Butler et al v. Hotel California, Inc. et al.
Filing
27
Memorandum Opinion and Order denying Plaintiffs' motion for preliminary injunction (Doc. # 3 ), granting Plaintiffs' motion to supplement their motion for TRO (Doc. # 14 ), and denying Defendants' motions for leave to respond as moot (Doc. # 23 and # 25 ). See order for addition instruction. Judge John R. Adams on 3/30/15. (K,C)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
RICHARD A. BUTLER, III, AND
OCEAN AVENUE PROPERTIES, LLC,
Plaintiff,
vs.
HOTEL CALIFORNIA, INC. AND
SEBASTIAN RUCCI,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
Case No. 4:14CV2380
JUDGE JOHN R. ADAMS
[Resolving Docs. 3; 14; 23; 25.]
MEMORANDUM OF OPINION
AND ORDER
This matter comes before the Court upon the Joint Motion for a Temporary Restraining
Order and Preliminary Injunctive Relief of Plaintiffs Richard A. Butler, III and Ocean Avenue
Properties, LLC.
Defendants Sebastian Rucci and Hotel California, Inc., have opposed
Plaintiffs’ Motion. A hearing has been held. For the reasons set forth herein, Plaintiff’s motion
for a temporary restraining order and preliminary injunctive relief is DENIED.
I.
Facts
The basic facts relative to Plaintiffs’ request for preliminary injunction are largely
undisputed. Plaintiff Richard A. Butler is the owner and operator of Ocean Avenue Properties,
which owns and operates a hotel in Santa Monica, California, named The Hotel California.
When Mr. Butler originally acquired the Santa Monica property he filed an application with the
United States Patent and Trademark Office (PTO) seeking to register “Hotel California” as a
service mark for “providing temporary furnished accommodations.” (Complaint, para. 13.) The
service mark was subsequently included in the Supplemental Register on July 8, 1997. (Doc #14.) Plaintiff then sought, and received, registration of “The Hotel California” for use with
1
“Hotel, motel and furnished lodging services;” this second mark was included in the Principal
Register on April 6, 2004. (Complaint, para 15.) The original mark for “Hotel California”
remains on the Supplemental Register. Plaintiff has continually operated “The Hotel California”
in Santa Monica, California. Plaintiffs have continually used and promoted the service mark
“The Hotel California,” in print and online, in connection with this business. The extent of the
Plaintiffs’ use of “Hotel California” is unclear, as the Plaintiffs’ website and references to travel
reviews use “The Hotel California” not “Hotel California.” Plaintiffs state that franchise and
licensed operations of the brand have begun and identify one other location in California, San
Francisco. However Plaintiff has not produced any document or material demonstrating a
connection with the San Francisco property or conclusively identified any hotel other than the
Santa Monica location that is owned, run, or licensed by Ocean Avenue Properties, LLC, or
Richard A. Butler III.
Defendants Sebastian Rucci and Hotel California, Inc., have begun the process of
developing a hotel and restaurant in Austintown, Ohio, under the names “Hotel California.” and
“Santa Monica Grille” (Complaint, para 5.)
Defendants have purchased a domain name
www.hotel-cali.com and prepared a Facebook page for “Hotel cali.” (Complaint, para 25.) The
parties collectively state that they were independently inspired by the Eagles’ release of a song
by the same name. 1 Defendant Rucci incorporated “Hotel California, Inc.” in July 2012 with the
Ohio Secretary of State for the purpose of operating a hotel, restaurant, and conference room in
Austintown, OH. Defendants state that they were unaware of The Hotel California in Santa
Monica, chose the name due to the Eagles’ song, and intended to position the Austintown
1
The song in question was released in 1976 on the album of the same name. Hotel California was not, as Plaintiffs
represent, released in 1972 on the album Desperado, which, incidentally, was released in 1973.
2
property to capitalize on the opportunity created by the new Hollywood Racino at Mahoning
Valley Racecourse in Youngstown, Ohio.
