Streamline Prod. Sys., Inc. v. Streamline Mfg., Inc.

• Decision Date: 16 March 2017
• Docket Number: No. 16-20046,16-20046
• Citation: 851 F.3d 440
• Parties: STREAMLINE PRODUCTION SYSTEMS, INC., Plaintiff-Appellee v. STREAMLINE MANUFACTURING, INC., Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

851 F.3d 440

STREAMLINE PRODUCTION SYSTEMS, INC., Plaintiff-Appellee

v.STREAMLINE MANUFACTURING, INC., Defendant-Appellant

No. 16-20046

United States Court of Appeals, Fifth Circuit.

Filed March 16, 2017

Terry Blaine Joseph, Esq., General Attorney, Holly H. Barnes, David Martin Lodholz, Esq., Trial Attorney, Matthews, Lawson, McCutcheon & Joseph, P.L.L.C., Houston, TX, for Plaintiff-Appellee.

Kevin D. Jewell, Steven Jon Knight, Chamberlain, Hrdlicka, White, Williams & Aughtry, Robert Harris Bateman, Bateman Pugh Chambers, P.L.L.C., Houston, TX, for Defendant-Appellant.

Before STEWART, Chief Judge, and KING and DENNIS, Circuit Judges.

KING, Circuit Judge:

Streamline Production Systems, Inc. filed this trademark infringement suit against Streamline Manufacturing, Inc. seeking damages under the Lanham Act and Texas common law. After stipulating to an injunction, the parties proceeded to a jury trial on the issues of infringement and damages. The jury returned a verdict finding that Streamline Manufacturing, Inc. infringed on Streamline Production Systems, Inc.'s valid trademark in its name and awarded damages for lost royalties, unjust enrichment, and exemplary damages, each in the sum of $230,000, for a total award of $690,000. The district court denied Streamline Manufacturing Inc.'s motion for judgment as a matter of law, as well as its renewed motion for judgment as a matter of law, or in the alternative, for a new trial. Finding insufficient evidence to support the damages awards, we AFFIRM the jury's finding of trademark infringement but VACATE the damages awards.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Facts

Plaintiff–Appellee Streamline Production Systems, Inc. (SPSI) was established in 1993 by Michael Renick in Beaumont, Texas. SPSI initially began as an oilfield services company. In 1997, SPSI began custom fabricating pressure vessels, and today, it produces a range of custom fabricated natural gas processing equipment, such as gas separators, heat exchangers, re-boilers, and pressure vessels, and sells that equipment to customers nationwide, in addition to continuing to provide oilfield services and repair. Later on, Renick founded three other companies that all use "Streamline" in their names and share staff with and operate in the same region as SPSI but do not manufacture custom fabricated natural gas processing equipment. SPSI's 2013 sales exceeded $27 million. According to Renick, his company has been successful over the years because it is "well-known in the oil field."

SPSI's logo consists of the word "Streamline" written on a ring encircling the image of a piece of natural gas production equipment. SPSI includes this logo, along with its phone number, on a metal placard that it attaches to each piece of equipment it produces. SPSI also uses this logo for its advertising, which includes printed brochures, branded merchandise, branded racecars, and a website. SPSI's current website is streamlinetexas.com. The website's color scheme is blue and white. The banner at the top of the website depicts "Streamline Production Systems" written in white lettering and integrated with a piece of natural gas production equipment against a blue background. Prior to operating its website at this URL, SPSI operated a website at the URL streamlinetx.com, which, according to SPSI's business manager, was "very generic" and was not relied upon for business.

Defendant–Appellant Streamline Manufacturing, Inc. (SMI) was founded in 2009 in Houston by Luis Morales and Bob Tulio. SMI also fabricates natural gas processing equipment, including pressure vessels, boilers, heat exchangers, skids, and separators, and sells them to customers nationwide. But unlike SPSI, it does not do any oil field servicing or repair work. SMI also attaches a placard to each piece of equipment it produces identifying SMI as the manufacturer, but unlike SPSI's placard, it does not include SMI's phone number. Both Morales and Tulio worked at another oil and gas equipment manufacturing company, RCH Industries, before they founded SMI. Initially, all of SMI's business came from customers with whom Morales and Tulio had preexisting relationships through their prior work at RCH Industries, and those customers have continued to comprise the majority of SMI's business. Some of these customers are equipment resellers who sell SMI's equipment to end-market users. Relying on this customer base, SMI reached over $1 million in sales in its first full year of business, and between 2009 and 2014, it had over $20 million in total sales.

