Reservoir, Inc. et al v. Truesdell et al

Filing 63

OPINION FOLLOWING BENCH TRIAL. (Signed by Judge Nancy F. Atlas) Parties notified.(gkelner, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
RESERVOIR, INC., et al.,
Plaintiffs,
v.
JUSTIN Z. TRUESDELL, et al.,
Defendants.

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CIVIL ACTION NO. 4:12-2756

OPINION
The Court held a bench trial in this trademark infringement case on February
4, 2014.

Plaintiffs Mohammad Ayman Jarrah (“Jarrah”), an individual, and

Reservoir, Inc. (“Reservoir”), a Texas corporation (collectively, “Plaintiffs”) have
sued Defendants Justin Z. Truesdell (“Truesdell”), Rainbow Cattle Company, Inc.
(“Rainbow Cattle”), Rebels Honky Tonk LLC, and 26710 North I45 Limited
Partnership (collectively, “Defendants”).

Having considered the testimony of

numerous witnesses, all other evidence in the trial record, and the applicable legal
authorities, the Court makes the following findings of fact and conclusions of law.
In summary, the Court holds that Defendants infringed and, to some extent, diluted
Plaintiffs’ trademarks, but did not infringe Plaintiffs’ trade dress. The Court holds
that Defendants are not entitled to benefit from any equitable defenses to
infringement. The Court orders cancellation of Defendants’ trademarks in issue,
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denies an injunction and grants Plaintiffs limited damages. The Court concludes this
is not an exceptional case and denies Plaintiffs’ request for an award of attorneys’
fees.
I.

FINDINGS OF FACT1
At the trial, the Court heard testimony from five witnesses: Defendant

Truesdell; Plaintiff Jarrah; Gary Holman (“Holman”); Kim Stovall (“Stovall”); and
Joe Applewhite (“Applewhite”). The Court credits some but not all of these
witnesses’ testimony.2
Both Truesdell and Jarrah3 are veterans of the restaurant, nightclub, and bar
business. Truesdell has worked in the hospitality industry for over twenty-three
years, and has owned or managed various bars, restaurants, and nightclubs in
Houston, Austin, and, from time-to-time, elsewhere. Jarrah has worked in the bar

1

The Court explains the evidence and uses various forms of the word “find” to indicate
a finding of fact, and sets forth legal principles and uses forms of the words “hold”
and “conclude” to indicate a conclusion of law. To the extent a finding of fact is
more properly a conclusion of law, and to the extent a conclusion of law is more
properly a finding of fact, it should be so construed.

2

In particular, the Court does not credit all the testimony by Jarrah, Truesdell, or
Applewhite.

3

The named party individuals both failed to distinguish in their testimony between the
corporate entities and the individuals with regard to the entities’ ownership, as well
as regarding ownership of the bars in issue. In certain respects, the parties’
documents also are not clear on the matter. Accordingly, the Court refers to
“Plaintiffs” and “Defendants” jointly throughout this opinion.

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business for approximately fifteen years.
In mid-2009, Plaintiffs opened a club4 named “Rebels Honky Tonk” on
Washington Avenue in Houston, Texas (“Rebels Houston”) . Plaintiffs used, in
connection with the club, the service mark REBELS HONKY TONK (the “Rebels
Word Mark”) in which they have senior rights, as explained hereafter. Jarrah leased
the space for Rebels Houston in February 2009. To create and operate Rebels
Houston, Jarrah enlisted the help of others, including Truesdell, Applewhite, and
Dustin Jones (“Jones”). At Jarrah’s invitation, Truesdell began to work on Rebels
Houston in Summer 2009. The witnesses disagree about how the parties met,5 but it
is clear that Jarrah and Truesdell worked together (with the assistance of Applewhite
and Jones) between June and August 2009.6 Jarrah invested approximately $400,000.
Truesdell contributed no funds but was actively involved in development of the
country western-theme for the bar and its name. During that period, a designer
identified by Truesdell was hired to create a logo for Rebels Houston. The logo

4

The Court, like Plaintiffs and Defendants, refer to the “Rebels Honky Tonk”
establishments interchangeably as “clubs” and “bars.”

5

Truesdell stated that Jarrah approached him about them jointly setting up a nightclub;
Jarrah stated that he brought on Jones to be a floor manager for Rebels Houston, and
that Jones brought along Applewhite and Truesdell.

6

The Court rejects Jarrah’s testimony that he and Truesdell never spoke or, at most,
spoke infrequently during this period.

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consisted of a cowboy hat with a star, placed on top of a pair of longhorns and a
pillow-shaped sign carrying the words “Rebels Honky Tonk” (the “Rebels Composite
Mark,” and together with the “Rebels Word Mark,” the “Rebels Marks” or “Marks”).
During construction, Truesdell arranged for Holman, an artist, to paint the
Rebels Composite Mark on the top of the facade of the Rebels Houston building.
Holman also painted an enormous mural on an interior wall behind the serving bar;
the mural depicted numerous iconic Hollywood and western historical figures leaning
on a bar (e.g., Willie Nelson, Marilyn Monroe, and John Wayne).
In August 2009, the relationship between Jarrah and Truesdell disintegrated.
Truesdell sought a written partnership agreement. Jarrah declined the terms Truesdell
requested, and Truesdell ceased working on the Rebels Houston project. Truesdell
and Jarrah never signed any written agreement. Indeed, they had no employment,
operating, or partnership contract. On the other hand, Jarrah, Applewhite, and Jones
did execute a “Management/Operating Agreement” pursuant to which Applewhite
and Jones agreed to manage Rebels Houston in exchange for 17% of the bar’s net
revenues.
When the parties parted ways, Truesdell did not request permission from Jarrah
to use the Rebels Marks for his own club or for any other purpose. Truesdell, in
anger or a fit of pique at the time of the break up, may have threatened Jarrah that he
would use the “Rebels Honky Tonk” name in Austin, but Jarrah did not affirmatively
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give Truesdell permission to use any of the Rebels Marks.
In November 2009, Truesdell opened a “Rebels Honky Tonk” bar in Austin,
Texas (“Rebels Austin”).7 Truesdell hired Holman to paint the Rebels Composite
Mark on the facade of Rebels Austin. On a wall of the outside patio of Rebels
Austin, Holman painted a very large mural that closely resembled the mural he had
painted inside Rebels Houston.
Rebels Austin was not affiliated with Rebels Houston or authorized by
Plaintiffs. At the time he opened Rebels Austin, Truesdell knew Jarrah was operating
Rebels Houston under the public name “Rebels Honky Tonk” and using the same
logo as Rebels Austin.
At some point, Jarrah learned that a Rebels Honky Tonk had opened in Austin.
It is unclear when he obtained this knowledge but it appears to have been in or about
early 2010, well before Jarrah received a request from Truesdell in February 2012 to
stop using the Rebels Marks.
In or about March 2012,8 Defendants opened a second club named “Rebels

7

The Court notes that, a few weeks before trial, Truesdell changed the name of Rebels
Austin to “Rowdys Saloon.”

8

Truesdell previously signed an affidavit stating that Rebels Woodlands opened in
March 2012. In his testimony at trial, Truesdell flatly contradicted himself by stating
that Rebels Woodlands did not open until “at least” May, if not June, 2012. The
Court finds that the earlier affidavit is correct, and that the bar opened in March 2012.

