Choice Hotels Int'l, Inc. v. Patel

• Decision Date: 16 April 2013
• Docket Number: Civil Action No. 6:12–CV–00023.
• Citation: 940 F.Supp.2d 532
• Parties: CHOICE HOTELS INTERNATIONAL, INC., Plaintiff, v. Vinodbhai PATEL, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

940 F.Supp.2d 532

CHOICE HOTELS INTERNATIONAL, INC., Plaintiff,

v.Vinodbhai PATEL, et al., Defendants.

Civil Action No. 6:12–CV–00023.

United States District Court,

S.D. Texas,

Victoria Division.

April 16, 2013.

Mark Wesley Thayer, Gordon & Rees, LLP, Houston, TX, for Plaintiff.

Edward J. Hennessy, Attorney at Law, Houston, TX, for Defendants.

MEMORANDUM AND ORDER

GREGG COSTA, District Judge.

Plaintiff Choice Hotels International, Inc. brings this action against two former franchisees—Defendants Mrs. Ilaben and Mr. Vinodbhai Patel—for continuing to use Comfort Inn trademarks after the parties' franchise agreement terminated on April 8, 2009. Choice Hotels now argues that it is entitled to summary judgment, both on liability and for treble damages, because the Patels waited over two years after the termination of the franchise agreement to remove the Comfort Inn marks from signs outside the hotel, the hotel's credit card receipts, and the hotel's Wi–Fi connection service.

Having reviewed the parties' briefs and submissions and the applicable law, the Court GRANTS IN PART and DENIES IN PART Choice Hotel's motion. Summary judgment on Mr. Patel's liability is warranted: the evidence shows that there is no genuine dispute that Choice Hotels had a legally protected interest in the marks; that Mr. Patel used the marks in commerce without the consent of Choice Hotels; and that such usage was likely to cause confusion. However, fact issues still remain about Mrs. Patel's involvement in the infringement and whether the Patels' conduct warrants the monetary damages that Choice Hotels seeks.

I. Background

Choice Hotels is a hotel franchisor, known for its line of roadside value hotels, including Comfort Inn, Econo Lodge, Cambria Suites, and Rodeway Inn.

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Its formal relationship with the Patels began on April 2, 1993, when the parties entered into a franchise agreement. In broad terms, the agreement permitted the Patels to operate a Comfort Inn franchise at 1906 Houston Highway, Victoria, Texas 77901, in exchange for royalties and other fees. See Docket Entry No. 5–3 at 2–19. The agreement licensed Comfort family marks to the Patels, but allowed Choice Hotels to revoke those licenses upon termination of the agreement. Id. at 5, 9. The agreement provided a number of reasons for which Choice Hotels could terminate the franchise, including an option to terminate without cause and as a matter of right on the fifteenth anniversary of the “commencement date.” Id. at 3.

Choice Hotels chose to exercise that option and sent a letter to the Patels on January 16, 2008 notifying them “of Choice's election to terminate on the 15th anniversary of the Commencement Date, the COMFORT INN franchise agreement and addendum ... on April 8, 2009.” Docket Entry No. 29–12 at 13 (emphasis in original). The termination notice also stated that the Patels' “use of Choice's proprietary marks, including, but not limited to, the trade name and service mark COMFORT INN®, must cease no later than April 8, 2009” in order not to infringe Choice's trademarks. Id. (emphasis in original). The notice also included a nonexhaustive checklist of 37 items containing Choice's trademarks that needed to be removed. Docket Entry No. 29–13 at 2. Choice Hotels sent subsequent cease-and-desist letters on April 27, 2010 and May 23, 2011, which specifically addressed the use of the marks on the signs. See Docket Entry Nos. 29–13 at 11; 29–14 at 10.

According to Mr. Patel and his premises manager, Mukesh Chandra, in or around April 2009, extensive efforts were made to remove the Comfort Inn name or marks from the subject hotel. See Docket Entry Nos. 36–2 at 6; 36–3 at 4. They testified that they removed and destroyed the Comfort-marked lobby displays, owner's plaque, stationery, shower curtains, fire evacuation cards, soap and amenity packages, in-room organizers, cups and glasses, ice buckets, guest service directories, phone plates and info caddies, waste baskets, sanitary bags, and sanitary toilet strips. Docket Entry Nos. 36–3 at 4–5; 29–17 at 22–23. They also testified to painting over the “guest room door signage,” changing the way they answered the phones, and not renewing the yellow pages advertisements. Docket Entry Nos. 36–3 at 4–5; 36–2 at 6. And, in May 2009, Mr. Patel filed new assumed name documents with the Victoria County Clerk's office, changing the hotel's name to “Crossroads Inn” or “Cameron Inn.” Docket Entry No. 36–2 at 6, 58–59.