According to Morales and Tulio, they selected the name "Streamline Manufacturing, Inc." for their new company after conferring with family members and "bouncing names around," with the goal of "trying to find something short" and "not[ ] confusing." They sought a name with a three letter acronym because that was how their previous company (RCH) was referred to and because they thought such a concise name "denote[d] efficiency." They brainstormed several possible names that they "pull[ed] ... out of the air," one of which was "Streamline Manufacturing, Inc." They provided these possible names to their lawyer so he could check the availability of the names with the Texas Secretary of State, and SMI showed as available, so it was chosen. In choosing this name, Morales and Tulio professed to be entirely unaware of SPSI's name, location, degree of success, customers, and even its mere existence; nor did they know Renick. After choosing SMI as a name, Morales sought to establish a website. He used a commercial website to search available domain names, and the search indicated that his first choice for a domain name, SMI.com, was not available. Morales then searched for "Streamline," and streamline.com was also not available, but the search provided a drop down box indicating several other available variations. Morales picked the shortest available variation shown in the drop down box, streamlinetx.com, as SMI's website domain name. This was the same domain name previously used by SPSI. SMI's website was predominantly blue and white in color scheme, and its homepage displayed SMI's logo: "SMI" in blue font against a background of a photo of natural gas equipment overlaid against an outline of the state of Texas. Besides this website, SMI did not engage in any advertising or marketing efforts and did not even have a sign outside its office.

Around 2011, SPSI began to learn of SMI's existence. First, it attempted to update its website but learned that its registration had lapsed and that SMI had taken over the domain. It also began to encounter customers and vendors who confused SPSI and SMI. In 2012, Renick learned that one of SPSI's oil field services customers, Century Exploration, had a piece of equipment manufactured by SMI that it mistakenly believed it had purchased from SPSI. Another customer, Union Services, mistakenly sent a $130 check intended for SPSI to SMI instead. Renick also received a call from a purchasing agent at Pioneer Resources, a natural gas company, who said he had a pressure vessel with a "Streamline" placard on it but no phone number and he was interested in purchasing more. It became clear that the purchasing agent was an SMI customer, had an SMI-manufactured vessel, and had erroneously called SPSI. According to Renick, SPSI's vendors also occasionally erroneously shipped equipment to SMI's offices. And two vendors refused to sell equipment and materials to SPSI because they confused it with SMI, who had unpaid bills. Despite these instances of confusion, SPSI did not contact SMI.

At the same time SPSI was learning of SMI's existence, SMI was also learning of SPSI. In 2011, a representative from the Texas Secretary of State called SMI seeking to collect franchise taxes owed by SPSI. In addition, a third-party insurance inspector mentioned to Morales that he knew of another company called "Streamline." SMI also received at least one phone call intended for SPSI. And in 2013, an employee at one of SMI's customers, Mustang, told Morales that there was another business called "Streamline" in Texas but it is not clear that he mentioned what type of work it did. SMI did not investigate SPSI after any of these instances of confusion. Tulio explained that at first he thought SPSI was a movie production business due to the presence of "production" in its name. He also justified his lack of concern over the confusion based on the fact that SMI did not "run into" SPSI.

In February 2013, Renick submitted an application to the United States Patent and Trademark Office (PTO) for trademark registration of the mark "Streamline Production Systems," and the PTO issued the trademark for this phrase on October 29, 2013. On November 26, 2013, SPSI sent a cease and desist letter to SMI, demanding that SMI "immediately cease and desist the use, display, and distribution of any materials bearing the phrase STREAMLINE MANUFACTURING." The letter stated that SPSI was the holder of the common law, state, and federal trademark in Streamline Production Systems and that SMI's use of "Streamline Manufacturing" infringed on SPSI's trademark because it was "highly similar in look, sound, and connotation" and used in conjunction with similar goods and services. SMI's counsel responded in a letter on January 14, 2014, disclaiming any infringement of SPSI's trademark. In March 2014, Renick signed an agreement with SPSI assigning his "entire right, title and interest in and to" his trademark in "Streamline Production Systems" to SPSI.

B. Proceedings

On May 9, 2014, SPSI filed suit against SMI, alleging, in relevant part, infringement of its trademark under the Lanham Act and Texas common law and seeking damages as well as injunctive relief. In its answer, SMI denied all claims.¹ Nevertheless, SMI ultimately stipulated to a preliminary injunction on August 28, 2014. Pursuant to the injunction, SMI agreed to, within 120 days, change its name and discontinue all...