Texas Tamale Company, Inc. v. CPUSA2, LLC

Filing 80

MEMORANDUM OPINION and ORDER GRANTING in Part and DENYING in part 68 SEALED MOTION FOR PERMANENT INJUNCTION, DAMAGES, AND AN EXCEPTIONAL CASE FINDING, GRANTING in Part and DENYING in part 69 MOTION for Permanent Injunction MOTION for Entry of Order re: Exceptional Case Finding and Final Judgment MOTION for Damages, and GRANTING 76 Opposed MOTION for Leave to File Sur-Reply to Plaintiff's Motion for Summary Judgment. ( Status Conference set for 7/9/2024 at 02:00 PM in by telephone before Magistrate Judge Christina A Bryan)(Signed by Magistrate Judge Christina A Bryan) Parties notified. (mem4)

United States District Court
Southern District of Texas

ENTERED

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
TEXAS TAMALE COMPANY, INC.,
Plaintiff,
v.
CPUSA2, LLC,
D/B/A TEXAS LONE STAR TAMALES
Defendant.

June 04, 2024
Nathan Ochsner, Clerk

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§ CIVIL ACTION NO. 4:21-cv-3341
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MEMORANDUM OPINION AND ORDER
This trademark infringement case is before the Court on Plaintiff’s Motion for
Permanent Injunction, Damages, and an Exceptional Case Finding. ECF 68; ECF
69.1 Defendant’s Motion for Leave to File a Sur-Reply (ECF 76) is GRANTED.
Having considered the parties’ submissions and the law, the Court GRANTS
Plaintiff’s Motion in part and DENIES it in part. The Court also sets a telephone
scheduling and status conference for July 9, 2024, at 2:00 p.m.
I.

Procedural Background

This Court previously entered a Summary Judgment Order ruling that Plaintiff
possesses the legally protectable, incontestable trademarks “TEXAS TAMALE” and
“TEXAS TAMALE COMPANY” (the Marks) and Defendant infringed Plaintiff’s

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The parties consented to the jurisdiction of the undersigned magistrate judge for all purposes including entry of
final judgment. ECF 27.

Marks. ECF 42. The Court denied Defendant’s motion for relief from the Order.
ECF 59; ECF 79. Only the scope of injunctive relief, damages, and attorney’s fees
to which Plaintiff may be entitled remain as issues to be decided. ECF 42 at 13.
II.

Legal Standards

Defendant argues that Plaintiff’s current Motion for Entry of Final Judgment
operates as a Motion for Summary Judgment under Rule 56 that must be denied due
to unresolved fact questions. ECF 71; ECF 76-1. Plaintiff characterizes its Motion
as a Motion for Entry of Final Judgment under Rule 58, pointing out that it filed a
separate proposed Final Judgment as required by Federal Rule of Civil Procedure
58(a). ECF 68-25; ECF 73 at 1. Plaintiff further argues that neither party requested
a jury and the three equitable remedies it seeks—permanent injunction, monetary
damages, and attorney’s fees—are issues for the Court to decide. ECF 68 at 2.
The Court cannot enter Final Judgment under Rule 58 until it has ruled on all
claims and issues in this case. In the Order granting Plaintiff’s Motion for Summary
Judgment as to Defendant’s liability for trademark infringement, the Court deferred
ruling on the scope of injunctive relief, damages, and attorney’s fees. ECF 42 at 13.
Having been presented with Plaintiff’s Motion for Entry of Final Judgment and its
request for equitable remedies in this non-jury case, the Court concludes that Rule 56
provides the appropriate standards for consideration of the requested relief.
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Summary judgment is appropriate if no genuine issues of material fact exist,
and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a).
The party moving for summary judgment has the initial burden to prove there are no
genuine issues of material fact for trial. Provident Life & Accident Ins. Co. v. Goel,
274 F.3d 984, 991 (5th Cir. 2001). If the party moving for summary judgment bears
the burden of proof on an issue he must “establish beyond peradventure all of the
essential elements of the claim or defense to warrant judgment in his favor.” Fontenot
v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). If a moving party who does not
bear the burden of proof meets its initial burden, the nonmoving party must go beyond
the pleadings and must present evidence such as affidavits, depositions, answers to
interrogatories, and admissions on file to show “specific facts showing that there is a
genuine issue for trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
A dispute about a material fact is “genuine” if the evidence could lead a
reasonable jury to find for the nonmoving party. Hyatt v. Thomas, 843 F.3d 172, 177
(5th Cir. 2016). “An issue is material if its resolution could affect the outcome of the
action.” Terrebonne Parish Sch. Bd. v. Columbia Gulf Transmission Co., 290 F.3d
303, 310 (5th Cir. 2002). The court construes the evidence in the light most favorable
to the nonmoving party and draws all reasonable inferences in that party’s favor. R.L.
Inv. Prop., LLC v. Hamm, 715 F.3d 145, 149 (5th Cir. 2013).
3