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Honky Tonk” in Oak Ridge, Texas, a town in the Houston suburbs near The
Woodlands, Texas (“Rebels Woodlands”). Defendants hoped to and did lure patrons
from Rebels Houston by enabling them to avoid traveling to downtown Houston.
Defendants used the Rebels Marks for Rebels Woodlands. Rebels Woodlands
operated for approximately ten months, from March to December, 2012.9 Rebels
Woodlands was advertised on the same Houston-area radio station as Rebels
Houston. Jarrah learned about Rebels Woodlands from these radio advertisements
at or about the time that Rebels Woodlands opened. Plaintiffs had no financial or
corporate affiliation with Rebels Woodlands.
Meanwhile, in June 2010, Truesdell filed an application with the United States
Patent and Trade Office (“USPTO”) to register the Rebels Marks. Despite knowledge
that Rebels Houston had been in operation using the Rebels Marks since August
2009, Truesdell, through his attorney who actually filed and signed the application,
stated misleadingly in his USPTO application that the “first use” of the Rebels Marks
was “as least as early as 3/11/2010.” Truesdell, through his counsel, also falsely
declared that “to the best of his/her knowledge and belief no other person, firm,
corporation, or association has the right to use the mark in commerce.” The USPTO

9

In December 2012, Rebels Woodlands closed; it is now a restaurant named “Mama
J’s BBQ.”

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granted registration of the Rebels Marks on April 5, 2011.
In February 2012, Jarrah learned that Truesdell had registered the Rebels
Marks with the USPTO in his name when Truesdell and Rainbow Cattle (to whom
the Rebels Marks were licensed) sent a cease-and-desist letter requesting that
Plaintiffs stop using the Rebels Marks. Jarrah filed this case in Texas state court in
August 2012, to enforce his common law trademark rights in the Rebels Marks. The
case thereafter was removed to this Court.
II.

CONCLUSIONS OF LAW
A.

Partnership Between Jarrah and Truesdell

The Texas Revised Partnership Act (“TRPA”) “provides that an association to
carry on a business for profit as owners creates a partnership.”10 Ingram v. Deere,
288 S.W.3d 886, 895 (Tex. 2009) (citing TEX. REV. CIV. STAT. art. 6132b-2.02(a)
(expired January 1, 2010)). Under the TRPA, five factors indicate a partnership:
“(1) receipt or right to receive a share of profits of the business; (2) expression of an
intent to be partners in the business; (3) participation or right to participate in control
of the business; (4) sharing or agreeing to share: (A) losses of the business; or (B)

10

The TRPA was made effective on January 1, 1994, and expired on January 1, 2010.
Because Truesdell claims that a partnership was formed (and dissolved) in 2009, the
TRPA governs in this action. See Rojas v. Duarte, 393 S.W.3d 837, 841 n.2 (Tex.
App. Ct.–El Paso 2012, pet. denied) (“Although the TRPA expired on January 1,
2010, it was in effect during all of the events made the basis of this lawsuit.”).

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liability for claims by third parties against the business; and (5) contributing or
agreeing to contribute money or property to the business.” Id. (citing TEX. REV. CIV.
STAT. art. 6132b-2.03(a) (expired January 1, 2010)). A partnership can be created
without each factor being met. Id. at 896. Texas courts must apply a “totality-of-thecircumstances” test in applying these factors. Id. The party asserting existence of a
partnership under the TRPA has the burden to prove creation of that partnership. See
Hoss v. Alardin, 338 S.W.3d 635, 640-41 (Tex. App. Ct.–Dallas 2001, no pet.).
Truesdell has failed to prove that he entered into a partnership with Jarrah or
Reservoir, let alone a partnership permitting him to use the Rebels Marks without
Plaintiffs’ permission. While Truesdell wanted, and arguably may have offered, to
enter into a partnership with Jarrah, Jarrah did not agree to the terms Truesdell
demanded.11 Furthermore, Truesdell offered no evidence addressing the other TRPA
factors. Truesdell admitted he did not contribute any funds or property to the Rebels
Houston enterprise12 and did not agree to share losses. No partnership was created
between any of Plaintiffs and any of Defendants.13
11

The Court recognizes that the “TRPA does not require direct proof of the parties’
intent to form a partnership” and that intent is not necessarily the “prime” factor in
creating a partnership under the TRPA. Ingram, 288 S.W.3d at 895-96.

12

Jarrah testified that he invested $400,000.

13

Moreover, even if one could find that a partnership had been formed, which it was

(continued...)
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B.

Trademark Infringement
1.

Infringement

The Lanham Act creates liability for “[a]ny person who . . . uses in commerce
any word, term, name, symbol, or device . . . which is likely to cause confusion, or to
cause mistake, or to deceive as to the affiliation, connection, or association of such
person with another person, or as to the origin, sponsorship, or approval of his or her
goods, services, or commercial activities by another person . . . ” 15 U.S.C.
§ 1125(a)(1)(A). A party alleging trademark infringement must show: (1) ownership
in a legally protectable mark, and (2) a likelihood of confusion in the minds of
potential customers caused by the infringer’s use of the mark. See Bd. of Supervisors
for La. State Univ. Agric. and Mech. Coll. v. Smack Apparel Co., 550 F.3d 465, 474
(5th Cir. 2008). Ownership of a mark is established by use in the market, not by
registration. See Smack Apparel, 550 F.3d at 475; Union Nat’l Bank of Tex., Laredo
v. Union Nat’l Bank of Tex., Austin, 909 F.2d 839, 842 (5th Cir. 1990). Thus, the
“senior user” who first uses the mark in the marketplace “is entitled to enjoin other
‘junior’ users from using the mark, or one that is deceptively similar to it.” Union
Nat’l Bank, 909 F.2d at 842-43.

(...continued)
not, the partnership clearly dissolved in August 2009, prior to the opening of Rebels
Houston and the first use of the Rebels Marks in commerce.
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The Court has previously held that Defendants infringed Plaintiffs’ mark. See
Memorandum and Order, dated April 30, 2013 [Doc. # 22], at 10-12. The evidence
at trial reinforces that conclusion. Plaintiffs are the senior users of the Rebels Marks,
having first used them in connection with Rebels Houston in August 2009.
Defendants do not contest this fact; the evidence is clear that Truesdell did not begin
using the Rebels Marks until, at earliest, November 2009, when he opened Rebels
Austin. Thus, Plaintiffs have established ownership in the Rebels Marks.14
The Court concludes that Defendants’ use of the Rebels Marks caused
consumer confusion arising from Rebels Austin (to a limited extent) and Rebels
Woodlands (to a great extent). In determining whether a defendant’s use of a mark
is likely to cause confusion, the Fifth Circuit considers eight factors: “(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.” Am. Rice, Inc. v. Producers Rice Mill, Inc., 518
F.3d 321, 329 (5th Cir. 2008). No factor is dispositive, and “a finding of likelihood

14

Defendants do not contest that the mark is legally protectable. Indeed, Truesdell
himself sought and obtained registration of the Rebels Marks with the USPTO. That
registration, though obtained by Truesdell, is “prima facie evidence of the mark’s
validity.” See Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 194 (5th Cir.
1998).