Plaintiffs state that they learned of the proposed Austintown hotel in July 2014 and sent a
first cease and desist letter to Defendants on July 14, 2014. Defendants did not respond to this
letter or a subsequent letter sent on October 8, 2014. Both letters were sent to the address
provided by Defendants for service of process in the business registration filed with the State of
Ohio. In September 2014 Defendants sought and received registration of the service mark Hotel
California from the State of Ohio. Plaintiffs have filed suit asserting an exclusive right to “The
Hotel California” and “Hotel California” for hotel and lodging services nationwide. Plaintiffs
allege Defendants have engaged in trademark infringement, counterfeiting, and unfair
competition in violation of the Lanham Act as well as violations of the Ohio Deceptive Trade
Practices Act.
II.
Legal Standard
When considering a motion for preliminary injunctive relief, courts must balance: (1)
whether the movant has a strong likelihood of success on the merits; (2) whether the movant
would suffer irreparable injury without the injunction; (3) whether issuance of the injunction
would cause substantial harm to others; and (4) whether the public interest would be served by
issuance of the injunction. PACCAR Inc. v. TeleScan Techs., L.L.C., 319 F.3d 243, 249 (6th
Cir.2003). “The four considerations applicable to preliminary injunction decisions are factors to
be balanced, not prerequisites that must be met.” Jones v. City of Monroe, 341 F.3d 474, 476
(6th Cir. 2003) (citing in re DeLorean Motor Co., 755 F.2d 1223, 1228 (6th Cir. 1985). A
district court is not required to make specific findings concerning each of the four factors used in
determining a motion for preliminary injunction if fewer factors are dispositive of the issue. Id.;
3
citing Mascio v. Public Employees Retirement Sys. of Ohio, 160 F.3d 310, 312 (6th Cir.1998)
(affirming the district court’s grant of a preliminary injunction based on the district court’s
conclusion that the plaintiff had demonstrated a substantial likelihood of success on the merits).
It is nevertheless “generally useful for the district court to analyze all four of the preliminary
injunction factors.” Certified restoration Dry Cleaning v. Tenke Corp., 511 F.3d 535, 542 (6th
Cir. 2007) (internal citation omitted). A district court’s evaluation of the preliminary question of
whether a movant is likely to succeed on the merits is a question of law subject to de novo
review. N.A.A.C.P. v. City of Mansfield, 866 F.2d 162, 169 (6th Cir.1989). The weight a district
court’s gives to each of the four factors and resulting decision to grant or deny preliminary
injunctive relief, however, is examined under the abuse of discretion standard. PACCAR, 319
F.3d at 249; N.A.A.C.P., 866 F.2d at 166 (noting that a “district judge’s weighing and balancing
of the equities should be disturbed on appeal only in the rarest of cases”) (internal quotation
marks and citations omitted). A district court has abused its discretion if it has “relied upon
clearly erroneous findings of fact, improperly applied the governing law, or used an erroneous
legal standard.” PACCAR, 319 F.3d at 249 (internal quotation marks and citation omitted).
III.
Legal Analysis
A. Likelihood of Success
To establish a likelihood of success on the merits of a claim, Plaintiffs must:
. . . show more than a mere possibility of success. However, it is ordinarily sufficient
if the plaintiff has raised questions going to the merits so serious, substantial, difficult
and doubtful as to make them for litigation and thus for more deliberate investigation.
Six Clinics Holding Corp. v. Cafcomp Sys., Inc., 119 F.3d 393, 402 (6th Cir.1997) (internal
citations omitted). As Plaintiffs note, to sustain a claim for trademark infringement, they must
demonstrate (1) ownership of a valid mark that is entitled to protection under the Lanham Act;
4
and (2) that the Defendants’ use of the mark is likely to cause consumer confusion. U.S.
Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185, 1188-89 (6th Cir. 1997). With regard to
ownership, Defendants do not dispute that Plaintiffs have registered “The Hotel California” in
the Principal Register and “Hotel California” in the Supplemental Register.
