Hot–hed Inc. v. (scotland)

• Decision Date: 18 November 2010
• Docket Number: No. 01–09–00547–CV.,01–09–00547–CV.
• Parties: HOT–HED, INC. and Cinaruco International, S.A., Appellants,v.SAFEHOUSE HABITATS (SCOTLAND), LTD., Appellee.
• Court: Texas Court of Appeals

333 S.W.3d 719

HOT–HED, INC. and Cinaruco International, S.A., Appellants,

v.SAFEHOUSE HABITATS (SCOTLAND), LTD., Appellee.

No. 01–09–00547–CV.

Court of Appeals of Texas, Houston (1st Dist.).

Nov. 18, 2010.Rehearing and Rehearing En Banc

Overruled Jan. 24, 2011.

Bruce R. Coulombe, Frank Z. Lin, Guy E. Matthews, Matthews, Lawson & Bowick, PLLC, Justin McKenzie Waggoner, Smyser, Kaplan & Veselka, L.L.P., Houston, TX, for Appellants.Bruce E. Ramage, Dale Jefferson, Douglas H. Elliott, Levon G. Hovnatanian, Martin, Disiere, Jefferson & Wisdom, L.L.P., William Bruce Patterson, Houston, TX, for Appellee.Panel consists of Justices KEYES, HIGLEY, and BLAND.

OPINION

EVELYN V. KEYES, Justice.

Appellants, Hot–Hed, Inc. and Cinaruco International, S.A. (collectively, “Hot–Hed”), appeal the trial court's grant of declaratory judgment against them in their suit for trademark infringement against appellee, Safehouse Habitats (Scotland), Ltd. (“Safehouse”). In four issues, Hot–Hed argues that the trial court erred in (1) entering declaratory judgment that the “Habitat” mark is not eligible for protection as a trademark under Texas or federal law; (2) awarding Safehouse attorney's fees under the Texas Uniform Declaratory Judgment Act (UDJA); (3) refusing Hot–Hed's timely request to issue findings of fact and conclusions of law on the attorney's fees award; and (4) declining to submit Hot–Hed's proposed special issue on statutory trademark infringement to the jury.

Safehouse also appeals the judgment of the trial court. In three issues, Safehouse argues that the trial court erred in (1) failing to either order the cancellation of Hot–Hed's Texas trademark registration or state that the term “habitat” “has become incapable of serving as a mark under section 16.16(a)(4)(e) of the Texas Business and Commerce Code”; (2) failing to direct the United States Patent and Trademark Office (USPTO) to dismiss Hot–Hed's proceedings before that office, or alternatively, failing to order Hot–Hed to abandon those proceedings; and (3) failing to specify an award of post-judgment interest in the judgment.

We modify and affirm as modified.

Background

Hot–Hed, a Texas corporation involved with the development and manufacture of specialty products for the oil and gas industry, began selling inflatable welding enclosures using the mark “Habitat” in 1990. Hot–Hed obtained registration of the “Habitat” mark through the USPTO in 1991. It subsequently allowed the federal registration to lapse in 1998 when it failed to file an affidavit of continuing use with the USPTO five years after it registered the mark. However, Hot–Hed continued to market its welding enclosures using the mark “Habitat.”

Safehouse, a Scottish private limited company, does business in Texas but has no regular place of business here. Safehouse designed and built its first flexible welding enclosures in 2001 and started selling them in 2002 under the name “Safehouse Habitats.” Hot–Hed first learned of Safehouse and its welding enclosures at a trade conference in Houston in 2006. Conference attendees informed Hot–Hed that Safehouse was marketing a similar welding enclosure using the term “habitat.”

In September 2005, Hot–Hed applied for a new federal registration of its “Habitat” mark, and in March 2006, Hot–Hed applied for registration of the trademark “Habitat” with the Texas Secretary of State. The Secretary of State issued a state trademark registration on May 30, 2006.

In March 2007, Safehouse timely filed a notice of opposition to Hot–Hed's application for federal trademark registration of the mark “Habitat” with the USPTO.

Meanwhile, on May 1, 2006, Hot–Hed sued Safehouse in Texas state court alleging Texas common law trademark infringement and unfair competition based on Safehouse's use of the term “habitat” for its welding enclosures. In subsequent amended petitions, Hot–Hed added causes of action for infringement of a registered Texas trademark and for injury to business reputation and trademark dilution under Texas Business and Commerce Code section 16.29. ¹

Safehouse attempted to remove Hot–Hed's state court action to federal court, arguing that Hot–Hed's claims presented a federal question. On appeal, the Fifth Circuit determined that no federal question was presented by Hot–Hed's claims against Safehouse and the cause was remanded to state court on February 12, 2007.