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of confusion need not be supported even by a majority of the . . . factors.” Id. (citing
Conan Props., Inc. v. Conans Pizza, Inc., 752 F.2d 145, 150 (5th Cir. 1985)).
In the case at bar, Defendants used the Rebels Marks on the exact same
product, a country western-theme club in Texas, as Plaintiffs. Given the use of the
same mark in the same manner, a “presumption of confusion exists.” See Choice
Hotels Int’l, Inc. v. Patel, 940 F. Supp. 2d 532, 540 (S.D. Tex. 2013) (Costa, J.)
(citing Paulsson Geophysical Servs. v. Sigmar, 529 F.3d 303, 310-11 (5th Cir. 2008),
and TGI Friday’s Inc. v. Great Nw. Rests, Inc., 652 F. Supp. 2d 763, 767 (N.D. Tex.
2009)). Even without this presumption, however, an analysis of the “likelihood of
confusion” factors, as detailed in American Rice, leads the Court to the same
conclusion.
Plaintiffs’ Marks are strong. “Marks may be classified as generic, descriptive,
suggestive, or arbitrary and fanciful.” Falcon Rice Mill, Inc. v. Community Rice Mill,
Inc., 725 F.2d 336, 346 (5th Cir. 1984). These categories are “commonly viewed as
central tones in a spectrum.” Id. While “Honky Tonk” is a generic term that
generally describes country western-theme bars, “Rebels” is arbitrary and fanciful,
at least in connection with “honky tonks.” Similarly, the Rebels Composite Mark—a
combination of the Rebels Word Mark and an arbitrary logo design—is clearly
fanciful.

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Plaintiffs and Defendants used the Rebels Marks on the same product: country
western-theme clubs in Houston, a Houston suburb (Oak Ridge/The Woodlands), and
Austin. Indeed, Defendants opened their second club, Rebels Woodlands, reasonably
near Plaintiffs’ club, Rebels Houston.15 There also is evidence that many college-age
and young adult Houstonians, the market for Rebels Houston, spend leisure time in
Austin. Defendants thus used Plaintiffs’ exact mark on the same product in roughly
the same geographic area. Accordingly, the second, third, and fourth factors,
respectively (the similarity of design of the marks, the similarity of the products, and
the identity of retailers and purchasers) all favor a finding of a likelihood of
confusion.
The fifth factor, similarity of advertising media used, also supports a finding
of likelihood of confusion. Jarrah testified that he spent approximately $120,000 on
radio advertising for Rebels Houston during a three-month period and that Rebels
Woodlands advertised on the same radio station in the same Houston radio media
market. Defendants have not rebutted Plaintiffs’ evidence in any way. The similarity
in advertising likely confused Houston area consumers as to the ownership or

15

The Court takes judicial notice that the distance between the two bars is
approximately 30 miles. See G OOGLE M APS, https://goo.gl/maps/t86En (last accessed
Feb. 24, 2014).

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sponsorship of Rebels Houston and Rebels Woodlands.16
The Court turns to the last three factors regarding proof of customer confusion.
Defendants used the mark under a claim of right, and thus did not intend to infringe
on Jarrah’s rights in the Rebels Marks. This factor tips in Defendants’ favor.
Plaintiffs present no probative evidence of actual confusion in the mind of any
customer at Defendants’ establishments, Rebels Austin and Rebels Woodlands,
regarding ownership or sponsorship of those clubs or their connection to Plaintiffs’
Rebels Houston, and thus this factor tips in Defendants’ favor. Finally, Plaintiffs
have offered no proof of the “degree of care” exercised by customers of any Rebels
location, making this factor neutral.
Ultimately, evaluation of all eight factors regarding confusion persuades the
Court that Plaintiffs have met their burden to establish a likelihood of confusion
stemming from Defendants’ use of the Rebels Marks at Rebels Woodlands and, to a
lesser degree, Rebels Austin. Accordingly, Defendants’ use of the Rebels Marks at
both Rebels Woodlands and Rebels Austin infringed Plaintiffs’ trademark rights.

16

The Court credits Jarrah’s testimony in this respect, although Plaintiffs did not
provide documentary proof of any radio advertising for Rebels Houston or Rebels
Woodlands. There also is no evidence of Rebels Austin’s advertising. Rebels Austin
is in a different media market from Houston, and Plaintiffs do not appear to contend
that Rebels Austin’s advertising affected Rebels Houston’s patronage.

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2.

Affirmative Defenses

Defendants assert the two equitable defenses of waiver and estoppel against
Plaintiffs’ claim of infringement. See Amended Answer [Doc. # 12] (“Answer”),
¶ 27.17 Reviewing Defendants’ submissions, it is unclear whether Defendants have
intended to assert these common law equitable defenses or, in the alternative, assert
the Lanham Act defense of “acquiescence” (also referred to as “estoppel by
acquiescence”).18 Moreover, “[i]t is unclear whether the Fifth Circuit recognizes a
separate defense of waiver or estoppel in the trademark context.” RE/MAX Int’l, Inc.
v. Trendsetter Realty, LLC, 655 F. Supp. 2d 679, 711 n.12 (S.D. Tex. 2009)
(Rosenthal, J.).19 Even if waiver or estoppel is a valid defense to trademark
infringement, Defendants have failed to meet their burden to establish any of these
defenses. The Court addresses each affirmative defense in turn.
17

Defendants also asserted a defense of laches. See Answer, ¶ 27. The Court rejected
this defense by granting Plaintiffs summary judgment on the issue. See Memorandum
and Order, dated October 9, 2013 [Doc. # 37], at 9-12.

18

In briefing its waiver defense, Defendants cite, see Defendants’ Memorandum of Law
[Doc. # 49-6], at 2, a Fifth Circuit case, Conan Properties, Inc. v. Conans Pizza, Inc.,
which outlines a district court’s jury instruction on the elements of an acquiescence
defense. See 752 F.2d at 152 n.3 (“The district court’s jury instruction for Conans’
acquiescence defense stated in pertinent part . . .”).

19

Courts differ on whether waiver is a defense to trademark infringement. Compare,
e.g., adidas Am., Inc. v. Payless Shoesource, Inc., 529 F. Supp. 2d 1215, 1256-57 (D.
Or. 2007) (entertaining waiver defense in trademark context), with Pandora Jewelers
1995, Inc. v. Pandora Jewelry, LLC, 703 F. Supp. 2d 1307, 1313 n.7 (S.D. Fla. 2010)
(refusing to address waiver defense because “the waiver defense has no root in
trademark law”).

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a.

Waiver

“Waiver is the intentional relinquishment of a right actually known, or
intentional conduct inconsistent with claiming that right.”

Tesco Corp. v.

Weatherford Int’l, Inc., 632 F. Supp. 2d 654, 658 (S.D. Tex. 2009) (citing Ulico Cas.
Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 778 (Tex. 2008)) (addressing waiver
defense to claim of patent infringement). To establish waiver, a defendant must
show: (1) that the plaintiff held an existing right, benefit, or advantage; (2) the
plaintiff’s actual knowledge of the existence of that right, benefit, or advantage; and
(3) the plaintiff’s “actual intent to relinquish that right, or intentional conduct
inconsistent with that right.” Id.20
Defendants have failed to establish that Plaintiffs “intentionally relinquished”
their right in the Rebels Marks. Jarrah never explicitly stated that Truesdell had a
right to use the Rebels Marks. Nor did Truesdell ask Jarrah for permission to use
them.21 At most, Jarrah failed to properly and timely object when he learned about

20

As noted, the Court evaluates the elements of this test without deciding whether the
common law waiver doctrine is applicable.

21

Truesdell’s own testimony, if credited, which the Court does not, establishes merely
that he claimed and demanded the right to use the Rebels Marks in Austin. There is
no persuasive proof that Jarrah knew the scope of his right and intentionally
relinquished a known right.

