Horseshoe Bay Resort Sales v. Lake L.B.J. Improv.

• Decision Date: 09 August 2001
• Citation: 53 S.W.3d 799
• Parties: (Tex.App.-Austin 2001) Horseshoe Bay Resort Sales Co., Appellant v. Lake Lyndon B. Johnson Improvement Corporation, Appellee NO. 03-00-00384-CV
• Court: Texas Court of Appeals

Page 799

53 S.W.3d 799 (Tex.App.-Austin 2001)

Horseshoe Bay Resort Sales Co., Appellant v. Lake Lyndon B. Johnson Improvement Corporation, Appellee

NO. 03-00-00384-CV

Court of Appeals of Texas, Austin

August 9, 2001

Rehearing Overruled Oct.4, 2001

FROM THE DISTRICT COURT OF LLANO COUNTY, 33RD JUDICIAL DISTRICT NO. 11,946, HONORABLE GUILFORD L. JONES, III, JUDGE PRESIDING

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[Copyrighted Material Omitted] Before Chief Justice Aboussie, Justices Yeakel and Patterson

Aboussie, Chief Justice

This is a dispute over an internet domain address and alleged trademark infringement and dilution. The parties to this suit provide real estate services in Llano County, Texas. Since 1971, appellee Lake Lyndon B. Johnson Improvement Corporation ("Lake LBJ Corp.") has done business as "Horseshoe Bay." In 1996, appellant Horseshoe Bay Resort Sales Company ("Resort Sales Co.") registered the domain name "horseshoebay.com" and began using this Internet address for its website. Lake LBJ Corp. consequently brought suit for common law infringement and dilution under the Texas Anti-Dilution Statute. See Tex. Bus. & Com. Code Ann. § 16.29 (West Supp. 2001). The district court issued a declaratory judgment that "Horseshoe Bay" is a valid trademark belonging to Lake LBJ Corp. and that Resort Sales Co.'s use of the mark constitutes dilution. The court also granted a permanent injunction, assigning the domain name "horseshoebay.com" to Lake LBJ Corp., and awarded Lake LBJ Corp. attorney's fees. Resort Sales Co. challenges the district court's findings (1) that "Horseshoe Bay" is a protectable mark, (2) that Resort Sales Co.'s use of the domain name dilutes the mark, (3) that the claims are not barred by the statute of limitations, (4) that declaratory relief was appropriate, and (5) that Lake LBJ Corp. is entitled to attorney's fees. We will affirm the district court's judgment.

BACKGROUND

Parties

Lake LBJ Corp. is a Texas corporation based in Llano County. The corporation was chartered in 1970 to develop residential real estate and a golf resort along the shores of Lake Lyndon B. Johnson. In 1971, Lake LBJ Corp. filed the appropriate forms in Burnet and Llano Counties, registering its intent to do business as "Horseshoe Bay" and has maintained this registration to date. Also in 1971, Lake LBJ Corp. began using the mark "Horseshoe Bay" with a sailboat logo and a specially designed typeface to designate both its real estate development services and the resort.

There was no established community by the name "Horseshoe Bay" at this location before that developed by Lake LBJ Corp. The area was previously known as the Lupton Ranch. Lake LBJ Corp.'s founders came to the name "Horseshoe Bay" as the result of a confluence of factors: the shoreline for the proposed development is in the rough shape of a horseshoe; Horseshoe Creek runs through the property; and Lake LBJ Corp.'s founders discovered a horseshoe on the beach while discussing a list of potential names, including Horseshoe Bay. The Marble Falls post office provided postal service to the area until the mid-1980s, when the Horseshoe Bay community received its own post office.

In 1986, Lake LBJ Corp. registered its "Horseshoe Bay" logo and typestyle with the United States Patent and Trademark Office as a service mark for commercial real estate brokerage and property management services. This registration specifically disclaimed any exclusive right in the name "Horseshoe Bay," apart from the mark registered, because the trademark examiner found the name to be geographically descriptive. The examiner based this decision on a preliminary review, which revealed that the application's postmark read "Horseshoe Bay." Lake LBJ Corp. did not challenge this finding and thus the examiner undertook no further investigation.

In 1987, Lake LBJ Corp. and the golf resort became separate entities. Under the severance agreement, both are permitted to use the "Horseshoe Bay" logo. Lake LBJ Corp.'s brochures and other advertisements continue to use the name "Horseshoe Bay" to designate both the company and the services it offers to the present day. The district court also determined that all other known Texas users of the words "Horseshoe Bay" add a business identifier to separate their identity from Lake LBJ Corp.