Clearly, if
Defendants sought to use “The Hotel California,” Plaintiffs would be entitled to the full
presumption of exclusivity conferred by the Principal Register listing for “hotel, motel and
furnished lodging services in class 42.” Allard Enterprises, Inc. v. Advanced Programming
Resources Inc., 249 F.3d 564, 572 (6th Cir. 2001), citing 15 U.S.C. §§ 1057 (b) and 1115 (a),
and U.S.P.T.O Reg. No. 2,828,786. Defendants have instead elected to use Hotel California,
which Plaintiffs hold a Supplemental Registration for use in connection with “providing
temporary furnished accommodations, in class 42.” (PTO Reg. No. 2,078,227.)
The significance of a registration in the Supplemental Register is not equally conclusive.
The Sixth Circuit explains:
Designations that have not yet acquired a trademark significance but are capable
of doing so may be registered on the Supplemental Register, which was created
by 15 U.S.C. § 1091. 3 McCarthy on Trademarks and Unfair Competition §
19:32 (4th ed.2013). ‘A Supplemental Registration confers no substantive
trademark rights beyond those under common law and section 26 of the Lanham
Act expressly excludes Supplemental Registrations from certain advantages
gained by registration on the Principal Register.’ Id. § 19:36 (footnote omitted)
Innovation Ventures v. N2G Distributing, Inc., 763 F.3d 524, fn. 2 (6th Cir. 2014). 15 U.S.C. §
1094 specifies:
but applications for and registrations on the supplemental register shall not be
subject to or receive the advantages of sections 1051(b), 1052(e), 1052 (f), 1057
(b), 1057 (c), 1062(a), 1063 to 1068 inclusive, 1072, 1115 1124 of this title.
The effects of these exclusions include the fact that Supplemental Registration does not establish
the registrant’s exclusive right to use the mark. 15 U.S.C. § 1057, which provides:
5
(b) Certificate as prima facie evidence
A certificate of registration of a mark upon the principal register provided by this
chapter shall be prima facie evidence of the validity of the registered mark and of
the registration of the mark, of the owner’s ownership of the mark, and of the
owner’s exclusive right to use the registered mark in commerce on or in
connection with the goods or services specified in the certificate, subject to any
conditions or limitations stated in the certificate.
(c) Application to register mark considered constructive use
Contingent on the registration of a mark on the principal register provided by this
chapter, the filing of the application to register such mark shall constitute
constructive use of the mark, conferring a right of priority, nationwide in effect,
on or in connection with the goods or services specified in the registration against
any other person except for a person whose mark has not been abandoned and
who, prior to such filing—
Thus, Supplemental Registration is not prima facie evidence of the existence, validity, or
exclusive right to a mark, even after a period of years, no presumption arises unless the mark is
successfully moved to the Principal Register. 15 U.S.C. § 1052(f), 3 McCarthy on Trademarks
and Unfair Competition § 9.36 (citing, as examples: McCormick & Co. v. Summers, 354 F.2d
668, 674 (C.C.P.A. 1966), “It must be remembered that registrations on the Supplemental
Register do not receive the advantages of section 7(b) with regard to prima facie evidence of
exclusive right to use”; George & Co. LLC v. Imagination Entertainment Ltd., 575 F.3d 383, 391
n.8, 91 U.S.P.Q.2d 1786 (4th Cir. 2009): “unlike principal registration, supplemental registration
is not prima facie evidence of the validity of the registered mark, of ownership of the mark, or of
the registrant’s exclusive right to use the registered mark in commerce”; and ERBE
Elektromedizin GmbH v. Canady Technology LLC, 629 F.3d 1278, 1288, 97 U.S.P.Q.2d 1048
(Fed. Cir. 2010) registrant of the mark on the Supplemental Register bears the burden of proof to
establish the existence of a valid mark).
Finally, it appears that the primary benefit of
registration on the Supplemental Register is the speculative deterrence it might provide a party
investigating the commercial viability of a mark and the fact that a Supplemental Registration
6
may be cited by an examiner against a subsequent application for registration on the Principal
Register. Application of Clorox Co., 578 F.2d 305, 308 (C.C.P.A. 1978).