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Truesdell’s use of the mark.22 This evidence is insufficient to establish waiver.
b.

Common Law Equitable Estoppel

The doctrine of equitable estoppel “requires the defendant to prove intentional
deception through concealment or inaction or gross negligence amounting to
constructive fraud.” Source, Inc. v. SourceOne, Inc., 2006 WL 2381594, at *8 (N.D.
Tex. Aug 16, 2006) (citing Matter of Henderson, 577 F.2d 997, 1001 (5th Cir. 1978)).
The Fifth Circuit’s test for equitable estoppel in the context of copyright infringement
requires that “(1) the plaintiff must know the facts of the defendant’s infringing
conduct; (2) the plaintiff must intend that its conduct shall be acted on or must so act
that the defendant has a right to believe that it is so intended; (3) the defendant must
be ignorant of true facts; and (4) the defendant must rely on the plaintiff’s conduct to
its injury.” Carson v. Dynegy, Inc., 344 F.3d 446, 453 (5th Cir. 2003).23
Defendants have not shown that Plaintiffs engaged in “intentional deception”

22

The Court also reaffirms its holding, based on the facts presented at trial, that
Defendants have failed to establish a laches defense.

23

Defendants propose that this standard, taken from the copyright infringement context,
applies in the context of trademark infringement. Defendants, however, have not
cited any cases establishing that this test applies to trademark infringement claims.
The single case on which Defendants rely, Officeware Corp. v. Dropbox, Inc., 2012
WL 3262760 (N.D. Tex. Aug. 10, 2012), refers to “collateral estoppel,” and not
equitable estoppel. See id. at *3. In any event, for the sake of completeness, the
Court evaluates the elements of this test without deciding whether equitable estoppel
is applicable.

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or that they concealed the true facts of their use of the Rebels Marks from
Defendants. To the contrary, Truesdell knew of Jarrah’s use of the Rebels Marks as
early as August 2009, when Jarrah and Truesdell worked together on Rebels Houston
and when Truesdell assisted in the design and painting of the Marks at Rebels
Houston. Indeed, the uncontradicted evidence is that Defendants copied and used the
Rebels Marks in Austin in November 2009, fully aware that Jarrah earlier had opened
Rebels Houston.24 Defendants copied the Marks again when they opened Rebels
Woodlands in 2012.
Defendants did not detrimentally rely on any representations from Jarrah in
deciding to use the Rebels Marks. The Court concludes that Jarrah made no such
representation to Truesdell.25 Moreover, there is no evidence that Truesdell relied on
Jarrah’s failure to pursue his trademark rights in opening and running either Rebels
Austin or Rebels Woodlands. Accordingly, Defendants have not met their burden to
prove any common law equitable estoppel defense.

24

There also is no evidence that Plaintiffs knew of Defendants’ use of the Rebels Marks
until after Rebels Austin began operating.

25

It appears that Defendants contend that Truesdell believed he had a right to use the
Rebels Marks because he helped design them and conceived of the Rebels Honky
Tonk theme for Rebels Houston. The Court is unpersuaded that these facts are
material to Defendants’ equitable estoppel defense. Truesdell cavalierly used the
Marks in creating Rebels Austin without regard for any rights Plaintiffs had in them.

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c.

Acquiescence

“[A]cquiescence involves the plaintiff’s implicit or explicit assurances to the
defendant which induces reliance by the defendant.” Conan Props., 752 F.2d at 153.
To prove acquiescence, a defendant must show: “(1) the plaintiff knew or should have
known the defendant’s use of the trademark; (2) the plaintiff made implicit or explicit
assurances to the defendant that it would not assert a claim; and (3) the defendant
relied on the assurances.” Trendsetter Realty, 655 F. Supp. 2d at 709 (citing Conan
Props., 752 F.2d at 153); see also Sara Lee Corp. v. Kayser Roth Corp., 81 F.3d 455,
462 (4th Cir. 1996) (“An infringement action may be barred by the doctrine of
estoppel by acquiescence where the owner of the trademark, by conveying to the
defendant through affirmative word or deed, expressly or impliedly consents to the
infringement.”). Acquiescence involves active consent by the senior user. See Sara
Lee Corp., 81 F.3d at 462; SunAmerica Corp. v. Sun Life Assurance Co. of Canada,
77 F.3d 1325, 1334 (11th Cir. 1996) (“Acquiescence is an equitable defense that
denotes active consent by a senior user to another’s use of the mark.”).26
Jarrah did not actively consent to Truesdell’s or Defendants’ use of the Rebels
Marks, nor did he otherwise assure Truesdell that he could use the Marks. The

26

The requirement of “active consent” distinguishes acquiescence from laches. See
Sara Lee Corp., 81 F.3d at 462 (“[A]cquiescence implies active consent, while laches
implies a mere passive consent.”).
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evidence reflects that Truesdell decided, on his own, to open Rebels Austin and, later,
Rebels Woodlands. He did not explain his plan to Jarrah. Jarrah provided no
assurance that Truesdell could use the Rebels Marks. Accordingly, Defendants have
failed to establish an acquiescence defense.
C.

Trade Dress Infringement

A plaintiff can bring an action under Section 43(a) of the Lanham Act, 15
U.S.C. § 1125(a), for “trade dress” infringement, even where the alleged trade dress
is not registered. Wal-Mart Stores, Inv. v. Samara Bros., Inc., 529 U.S. 205, 209
(2000). “To prove infringement of a trade dress, a plaintiff must show (1) that the
dress is protectable, and (2) that infringement has occurred.” Clearline Techs. Ltd.
v. Cooper B-Line, Inc., 948 F. Supp. 2d 691, 700 (S.D. Tex. 2013) (Ellison, J.) (citing
Taco Cababa Int’l, Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1117-18 (5th Cir. 1991),
aff’d, 505 U.S. 763, 774-76 (1992)). Trade dress is “protectable” if it is “distinctive”
and nonfunctional. Wal-Mart Stores, 529 U.S. at 210. Infringement requires a
showing of a likelihood of confusion “as to the source, affiliation, or sponsorship of
the alleged infringer’s product.” Clearline Techs., 948 F. Supp. 2d at 700. “Trade
dress protection has been extended to the overall ‘motif’ of a restaurant.” Amazing
Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 251 (5th Cir. 2010) (citing Two
Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 765 (1992)).

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Like trademarks, trade dress can be distinctive “if [it] serves as an indicator[]
of source.” Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 540 (5th Cir. 1998),
abrogated on other grounds by TrafFix Devices, Inc. v. Marketing Displays, Inc., 532
U.S. 23, 32-33 (2001). A trademark “can be distinctive in one of two ways.” WalMart Stores, 529 U.S. at 210. First, a mark can be “inherently distinctive if its
intrinsic nature serves to identify a particular source.” Id. Second, a mark can
acquire distinctiveness when “in the minds of the public, the primary significance of
a mark is to identify the source of the product rather than the product itself.” Id. at
211. Trade dress, like a mark, can be inherently distinctive, even without acquiring
secondary meaning. See Two Pesos, 505 U.S. at 774-76.
There is no evidence in the record that Plaintiffs’ trade dress was “distinctive.”
Plaintiffs here have presented evidence of only three aspects of Rebels Houston’s
“trade dress” that Rebels Austin imitated: a mural of a “bar scene” painted by
Holman, wood or faux-wood paneled walls, and wooden barrels used as cocktail
tables. Holman testified that he painted the “bar scene” mural on an interior wall of
Rebels Houston, and that he was instructed by Truesdell, through a middleman, to
paint a bar scene mural on an outside patio at Rebels Austin. But Holman also
acknowledged that he has painted several comparable murals elsewhere and that,

