Louangel, Inc. et al v. Darden Restaurants, Inc. et al

Filing 59

ORDER granting in part and denying in part 25 Motion to Compel.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(lcayce, )

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
LOUANGEL, INC.; dba LONGHORN
STEAKHOUSE RESTAURANT, et al,
Plaintiffs,
VS.
DARDEN RESTAURANTS, INC., et al,
Defendants.

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§ CIVIL ACTION NO. C-12-147
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ORDER ON MOTION TO COMPEL
Before the Court is Plaintiffs’ First Motion to Compel (D.E. 25), along with the
Defendants’ Response (D.E. 28), Plaintiffs’ Reply (D.E. 31), and Defendants’ Sur-Reply
(D.E. 44). The transcript of the hearing on the Motion has also been filed. (D.E. 50).
Plaintiff seeks to compel discovery of the Defendants’ site selection criteria for opening a
Longhorn Steakhouse restaurant in Corpus Christi, Texas and Defendants’ sales figures
for each of its 391 LongHorn Restaurants for the last 30 years. At the hearing held
November 5, 2012, the Court DENIED the Motion with respect to the site selection
criteria and took UNDER ADVISEMENT the request to compel discovery of sales
figures. The Court now GRANTS IN PART and DENIES IN PART the Motion to
Compel as to sales figures.
INTRODUCTION
Because the parties have a Protective Order (D.E. 18) in place to protect trade
secret and other confidential information, the issue for the Court is whether the requested
discovery of specific sales data is relevant and admissible on any issue in this case or is
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calculated to lead to the discovery of such admissible evidence. Plaintiffs have identified
four issues for which they contend the sales figures they seek are within the scope of
discovery:
1.
2.
3.
4.

Whether the mark was used;
Whether the mark was abandoned;
The likelihood of confusion; and
The amount of damages.

Discussion of each of these issues follows.
A. Use
Under the Lanham Act, 15 U.S.C.A. § 1127, both “use” and “abandonment” refer
to whether the mark is used in the ordinary course of trade. Specifically with respect to
services, such as the restaurant services here, the mark is used “when it is used or
displayed in the sale or advertising of services and the services are rendered in
commerce.”1 Id. There is no threshold amount of trade or commerce required.
According to Dallas Cowboys Football Club, Ltd. v. American’s Team Props.,
616 F.Supp.2d 622, 633 (N.D. Tex. 2009), a case on which Plaintiffs rely, the relevant
transactions need only be legitimate business transactions:
To establish priority, a mark must be used in a bona fide sale
to create an impact on the buying public. 2 MCCARTHY
supra § 16.7. “Nominal or token sales to relatives and
personal friends do not constitute a bona fide commercial use
of a trademark.” Id. Secretive and non-open transactions are
not proper usage, as the relevant class of prospective buyers is
not exposed to the mark. Id. The Lanham Act specifically
provides that “a mark shall be deemed to be in use in com1

There was some discussion at the hearing about whether an internal wall display of historical memorabilia
constitutes “use.” See Lone Star Steakhouse & Saloon, Inc. v. Longhorn Steaks, Inc., 106 F.3d 355 (11th Cir. 1997).
This issue is not before the Court in the context of the Motion to Compel and may be raised in a proper motion or at
trial.

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merce . . . when it is placed in any manner on the goods . . .
and the goods are sold or transported in commerce.” 15
U.S.C. § 1127.
While the Dallas Cowboys case adjudicated competing claims to a mark on goods rather
than services, it is instructive with respect to what is considered commerce, which is
common to the definition of use for both goods and services.
The only reference to the quantity of sales in the Dallas Cowboys opinion has to
do with the determination of whether a mark has a “secondary meaning”—or is
“suggestive” rather than “descriptive”—and whether it is “famous” for purposes of a
dilution claim based on the volume of sales. Plaintiffs have not raised these arguments.
Nonetheless, these arguments do not support the detailed discovery they seek in this case.
The concept of a volume of sales sufficient to affect a legal change in the meaning of a
mark involves overall sales, not a restaurant-by-restaurant, year-by-year historical
quantification.
Plaintiffs also rely on Sunkist Growers, Inc. v. Benjamin Ansehl Co., 229 U.S.P.Q.
147, 148 (T.T.A.B. 1985). That case addresses sales figures more specifically, stating:
The Board has held that annual sales and advertising figures
of recent years given in round numbers for specific goods
bearing the involved mark(s) are proper matters for discovery
since the information may well have a bearing upon the issues
in an opposition or cancellation proceeding.
(footnote omitted). That opinion does not shed light on the specific issues for which the
data is considered relevant. Importantly, however, it speaks in terms of “recent years”
and “round numbers” and held that “annual gross sales figures” were relevant.