When ruling on a motion for summary judgment the Court does not “weigh
evidence, assess credibility, or determine the most reasonable inference to be drawn
from the evidence.” Honore v. Douglas, 833 F.2d 565, 567 (5th Cir. 1987). However,
“[c]onclusional allegations and denials, speculation, improbable inferences,
unsubstantiated assertions, and legalistic argumentation do not adequately substitute
for specific facts showing a genuine issue for trial.” U.S. ex rel. Farmer v. City of
Houston, 523 F.3d 333, 337 (5th Cir. 2008) (citation omitted).
In a non-jury trial, the judge is the ultimate trier of fact. In non-jury cases, the
court may grant summary judgment where a trial would not enhance the court’s ability
to draw inferences and conclusions. Nunez v. Superior Oil Co., 572 F.2d 1119, 112324 (5th Cir. 1978); In re Placid Oil Co., 932 F.2d 394, 398 (5th Cir. 1991). The district
court must be aware, however, that assessments of credibility come into sharper focus
upon hearing live witnesses. Placid Oil, 932 F.2d at 398.
III.

Analysis

A. Plaintiff is entitled to entry of a permanent injunction.
On April 25, 2024, the Court granted summary judgment in Plaintiff’s favor
on its trademark infringement claim. ECF 42. In its Order, the Court ruled that
Plaintiff’s Marks “Texas Tamale” and “Texas Tamale Company” are registered,
have acquired secondary meaning, are incontestable, and are legally protectable.
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Id. The Court also ruled that Defendant’s use of Plaintiff’s Marks is likely to cause,
and has caused, customer confusion. Id. Thus, the Court concluded that Defendant
is liable for infringement of Plaintiff’s Marks. Id. Plaintiff now asks the Court to
enter the following permanent injunction:
An injunction permanently enjoining Defendant its agents, employees,
servants, and others acting in concert with them from: (1) using the
terms “TEXAS TAMALE” or “TEXAS TAMALES” in combination
on any advertising platform, including keyword purchases such as
Google AdWords; (2) Using “TEXAS TAMALE” or “TEXAS
TAMALES” (or any confusingly similar term) in online ad copy; and
(3) Using “TEXAS TAMALES” or “TEXAS TAMALE” (or any
confusingly similar term) in any marketing materials.
ECF 68 at 5.
“A permanent injunction is the usual and normal remedy once trademark
infringement has been found in a final judgment.” Diageo N. Am., Inc. v. Mexcor,
Inc., 661 F. App'x 806, 813 (5th Cir. 2016). However, a court should issue an
injunction that is no broader than necessary to prevent unlawful activity. Id. at 81314. In deciding whether to issue a permanent injunction against Defendant, the Court
considers whether: (1) Plaintiff has suffered an irreparable injury; (2) remedies
available at law, such as monetary damages, are inadequate to compensate for that
injury; (3) the hardships between the Plaintiff and Defendant warrant an equitable
remedy; and (4) the public interest would not be disserved by a permanent

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injunction. Abraham v. Alpha Chi Omega, 708 F.3d 614, 627 (5th Cir. 2013) (citing
eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006)). “The decision to grant
or deny permanent injunctive relief is an act of equitable discretion” by the Court.
Id.