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generally, his artwork in different country western-theme bars is “similar.”27 This
evidence is insufficient to support a finding or legal conclusion that Rebels Houston’s
“bar scene” mural was either inherently distinctive or had acquired distinctiveness
through a secondary meaning.28 Further, Plaintiffs have presented no evidence on
whether the mural painted in Rebels Austin is likely to cause confusion regarding the
“source, affiliation, or sponsorship” of the mural. For example, Plaintiffs have
presented no evidence of, among other things, Defendants’ intent in including the
mural in Rebels Austin, actual confusion as a result of the mural, or customer identity.
See Clearline Techs., 948 F. Supp. 2d at 704-05 (listing “nonexhaustive digits of
confusion in evaluating likelihood of confusion”). Indeed, the evidence presented
shows the opposite; the evidence of records establishes that the type of mural Holman
painted in Rebels Austin is found in various other unaffiliated country western-theme
bars and does not suggest any affiliation between Rebels Austin and Rebels Houston
in particular.
Plaintiffs also fail to establish an actionable claim of trade dress infringement
based on the wood (or faux-wood) paneled walls or the use of wooden barrels as

27

28

Plaintiffs have not provided any evidence regarding possible trade dress infringement
at Rebels Woodlands.

While not necessary to the Court’s conclusion, the Court notes that Plaintiffs bear the
burden to show that their trade dress is not functional. See 15 U.S.C. § 1125(a)(3).
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cocktail tables. Both of these features are often included in typical designs for
country western-theme establishments. Plaintiffs have not proven a likelihood of
confusion regarding Rebels Austin’s alleged use of Plaintiffs’ trade dress.
D.

Trademark Dilution

Plaintiffs also seek a finding of trademark dilution under Section 16.29 of the
Texas Business and Commerce Code (the “Texas Anti-Dilution Act”).29 The Texas
Anti-Dilution Act permits the owner of a mark “to enjoin an act likely to injure a
business reputation or to dilute the distinctive quality of a mark.” TEX. BUS. & COM.
CODE § 16.29. To succeed on such a claim, a plaintiff “must show (1) ownership of
a distinctive mark and (2) a likelihood of dilution.”30 Pebble Beach Co. v. Tour 18
I, Ltd., 942 F. Supp. 1513, 1564 (S.D. Tex. 1996), aff’d, 155 F.3d 526 (5th Cir. 1998)
(citing Hormel Foods Corp. v. Jim Henson Prods., Inc., 73 F.3d 497, 506 (2d Cir.
29

30

On September 1, 2012, a new version of the Texas Anti-Dilution Act, codified at
Section 16.103 of the Texas Business and Commerce Code, went into effect. Section
16.103 permits “the owner of a mark that is famous and distinctive, inherently or
through acquired distinctiveness, in this state . . . to enjoin another person’s
commercial use of a mark or trade name that begins after the mark has become
famous if use of the mark or trade name is likely to cause the dilution of the famous
mark.” T EX . B US. & C OM. C ODE § 16.103. The Statutory Notes to Section 16.103
make clear, however, that changes to the law codified in the new Anti-Dilution Act
do not apply to “any suit, proceeding, or appeal pending on the effective date of this
Act.” Because Plaintiffs’ Original Petition was filed in Texas state court on August
3, 2012, the prior version of the Anti-Dilution Act (i.e., Section 16.29) applies in this
case. See also US Risk Ins. Group, Inc. v. U.S. Risk Management LLC, 2013 WL
4504754, at *20 n.3 (N.D. Tex. Aug. 20, 2013).

Plaintiffs do not assert a claim for trademark dilution under 15 U.S.C. § 1125(c).
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1996). There is no requirement under the Texas Anti-Dilution Act that Defendants’
use of the mark be “commercial” in nature. See E. & J. Gallo Winery v. Spider Webs
Ltd., 129 F. Supp. 2d 1033, 1037 (S.D. Tex. 2001), aff’d, 286 F.3d 270 (5th Cir.
2002). Defendants do not appear to dispute that Jarrah owns the Rebels mark and that
the mark is distinctive.
A plaintiff can prove the likelihood of dilution under two theories: dilution by
blurring or dilution by tarnishment. E. & J. Gallo Winery v. Spider Webs Ltd., 286
F.3d 270, 279 (5th Cir. 2002). “Blurring” involves “a diminution in the uniqueness
or individuality of the mark.” Id. “Tarnishment,” in contrast, involves “an injury
resulting from another’s use of the mark in a manner that tarnishes or appropriates the
goodwill and reputation associated with the plaintiff’s mark.” Id. Plaintiffs have not
alleged, nor have they offered any evidence regarding, “dilution by blurring” with
respect to Truesdell’s use of the Rebels mark.
With respect to “dilution by tarnishment,” Jarrah testified that Rebels
Woodlands “affected his local reputation.” Jarrah stated that Rebels Woodlands
served customers as young as 18 years old in an “after hours” setting,31 unlike Rebels
Houston, which limited patrons to those of legal alcohol drinking age, 21 years and
older. Jarrah also testified that there were fist fights at Rebels Woodlands, and both
31

There is no evidence that Rebels Woodlands served alcohol to underage patrons, only
that the establishment was open to customers as young as 18.
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Jarrah and Truesdell testified about deaths caused by two separate car crash incidents
involving drunk patrons leaving Rebels Woodlands or nearby establishments.
Furthermore, Jarrah testified that Rebels Austin opened to patrons ages 18 and older,
which is a different “crowd” from the one he cultivates at Rebels Houston. As a
result, Jarrah claims that he cannot now open a Rebels location in either Austin or the
Woodlands.
Plaintiffs’ evidence establishes “likelihood of dilution” by tarnishment with
respect to Rebels Woodlands, but not with respect to Rebels Austin. Rebels
Woodlands developed a negative reputation. The identity of the name and logo, and
the proximity of the two clubs (both in the Houston area), establishes a likelihood that
this reputation was also associated with Rebels Houston, at least concerning
customers from the Woodlands area and other Houston suburbs who had patronized
Rebels Houston until Rebels Woodlands opened. There is no evidence, however, that
Rebels Austin’s business caused dilution to the Rebels Marks or Rebels Houston’s
reputation. Service of customers between the ages of 18 and 21 in Austin (the only
criticism lodged by Jarrah against Rebels Austin) is not likely to dilute Rebels
Houston’s reputation in the minds of what Jarrah claimed was an older, more
sophisticated clientele in Houston. Accordingly, the Court concludes that the
likelihood of tarnishment resulting from Rebels Woodlands makes Defendants liable

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for trademark dilution.
E.

Remedies
1.

Cancellation of Registration

“In any action involving a registered mark,” a district court has the power to
“order the cancellation of registrations.” 15 U.S.C. § 1119. Plaintiffs here urge the
Court to cancel the Rebels Marks that Truesdell registered with the USPTO
(Registration No. 3,940,282).
The Lanham Act prohibits the registration of a trademark that “consists of or
comprises a mark which so resembles . . . a mark or trade name previously used in the
United States by another and not abandoned, as to be likely, when used or in
connection with the goods of the applicant, to cause confusion, or to cause mistake,
or to deceive.” 15 U.S.C. § 1052(d). The test of “likelihood of confusion” under
Section 1052(d) is the same as the test for trademark infringement. See Trendsetter,
655 F. Supp. 2d at 712 (citing 3 MCCARTHY

ON

TRADEMARKS

AND

UNFAIR

COMPETITION §§ 20:15, 20:53 (2009)). The Court has held and here reaffirms that
Defendants infringed on Plaintiffs’ Marks in that there is a likelihood of confusion
between the Marks as used by Defendants and as used by Plaintiffs.