On the other hand, Mr. Patel admits that he did not initially remove or paint over exterior Comfort Inn signs—including a 30–foot street sign and smaller entrance and exit signs—allegedly because he planned to use them at a new Comfort Inn to be built elsewhere in Victoria pursuant to a separate franchise agreement. Docket Entry No. 36 at 5. Mr. Patel purportedly hired someone to cover the signs with tarps sometime before June 29, 2009, but as photographs provided by Choice Hotels show, the tarps sagged off, or flew off entirely, from the signs on numerous occasions. See Docket Entry Nos. 36–5 at 3–5; 29–20 at 7–9. A May 2011 e-mail from a different Choice franchisee states that the poorly secured tarp would come down every few weeks causing the main sign to be visible for weeks or months thereafter, and that the entrance and exit signs never had any covering. Docket Entry No. 29–14 at 5.¹ Eventually, sometime on or around November 11, 2011, Mr. Patel had the exterior signs painted black. See Docket Entry No. 42–2 at 15.

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In addition to the signs, the Comfort marks continued to be used in at least two other ways after the termination of the franchise agreement. Namely, the hotel's credit card receipts still bore the Comfort Inn name and the hotel's wireless service directed users to a website that displayed a “Welcome to the Comfort Inn” greeting. According to Mr. Patel, after his deposition he corrected the credit card receipt situation on or around February 15, 2013, and the Wi–Fi situation on or around March 6, 2013. See Docket Entry Nos. 49 at 4; 36–2 at 6–7; 49–1.

Choice Hotels also presents evidence that consumers mistook the hotel for a Comfort Inn after the franchise agreement had ended. For instance, a guest who stayed at the hotel in July 2009 logged a complaint “regarding my stay at Comfort Inn,” implying that the “dirt,” “grime,” and “insects” in his room ran counter to the “company advertisements about clean rooms.” Docket Entry No. 29–13 at 6–7. Another guest complained in March 2010 that he was not able to earn Choice's guest rewards points after staying at the hotel for 18 nights. Id. at 9.²

While there is no evidence showing that the Patels continue to use Comfort marks, Choice Hotels requests a permanent injunction to prevent any further harm and monetary damages to compensate its brand's damaged goodwill.

II. Summary Judgment Standard

When a party moves for summary judgment, the reviewing court shall grant the motion “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute about a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). All reasonable doubts on questions of fact must be resolved in favor of the party opposing summary judgment. See Evans v. City of Houston, 246 F.3d 344, 348 (5th Cir.2001) (citation omitted).

III. Liability

Choice Hotels seeks rulings of joint and several liability on all four causes of action it brings against the Patels: trademark infringement under the Lanham Act (15 U.S.C. § 1114); false designation of origin under the Lanham Act (15 U.S.C. § 1125); trademark infringement under Texas common law; and unfair competition under Texas common law. Docket Entry No. 29 at 13. Nevertheless, the Court must only conduct one inquiry to determine the Patels' liability because, as the parties appear to agree, the facts that support an action for trademark infringement under the Lanham Act also support the other three actions. See Philip Morris USA Inc. v. Lee, 547 F.Supp.2d 667, 674 (W.D.Tex.2008) (“The elements of trademark infringement and false designation of origin are identical, and the same evidence will establish both claims.” (citations omitted)); Dallas Cowboys Football Club, Ltd. v. Am.'s Team Props., Inc., 616 F.Supp.2d 622, 637 (N.D.Tex.2009) (“A determination of a likelihood of confusion under federal law is sufficient to prove trademark infringement under Texas law.” (citing Elvis Presley Enters. v. Capece, 141 F.3d 188, 193 (5th Cir.1998)); Horseshoe Bay Resort Sales Co. v. Lake Lyndon B. Johnson Improvement Corp., 53 S.W.3d 799, 806 n. 3 (Tex.App.-Austin 2001, pet. denied) (“A trademark infringement and unfair competition action under Texas common law presents essentially ‘no difference in issues than those under federal trademark infringement actions.’ ” (quoting Zapata Corp. v. Zapata Trading Int'l, Inc., 841 S.W.2d 45, 47 (Tex.App.-Houston [14th Dist.] 1992, no writ)).

A. Infringement of the Comfort Marks

“To recover on a claim of trademark infringement, a plaintiff must first show that the mark is legally protectable and must then establish infringement by showing a likelihood of confusion.” Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 329 (5th Cir.2008) (citations omitted). A cause of action for infringement exists where a person “uses (1) any reproduction, counterfeit, copy[,] or colorable imitation of a mark; (2) without the registrant's consent; (3) in commerce; (4) in connection with the sale, offering for sale, distribution[,] or advertising of any goods; (5) where such use is likely to cause confusion, or to cause mistake or to deceive.” Id. (alterations in original) (quoting Boston Prof'l Hockey Ass'n, Inc. v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d 1004,...