Ambient Heating & Cooling, LLC v. Shepherd
| Decision Date | 28 March 2017 |
| Docket Number | C.A. No. 9596-MA |
| Parties | Ambient Heating & Cooling, LLC, a Delaware Limited Liability Company, Petitioner, v. Ernest D. Shepherd, Jr., and individual, and Christopher Ferguson, and individual both d/b/a/ Ambient Respondents. |
| Court | Court of Chancery of Delaware |
In February 2007, a Delaware limited liability company was formed and began to provide heating, ventilation, and air conditioning services in Kent and New Castle Counties. In January 2013, a partnership was established to provide heating, ventilation, and air conditioning services in New Castle County. The two businesses have similar names and similar marks and provide services to residential customers. In April 2013, the managing member of the limited liability company contacted one of the partners and asked him to consider changing the name of his business. The partner refused. The limited liability company now has petitioned this Court, seeking to enjoin the partnership from continuing to operate and advertise its heating and cooling business in Delaware under the name "Ambient." For the reasons that follow, I recommend that the Court grant injunctive relief in this case.
In 2006, after many years of working in the heating, ventilation, and air conditioning ("HVAC") industry, Scott Lang and Sean Wilson decided to start their own business providing HVAC services.1 They wanted a name for their business which started with the letter "A" and, after reviewing advertisements in the phone book and customer lists at HVAC supply houses, they settled on the name "Ambient Heating and Cooling."2 On February 6, 2007, Petitioner Ambient Heating & Cooling, LLC ("Ambient LLC") was formed and has been in business ever since.3 Ambient LLC grew through word of mouth and state-wide advertisements in the phone book.4 However, the recession of 2008-2009 took its toll on the business and Ambient LLC ceased placing ads in the phone book.5 In early 2011, Wilson left the company to find other employment, and Lang slowly built up the company again on his own.6 By 2012, business had sufficiently rebounded that Ambient LLC was able to hire an employee to help Lang with installations and service calls.7
Ambient LLC is based in Dover, Delaware and provides HVAC services mostly to residential customers and a few light commercial customers in Kent and New Castle Counties.8 Ambient LLC's mark is displayed on the company's white truck and black sweatshirts.9 The mark depicts a cloud partially shaped like a human face which is blowing steam out of its mouth. A yellow sun with extended rays appears to be rising up behind the cloud. The word "Ambient" is prominently displayed over this image and the words "heating & cooling" are arrayed in smaller letters under the cloud. The company's invoices and yard signs display the words "Ambient Heating & Cooling LLC" and the company's telephone numbers.10
Respondents Ernest Shepherd and Christopher Ferguson have worked in the HVAC industry since the late 1990s.11 For the past eight years, Shepherd has been employed by a company that manages commercial high-rise facilities and construction,12 but in 2012 he and Ferguson decided to start their own HVAC business as partners.13 They also thought the letter "A" was a good letter to use and chose "Ambient" for their business name. According to Shepherd, "ambient" is a term frequently used in the HVAC industry.14 In early December 2012, Shepherdwent to the New Castle County Prothonotary's Office and registered "Ambient" as the trade name of their business,15 using the address of Shepherd's home in Hockessin - 3701 Oak Ridge Road - as Ambient's address.16
The two partners are responsible for different tasks. Ferguson goes out on installation and service calls during the day, and Shepherd does estimates and some service calls in the evening.17 Ferguson's wife answers the telephone for Ambient and schedules the customers' appointments.18 Shepherd's wife designed the mark that is displayed on Ambient's white truck, yard signs, invoices, proposals, advertising, and blue shirts.19 Ambient's mark prominently features the word "AMBIENT" without the letter "I."20 In the letter's place is an image of a large thermometer with lines and red mercury extending above and below the other letters. Below "AMB