See

Memorandum and Order, dated April 30, 2013 [Doc. # 22], at 11-12; see also supra
Part II.B.1. Thus, the Court holds that Defendants’ use of the Rebels Marks is also

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likely to cause confusion under a Section 1052(d) analysis. See Trendsetter, 655 F.
Supp. 2d at 712. Accordingly, the Lanham Act prohibits Truesdell’s registration of
the Rebels Marks, and Plaintiffs’ request for cancellation of Registration No.
3,940,282 is granted.
2.

Injunction

Section 1116 of Title 15 of the United States Code authorizes district courts the
“power to grant injunctions, according to the principles of equity and upon such terms
as the court may deem reasonable.” 28 U.S.C. § 1116(a). To obtain an injunction,
Plaintiffs must establish “(1) that it has suffered an irreparable injury; (2) that
remedies available at law, such as monetary damages, are inadequate to compensate
for that injury; (3) that, considering the balance of hardships between the plaintiff and
defendant, a remedy in equity is warranted; and (4) that the public interest would not
be disserved by a permanent injunction.” eBay Inc. v. MercExchange, L.L.C., 547
U.S. 388, 391 (2006). Whether to grant a permanent injunction lies in the discretion
of this Court. Id.
Plaintiffs are not entitled to a permanent injunction barring Defendants from
using the Rebels Marks. The Court notes that Plaintiffs have proven a likelihood of
confusion from Defendants’ use of the Rebels Marks, which courts have found
sufficient to show irreparable injury. See Abraham v. Alpha Chi Omega, 708 F.3d

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614, 627 (5th Cir. 2013) (“As to the first factor, 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.”); see also Clearline
Techs., 948 F. Supp. 2d at 714 (noting that “[s]ome courts have suggested that a
finding of likelihood of confusion can satisfy the irreparable harm requirement”).
Importantly, however, Defendants voluntarily ceased using the Rebels Marks
in connection with their two clubs during the course of this lawsuit, and there is no
evidence in the record indicating Defendants will resume (or have any incentive to
resume) use of the Rebels Marks in the future. Continuing acts of infringement, to
be sure, are sufficient to show the inadequacy of remedies at law. See Alpha Chi
Omega, 708 F.3d at 627 (“There seems little doubt that money damages are
‘inadequate’ to compensate owner for continuing acts of infringer.”). But, there is no
proof in this record that Defendants continue to infringe or are reasonably likely to
infringe in the future. As explained above, Defendants’ registration of the Rebels
Marks will be cancelled and Defendants now know they have no claim to the Marks.
The Court next concludes, on the second injunction factor, that monetary
damages can adequately compensate Plaintiffs for past injury they prove they have
suffered. It is up to Plaintiffs to produce this evidence.32 This second factor therefore
32

As discussed later, see infra Part II.E.3, Plaintiffs in fact have not tried to prove with
(continued...)
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does not support issuance of an injunction in this case.
The third factor—balancing of the hardships—does not favor either side. The
parties have not presented meaningful argument or evidence that they will be harmed
by the grant or denial of an injunction, given that Defendants have not indicated an
interest in using the Marks without authority.
Finally, the public interest would be disserved by the grant of a permanent
injunction on the record presented. There is no evidence that Defendants again will
infringe Plaintiffs’ rights in the Rebels Marks, now that the parties’ rights to the
Marks are clearly established. The public has no interest in courts issuing injunctive
relief when there is no evidence of continuing infringement and there is no proven
likelihood of future infringement. In fact, Truesdell and the other Defendants now are
on notice, which they apparently previously were not, that they have no rights to use
the Rebels Marks. Given the Court’s rulings in this Opinion, should Defendants
again infringe on Plaintiffs’ rights in the Rebels Marks, such infringement could
easily be characterized as “malicious, fraudulent, deliberate, or willful.” Seven-Up
Co. v. Coca-Cola Co., 86 F.3d 1379, 1390 (5th Cir. 1996). For these reasons, the
Court denies Plaintiffs’ request for a permanent injunction barring Defendants from

32

(...continued)
any specificity lost sales at Rebels Houston.
documentary evidence.
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They elected not to present any

using the Rebels Marks.33
3.

Damages
a.

Entitlement to Damages

Under the Lanham Act, a plaintiff who proves trademark infringement can
receive damages in the amount of “(1) defendant’s profits, (2) any damages sustained
by the plaintiff, or (3) the costs of the action.” 15 U.S.C. § 1117(a). These damages,
however, are “subject to the principles of equity.” Id. A district court is not required
to award damages. If proof of a defendant’s profits and proof of a plaintiff’s damages
are too burdensome or are truly unavailable, the Court may award damages “for such
sum as the court shall find to be just, according to the circumstances of the case.” Id.;
see also Seatrax v. Sonbeck Int’l, Inc., 200 F.3d 358, 369 (5th Cir. 2000) (“The goal
behind §§ 1116 and 1117 remedies is to achieve equity between or among the parties
. . . Because each case presents a different set of facts and circumstances, a case-bycase evaluation is warranted to determine the nature of the infringing conduct and its
adverse effects, if any, on the plaintiff.”). “Great latitude is given the district court
in awarding damages under the Lanham Act.” Martin’s Herend Imports, Inc. v.

33

Because the Court concludes that Defendants have not infringed on Plaintiffs’ trade
dress, the Court will not issue an injunction requiring Defendants to remove the “bar
scene” mural from the Rebels Austin (now “Rowdys Saloon”), the only element of
Rebels Houston’s trade dress that Plaintiffs have meaningfully asserted as having
been infringed.
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Diamond & Gem Trading USA, Co., 112 F.3d 1296, 1304 (5th Cir. 1997).
A district court need not automatically award damages based on an accounting
of the defendant’s profits. See Seatrax, 200 F.3d at 369. Rather, a court should look
to the following “non-exhaustive list of factors” in determining whether an
accounting of profits is proper: “(1) whether the defendant intended to confuse or
deceive; (2) whether sales have been diverted; (3) the adequacy of other remedies; (4)
any unreasonable delay by the plaintiff in asserting her rights; (5) the public interest
in making the conduct unprofitable, and (6) whether it is a case of palming off.” Id.
Plaintiffs here seek damages in the amount of Defendants’ gross profits from
Rebels Austin and Rebels Woodlands.34 In support of their request, Plaintiffs have
submitted portions of Rebels Austin’s and Rebels Woodlands’ bank statements,
internal expenditure logs, and state filings regarding liquor sales. Based on the
information available, Plaintiffs estimate that Rebels Austin’s gross revenue between
October 2009 and July 2013 exceeds $2.3 million. Plaintiffs estimate Rebels
Woodlands’ gross revenue from August 2012 to December 2012 to be more than
$600,000.
Rebels Austin.— The Court concludes that damages are unwarranted based on
Defendants’ use of the Rebels Marks at Rebels Austin.
34