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Defendants represented to the Court that they have produced consolidated sales figures
for the last five years.
Furthermore, like Dallas Cowboys, the Sunkist case is a “goods” case. And like
Dallas Cowboys, the Sunkist case fails to support burdensome discovery that requires the
responding party to quantify all historical sales for thirty years on a restaurant-byrestaurant basis.
B. Abandonment
Plaintiffs call upon Elvis Presley Enters, Inc. v. Capece, 141 F.3d 188, 205 n.9 (5th
Cir. 1998) (EPE), apparently to argue that sales data might uncover “nonuse” or
abandonment. According to EPE, “[T]he nonuse of the mark during the period while no
nightclub was open may also break the period of continuous use required to establish the
mark as incontestable under 15 U.S.C. § 1065.” Id. Nothing in EPE addressed the
discovery of specific sales figures. It was undisputed that the nightclub had been closed
for a period of time before being moved to a new location.
In this case, while some historical sales figures may have some bearing on the
issue of continuous use, it is not the actual volume of sales of each individual restaurant
that is relevant. Instead, it is the absence of such sales that would be relevant. To defeat
a claim of nonuse or abandonment, Defendants would have to show a continuous record
of commerce using the applicable marks for any single restaurant or combination of
restaurants over the relevant time period to satisfy the Plaintiffs’ right to discovery on this
issue.

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In other words, any continuous use of the marks in commerce, regardless of which
restaurant generated the sales, would be relevant and sufficient. Again, that would mean
any sales in legitimate commerce and would not trigger an inquiry into the specific
amount of each restaurant’s historical sales. According to Sunkist, supra at 148, a party
may satisfy its discovery obligation by providing representative samples of data that
would otherwise be unduly burdensome or harassing to assemble in its totality.
C. Confusion
Plaintiffs argue that sales figures are relevant to the issue of whether consumers
would be confused by the Defendants’ commercial activity. The Fifth Circuit instructs as
follows:
The factors used by this Circuit in determining whether a
likelihood of confusion exists are: (1) strength of the
plaintiff's mark; (2) similarity of design between the marks;
(3) similarity of the products; (4) identity of retail outlets and
purchasers; (5) similarity of advertising media used; (6) the
defendant's intent; (7) actual confusion; and (8) degree of care
exercised by potential purchasers.
American Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 329 (5th Cir. 2008)
(quotations and footnote omitted). “Strength of the plaintiff’s mark” could address its
earning power.
Plaintiffs also argue that sales figures will show that Defendant is the “giant” in
the industry in support of a “reverse confusion” claim as the Defendant enters the
Plaintiff’s more restricted market. According to this “reverse confusion” argument, as an
alleged infringer, Defendants' use of Plaintiffs' mark results in confusion as to the origin
of the Plaintiffs' product. See generally, Big O Tire Dealers, Inc. v. Goodyear Tire &
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Rubber Co., 561 F.2d 1365 (10th Cir. 1977). See also, Great American Restaurant Co. v.
Domino's Pizza L.L.C., 348 Fed. Appx. 907, 909, 2009 WL 3150310, *1 (5th Cir. 2009).
For these issues, Plaintiffs have failed to show how the question of “who is the
giant” or “how strong is the mark” as to claims of recent infringement cannot be
answered by the gross sales figures for the past five years. Defendants have supplied
those figures, rendering this issue moot as to any additional, more specific or more
broadened, historic discovery.
D. Damages
Plaintiffs also relied on the matter of the calculation of damages as a basis for their
sales figure discovery at the hearing. However, they did not elaborate on how any
damage issue requires the requested discovery other than “sales figures are used by
experts in calculating damages.”

According to the Complaint (D.E. 1, pp. 16-17),

Plaintiffs have pled for their damages (presumably compensatory), additional damages
for Defendants’ willful acts, litigation expenses, and the cost of corrected advertising.
None of the Plaintiffs’ categories of damages appear to be based on historical restaurantby-restaurant sales figures of the Defendants.
Defendants have counterclaimed for damages in the form of Plaintiffs’ profits,
Defendants’ actual damages, trebled, and litigation expenses. While the Defendants’
“actual damages” presumably involve Defendants’ sales, by failing to produce discovery
responses for more than the last five years, Defendants are subject to a finding that they
have waived any claim that would be based on evidence of sales from earlier years. Fed.
R. Civ. P. 26(a)(1)(A)(iii), 37(c)(1).
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CONCLUSION
Plaintiffs have failed to show that they are entitled to discovery of sales figures on
a restaurant-by-restaurant basis for all of the Defendants’ hundreds of restaurants going
back 30 years. However, Plaintiffs are entitled to discovery on the issue of continuous
use, nonuse, and/or abandonment with respect to each of the marks in dispute and on the
issue of Defendants’ actual damages. Accordingly, the Motion is GRANTED IN PART
and DENIED IN PART as follows:
• The Court ORDERS Defendants to produce representative sales data that
reflects the continuous commercial use (or lack thereof) of each mark on a
mark-by-mark basis from the date of the claimed inception of each mark to the
present, identifying the restaurant(s) and dates from which the data is taken.
• The Court ORDERS Defendants to produce consolidated annual sales data,
referencing the mark(s) to which the sales are attributed, for each year that the
Defendants claim to have incurred actual damages from Plaintiffs’ alleged
infringing conduct.
Defendants are to comply with this Order within 25 days of the date of this Order.
ORDERED this 26th day of November, 2012.

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NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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