T-Mobile United States, Inc. v. Aio Wireless LLC

• Decision Date: 03 February 2014
• Docket Number: Civil Action No. H–13–2478.
• Citation: 991 F.Supp.2d 888
• Parties: T–MOBILE US, INC., et al., Plaintiffs, v. AIO WIRELESS LLC, Defendant.
• Court: U.S. District Court — Southern District of Texas

991 F.Supp.2d 888

T–MOBILE US, INC., et al., Plaintiffs,

v.AIO WIRELESS LLC, Defendant.

Civil Action No. H–13–2478.

United States District Court,

S.D. Texas,

Houston Division.

Signed Jan. 22, 2014.

Filed Feb. 3, 2014.

Joseph Beauchamp, Jones Day, Houston, TX, Bradley I. Ruskin, Brendan Orourke, Erika Marie Stallings, Kevin J. Perra, Victoria L. Loughery, Proskauer Rose LLP, New York, NY, Jessica D. Bradley, Tracy A. Stitt, Jones Day, John G. Froemming, Washington, DC, for Plaintiffs.

Charles H. Hooker, III, Jennifer Fairbairn Deal, R. Charles Henn, William H. Brewster, Kilpatrick, Townsend & Stockton LLP, Atlanta, GA, Mark Ryan Trachtenberg, Haynes and Boone, LLP, Houston, TX, for Defendant.

MEMORANDUM OPINION^* SETTING OUT FINDINGS OF FACT AND CONCLUSIONS OF LAW¹

LEE H. ROSENTHAL, District Judge.

The plaintiffs, T–Mobile US, Inc., T–Mobile USA, Inc., and Deutsche Telekom AG (together, “T–Mobile”), moved for a preliminary injunction to stop the defendant, Aio Wireless LLC, from using a plum color as a central part of its trade dress for consumer wireless telecommunications services and products. Telecommunications companies use color as an integral part of elaborate marketing campaigns to identify the sources for various consumer products and services. Familiar examples include “Verizon red,” “Sprint yellow,” “AT & T orange,” and “T–Mobile magenta.”

T–Mobile seeks to protect its trademarked use of magenta from what it alleges is Aio's infringing use of a confusingly similar plum color.

The products and services at issue are wireless cellular phone communications not tied to particular devices or to long-term contracts with particular carriers. Such no-contract services are relatively new and the competition among service providers is intense. Aio is a new AT & T subsidiary competing with T–Mobile in this area. Aio's launch of its initial marketing campaign prominently features large blocks or swaths of its plum color. T–Mobile's marketing prominently features large blocks or swaths of its magenta color. T–Mobile alleges that AT & T's plum—Pantone 676C—is so close to T–Mobile's trademarked magenta—Pantone Process Magenta—that it infringes the T–Mobile mark, dilutes its strength, and likely causes confusion among consumers. Aio responds by attacking the validity of T–Mobile's magenta mark and denying that it has acquired secondary meaning. Aio also argues that the marketing changes it has made since this suit was filed, greatly reducing its use of the plum color, moot the issues.

Both sides have provided the court with excellent briefs on the legal issues and thorough submissions substantiating their factual claims. Based on the pleadings, the application for the preliminary injunction and the response, the extensive briefing and submissions, the testimony, arguments, and exhibits presented at the three-day evidentiary hearing, the post-hearing briefs and submissions, and the applicable law, the court enters findings of fact and conclusions of law. Based on the findings and conclusions, the court grants the motion for a preliminary injunction on the terms and conditions set out below, which take into account the marketing changes Aio made during this litigation.

I. Procedural Background: The Evidence in the Record

T–Mobile filed its complaint on August 23, 2013. (Docket Entry No. 1). On September 4, 2013, T–Mobile filed an amended complaint, motion for preliminary injunction, and motion for expedited hearing on that motion. (Docket Entry Nos, 18, 19, & 24). The motion for preliminary injunction included expert reports from Dr. Susan Schwartz McDonald, a survey research and marketing expert who advises companies on brand strategy and marketing; Sarah Butler of NERA economic consulting, who researches and provides marketing analyses of consumers' decisionmaking processes; and Dr. Bruce Isaacson of MMR Strategy Marketing, who is an expert in survey research and marketing. (Docket Entry No. 20, Exs. 3–5). On September 13, 2013, in a videoconference hearing with all parties, the court set a scheduling order with deadlines for completing fact and expert discovery and for filing briefs, and with a date for a preliminary injunction hearing. (Docket Entry No. 46).² The schedule was followed with minor deviations.