When crafting a permanent injunction, the Court exercises its discretion to

redress Plaintiff’s injury, balances the equities, and ensures the injunction does not
disserve the public interest. Id. (“The district court did not abuse its discretion in
crafting an injunction to balance the equities.”).
1.

Plaintiff has met the factors required for an injunction.

Irreparable Injury that cannot be compensated by money damages. The
Court’s prior summary judgment ruling, particularly the ruling that Defendant’s use
of Plaintiff’s Marks creates a likelihood of confusion, also satisfies the requirement
for permanent injunctive relief that Plaintiff suffered an irreparable injury for which
money damages are inadequate compensation.

Abraham, 708 F.3d at 627 (“All

that must be proven to establish liability and the need for an injunction against
infringement is the likelihood of confusion—injury is presumed.” (quoting 5
MCCARTHY

ON

TRADEMARKS AND UNFAIR COMPETITION § 30:2 (4th ed. 2001))).

Thus, the first factor weighs in favor of granting a permanent injunction.
The Balance of Hardships. The balance of hardships between Defendant and
Plaintiff weighs in favor of an injunction. A permanent injunction poses no undue
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hardship on Defendant because it merely requires Defendant to comply with the law
when marketing its own products and not infringe on Plaintiff’s Marks.

An

injunction is appropriate with respect to the balance of hardships because absent an
injunction, Plaintiff would lose control of its product and reputation. See Choice
Hotels Int'l, Inc. v. Patel, 940 F. Supp. 2d 532, 543 (S.D. Tex. 2013) (noting the only
hardship imposed on defendant by permanent injunction—the requirement that
defendant comply with state and federal law—“pales in comparison with the
irreparable harm that [the plaintiff] would face if [the defendant] once again began
displaying plaintiff’s trademarks] at the subject property.”).
An injunction will not disserve the public interest. The public interest in
avoiding product confusion will be served by an injunction. Pengu Swim Sch., LLC
v. Blue Legend, LLC, No. 4:21-CV-1525, 2023 WL 5598996, at *14 (S.D. Tex. Aug.
29, 2023) (holding “[t]he public interest is always served by requiring compliance
with Congressional statutes such as the Lanham Act and by enjoining the use of
infringing marks.” (quoting Board of Regents of the University of Houston System
v. Houston College of Law, Inc., 214 F. Supp. 3d 573, 605 (S.D. Tex. 2016))).
After considering the relevant factors and the record evidence, the Court
concludes that Plaintiff has met its burden to establish that the factors weigh in favor
of entry of a permanent injunction.
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2.

Defendant’s “fair use” defense does not overcome Plaintiff’s
entitlement to a permanent injunction.

Defendant argues that Plaintiff is not entitled to a permanent injunction
because its infringement was “fair use.” “Fair use” is an affirmative defense to a
trademark infringement claim. Unlike the broader fair use doctrine in copyright law,
the trademark fair use defense “allows a party to use a term in good faith to describe
its goods or services, but [applies] only in actions involving descriptive terms and
only when the term is used in its descriptive sense rather than in its trademark sense.”
DHI Grp., Inc. v. Kent, No. CV H-16-1670, 2017 WL 8794877, at *11 (S.D. Tex.
Apr. 21, 2017) (citing Sugar Busters LLC v. Brennan, 177 F.3d 258, 270 (5th Cir.
1999)), report and recommendation adopted, No. CV H-16-1670, 2017 WL 4837730
(S.D. Tex. Oct. 26, 2017). Here, Defendants’ fair use defense argues that “TEXAS
TAMALE” describes a style of tamale made in Texas that is not legally protected.
Defendant’s fair use defense essentially rehashes arguments the Court rejected, first
when it granted Plaintiff’s Motion for Summary Judgment and then again when it
denied Defendant’s Motion for Relief. See ECF 42; ECF 79. Having ruled that
Defendant is liable for trademark infringement, the Court will not revisit the issue in
connection with Plaintiff’s request for a permanent injunction.2
Whether Defendants’ fair use arguments are relevant to Plaintiff’s request for disgorgement of profits and
attorney’s fees will be determined only after a bench trial on the issue of damages.
2

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3.