Plaintiffs have failed to

Plaintiffs have not requested, nor have they submitted evidence showing, damages
from lost profits they sustained or their costs in prosecuting this action.
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show that Defendants’ infringement at Rebels Austin was “intended to confuse or
deceive.” While willfulness—the intent to confuse or deceive—is not a prerequisite
to receive an accounting of profits, see Quick Techs., Inc. v. Sage Group PLC, 313
F.3d 338, 349 (5th Cir. 2002), it remains an important consideration in awarding
profits, see, e.g., Choice Hotels, 940 F. Supp. 2d at 544-45 (“Additionally, the mere
inclusion of the Comfort name on credit card receipts and the Wi-Fi connection
website is not the type of willful and egregious conduct for which courts within this
circuit have previously awarded profits.”); see also Quick Techs., 313 F.3d 338 (“It
is obvious from our cases that willful infringement is an important factor which must
be considered when determining whether an accounting of profits is appropriate.”).
There is no evidence that Defendants used the Rebels Marks with the intent to
confuse or deceive customers into believing Rebels Austin was affiliated with Rebels
Houston. Rather, Truesdell appears to have used the Marks under a claim that he had
an independent right to do so because he had been involved in the Marks’
development. While that claim of right does not absolve Defendants of trademark
infringement, it does weigh in their favor in the decision on whether to award
damages.
There is also no persuasive evidence that Plaintiffs’ sales have been diverted

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from Rebels Houston to Rebels Austin.35 These two Rebels clubs’ locations are in
two different major Texas cities, approximately 150 miles apart.36

There is

insufficient evidence in the record to support this claim for damages.
The third factor in a damages analysis—the adequacy of other remedies—is
neutral. The Court has ordered cancellation of Truesdell’s registration of the Rebels
Marks but has declined Plaintiffs’ request for a permanent injunction.37 The Court’s
conclusion denying the injunction, however, is based on the lack of evidence of
continuing or the likelihood of future infringement, whereas Plaintiffs’ damages
request is for past infringement. This factor, therefore, does not weigh significantly
in the Court’s conclusion regarding damages.
The fourth factor—delay—weighs in Defendants’ favor. Jarrah delayed for
two or more years in protesting Defendants’ use of the Rebels Marks at Rebels
Austin. The Court credits Applewhite’s testimony that Jarrah and he discussed in or
about early 2010 that Rebels Austin had opened, and discussed whether Jarrah should
copy the Austin club by installing a “mechanical bull” in Rebels Houston. Jarrah
waited nearly three years before filing suit to enjoin Defendants’ use of the Rebels
35

Indeed, as noted, Plaintiffs do not request recovery of their own lost profits.

36

The only evidence presented about overlapping customer bases came from a passing
comment by Jarrah that college students traveled back and forth between Austin and
Houston and may have thought the two bars were related.

37

See supra Parts II.E.1 and II.E.2.

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Marks. These delays counsel against an award of damages as to Rebels Austin.
The fifth factor—the public interest in making the conduct unprofitable—tips
in Plaintiffs favor. While an award of damages helps deter trademark infringement,
there is less of a need for deterrence when the infringement occurs under an alleged,
even if unfounded, claim of right in the mark in issue.
The evidence of record is insufficient to weigh in any party’s favor on the sixth
factor, palming off. Plaintiffs have presented no evidence of “palming off” or
customer confusion with regard to Rebels Austin. See Choice Hotels, 940 F. Supp.
2d at 546 (“But because there is no evidence of ‘palming off,’ the sixth factor, like
the first three, weighs against such relief.”).
Rebels Woodlands.— In contrast, the Court concludes that Plaintiffs are
entitled to damages for Defendants’ infringement arising from their operation of
Rebels Woodlands. The Court notes that there is no evidence that Defendants sought
to “confuse and deceive” customers about the affiliation between Rebels Woodlands
and Rebels Houston.38 Truesdell opened Rebels Woodlands, like Rebels Austin,
under a claim of right after obtaining registration of the Rebels Marks. Defendants,
38

The Court considers Jarrah’s testimony regarding Defendants’ advertising for Rebels
Woodlands as evidence of “palming off”—the sixth factor—and not as evidence of
Defendants’ intent to confuse or deceive. While Defendants sought to make use of
Rebels Houston’s reputation to garner business to Rebels Woodlands, there is no
evidence that Defendants’ intent was confuse customers, given his claim of right in
the Rebels Marks.
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in February 2012, had informed Plaintiffs of his registration of the Marks, and
Plaintiffs did not initially respond to that letter. Thus, Defendants appear to have
used the Rebels Marks at Rebels Woodlands under the misguided assumption that
they held exclusive rights in the Marks, and not to deceive customers as to ownership
or affiliation. This first factor thus tips in Defendants favor.
The second factor—whether sales were diverted—favors Plaintiffs to the extent
that it suggests that some damages should be awarded. Jarrah testified, but only in
summary fashion, that sales at Rebels Houston dropped after Rebels Woodlands
opened. Jarrah stated that gross sales at Rebels Houston dropped from $120,000 per
month to $80,000 per month, because “people from the Woodlands and Katy went to
Rebels Woodlands instead. There is no evidence of loss of Rebels Houston’s profits,
however. Plaintiffs’ testimony therefore is sufficient to establish that they likely
suffered some loss of business but the evidence is grossly insufficient to establish the
quantity of damages associated with Rebels Woodlands’ operation.39
The limited remedies available to Plaintiffs also counsel in favor of a damages
award here. While Plaintiffs are obtaining cancellation of Truesdell’s registration of

39

The testimony is unsupported by any documentary proof or evidence of cause and
effect. There is no specific time frame as to which the losses occurred. Furthermore,
correlation does not equal causation. That is, Plaintiffs have failed to prove that any
claimed drop in sales that may have developed at Rebels Houston in 2012 resulted
from the Defendants’ use of the Rebels Marks or from the opening of Rebels
Woodlands generally, as a opposed to some other, unidentified cause.
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the Rebels Marks, no permanent injunction barring Defendants’ future use of the
Rebels Marks—a traditional equitable remedy in infringement cases—will be issued.
Furthermore, as to the delay factor, there is no evidence that Plaintiffs
materially delayed in asserting their rights vis-a-vis Rebels Woodlands. Rebels
Woodlands opened in March 2012; Plaintiffs filed this lawsuit that August. This
five-month delay is not unreasonable.
Finally, the fifth and sixth factors favor an award of damages to Plaintiffs.
Most significantly, Defendants’ advertising of Rebels Woodlands, which opened in
the same market as Rebels Houston, palmed off Rebels Houston’s reputation. Jarrah
testified, and the Court finds, that Rebels Woodlands advertised on a Houston-area
radio station with the phrase, “Rebels Honky Tonk, now in the Woodlands.”
Defendants thus sought to imply an affiliation between the two Rebels locations.
There is a public interest in avoiding customer confusion and thus making
Defendants’ conduct (in opening Rebels Woodlands) unprofitable. Further, the use
of the same logo and advertising as a “Rebels Honky Tonk” in the same media market
aggravated the likelihood of confusion.
Accordingly, Plaintiffs are entitled to an award of damages.
b.

Calculation of Damages

Plaintiffs seek an award of damages calculated as Defendants’ profits.

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Plaintiffs estimate Rebels Woodlands’ gross profits from August to December 2012
was approximately $600,000. Plaintiffs derive these numbers from three sets of
documents provided by Defendants: (1) bank records for an account held at JP
Morgan Chase Bank, N.A. by 26710 North I45 GP LLC; (2) expenditure sheets that
reflect cash, debit, and check payments made by Rebels Woodlands; and (3) state tax
filings regarding liquor sales. During discovery, Defendants only provided Plaintiffs
with documents for this limited, five-month period.