In early 2013, Lang learned through a mutual acquaintance that another business called Ambient was located in the Hockessin area, but did nothing about it.22 In the spring of 2013, however, Lang became concerned after speaking with his daughter who had seen Ambient's truck in Newark and mistaken it for her father's truck, and with another acquaintance who had told Lang that Ambient was doing business up north.23 Lang did some research and found a Facebook advertisement listing the business as "Ambient Heating and Cooling."24 He called the telephone number listed on the website and Ferguson's wife answered the telephone saying: "Ambient Heating and Cooling." Lang identified himself and his business, and asked to speak with the owner. When Shepherd returned his call, Lang asked him to consider changing his business's name, but Shepherd refused.25 At trial, Shepherd testified that he already had put too much time and money into the business to consider changing its name.26 After this conversation, Shepherd attempted to register the name "Ambient" with the United States Trademark and Patent Office("USTPO"), but his application was denied. According to Shepherd's testimony, it was denied because "ambient" is a generic word.27
In 2013, Lang received a voicemail from a woman looking for "Ernie Shepherd" with "Ambient Heating and Cooling" to replace her water heater.28 In June 2013, Ambient LLC received a notice of a code violation from the City of New Castle for working at a residence without a current business license.29 Lang checked his records and discovered that Ambient LLC had not done any work at the address listed in the citation.30 What had occurred was that Shepherd and Ferguson helped a friend finish an installation job at his home in New Castle and, in exchange, they had put their yard sign advertising Ambient in their friend's front yard.31 In March 2014, Lang noticed that Angie's List contained a profile for "Ambient Heating & Cooling" with the address of 3701 Oak Ridge Road in Wilmington, Delaware.32 In May 2014, Ambient LLC received an invoice from Pierce-Phelps, Inc., an HVAC supply house,for parts that Lang had not ordered.33 The invoice had been signed by Ferguson.34 Another invoice from Pierce-Phelps, dated May 2015, listed items that Lang had asked his assistant to pick up, but the invoice was billed to Ambient with the notation "attention Chris Ferguson."35 Around this time, Lang received a phone call from Kurt Vanscoy asking to speak with Ferguson about doing more work for Vanscoy.36 In October 2015, Ambient LLC was contacted by Lou Mazzio who was looking for Ambient to do some work at his house in Wilmington.37 As a subcontractor, Ambient LLC did some work at the Gaskell residence where Mr. Gaskell mentioned that Ambient LLC previously had worked for his parents.38 Mrs. Gaskell then asked Lang why he had never shown up to give her a price for a job. Confused by his response, Mrs. Gaskell asked whether he worked out of Hockessin and Lang replied that he was out of Dover.39 Glenn Fedele called Ambient LLC looking for Shepherd with "Ambient Heating and Cooling."40 Similarly, Lang knew an acquaintance who had tried to contact Lang through Ambient's Facebook page.41
Each time Lang answered a call from someone looking for Ambient, it took time away from Ambient LLC.42 In addition, Lang decided not to pay for advertising during 2013-2016 because he did not want to spend money advertising his own company only to provide a benefit to Ambient instead. During the past three years, the growth of Ambient LLC has depended on displaying the company's name and mark on yard signs, shirts, and its truck, in addition to word-of-mouth communications.
In contrast, Shepherd and Ferguson have continued to advertise their business on the radio, in print, and on the web, and have seen their business grow at a rate of 30 percent per year since 2013.43 On two occasions, Mrs. Ferguson received phone calls from a customer trying to reach Lang at Ambient LLC.44 Mrs. Ferguson no longer answers the telephone with the words "Ambient Heating and Cooling;" instead, she now says "Ambient."45 Ambient's business is currently advertised on Angie's List and Facebook under the name "Ambient HVAC," but the words"heating" and "cooling" are still displayed on Ambient's trucks, invoices, yard signs, and the shirts worn by its partners and employees.46
On April 30, 2014, a petition for injunction was filed by Ambient LLC.47 Respondents Shepherd and Ferguson filed their answer and counterclaim on June 4, 2014.48 The following day, Petitioner filed its response to Respondents' counterclaim.49 On June 19, 2014, Respondents filed an amended answer and counterclaim.50 On April 17, 2015, Petitioner filed an amended petition for injunction, which was followed on May 7, 2015, by the filing of Respondents' answer to the amended petition and counterclaim.51 As a result of considerable discovery efforts, the parties were able to stipulate to numerous facts.52 A one-day trial was held on March 23, 2016,53 and was followed by the submission of the parties' post-trial closing arguments/briefs.
Issues Petitioner contends that common law trademark and the Delaware Deceptive Trade Practices Act ("the Act") should prevent Respondents from continuing to trade using the name Ambient. Under the common law, a trademark acquires specific significance through prior exclusive use in the same market or...
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