Plaintiff is not entitled to an injunction prohibiting
Defendant’s purchase of keywords.

The Court did not decide in its Memorandum Opinion and Order on Plaintiff’s
Motion for Summary Judgment “whether Defendant’s use of Plaintiff’s Marks in
Google AdWords by itself constitutes infringement entitling Plaintiff to a
corresponding injunction and damages.” ECF 79 at 11. Defendant now argues that
Plaintiff is not entitled to an injunction preventing Defendant from purchasing
“TEXAS TAMALE” or “TEXAS TAMALES” as keywords or Google AdWords
because, as a matter of law, the purchase of keywords does not infringe Plaintiff’s
Marks. ECF 71.
District courts in the Fifth Circuit have held that “in and of itself—using a
competitor's trademark as a Google AdWords or keyword does not constitute
trademark infringement.” WorkshopX Inc. v. Build a Sign, LLC, No. 1:18-CV-850RP, 2019 WL 5258056, at *2 (W.D. Tex. June 26, 2019), report and
recommendation adopted, No. 1:18-CV-850-RP, 2019 WL 5243187 (W.D. Tex.
July 12, 2019). For infringement purposes, the focus is on the ads that a consumer
sees as the result of a Google AdWords search. See Tempur-Pedic N. Am., LLC v.
Mattress Firm, Inc., No. CV H-17-1068, 2017 WL 2957912, at *8 (S.D. Tex. July
11, 2017) (holding that “the mere purchase of AdWords alone, without directing a

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consumer to a potentially confusing web page, is not sufficient for a claim of
trademark infringement,” citing Mary Kay, 601 F. Supp. 2d at 855)). Because the
purchase of Google AdWords or keywords, in and of itself, does not constitute
infringement of Plaintiff’s Marks, Plaintiff is not entitled to an injunction prohibiting
the purchase of Plaintiff’s Marks as keywords or Google AdWords. However,
Plaintiff is entitled to an injunction prohibiting Defendant from using Plaintiff’s
Marks in any advertisement, whether online or in print, whether or not the
advertisement is the result of a keyword or Google AdWords search. Id.
4.

Plaintiff is not entitled to an injunction that includes a
prohibition on Defendant’s use of “any confusingly similar
term.”

“All injunctions must (1) state the reasons why it issued; (2) state its terms
specifically; and (3) describe in reasonable detail—and not by referring to the
complaint or other document—the act or acts restrained or required.”