For these reasons Plaintiffs reference to the Supplemental Registration of “Hotel
California” is insufficient to establish ownership of a protectable mark. Nevertheless, the fact of
the mark’s inclusion in the Supplemental Register is, as the Sixth Circuit noted in Innovation
Ventures, supra at 5, an indication that “Hotel California” is capable of acquiring trademark
significance use. Prior to the placement of a mark on the Principal Register, or obtaining
trademark protection under State law, an entity seeking to enforce the right may have a common
law right to the mark. Allard Enterprises, Inc. v. Advanced Programming Resources, Inc., 249
F.3d 564, 58 U.S.P.Q.2d 1710 (6th Cir. 2001). At common law, “ownership of trademark or
service mark rights is obtained by actual use.” Id. at 571-571, citing 2 McCarthy on Trademarks
and Unfair Competition § 16.1 (4th Ed. 2000). Further, “[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. Ownership rights flow only from prior use-either
actual or constructive.” Id. at 572. The court continues:
The U.S. Court of Customs and Patent Appeals has explicitly addressed ‘the
questions as to what circumstances, if any, short of actual use of the trademark,
may create rights in a territory . . .’ In re Beatrice Foods Co., 57 C.C.PA.1320,
429 F.2d 466, 475 (1970). The court’s answer relied on the underlying purpose of
trademark law to eliminate consumer confusion. The Beatrice court explained
that, ‘where a party has submitted evidence sufficient to prove a strong
probability of future expansion of his trade into an area, that area would then
become an area of likelihood of confusion if a registration covering it was granted
to another party.’
Id. at 574. At this juncture, Plaintiffs have not established the extent of their use of “Hotel
California” as opposed to “The Hotel California.” Moreover, as Defendants indicated in
opposition to the motion and during the hearing on the motion, there are a number of hotels
7
operating under the name “Hotel California” in California itself without any apparent affiliation
with Plaintiffs. Plaintiffs do not appear at this stage to have established a protected right to
“Hotel California” in a geographic area that encompasses California, and the extension of a
protected right to Ohio would be inconsistent with that fact.
To the extent that Plaintiffs have a protected right to “The Hotel California,” Plaintiffs
must establish that Defendants’ use of “Hotel California” in Ohio would create a likelihood of
confusion. Frisch’s Restaurants, Inc. v. Elby’s Big Boy, Inc., 670 F.2d 1100, 1107 (6th Cir.
1982). The Sixth Circuit has adopted eight factors relevant to the likelihood of confusion
determination:
1.
2.
3.
4.
5.
6.
7.
8.
Strength of the plaintiff’s mark;
Relatedness of the goods;
Similarity of the marks;
Evidence of actual confusion;
Marketing channels used;
Likely degree of purchaser care;
Defendant’s intent in selecting the mark; and
Likelihood of expansion of the product lines
Id. at 648. “These factors imply no mathematical precision, but are simply a guide to help
determine whether confusion is likely. They are also interrelated in effect. Each case presents its
own complex set of circumstances and not all of these factors may be particularly helpful in any
given case.” Homeowners Grp., Inc. v. Home Mktg. Specialists, Inc., 931 F.2d 1100, 1107 (6th
Cir. 1991). While all of these factors are relevant, actual confusion is “obviously the most
probative proof of the likelihood of confusion.” U.S. Structures, Inc. v. J.P. Structures, Inc., 130
F.3d 1185, 1190 (6th Cir. 1997).
Plaintiffs contend that the “The Hotel California” mark is strong due to the duration of
registration and the success of the Eagles’ song by the same name. Neither of these facts
addresses the inquiry prescribed by the Sixth Circuit when evaluating the strength of a mark:
8
The strength of a mark is a determination of the mark’s distinctiveness and
degree of recognition in the marketplace. “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.”
Homeowners Grp., Inc. v. Home Mktg. Specialists, Inc., 931 F.2d 1100, 1107 (6th Cir. 1991).
