Condom Sense, Inc. v. Alshalabi

• Decision Date: 21 December 2012
• Docket Number: No. 05–10–01024–CV.,05–10–01024–CV.
• Citation: 390 S.W.3d 734
• Parties: CONDOM SENSE, INC., MRSK, Inc., MRK, Inc., MKSK, LLC, Marstek, LLC, SKCMK, LLC, and MSCK 121, LLC, Appellants v. Jamal ALSHALABI a/k/a Mike Edwards, Greg Smith, Monserrat Smith, J & J No–Limit, Inc., Condoms Etc., LLC, Condom Sensation Dallas LLC, Condom Express, LLC, and Comoros, LLC, Appellees.
• Court: Texas Court of Appeals

390 S.W.3d 734

CONDOM SENSE, INC., MRSK, Inc., MRK, Inc., MKSK, LLC, Marstek, LLC, SKCMK, LLC, and MSCK 121, LLC, Appellants

v.Jamal ALSHALABI a/k/a Mike Edwards, Greg Smith, Monserrat Smith, J & J No–Limit, Inc., Condoms Etc., LLC, Condom Sensation Dallas LLC, Condom Express, LLC, and Comoros, LLC, Appellees.

No. 05–10–01024–CV.

Court of Appeals of Texas,

Dallas.

Dec. 21, 2012.

Jay Edward Ray, McKinney, TX, Monica Lynne Luebker, Dallas, TX, for appellants.

Jennifer R. Poe, James N. Henry, Dallas, TX, for appellees.

Before Justices LANG, MURPHY, and MYERS.

OPINION

Opinion By Justice MURPHY.

This multi-party dispute involves one federal and four Texas service mark registrations using the words “Condom Sense.” Appellant Condom Sense, Inc. (CSI) is the named holder of those registrations. CSI and the additional appellants, who are individual management companies owning and operating Condom Sense retail stores in the Dallas area, sued appellees seeking damages and an injunction to prevent use of the marks. The trial court granted judgment for appellees, ordering the cancellation of the marks. This appeal followed. We reverse the judgment regarding cancellation of the four Texas service mark registrations but otherwise affirm the judgment.

I. INTRODUCTION

Trademark infringement law is part of the broader law of unfair competition. Moseley V. v. Secret Catalogue, Inc., 537 U.S. 418, 428, 123 S.Ct. 1115, 155 L.Ed.2d 1 (2003); Union Nat'l Bank of Tex., Laredo, Tex. v. Union Nat'l Bank of Tex., Austin, Tex., 909 F.2d 839, 843 n. 10 (5th Cir.1990). That law prohibits uses of trademarks, service marks, trade names, and trade dress that are likely to cause confusion as to the source of the product or service. See Moseley, 537 U.S. at 428, 123 S.Ct. 1115. Infringement law serves two roles: one is to protect the consumer from being misled by the use of infringing marks; the other is to protect the investment in a mark made by the owner. See Qualitex Co. v. Jacobson Prods., Co., 514 U.S. 159, 163–64, 115 S.Ct. 1300, 131 L.Ed.2d 248 (1995); Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 205, 62 S.Ct. 1022, 86 L.Ed. 1381 (1942) (noting infringement law recognizes the value of symbols; if one “poaches upon the commercial magnetism of the symbol” created by the owner, “the owner can obtain legal redress”); see also King–Size, Inc. v. Frank's King Size Clothes, Inc., 547 F.Supp. 1138, 1149 n. 3 (S.D.Tex.1982).

Appellants' claims are governed by the Trademark Act of 1946, also known as the Lanham Act, see15 U.S.C.A. §§ 1051–1127 (West 2009), the Texas Trademark Act, seeTex. Bus. & Com.Code Ann. §§ 16.01–.31 (West 2011), ¹ and Texas common law. Congress enacted the Lanham Act to provide for national protection of marks used in interstate and foreign commerce. See Park 'N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 193, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985). The Texas legislature similarly enacted legislation to confer statewide protection for the owner of a mark. SeeTex. Bus. & Com.Code Ann. § 16.15(b); Hot–Hed, Inc. v. Safehouse Habitats (Scot.), Ltd., 333 S.W.3d 719, 730 (Tex.App.-Houston [1st Dist.] 2010, pet. denied). The Texas Trademark Act was derived from the Model State Trademark Bill drafted by the United States Trademark Association in 1949, which was revised in 1964 and 1992. See Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1081 (5th Cir.1997). And the Texas common law elements of unfair competition, including trademark, “are no different than those under federal trademark law.” All Am. Builders, Inc. v. All Am. Siding of Dallas, Inc., 991 S.W.2d 484, 488 (Tex.App.-Fort Worth 1999, no pet.); see also Hot–Hed, Inc., 333 S.W.3d at 730;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); Zapata Corp. v. Zapata Trading Int'l, Inc., 841 S.W.2d 45, 47 (Tex.App.-Houston [14th Dist.] 1992, no writ). Courts therefore look to the Lanham Act and cases thereunder for generally accepted principles of substantive trademark law and to discern meaning and interpretation of the state law provisions. See KLN Steel Prods. Co. v. CNA Ins. Cos., 278 S.W.3d 429, 440–41 (Tex.App.-San Antonio 2008, pet. denied).²