Ledge

Lounger, Inc. v. Luxury Lounger, Inc., No. CV H-23-727, 2024 WL 625317, at *2
(S.D. Tex. Feb. 14, 2024) (citing FED. R. CIV. P. 65(d)). Vague or overbroad
injunctions may violate Rule 65(d). Id. Injunctions that merely instruct an enjoined
party not to violate a statute, so-called “obey the law” injunctions, have been
denounced as overbroad by the Supreme Court. Ledge Lounger, 2024 WL 625317
at *2 (citing Int’l Rectifier Corp. v. IXYS Corp., 383 F.3d 1312, 1316 (Fed. Cir.
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2004).
Injunctions prohibiting the use of terms or marks that are “confusingly
similar” to a plaintiff’s trademark can be an overbroad directive to “obey the law.”
See Diageo N. Am., Inc., 661 F. App'x at 814. The Fifth Circuit has been “hesitant
to approve” open-ended injunction language prohibiting the use of “any
confusingly similar” term, because “in other contexts . . . ‘obey the law’ injunction
orders are not permitted.” Diageo N. Am., Inc. v. Mexcor, Inc., 661 F. App'x 806,
814 (5th Cir. 2016) (citing Payne v. Travenol Labs., Inc., 565 F.2d 895, 898 (5th
Cir. 1978). Additionally, “obey the law” injunctions are (1) overbroad because they
“increase the likelihood of unwarranted contempt proceedings[,]” and (2) vague
because they do not “give the restrained party fair notice of what conduct will risk
contempt.” Ledge Lounger, Inc. v. Luxury Lounger, Inc., No. CV H-23-727, 2024
WL 625317, at *2 (S.D. Tex. Feb. 14, 2024).
Plaintiff seeks an injunction prohibiting Defendant from:
Using “TEXAS TAMALE” or “TEXAS TAMALES” (or any
confusingly similar term) in online ad copy; and (3) Using “TEXAS
TAMALES” or “TEXAS TAMALE” (or any confusingly similar term)
in any marketing materials.
The inclusion of the parentheticals “or any confusingly similar term” could be found
to be vague and overbroad. The Court finds that an injunction prohibiting Defendant

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from using the marks “TEXAS TAMALE” or “TEXAS TAMALES,” without the
addition of the phrase “or any confusingly similar term” is sufficiently specific and
narrow to prevent unlawful infringement of Plaintiff’s Marks. The following
injunction will properly balance the equities and redress Plaintiff’s injury:
Defendant its agents, employees, servants, and others acting in concert
with them, are permanently enjoined from using the terms “TEXAS
TAMALE” or “TEXAS TAMALES,” in any combination, on any
advertising platform, in online ad copy (whether or not ads are the result
of a keyword or Google AdWords purchase), or in any marketing
materials in connection with the sale of tamales and other Mexicanstyle food products.
B.

Plaintiff is not entitled to summary judgment on the issue of monetary
damages or attorney’s fees.
1. Monetary Damages
Disgorgement of lost profits is an available, equitable remedy for trademark

infringement. 15 U.S.C. § 1117(a). An award of defendant’s profits as damages for
trademark infringement is not automatic. Seatrax, Inc. v. Sonbeck Int'l, Inc., 200
F.3d 358, 369 (5th Cir. 2000). In deciding whether to award lost profits damages,
courts consider (1) whether the defendant intended to confuse or deceive; (2)
whether sales were diverted from Plaintiff; (3) the adequacy of other remedies; (4)
any unreasonable delay by Plaintiff in asserting her rights; (5) the public interest in
making infringing conduct unprofitable; and (6) whether it is a case of “palming

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off.” Id.; Liquid Manna, LLC v. GLN Glob. Light Network, LLC, No. 5:14-CV1123-DAE, 2016 WL 11782886, at *2 (W.D. Tex. May 31, 2016 (listing factors).
The court is not prepared on the current record to rule that Plaintiff is entitled
to disgorgement of profits, and particularly not in the amount requested. “In
assessing profits the plaintiff shall be required to prove defendant's sales only;
defendant must prove all elements of cost or deduction claimed.” 15 U.S.C. §
1117(a). Plaintiff seeks entry of a judgment in the amount of $7,854,640.65, which
Plaintiff contends is the amount of Defendant’s profits from infringement. ECF 68
at 5. Defendant contends that over the relevant 5-year period its net profits were
negative (-) $155,998.52. ECF 71 at 6. Both parties rely on “Exhibit L,” called
“Profit and Loss Lone Star Tamales Statement for January 2019 – May 2023,” in
support of their wildly divergent positions. ECF 68-22.
Defendant also relies on the Declaration of its CEO, Jose Felix Silva. ECF 711.

Silva explains that the business’s profitability suffered due to COVID-19

shutdowns, vendor shortages, and delayed shipments. ECF 71-1 ¶ 14. Supply chain
issues, shipping delays, and marketing expenses continued to cause losses through
2022.