The fact that Plaintiffs describe the mark as distinctive only in the context of the Eagles song is
telling. Plaintiffs have not produced any indication that “The Hotel California” as an actual hotel
is uniquely or distinctively associated with the property in Santa Monica or even that potential
hotel patrons are generally aware of a hotel by that name in the marketplace. As Defendants
demonstrated, the hotel is not the only property in the State of California to use “Hotel
California” in association with hotel or residential services. The actual strength of the mark
cannot and should not be definitively determined at this stage in the matter; but the information
provided in support of the motion for preliminary injunction does not support a conclusion that
the mark is particularly strong in California, much less that its strength extends from California
to Ohio.
With regard to the remaining Frisch factors, while it is true that Plaintiffs and Defendants
both intend to operate hotels, and to a certain degree one hotel room is like any other, in this
instance one property is in Santa Monica with walking access to a beach and the other overlooks
an interstate highway in northeastern Ohio. The fact that the properties are both hotels is not
sufficient to support the conclusion that a customer seeking accommodation in costal California
would be swayed or mistakenly register near Youngstown, Ohio due to the superficial
relatedness of the service. Similarly, Plaintiffs’ assertion that hotel rooms are so inexpensive and
readily available that a purchaser intending to travel to California might, due to a general lack of
care, mistakenly book a room in Ohio is insupportable. The two properties appear to offer
services to differing clientele in distant, and distinct, geographic locations.
9
The fact that the properties are geographically distinct and cannot therefore offer
comparable services is also relevant to the marketing channels used. An evaluation of marketing
channels “requires a court to consider the similarities or differences between the predominant
customers of the parties’ respective goods or services. Daddy’s Junky Music, supra at 285. It
seems clear that Plaintiffs’ and Defendants’ predominant customer differs substantially,
Plaintiffs, by their own representation, are a family friendly vacation destination catering to
vacationers looking for accommodations near the beach in Santa Monica, California. Defendant
envisions a more opportunistic clientele based on his proximity to a race course and casino
combination in Youngstown, Ohio. The geographic distance of the two locations suggest a fairly
distinct consumer base and differing marketing channels. Neither operation has indicated an
intent to engage in national advertising at this time. The fact that both parties intend to maintain
an internet presence relative to their services does not negate the differences in their presumptive
clientele for the purposes of this preliminary analysis. 2
Plaintiff concedes that there is no
evidence of actual confusion at this stage, and the Court acknowledges that the absence of actual
confusion is not dispositive. Homeowners’, supra.
Regardless of what Defendants may have or should have known in September when
applying to trademark “Hotel California” for use in Ohio, nothing in the presentation or
marketing of the Austintown property suggests that Defendants chose the mark “with the intent
of causing confusion” or that they engaged in “purposeful copying” that they believed “may
divert some business from the senior user.” Homeowners Grp., supra at 1111; Daddy’s Junky
Music Stores, Inc., v. Big Daddy’s Family Music Ctr., 109 F.3d 275, 286 (6th Cir. 1997).
2
Plaintiffs specifically reference their website, www.hotelca.com, and Defendants website, www.hotel-cali.com, in
their motion for injunction, it appears that neither party was able to purchase or use www.hotelcalifornia.com
because it was already owned by an unaffiliated property in Palo Alto, California, and appears to have been
copyrighted in 1996.
10
Finally, although Plaintiffs suggest both that they intend to expand and have already begun an
expansion, they have produced nothing that indicates any actual affiliation with another property.
Plaintiffs’ website lists a single location, and the other properties in California that use “The
Hotel California” or “Hotel California” do not reference the Santa Monica location, share a
reservation system, or otherwise indicate franchise status. Plaintiffs have not produced any
material demonstrating the claimed relationship(s).
The totality of the material presented by Plaintiffs in support of their motion for
preliminary injunction does not demonstrate a likelihood of success on the merits. This question
drives the Court’s analysis of the need for a preliminary injunction, but the Court will briefly
address the other factors as well.