Safehouse counterclaimed in the state court suit, seeking “a judicial declaration [under the UDJA] that the term ‘habitat’ is not eligible for trademark protection under either state or federal law” and seeking to have Hot–Hed's Texas registration of the “Habitat” mark cancelled pursuant to Texas Business and Commerce Code sections 16.16 and 16.25.² Safehouse also petitioned for attorney's fees under Texas Business and Commerce Code section 16.25 and the UDJA. In its prayer, Safehouse asked that the trial court dismiss each of Hot–Hed's claims with prejudice and enter an order that Hot–Hed take nothing on those claims; declare that the term “habitat” is generic or descriptive and not eligible for protection under state or federal law; cancel Hot–Hed's Texas trademark registration for the term “Habitat”; and award it attorney's fees. It also generally prayed for “such other and further relief in law and equity to which it may show itself to be justly entitled.” ³

On July 22, 2006, Safehouse applied to the USPTO to federally register the mark “Safehouse Habitats,” and, on August 19, 2008, the USPTO issued a federal trademark registration for “Safehouse Habitats.”

On August 27, 2008, Hot–Hed filed a Petition of Cancellation asking the USPTO to cancel Safehouse's federal registration of “Safehouse Habitats.”

Subsequently, the Trademark Trial and Appeals Board of the USPTO suspended the proceedings initiated by Hot–Hed to register “Habitat” on behalf of Hot–Hed and to cancel Safehouse's registration of “Safehouse Habitats,” stating that the resolution of the issues in the state court litigation could have a bearing on the issues in the federal proceedings.

At trial of Hot–Hed's state court causes of action and Safehouse's counterclaims, both sides presented evidence regarding the use of the term habitat in relation to welding enclosures. Hot–Hed presented evidence that it possessed a registration from the Texas Secretary of State for the term “Habitat” when used in connection with inflatable welding enclosures. It also presented evidence that Safehouse had used the term “Habitat” in marketing its welding enclosures. Hot–Hed's founder, Louis Wardlaw, testified that he invented the term “Habitat” as it related to welding enclosures and that Hot–Hed was the first to use that mark to market inflatable welding enclosures. Hot–Hed also presented evidence that it had used the term “Habitat” continuously for twenty years and that it had at one time secured federal registration of the mark.

Safehouse presented evidence that, from their beginning in the 1960s, underwater welding enclosures were referred to as “welding habitats” and that the term had been in continuous use since that time to refer generally to welding enclosures, not just to Hot–Hed enclosures. Patents for other welding enclosures filed throughout the last three to four decades by third parties referred to the welding enclosures as “habitats.” Safehouse also presented evidence that that term was used generally to refer to welding enclosures by oil and gas companies, by the Minerals Management Services of the United States Department of the Interior, and in an article entitled “Welding Hot Work Habitats” that addressed the use of welding “habitats” in New Zealand in 1990.

During the charge conference, Hot–Hed objected generally to jury questions one through four as they were submitted to the jury and filed two requested questions to replace the submitted questions. The instructions requested by Hot–Hed, and refused by the trial court, were unconditional questions. Question one asked whether the jury found it “more likely so than not” that Hot–Hed has a “Texas common law trademark for “HABITAT” that has been infringed by Safehouse.” This proposed instruction defined trademark, listed the elements of common law trademark infringement, and included instructions on when marks are eligible for protection and explanations of other elements of common law trademark infringement. It likewise stated that Hot–Hed bore the burden of proof on the issue generally, but it provided that Safehouse had the burden of proving that Hot–Hed's “Habitat” mark was not eligible for protection by a preponderance of the evidence. The second proposed jury instruction addressed Hot–Hed's statutory cause of action for infringement of a Texas registered trademark. The trial court refused both of these proposed jury charges.

The first question the jury was asked to consider was, “Do you find that the term ‘habitat’ is eligible for protection as a trademark?” The instructions with question one defined “trademark,” stated that Hot–Hed or Cinaruco had the burden of proving whether the term “habitat” was eligible for protection, and explained the requirements for determining whether a term is eligible for protection. The jury answered “No.” Jury questions two through nine were contingent on the answer to jury question number one. Because the jury determined that “habitat” was not eligible for trademark protection, it did not answer any of these questions regarding the remaining elements of the parties' claims.

Jury question ten asked, “Do you find that Defendant Safe House is entitled to the recovery of its reasonable and necessary attorney's fees from Hot–Hed, Inc. and/or Cinaruco International, S.A.?” The jury answered “Yes” for both Hot–Hed and Cinaruco. Jury question eleven asked, “Do you find more likely than not that Safe House's use of the “HABITAT” trademark will cause irreparable injury to the trademark owner? The trademark owner has the burden of proof for...