use is infringing.”
Homeowners Group, Inc. v. Home Marketing Specialists, Inc., 931 F.2d 1100, 1112
(citing Restatement of Torts § 731(b) & comment c (1938)). The evidence proffered to
the Court compels a finding that Walters is infringing on the trademark rights of
Plaintiffs. There is no reason to forecast the possibility of expansion of the product line
or its effects on Plaintiffs’ business because Walters is already competing for the same
customers, [R. 4-2; R. 4-7] and as already pointed out, using the same channels of
commerce resulting in actual confusion.
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Finally, what is Walters’ intent? Whether he is purposefully attempting to avail
himself of the goodwill built by Plaintiffs is unclear, but the case can be argued quite
persuasively that by using the STAXX marks to promote his services, he impliedly
concedes that he stands a better chance of generating business. Of course, having
developed the concept, it is conceivable that Walters feels entitled to use the name along
with its marks. Given the realistic possibility that his only intent is to use that which he
believes is rightfully his, this factor does not weigh in favor of Plaintiffs. Nevertheless,
“‘intent is largely irrelevant in determining if consumers likely will be confused as to
source.’” Wynn, 839 F.2d at 1189 (quoting Lois Sportswear, U.S.A., Inc. v. Levi Strauss
& Co., 799 F.2d 867, 875 (2d Cir. 1986)).
After reviewing all of the applicable factors, a finding of likelihood of confusion
is appropriate. Walters claims this does not matter, however, because common law rights
flowing from his prior use of the STAXX and STAXX BBQ markings allow him to
“operate under the ‘STAXX’ name throughout central Kentucky including Franklin
County, Kentucky.” [R. 16.]
Registering a trademark with the USPTO does not “create rights and priority over
others who have previously used the mark in commerce,” however, registration creates
“prima facie evidence of the registrant’s ownership and exclusive right to use the mark,
15 U.S.C. §§ 1057(b), 1115(a), and constitutes constructive use of the mark.” Allard
Enterprises, Inc. v. Advanced Programming Resources, Inc., 249 F.3d 564, 572 (6th Cir.
2001). Even with registration, “[t]he territorial rights of a holder of a federally registered
trademark are always subject to any superior common law rights acquired by another
party through actual use prior to the registrant’s constructive use.” Id.
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Walters contends that his use of the STAXX trademarks preceded Plaintiffs’ use
and consequently, based on provisions of the Lanham Act and common law, his title to
the marks is superior to theirs. [R. 16, at 16.] It is true, that “[t]he first to use a mark in
the sale of goods or services is the ‘senior user’ of the mark and gains common law rights
to the mark in the geographic area in which the mark is used.” Allard Enterprises, 249
F.3d at 572. However, first use means more than sporadic or casual use; the use should
be deliberate and continuous. See McDonald’s Corp. v. Burger King Corp., 107
F.Supp.2d 787, 790 (E.D. Mich. 2000). “Common law trademark rights develop when
goods bearing the mark are placed in the market and followed by continuous commercial
utilization.” Id. (citing Cullman Ventures, Inc. v. Columbian Art Works, Inc., 717 F.Supp.
96, 113 (S.D.N.Y. 1989) (emphasis added).
At this stage of the litigation, the examples Walters provides of prior use are not
sufficient to establish a common law right to the marks. Walters lists the use of a
“Staxxroadhouse@gmail.com” email account; the creation of a “Furlongs Catering and
Staxx Catering” page, which was started on Facebook on September 27, 2010; the
procurement of STAXX sign estimates; and the listing of “Staxx Blackberry Baby Back
Ribs” on a menu emailed to Liebman on August 12, 2009 to establish common law
rights. [R. 16, at 2-3.] Despite these examples, there is no evidence that potential
customers connected the marks with Walters’ services, and without establishing that
connection, Walters cannot prove his right to the mark. See Circuit City Stores, Inc. v.
CarMax, Inc., 165 F.3d 1047, 1055 (6th Cir. 1999).
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2.
To establish irreparable harm, Plaintiffs must show that unless injunctive relief is
granted, they will suffer “‘actual and imminent’ harm rather than harm that is speculative
or unsubstantiated.” Abney v. Amgen, Inc., 443 F.3d 540, 552 (6th Cir. 2006) (citing
Monsanto Co. v. Manning¸ 841 F.3d 1126, 1988 WL 19169, at *6 (6th Cir. Mar. 8,
1998)). Under the trademark infringement framework, once a moving party has
demonstrated a likelihood of confusion, irreparable injury is presumed. Wynn¸ 943 F.2d
at 608. Irreparable harm is “inherent in the loss of control over the use of one’s
registered trademark.” National Bd. Young Men’s Christian Associations v. Flint Young
Men’s Christian Ass’n of Flint, Mich., 764 F.2d 199, 202 (6th Cir. 1985) (citing
Burberry’s (Wholesale) Ltd. V. After Six Ciro., 122 Misc.2d 561, 471 N.Y.S.2d 235
(1984)). Here, Plaintiffs have lost control of their registered trademark because Walters
has decided to use the mark in his advertising and promotion of his catering business.