B. Irreparable harm, harm to others, the public interest
The Court is sensitive to Plaintiffs’ concern that Defendant Rucci’s personal and business
history could reflect negatively on the good will and reputation associated with the Santa Monica
Property. Defendants have offered, and it seems appropriate under the circumstances, to include
a disclaimer in Defendants’ web based advertising stating that they are in no way affiliated with
or endorsed by Ocean Avenue Properties, and “The Hotel California Santa Monica.” The Sixth
Circuit has found disclaimers sufficient even where a trademark has broad national use, and the
alleged infringer specifically intended to capitalize on the mark through misdials associated with
national ad campaigns. Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 19, 39 U.S.P.Q.2D
1181 (6th Cir 1996).
In Holiday Inn, the Sixth Circuit reversed the grant of partial summary judgment to
Holiday Inn and dissolved a permanent injunction, finding that “use of a protected mark or use of
a misleading representation is a prerequisite to the finding of a Lanham Act violation” and that
11
despite
a prominent, multimedia, national ad campaign of “1-800-Holiday”, and an
incontestable mark, the defendant’s decision to register an 800 number reflecting common
misdials of the number 0 for O and 1 for the letter l specifically intending to offer a competing
hotel booking service was permissible. Id. at 626 (emphasis sic). At the time Holiday Inn had
been in operation under that name since 1952, had advertised extensively, owed, operated, and
licensed approximately 1,300 locations and spent $30,000,000 annually on advertising. The
Circuit found dispositive the fact that 800 Reservations began each call with an explicit
disclaimer and, although it exploited Holiday Inns’ decision not to take the precaution of
registering similar numbers, did not independently create confusion. 3 While the creation of
confusion may continue to be an issue in this matter, the fact that a disclaimer was found
sufficient to protect an indisputably national trademark’s reservation service from intentional
exploitation by a dial alike places Plaintiffs’ reputational concern in a broader context. Evidence
of the possibility of irreparable harm, or even harm, is not present in this matter to a degree
necessitating a preliminary injunction. Bearing in mind that even a “preliminary injunction is an
extraordinary remedy never awarded as of right” and that “[i]ssuing a preliminary injunction
based only on the a possibility of irreparable harm is inconsistent with [the Supreme Court’s]
characterization of injunctive relief as an extraordinary remedy” the apparent strength of
Plaintiffs’ “The Hotel California” mark in California does not merit a finding that there is a
genuine likelihood of confusion, harm resulting from, or public interest in, Defendants’ use of
3
“Hello. You have misdialed and have not reach Holiday Inns or any of its affiliates. You’ve called 800
Reservations America’s fastest growing independent computerized reservation service One of our highly trained
hotel reservation specialists will be with you momentarily to provide the Holiday Inns number or to assist you in
finding the lowest rate at over 19,000 properties worldwide, including such hotel chains as Holiday Inns, Guest
Quarters, Hampton Inn, Sheraton, Comfort Inn, and many more. If you are a member of a hotel’s frequent guest
program, have that number ready. Please stay on the line, assistance is just a moment away.” Id. at 621.
12
“Hotel California” in Ohio. Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 23
and 22 (2008).
Conclusion
For the foregoing reasons Plaintiffs’ Motion for Preliminary Injunctive Relief (Doc. # 3)
is DENIED. Plaintiffs’ Motion to Supplement their Motion for Temporary Restraining Order
and Preliminary Injunctive Relief (Doc. # 14) is GRANTED. Defendants’ Motions for Leave to
File a Response to Documents Filed Without Leave of Court (Docs. #23 and #25) are DENIED
AS MOOT. Defendants are ordered to include a disclaimer clarifying their status as separate
from Plaintiffs individually, and collectively, as well as from The Hotel California in Santa
Monica in all print, internet-based, and other advertising. Defendant Rucci is further ordered to
provide a valid and current address for service of process in his filings with the Ohio Secretary of
State and on ECF.
IT IS SO ORDERED.
/s/ John R. Adams
_____________________________
John R. Adams
U.S. District Court Judge
Dated: March 30, 2015
13
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?