IP Law Daily, TRADEMARK—EDKy: Restaurateur Entitled to Preliminary Injunction Prohibiting Former Business Partner from Using STAXX and STAXX BBQ Marks, (Nov 19, 2012)

By Mark Engstrom, J.D.

The owner of federal trademark registrations for the marks STAXX and STAXX BBQ was entitled to a preliminary injunction that prohibited a former business partner from using either mark to promote his catering business, the federal district court in Pikeville, Kentucky, has ruled (Eat BBQ LLC v. Walters, November 16, 2012, Van Tatenhove, G.).

Background

The plaintiff and the defendant opened restaurants named STAXX Roadhouse and STAXX BBQ in 2010 and 2011, respectively. With the help of a few investors, the plaintiff provided the financial support for the business. The defendant contributed “years of restaurant experience, management skills, and the idea for the STAXX name.” After adopting STAXX as the restaurants’ identifying mark, the plaintiff applied for a trademark registration to use STAXX and STAXX BBQ.

When the defendant discovered the plaintiff’s application, he sent e-mails to the plaintiff and one of the investors, asking them to add him as an owner of the marks. The defendant did not file an objection with the USPTO. The investor denied the request because the defendant was “not an owner of the marks as defined by the U.S. Trademark Statute.” Eventually, the marks were approved by, and registered with, the USPTO.

After irreconcilable differences caused the parties to sever their business ties, the plaintiff continued to operate the STAXX BBQ restaurant, using the registered marks to promote it, and the defendant decided to run a catering business, using the registered marks to promote that business. When the plaintiff discovered the defendant’s alleged infringement, he filed a lawsuit alleging federal and state trademark infringement and unfair competition. He also requested preliminary injunctive relief.

When evaluating a request for a preliminary injunction, a district court must consider whether: (1) a likelihood of success existed on the merits of the plaintiff’s claim; (2) the plaintiff would suffer irreparable harm absent an injunction; (3) others would be harmed by an injunction; and (4) the public good was served by an injunction. In this case, all four factors favored preliminary relief.

Likelihood of Success on the Merits

To establish a likelihood of success on the merits of a trademark infringement claim asserted under the federal Lanham Act or Kentucky common law, a plaintiff had to show a likelihood of consumer confusion. In this case, the court addressed six likelihood of confusion factors: (1) similarity of the parties’ marks; (2) strength of the plaintiff’s marks; (3) similarity of the parties’ marketing channels; (4) evidence of actual confusion; (5) likelihood of product line expansion; and (6) defendant’s intent in selecting his marks.

Similarity of marks. Because the parties used identical marks, potential consumers might think that the defendant and STAXX BBQ were the same company, and thus could unintentionally buy the defendant’s services, thinking they were being provided by the plaintiff. The evidence for this likelihood of confusion factor favored a finding of consumer confusion.

Strength of marks. According to the plaintiff, his service marks were “highly distinctive and unique” and were “renowned” in central Kentucky. Because the defendant offered nothing to refute this assertion (and the court could find nothing in the record to suggest otherwise), this factor favored a likelihood of confusion.

Similarity of marketing channels. By using ads with the STAXX BBQ marks to solicit business through e-mail communications, the defendant was using the same marketing channels that were used by the plaintiff. By using a “staxxbbq@gmail” e-mail address on his promotional materials, the defendant was impliedly suggesting that he was an agent of the plaintiff’s restaurant. Further, he was advertising and competing for the same customers and events as the plaintiff. These occurrences showed that the defendant was using the same marketing channels to promote his services, a conclusion that favored a likelihood of confusion.

Evidence of actual confusion. The defendant’s use of the same marketing channels caused actual consumer confusion. According to the plaintiff, an existing customer had received an e-mail message with promotional materials from the defendant. The message included the “STAXX BBQ” trademark and the “staxxbbq” e-mail address. The customer was confused, however, as to the source of the e-mail message, because the plaintiff’s name and business information were absent from the message. This single anecdote was “undoubtedly the best evidence of likelihood of confusion.” The actual confusion factor thus favored a finding of confusion.