Resort Sales Co. was founded in 1988 as a real estate brokerage firm in Llano County. Resort Sales Co. is not a real estate development corporation, but to the extent that it sells real estate in Llano County, it directly competes with Lake LBJ Corp. The district court found that Resort Sales Co. has never done business solely as "Horseshoe Bay" and that Resort Sales Co. was aware that Lake LBJ Corp. did business under that name. In 1996, Resort Sales Co. registered and began using the Internet domain name "horseshoebay.com" for its website.¹

District Court Proceedings

In 1999, Lake LBJ Corp. brought suit against Resort Sales Co. for common law infringement and statutory dilution based on Resort Sales Co.'s registration and use of the "horseshoebay.com" domain name. In seventy findings of fact and fifteen conclusions of law, the district court found that "Horseshoe Bay" is a valid mark² owned by Lake LBJ Corp. and that Resort Sales Co.'s registration of the domain name constitutes both infringement and dilution. The court ordered Resort Sales Co. to transfer ownership of the domain name to Lake LBJ Corp. and enjoined Resort Sales Co. from registering or attempting to register any domain name containing the words "horseshoe" or "bay," except a domain name that consists solely of Resort Sales Co.'s full name. The court also awarded Lake LBJ Corp. $23,465 in attorney's fees. The district court rendered a judgment granting this relief on March 15, 2000. On June 27, 2000, the district court modified its judgment, awarding an additional $15,000 in attorney's fees to Lake LBJ Corp.

DISCUSSION

Standard of Review

The distinctiveness of a mark, whether that mark has acquired secondary meaning, and the existence of likelihood of confusion are all questions of fact. Pebble Beach Co. v. Tour 18 I, Ltd., 155 F.3d 526, 537 (5th Cir. 1998). We attach to the court's findings of fact the same weight that we attach to a jury's verdict upon jury questions. Lawyers Sur. Corp. v. Larson, 869 S.W.2d 649, 653 (Tex. App.--Austin 1994, writ denied). When reviewing a finding for factual sufficiency, we must consider and weigh all the evidence and should set aside the judgment only if the evidence supporting the finding is so weak or the finding is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965). We will not substitute our judgment for that of the trier of fact merely because we reach a different conclusion. Westech Eng'g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex. App.--Austin 1992, no writ).

Infringement Claim

To establish a claim for infringement of a common law mark, the plaintiff must demonstrate: (1) the name it seeks to protect is eligible for protection; (2) it is the senior user of the name; (3) there is a likelihood of confusion between its mark and that of the other user; and (4) because it seeks the equitable remedy of injunction, it must show that the likelihood of confusion will cause irreparable injury for which there is no adequate legal remedy. Zapata Corp. v. Zapata Trading Int'l, Inc., 841 S.W.2d 45, 47 (Tex. App.--Houston [14th Dist.] 1992, no writ).³ By its first issue, Resort Sales Co. challenges the first prong, arguing that "Horseshoe Bay" is not eligible for protection because it is a geographically descriptive term that has not acquired secondary meaning.

I. Protectability of Marks

Trade and service marks are defined as words, names, or symbols that enable consumers both to distinguish goods or services and to identify their source. See Pebble Beach, 155 F.3d at 536. Marks are therefore eligible for protection only if they can identify and distinguish the plaintiff's goods or services from those of others. See Pebble Beach Co. v. Tour 18 I, Ltd., 942 F. Supp. 1513, 1536 (S.D. Tex. 1996), aff'd as modified, 155 F.3d 526 (5th Cir. 1998).

To determine the distinguishing capability of a mark, and thus its eligibility for protection, courts employ the classic trademark continuum articulated in Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2nd Cir. 1976). Pebble Beach, 942 F. Supp. at 1537. A mark may be (1) fanciful, (2) arbitrary, (3) suggestive, (4) descriptive, or (5) generic. Id. Fanciful, arbitrary, and suggestive marks are inherently distinctive and therefore protectable without an additional showing of consumer identification.⁴ Id. At the other end of the continuum are generic marks, which are never protectable because they represent the name of the good or service itself and therefore cannot identify or distinguish a particular source. Id. Descriptive marks fall somewhere in between. These marks describe a characteristic of the good or service itself and may not be protected absent a showing that the mark has become associated in the minds of consumers with the particular, albeit unknown, source. Pebble Beach, 155 F.3d at 540. This association is called secondary meaning. Id.

When coined by Lake LBJ Corp.'s founders in 1971, the name "Horseshoe Bay" for real estate development services was arbitrary. Whether the mark continues to be arbitrary, however, is potentially complicated by the fact that the mark is used not only to name Lake LBJ Corp.'s services but also to name a residential development. Thus, the significance of the mark has taken on a geographic aspect.

Generally, geographically descriptive marks constitute a subset of descriptive marks. Because the primary significance to consumers of a...