Given this infringement of Plaintiffs’ trademark, irreparable harm is presumed. See
Circuit City, 165 F.3d at 1055.
Although Plaintiffs are allowed to recover monetary damages under the Lanham
Act’s statutory framework, 15 U.S.C. § 1117(a), monetary damages will only remedy a
portion of the harm done. They will not compensate Plaintiffs for the considerable loss
of goodwill potentially suffered. “Where a defendant infringes upon a plaintiff’s
trademark, causing irreparable harm, an injunction is appropriate to protect the plaintiff’s
reputation and goodwill that it has established in its marks.” ProNational Ins. Co. v.
Bagetta, 347 F.Supp.2d 469, 473 (E.D. Mich. 2004) (citing DaimlerChrysler v. The Net
Inc., 388 F.3d 201 (6th Cir. 2004)). Because of the potential harm to Plaintiffs’ goodwill
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and the presumption that irreparable harm follows a finding of likelihood of success on
the merits, this factor weighs in favor of granting the preliminary injunction.
3.
The lack of potential harm to others also weighs in favor of granting Plaintiffs’
request for injunctive relief. The focus, here, is whether the defendant will suffer harm if
the court grants injunctive relief, and whether the harm plaintiff will suffer is more or less
than the harm to the defendant. See Southern Ohio Coal Co. v. United Mine Workers of
America, 551 F.2d 695 (6th Cir. 1977). Before the hearing, the Court was concerned
about a potential ownership interest in the trademark for Walters. He has also argued that
as first user of the STAXX markings, he is entitled to protection. The evidence, however,
does not support Walters’ view. The trademarks are registered in Liebman’s name, and
registration establishes prima facie evidence of ownership and solidifies the owner’s
exclusive right to use it. Allard Enterprises, 249 F.3d at 572; see also 15 U.S.C. §§
1057(b), 1115(a). Without establishing any right to the trademark grounded in common
or statutory law, the Court is unaware of any harm that might befall Walters. Moreover,
granting the injunction does not foreclose Walters’ ability to run his business. He would
simply give up the right to use a federally protected trademark to do it. Plaintiffs, on the
other hand, face significant harm to their reputation and goodwill if Walters is allowed to
continue using their mark.
4.
Finally, consideration of the public interest also weighs in favor of granting
injunctive relief. “‘Trademark infringement, by its very nature, adversely affects the
public interest in the ‘free flow’ of truthful commercial information.’” Big Boy
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Restaurants v. Cadillac Coffee Co., 238 F.Supp.2d 866, 873 (E.D. Mich. 2002) (quoting
Gougeon Bros., Inc. v. Hendricks, 708 F.Supp. 811, 818 (E.D. Mich. 1988)). Allowing
Walters to continue his use of the trademark runs afoul of the statutory protections
guaranteed to Plaintiffs, and increases the chance that potential customers might
inadvertently purchase Walters’ services when they intend to procure Plaintiffs’ services.
Audi AG v. D’Amato, 469 F.3d 534, 550 (6th Cir. 2006) (affirming the district court’s
decision to issue an injunction to “prevent consumers from being misled.”). Hence, the
need for injunctive relief based on the public interest.
C.
In the event that a district court grants a request for injunctive relief, Rule 65
requires the movant to provide a bond “in an amount that the court considers proper to
pay the costs and damages sustained by any party found to have been wrongfully
enjoined or restrained.” Fed. R. Civ. P. 65(c). While this rule appears to be mandatory,
district courts have “discretion over whether to require the posting of security.” Moltan
Co. v. Eagle-Picher Industries, Inc., 55 F.3d 1171, 1176 (6th Cir. 1995). Plaintiffs raise
this issue briefly in their motion, but Walters did not address it. Given the Court’s
current position, the parties will be given ten days to file briefs addressing the necessity
and amount, if appropriate, of a bond.
III.
For the reasons articulated, the Court finds that issuing a preliminary injunction is
appropriate. Accordingly, and the Court being sufficiently advised, it is hereby
ORDERED as follows:
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(1)
The Motion for Ex Parte Temporary Restraining Order and Preliminary
Injunction for Trademark Infringement [R. 4] is GRANTED in part;
(2)
PENDING final resolution of this matter, Walters is prohibited from using
the STAXX and STAXX BBQ trademarks in any capacity to advertise or promote his
business ventures; and
(3)
The parties shall have ten days to file briefs to address the necessity and
amount, if appropriate, of a bond.
This 16th day of November, 2012.
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