Likelihood of product line expansion. The court had no reason to predict the possibility of product line expansion, or its effects on the plaintiffs’ business, because the defendant was already competing for the same customers and was using the same channels of trade (activities that resulted in actual confusion). This factor favored a finding of consumer confusion.

Defendant’s intent. Whether the defendant was purposefully attempting to avail himself of the plaintiff’s goodwill was unclear, but it was conceivable that the defendant felt that he was entitled to use the marks, since they were his idea. Given the realistic possibility that his only intent was to use what he believed was rightfully his, this factor did not favor a likelihood of consumer confusion. Nevertheless, intent was largely irrelevant in determining whether consumers were likely to be confused as to the source of the parties’ services.

Weight of the evidence. After reviewing all of the applicable factors, the court determined that consumer confusion was likely. Only the defendant’s intent did not favor a likelihood of confusion. Accordingly, the plaintiff demonstrated a likelihood of success on the merits, which favored a preliminary injunction.

Priority of use. The defendant argued that his title to the STAXX marks was superior to the plaintiff’s because his use of the marks had preceded the plaintiff’s use. The defendant’s examples of prior use, however, were insufficient to establish a common law right to the marks. The defendant proffered as evidence: (1) the use of a “Staxxroadhouse@gmail.com” e-mail account; (2) the creation of a “Furlongs Catering and Staxx Catering” webpage; (3) the procurement of estimates for a STAXX sign; and (4) a menu listing “Staxx Blackberry Baby Back Ribs,” which he sent to the plaintiff via e-mail to establish his common law rights to the marks. Despite these examples of use, there was no evidence that potential customers had connected the STAXX marks with the defendant’s services. Without establishing that connection, the defendant could not prove his right to the mark.

Irreparable Harm

Once the moving party in a trademark infringement case demonstrated a likelihood of consumer confusion, an irreparable injury was presumed because irreparable harm was “inherent in the loss of control over the use of one’s registered trademark.” In this case, the plaintiff lost control of his registered mark because the defendant used the mark in the promotion of his catering business. Given this infringement of the plaintiff’s mark, irreparable harm was presumed. Further, monetary damages would not compensate the plaintiff for the considerable loss of goodwill that he potentially suffered. Because of the potential harm to the plaintiff’s goodwill and the presumption that irreparable harm followed a finding that success on the merits was likely, this factor favored a preliminary injunction.

Harm to Others

The defendant was the focus of the preliminary injunction factor that asked whether others would be harmed by preliminary relief. More specifically, the focus was placed on: (1) whether the defendant would suffer harm if the court granted injunctive relief and (2) whether the harm that the plaintiff might suffer would outweigh any harm to the defendant. In this case, the defendant failed to establish any statutory or common law right to the STAXX marks. Therefore, the court was unaware of any harm that the defendant might suffer. Further, an injunction did not foreclose the defendant’s ability to run his catering business. The defendant would simply have to give up the right to use a federally protected trademark. The plaintiff, however, faced significant harm to his reputation and goodwill if the defendant was allowed to use the marks. This factor favored a preliminary injunction.

Public Interest

Trademark infringement, by its very nature, adversely affected the public interest in the “free flow” of truthful commercial information. Allowing the defendant to continue his use of the trademark would: (1) undermine the statutory protections that were guaranteed to the plaintiff and (2) increase the chance that potential customers might inadvertently purchase the defendant’s services when they intended to purchase the plaintiff’s services. Therefore, the public interest favored preliminary relief.

The case is No. 12-71-GFVT.

Christopher L. Thacker (Stoll, Keenon, Ogden, PLLC) for Eat BBQ LLC. Daniel D. Brock, Jr. (Bunch & Brock) for Thomas C. Walters.

Cases: Trademark KentuckyNews