On November 1, 2013, Aio filed its opposition brief. (Docket Entry No. 76). Aio supported its opposition with declarations from Dr. Robert A. Paterson, who specializes in marketing and survey research; and reports from Dr. Erich Joachimsthaler, who has been a professional in the brand and marketing field for more than 20 years; Dr. Daniel J. Howard, an expert in the empirical study of marketing; Dr. Roy S. Berns, a “color scientist”; and Dr. Michael J. Tarr, an expert in visual perception and cognition. Aio also attached the declaration and deposition of Dr. Shari Seidman Diamond, a Professor of Law and Psychology at Northwestern University. (Docket Entry No. 77, Exs. 1–9). With its reply brief, T–Mobile submitted a supplemental report from Sarah Butler and a report from Dr. Dhruv Grewal, an expert on value-based marketing and marketing research. (Docket Entry No. 89, Exs. 39, 41). The court permitted Aio to submit supplemental reports from Dr. Howard, Dr. Tarr, Dr. Berns, and Dr. Joachimsthaler. (Docket Entry Nos. 95–98).

A three-day evidentiary hearing was held from November 12 to November 14, 2013. At the evidentiary hearing, the court heard testimony from T–Mobile's Senior Vice–President of Brand & Advertising, Peter DeLuca. The parties argued the inferences to be drawn from the extensive evidence on how the parties and industry use color in their trade dress and marketing.³

At the end of the three-day hearing, the court announced its tentative ruling that T–Mobile had established secondary meaning in its magenta mark and that Aio's use of broad swaths or blocks of plum was confusingly similar and infringing. The court also indicated that it was considering a more limited injunction than T–Mobile sought, directed to Aio's use of large swaths of its plum color rather than to all uses of the color.

After the evidentiary hearing, Aio filed a supplemental brief outlining changes in its advertising and store appearance. Aio argued that those changes made T–Mobile's expert reports and consumer surveys obsolete and mooted the issues. T–Mobile responded that voluntary cessation of the infringing activity did not moot the claims. First, absent a court-ordered injunction, T–Mobile had no assurance that the infringing activity would not resume. Second, T–Mobile argued that the changes were insufficient to avoid infringement. Third, T–Mobile argued that the changes both conceded infringement and showed a lack of substantial harm to Aio should the injunction issue.

The court ordered the parties to answer specific questions about the extent and effect of Aio's marketing changes on T–Mobile's claim for injunctive relief. Aio's response emphasized that it objected to any injunction, “even one that tracks changes already being made by the business.” (Docket Entry No. 128 at 2). Aio also asked that any injunction be stayed pending an interlocutory appeal to the Fifth Circuit.

For the reasons that follow, the court finds and concludes that T–Mobile magenta has acquired secondary meaning in the marketplace and that T–Mobile has demonstrated a substantial likelihood of success on the merits of its unfair-competition claim under the Lanham Act. The court finds and concludes that Aio's use of broad swaths or blocks of its plum color will likely cause confusion between Aio and T–Mobile and that the loss of goodwill and potential customers poses a substantial threat of irreparable injury to T–Mobile that outweighs the costs Aio will incur from the injunction. The injunction, issued under separate order, is limited to Aio's use in marketing of large swaths or blocks of its plum color that dominate Aio's advertisements, websites, and stores when Aio launched its marketing. This limited scope, and Aio's posthearing marketing changes, together lead the court to find that the impact on Aio does not weigh against the injunction's issuance. Finally, the court concludes that the injunction serves the public interest in upholding the mark protections provided by the Lanham Act.

Findings of Fact

II. The Industry

Within the consumer wireless-telecommunications industry, the major product and service providers use colors as important source indicators in their marketing. (Decl. of Peter DeLuca¶ 29). Particular colors are an important part of each provider's visual brand identity and trade dress. ( Id., Exs. 32, 33). The association of specific colors to certain providers is so common that these providers use those colors to make interbrand comparisons. ( Id., Ex. 34). The record contains evidence that T–Mobile runs advertisements comparing itself to its competitors using color to represent a few competitor companies, confident that consumers associate those specific colors with the specific brands. A T–Mobile holiday commercial in December 2012 shows a line of Christmas stockings, each colored with a shade of blue, yellow, red, and magenta; these colors are associated with the major competitors in the wireless telecommunications industry, AT & T, Sprint, Verizon, and T–Mobile. ( Id., Ex. 17). An advertisement that ran during the fall 2012 election season showed a line of voting booths, each with a different color curtain: blue, yellow, red, and magenta. The tag line: “Vote Magenta.” ( Id., Ex. 16). T–Mobile'smajor competitors operate similarly. At the evidentiary hearing, T–Mobile played a Verizon commercial using colors identified with particular wireless telecommunications providers to symbolize and differentiate the major competing brands. (Plaintiff's Hearing Ex. 1). Exhibits to DeLuca's declaration show an Alltell Wireless commercial in which T–Mobile is represented by a character wearing a magenta shirt. An advertisement...