Defendants provided no

documents detailing Rebels Woodlands’ revenues and expenditures between March
and July 2012.
Under Section 1117(a), Plaintiffs are only “required to prove [Defendants’]
sales”—that is, their gross revenues; Defendants bear the burden of proving their
costs and deductions. 15 U.S.C. § 1117(a). Defendants claim all expenses listed on
the expenditure sheets and their bank statements comprise their costs and deductions.
Furthermore, in awarding damages in the form of profits, the district court may, in its
discretion, “enter judgment for such sum as the court shall find to be just” if it finds
that “the amount of recovery based on profits is either inadequate or excessive.” Id.
The Court independently has assessed the documentary evidence. In
calculating Defendants’ net profits, the Court examined Rebels Woodlands’ bank

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statements and expenditure logs.40 The bank account’s opening balance on August
1, 2012 was $34,870;41 its ending balance on December 31, 2012 was $14,254. Thus,
over the course of this five-month period, Rebels Woodlands, as reflected in the bank
statements alone, lost $20,616. Extrapolating these numbers to the March through
July 2012 period,42 these losses amount to $41,232.
The expenditure logs make clear, however, that Rebels Woodlands also
realized revenue in cash, above and beyond what is reflected in the bank account
statements. For each cash expenditure tallied in the logs, the Court assumes that
Rebels Woodlands’ gained an equal amount in revenue.

To the extent that

expenditures were made to a particular person (e.g., Kelly, Daryl, Chris) or for a
particular event (e.g., “Bikini Contest”), the Court finds that those expenditures offset
an equal amount of revenue.
What troubles the Court is expenditures variously labeled as “payouts.”
Truesdell testified that expenditures labeled “payouts” reflect tips collected and paid
40

The Court did not independently examine documents reflecting liquor taxes paid by
Rebels Woodlands. Plaintiffs did not offer these documents as a basis for the club’s
profits. Furthermore, the club generated revenues aside from liquor sales, and thus
the bank statements and expenditure logs are more complete.

41

For the ease of computation, the Court has rounded all decimals to the nearest whole
number.

42

Without evidence to the contrary, the Court assumes these numbers were largely
consistent between the two five-month periods.

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to bartenders or servers. The Court credits this testimony only in part. These entries
do not list servers’ or others payees’ names. The Court does not credit the testimony
of Truesdell that the club did not earn profits. The Court estimates and finds that onethird of the payouts reflect profits realized by Rebels Woodlands and were payments
to its owners, including Truesdell. Otherwise Truesdell would not have continued to
operate the club for ten months.
The payouts listed in Rebels Woodlands’ expenditure logs total $102,880. As
noted, the expenditure logs reflect revenues and expenditures from August through
December 2012. Extrapolating these numbers for the March through July 2012
period, the payouts for Rebels Woodlands over the entire 10 months it operated total
$205,760. No evidence was offered by either party regarding what percentage of
these payouts reflect payments to the club’s owners, rather than cash payments or tips
to workers. As noted, the Court finds that one-third of the payouts were profits taken
by Rebels Woodlands’ owners, or $68,587.43

Rebels Woodlands net profits,

therefore, equal the revenues not reflected in its bank statements ($68,587) less its
losses as shown in its bank statements ($41,232), or $27,355.
The Court holds that the amount of profits calculated, $27,355, given the

43

The Court finds that one-third is a conservative figure and adopts it in an exercise of
caution.

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circumstances of this case, is sufficient and awards that sum to Plaintiffs in damages.
4.

Attorneys’ Fees

Section 1117(a) also allows the court to award reasonable attorneys’ fees in
“exceptional cases.” 15 U.S.C. § 1117(a). “An exceptional case is one where the
violative acts can be characterized as malicious, fraudulent, deliberate, or willful.”
Seven-Up Co., 86 F.3d at 1390. The Fifth Circuit has also indicated that a plaintiff
must show “a high degree of culpability on the part of the infringer, for example, bad
faith or fraud” to qualify as an exceptional case. Id. But see Clearline Techs., 948
F. Supp. 2d at 717 (“It is not clear whether the Fifth Circuit has itself adopted such
a requirement.”). The burden is on the prevailing party to demonstrate that this is an
exceptional case. Id. Plaintiffs here request $22,500 in fees.
This case is not exceptional, and thus Plaintiffs are not entitled to attorneys’
fees. Though Defendants infringed on Plaintiffs’ Marks, the evidence reflects that
Defendants believed, in good faith, that they had a right to use the Marks in opening
Rebels Austin and Rebels Woodlands. None of the witnesses (including Jarrah) have
testified otherwise. Moreover, Plaintiffs have failed to prove any damages as a result
of Defendants’ infringing conduct. Because the evidence of record does not suggest
that Defendants’ actions were “malicious, fraudulent, deliberate, or willful,” the Court
will not award Plaintiffs any attorneys’ fees. See, e.g., Pebble Beach Co., 155 F.3d

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at 555-56 (“[T]he district court did not clearly err in finding a lack of the requisite
level of culpability because there was no intent on Tour 18's part to divert sales, there
were no actual damages proven, there was no lack of good faith . . . and there were
available legitimate uses of the Plaintiffs’ marks to identify the Plaintiffs’ products.”);
Clearline Techs., 948 F. Supp. 2d at 718-19 (“[T]he Court does not find that Cooper
infringed willfully by a clear and convincing standard . . . Cooper may well have
copied Clearline’s trade dress because it, in good faith, believed there was nothing
protectable about it.”).
III.

CONCLUSION AND ORDER
Defendants infringed on and diluted Plaintiff’s Marks. Plaintiffs are entitled

to cancellation of Truesdell’s registration of the Rebels Marks. Plaintiffs are not,
however, entitled to a permanent injunction barring Defendants’ future use of the
Marks, as Defendants do not continue to use the Marks nor is it reasonably likely that
they will use the Marks in the future. Furthermore, Plaintiffs have not shown that
they are entitled to receive damages in the amount of Rebels Austin’s profits, but
have shown entitlement to damages for Defendants’ profits from Rebels Woodlands,
in the sum of $27,355. Finally, this case is not “exceptional,” and thus Plaintiffs are
not entitled to attorneys’ fees.
For the foregoing reasons, it is hereby

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ORDERED that Defendants are liable on Plaintiffs’ claim of trademark
infringement. It is further
ORDERED that Defendants are not liable on Plaintiffs’ claim of trade dress
infringement. It is further
ORDERED that Defendants are liable on Plaintiffs claim of trademark
dilution. It is further
ORDERED that Federal Registration No. 3,940,282 is CANCELLED. The
Clerk of Court is directed to provide a certified copy of the judgment issued pursuant
to this ruling to the Director of the U.S. Patent and Trademark Office for appropriate
cancellation of the registration number. It is further
ORDERED that Plaintiffs request for a permanent injunction is DENIED. It
is further
ORDERED that Plaintiffs shall recover damages from the Defendants, jointly
and severally, in the amount of $27,355. It is further
ORDERED that Plaintiffs are awarded post-judgment interest on the amount
awarded herein at an annual rate of 0.12% from the date of this Judgment until paid.
It is further
ORDERED that Plaintiffs’ request for attorneys’ fees is DENIED.
The Court will separately issue a final judgment.
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SIGNED at Houston, Texas, this 28th day of February, 2014.
___

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