Choice Hotels Int'l, Inc. v. Zeal, LLC
| Decision Date | 29 September 2015 |
| Docket Number | Civil Action No.: 4:13–cv–1961 |
| Citation | 135 F.Supp.3d 451 |
| Court | U.S. District Court — District of South Carolina |
| Parties | Choice Hotels International, Inc., Plaintiff, v. Zeal, LLC, Harshil J. Shah, Pranay Parekh, Chhaya Parekh, Rajan Gupta, and Monica Garg, Defendants. |
Theodore Fuller Mitchell, Gray Layton Kersh Solomon Sigmon Furr and Smith, Gastonia, NC, Matthew J. Ladenheim, Trego Hines and Ladenheim, Charlotte, NC, for Plaintiff.
Stephen Jahue Moore, Moore Taylor and Thomas, West Columbia, SC, for Defendants.
Bruce Howe Hendricks
This matter is before the Court on the motion of the plaintiff, Choice Hotels International, Inc., for summary judgment (ECF No. 58). The Court held a hearing on the motion on August 18, 2015, and has considered the parties' briefing in support and opposition. For the reasons set forth herein the Court grants the motion for summary judgment.
The plaintiff is the owner of a "family" of ECONO LODGE® trademarks which it uses in connection with its lodging franchise business. The defendants are the owners of a hotel in Myrtle Beach (the "Subject Property") that was previously owned by Kelley Properties, LLC ("Kelley"), a former franchisee of the plaintiff. Kelley operated an ECONO LODGE INN & SUITES, but its rights to do so were terminated before the hotel was acquired by the defendants. Nevertheless, the defendants continued to operate the hotel as an ECONO LODGE INN & SUITES, displaying the plaintiff's trademark on a large sign in front of the Subject Property. When the defendants finally rebranded the hotel, they changed the name to ECONO STUDIOS INN & SUITES, and replaced the plaintiff's sign with a new sign bearing the new name.1 The plaintiff alleges that this modified name still violates its trademark and creates a likelihood of consumer confusion.
The plaintiff advanced causes of action for trademark infringement and unfair competition under the Lanham Act and common law. The plaintiff seeks a permanent injunction prohibiting the defendant from further use of any of the marks in the ECONO LODGE family of marks and from further use of the similar ECONO STUDIOS INN & SUITES. The plaintiff also seeks the profits of the infringer, damages suffered by the plaintiff, and the costs of the action.
The court shall grant summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(a)
. The movant bears the initial burden of demonstrating that summary judgment is appropriate; if the movant carries its burden, then the burden shifts to the non-movant to set forth specific facts showing that there is a genuine issue for trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If a movant asserts that a fact cannot be disputed, it must support that assertion either by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials;" or "showing ... that an adverse party cannot produce admissible evidence to support the fact." Fed.R.Civ.P. 56(c)(1).
Accordingly, to prevail on a motion for summary judgment, the movant must demonstrate that: (1) there is no genuine issue as to any material fact; and (2) that he is entitled to judgment as a matter of law. As to the first of these determinations, a fact is deemed "material" if proof of its existence or non-existence would affect disposition of the case under applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)
. An issue of material fact is "genuine" if the evidence offered is such that a reasonable jury might return a verdict for the non-movant. Id. at 257, 106 S.Ct. 2505. In determining whether a genuine issue has been raised, the court must construe all inferences and ambiguities against the movant and in favor of the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)
.
Under this standard, the existence of a mere scintilla of evidence in support of the non-moving party's position is insufficient to withstand the summary judgment motion. Anderson, 477 U.S. at 252, 106 S.Ct. 2505
. Likewise, conclusory allegations or denials, without more, are insufficient to preclude the granting of the summary judgment motion. Ross v. Communications Satellite Corp., 759 F.2d 355, 365 (4th Cir.1985). Anderson, 477 U.S. at 248, 106 S.Ct. 2505. "Likelihood of confusion," a key inquiry in many trademark cases, "is a factual issue dependent on the circumstances of each case." Resorts of Pinehurst, Inc. v. Pinehurst Nat. Corp., 148 F.3d 417, 422 (4th Cir.1998). "Nevertheless, summary judgment is appropriate when the material, undisputed facts disclose a likelihood of confusion." Id.
To establish trademark infringement under the Lanham Act, the plaintiff must prove: "(1) that it owns a valid mark; (2) that the defendant used the mark ‘in commerce’ and without plaintiff's authorization; (3) that the defendant used the mark (or an imitation of it) ‘in connection with the sale, offering for sale, distribution, or advertising’ of goods or services; and (4) that the defendant's use of the mark is likely to confuse consumers." Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144, 152 (4th Cir.2012)
(internal citations omitted).
The plaintiff contends that it owns a family of ECONO LODGE trademarks. In support of this claim, it submitted copies of certificates of registration issued by the United States Patent and Trademark Office (USPTO), which are attached as Exhibits 18 to the plaintiff's complaint. (See ECF No. 1.) The plaintiff also alleges that the registrations have achieved incontestable status under Section 15 of the Lanham Act, 15 U.S.C. § 1065
. The defendants do not dispute the plaintiff's ownership of the marks or their incontestable status.
The plaintiff claims that the defendant used its marks in commerce without authorization in two different ways. First, the plaintiff alleges that when the defendants purchased the Subject Property from the holdover franchisee, they began operating the facility before removing the ECONO LODGE sign and other ECONO LODGE branded materials. The defendants admit that they operated the facility using the plaintiff's marks for a short period of time while they negotiated with the plaintiff regarding whether Zeal, LLC would become a franchisee. The defendants allege that once these negotiations fell through, they removed the ECONO LODGE sign and ECONO LODGE branded materials and changed the name of the facility. Second, the plaintiff alleges that the "new" name and mark that the defendants adopted, ECONO STUDIOS INN & SUITES, infringes the plaintiff's ECONO LODGE family of marks, which includes the mark, ECONO LODGE INN & SUITES. The plaintiff alleges that the defendants began using the new mark without the plaintiff's permission, which defendants concede, arguing that they did not need the plaintiff's permission because the marks are sufficiently distinct.
It is undisputed that the defendants used both the plaintiff's mark and the "new" mark in connection with the sale, offering for sale, distribution, or advertising of goods and services, specifically, lodging accommodations at the Subject Property.
It is axiomatic that continued unauthorized use of a mark by a holdover franchisee creates a likelihood of confusion in the marketplace. Several circuits have held that where a franchisee continues to use the franchisor's mark without authorization, likelihood of confusion can be assumed and the traditional analysis is unnecessary. See U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185, 1190 (6th Cir.1997)
(); Burger King Corp. v. Mason, 710 F.2d 1480, 1492–93 (11th Cir.1983) ( ).
As the plaintiff points out, the defendants are not even holdover franchisees, but merely successors in interest to holdover franchisees, meaning that the defendants never actually had permission to use the plaintiff's mark at any point. Here the defendants do not meaningfully contest that their operation of the Subject Property while it was still branded an ECONO LODGE created a likelihood of confusion. The defendants' brief in opposition to the motion for summary judgment fails to address the defendants' operation of the Subject Property prior to removing the ECONO LODGE sign and other branded materials. At the hearing on the motion for summary judgment, defense counsel argued that the use was de minimis and that the plaintiff had implicitly consented to the defendants continuing to operate the hotel while the parties negotiated whether the defendants would become a...
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