Id. ¶ 15. Later in 2022, the company had many technical issues from

migrating to a new e-commerce platform that resulted in a significant dip in revenue,
leading to the decision to spend even more on marketing and hiring a “search-engine
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optimization and site-redesign firm.” Id. ¶ 16. To date, the company is trying to
recuperate but is being held back by his lawsuit. Id. ¶ 17. Silva attests that “the
percentage of “Texas Tamale” keyword ads we ran in comparison to all keyword
ads during this period was only 7.89%.” Id. ¶ 20; ECF 71-1 at 34-46 (“Exhibit B”).
Plaintiff argues that Exhibit L is admissible to prove its damages under the
“statement against interest” exception to hearsay rule set forth in Fed. R. Evid.
801(d)(2). ECF 73 at 2. Plaintiff objects to Defendant’s use of same document
because there is no hearsay exception that makes it admissible for Defendant. Id.
Defendant’s argument ignores Silva’s declaration, which authenticates and attests to
the accuracy of Exhibit L. The Court presumes Silva will be available to testify at
trial, eliminating the hearsay objection.
Further, the Court is not prepared to rule as a matter of law on Defendant’s
intent to confuse or deceive for purposes of the disgorgement of profits analysis. In
the Summary Judgment Order, the Court stated: “There is no question that
Defendant was aware of Plaintiff’s Marks and the likelihood of confusion and has
been since Plaintiff’s 2014 enforcement actions that led Defendant to change its
company name.” ECF 42 at 10. However, the record now reflects a factual dispute
as to whether Defendant is the successor in interest to Lone Star Tamales (the
company name adopted in 2014 in response to Plaintiff’s first round of cease-and14

desist letters). ECF 71 at 3-4 (citing Tapp Declaration, ECF 59-2).
The Court finds that a bench trial at which live testimony can be presented is
necessary to decide these issues. Thus, the Court defers entry of final judgment
awarding Plaintiff lost profits damages until after a bench trial.
2. Attorney’s Fees/Exceptional Case
In a Lanham Act case, attorney’s fees are recoverable in an “exceptional
case.” 15 U.S.C. § 1117(a). The Court has discretion to determine whether a case
is “exceptional.” Spectrum Ass'n Mgmt. of Texas, L.L.C. v. Lifetime HOA Mgmt.
L.L.C., 5 F.4th 560, 564 (5th Cir. 2021). The prevailing party bears the burden to
prove by clear and convincing evidence that a case is exceptional. Id. at 566-67. An
exceptional case is one in which the defendant infringed the plaintiff’s mark
“maliciously, fraudulently, deliberately, or willfully.”

Id.

In addition, an

exceptional case finding “may be warranted either where the prevailing party stood
out in terms of the strength of its litigating position or where the non-prevailing party
litigated the case in an ‘unreasonable manner.’” Id.
To date the Court has made no final rulings as to whether Defendant’s
infringement of Plaintiff’s Marks was willful. With respect to the “unreasonable
manner” in which Defendant litigated this case, Defendant’s former counsel was
largely at fault. See ECF 79. As with disgorgement of lost profits, the Court is not
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prepared to grant summary judgment that this is an “exceptional case” and defers
ruling until after a bench trial.
I.

Conclusion and Order
For the reasons set forth above, it is
ORDERED that Plaintiff’s Motion for Permanent Injunction, Damages, and an

Exceptional Case Finding (ECF 68) is GRANTED IN PART and DENIED IN
PART. It is further
ORDERED that the Court will enter a permanent injunction as set forth above.
It is further
ORDERED that the Court will hold a telephone scheduling and status
conference on July 9, 2024 at 2:00 p.m. to discuss whether further mediation at this
stage of the proceedings is appropriate and to set a date for a bench trial on Plaintiff’s
remaining claims for monetary damages and an exceptional case finding.

Signed on June 04, 2024, at Houston, Texas.

Christina A. Bryan
United States Magistrate Judge

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