Although often used interchangeably, the words trademark, service mark, and trade name have different meanings. See Am. Legion v. Matthew, 144 F.3d 498, 499 (7th Cir.1998) (noting “[m]ost of the time ‘trademark’ and ‘trade name’ operate as synonyms”). A trademark is a designation, including any word, name, symbol, or device, used by a person to identify his goods and distinguish them from goods produced by another. 15 U.S.C.A. § 1127; Tex. Bus. & Com.Code Ann. § 16.01(a)(5); Blue Bell, Inc. v. Farah Mfg. Co., 508 F.2d 1260, 1264 (5th Cir.1975). A service mark is essentially a trademark that is used in connection with services; it is a designation used by a person to identify his services and distinguish them from the services of another. 15 U.S.C.A. § 1127; Tex. Bus. & Com.Code Ann. § 16.01(a)(4). Trademarks and service marks are separately defined in the applicable statutes, but their definitions closely track each other, and they are governed by identical standards. See Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 236 n. 10 (5th Cir.2010); see alsoRestatement (Third) of Unfair CompetitionN § 9 cmt. f (1995); 1 McCarthy on Trademarks § 4:14, at 4–16 (“For all practical purposes, both trademarks and service marks are subject to the same substantive rules of validity and infringement.”); cf.15 U.S.C.A. § 1053 (“service marks shall be registrable, in the same manner and with the same effect as are trademarks, and when registered they shall be entitled to the protection provided in this chapter in the case of trademarks”). The term “mark” includes any trademark or service mark. 15 U.S.C.A. § 1127; Tex. Bus. & Com.Code Ann. § 16.01(a)(2).

A trade name is any designation adopted and used by a person to identify his business; it represents the goodwill that has been built over time by the user. 15 U.S.C.A. § 1127; Tex. Bus. & Com.Code Ann. § 16.01(a)(6); Thompson v. Thompson Air Conditioning & Heating, Inc., 884 S.W.2d 555, 558 (Tex.App.-Texarkana 1994, no pet.). Unlike trademarks or service marks, which are used to identify and distinguish the goods or services provided, a trade name is used to identify and distinguish the business itself from other entities. See15 U.S.C.A. § 1127.

A registered mark is one that has been registered in the United States Patent and Trademark Office (USPTO) or in the office of the secretary of state of Texas; trade names are not subject to registration, unless they also are used as marks. See15 U.S.C.A. § 1127; Tex. Bus. & Com.Code Ann. §§ 16.08(c), 16.10. Rights in a mark, however, grow out of use of the mark in commerce, not from mere registration. See Union Nat'l Bank of Tex., Laredo, 909 F.2d at 842;Blue Bell, Inc., 508 F.2d at 1265;cf.15 U.S.C.A. § 1127 (use of mark means “bona fide use of such mark”). Those rights are retained for as long as the use of the mark continues, or as long as nonuse of the mark is suitably explained. See15 U.S.C.A. § 1058. Like other rights that depend upon use, rights in a mark may be lost by abandonment, laches, or acquiescence. Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 418–19, 36 S.Ct. 357, 60 L.Ed. 713 (1916), superseded by statute as stated in Park 'N Fly, Inc., 469 U.S. at 200, 105 S.Ct. 658.

II. FACTUAL BACKGROUND

A. The “Condom Sense” Service Marks

The primary service mark at issue in this case is “Condom Sense,” which is presented with and without a circle design. When used, the circle is positioned around the two words and is said to represent a condom.

The Condom Sense mark was first registered as a trademark in 1989 by a company called Ansell Incorporated, later renamed Ansell Healthcare Products, LLC. Ansell manufactures latex products, including condoms, and it registered the trademark “Condom Sense” with the USPTO for use in class 10 prophylactics. Ansell used the trademark on packaging for its Lifestyle brand condoms with the tagline: “LIFESTYLES ... It's a Matter of Condom Sense!”

In August 1992, Ansell filed an intent-to-use application,³ seeking federal registration of the mark as a service mark for use in class 42, retail store services. At that time, Ansell did not have a retail storefront or otherwise use the mark in connection with retail store services. But in its application, it stated a bona-fide intention to do so. Ansell received notice that the Condom Sense service mark was allowed for registration by the USPTO in mid–1994. The USPTO registered the mark to Ansell on June 13, 1995. In 2005, Ansell assigned its entire interest and goodwill in the class 42 mark to appellant CSI. That assignment and the surrounding events will be described in more detail below.

After acquiring the federal registration of the Condom Sense mark by assignment, CSI then registered that mark with and without the circle design in Texas. It also registered two additional marks in Texas: (1) the phrase “Condom Sense Est.1990” with a circle design and (2) the phrase “Condom Sense Stores” with the circle design. In all, CSI registered four services marks in Texas, each dated April 19, 2007.

B. The Parties

The parties are competitors in the adult novelty and gift industry and use the service marks in connection with their retail stores. The parties also identify their stores by the name “Condom Sense” featuring the circle design.

1. Appellants

Appellant CSI is a Texas corporation that holds the federal and state registrations for the Condom Sense mark, as well as the additional state-registered marks. The remaining appellants are individual management companies that own and operate six Condom Sense retail stores in Dallas and the surrounding areas.⁴ The entities that operate the retail stores claim the right to use the Condom...