Test Masters Educational Services, Inc. v. Singh

• Decision Date: 18 October 2005
• Docket Number: No. 05-20049.,No. 03-20787.,No. 04-20861.,03-20787.,04-20861.,05-20049.
• Citation: 428 F.3d 559
• Parties: TEST MASTERS EDUCATIONAL SERVICES, INC.; Vivek Israni, Plaintiffs-Appellees, v. Robin SINGH, doing business as Testmasters, Defendant-Appellant. Robin Singh Educational Services, Inc., a California Corporation, doing business as Testmasters, Plaintiff-Appellant-Cross-Appellee, v. Test Masters Educational Services, Inc., a Texas Corporation, Defendant-Appellee-Cross-Appellant, Vivek Israni, Defendant-Appellee. Test Masters Educational Services, Inc., Plaintiff-Appellee-Cross-Appellant, Vivek Israni, Plaintiff-Appellee, v. Robin Singh, Defendant-Appellant-Cross-Appellee. Test Masters Educational Services, Inc., Plaintiff-Appellant, v. Robin Singh, doing business as Testmasters, Defendant-Appellee. Robin Singh, doing business as Testmasters, Plaintiff-Appellee, v. Test Masters Educational Services, Inc.; et al., Defendants, Test Masters Educational Services, Inc., Defendant-Appellant. Robin Singh Educational Services, Inc., a California Corporation, doing business as Testmasters, Plaintiff-Appellee, v. Test Masters Educational Services, Inc., a Texas Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

428 F.3d 559

TEST MASTERS EDUCATIONAL SERVICES, INC.; Vivek Israni, Plaintiffs-Appellees, v.Robin SINGH, doing business as Testmasters, Defendant-Appellant.

Robin Singh Educational Services, Inc., a California Corporation, doing business as Testmasters, Plaintiff-Appellant-Cross-Appellee, v.Test Masters Educational Services, Inc., a Texas Corporation, Defendant-Appellee-Cross-Appellant,Vivek Israni, Defendant-Appellee.

Test Masters Educational Services, Inc., Plaintiff-Appellee-Cross-Appellant,Vivek Israni, Plaintiff-Appellee, v.Robin Singh, Defendant-Appellant-Cross-Appellee.

Test Masters Educational Services, Inc., Plaintiff-Appellant, v.Robin Singh, doing business as Testmasters, Defendant-Appellee.

Robin Singh, doing business as Testmasters, Plaintiff-Appellee, v.Test Masters Educational Services, Inc.; et al., Defendants,Test Masters Educational Services, Inc., Defendant-Appellant.

Robin Singh Educational Services, Inc., a California Corporation, doing business as Testmasters, Plaintiff-Appellee, v.Test Masters Educational Services, Inc., a Texas Corporation, Defendant-Appellant.

No. 03-20787.

No. 04-20861.

No. 05-20049.

United States Court of Appeals, Fifth Circuit.

October 18, 2005.

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David John Schenck(argued), Christopher Donald Kratovil, Jones Day, John Walter Patton, Hughes & Luce, Dallas, TX, for Plaintiffs-Appellees.

Hassan A. Zavareei(argued), Jonathan K. Tycko, Tycko, Zavareei & Spiva, Washington, DC, Paul Douglas Heard, Brown McCarroll, Houston, TX, Brian M. Berliner, O'Melveny & Myers, Los Angeles, CA, Thomas M. Norminton, Beverly Hills, CA, for Singh.

Mario A. Aieta, Garvey Schubert Barer, New York City, Richard Charles Henn, Theodore Harris Davis, Kilpatrick Stockton, Atlanta, GA, for Intern. Trademark Ass'n, Amicus Curiae.

Appeals from the United States District Court for the Southern District of Texas.

Before GARWOOD, JONES and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

The principal issue in this case is whether Robin Singh is estopped by res judicata from asserting his claims of unfair competition, false designation of origin, and deceptive advertising pursuant to 15 U.S.C. § 1125(a)(1)(A); false advertising pursuant to 15 U.S.C. § 1125(a)(1)(B); and infringement of a registered trademark under California law.The district court held that a prior action and final judgment on the merits between these parties barred this litigation.Singh also challenges the district court's permanent injunction order.For the following reasons, we affirm in part, vacate in part, and remand.

I.FACTUAL AND PROCEDURAL BACKGROUND

As the district court in California so aptly stated, "[t]his is the second coming of the Hatfields versus the McCoys."Robin Singh Educ. Servs., Inc. v. Test MastersEduc. Servs., Inc., No. CV 03-04436 PA03-04436PAADCPA-ADC0003ES (C.D.Cal. Aug. 15, 2003).The parties seem to share a mutual animosity, as evidenced by their litigious history.¹Their problems stem from the fact that AppellantRobin Singh("Singh") and AppelleeTest Masters Educational Services, Inc.("TES") both operate test preparation companies under the name "Testmasters" or "Test Masters."Singh began doing business as "Testmasters" in Beverly Hills in 1991, offering test preparation classes exclusively for the LSAT.He only offered classes in California until 1996, when he began to expand nationally.TES began operations in 1992, offering test preparation for the SAT, GMAT, MCAT, and other standardized tests and professional licensing exams.AppelleeVivek Israni is the owner and president of TES.Until 2002, TES offered classes mostly in Houston, Texas, though sometimes in other cities in the state, but it did not operate outside of Texas.Curiously, despite the ongoing controversy between these two companies, TES has begun to provide LSAT classes outside of Texas under the "Test Masters" name.To add to the ongoing confusion, Singh has begun to offer test preparation classes for the SAT, GRE and GMAT.

The dispute between these parties centers around whether the "TESTMASTERS" mark is a valid trademark that can be federally registered."In order to be registered as a trademark, a mark must be capable of distinguishing the applicant's goods from those of others," or stated another way, a mark must be distinctive.Sugar Busters, LLC v. Brennan,177 F.3d 258, 267-68(5th Cir.1999)(citations omitted).A distinctive mark identifies the source of the manufacturer to the buying public.Id.A mark is inherently distinctive if by its intrinsic nature the mark serves to identify the particular source of a product.Two Pesos, Inc. v. Taco Cabana, Inc.,505 U.S. 763, 768, 112 S.Ct. 2753, 120 L.Ed.2d 615(1992).Examples are Judge Henry Friendly's often cited description of inherently distinctive marks as being either "arbitrary"("Camel" cigarettes), "fanciful"("Kodak" film), or "suggestive"("Tide" laundry detergent).Id.(citingAbercrombie & Fitch Co. v. Hunting World, Inc.,537 F.2d 4, 10-11(2d Cir.1976)).The holder of a distinctive mark is entitled to trademark protection and can enjoin the use of similar marks that might cause confusion in the market.Id.;see also15 U.S.C. § 1114(1)(a).

Descriptive marks are marks that denote "a characteristic or quality of an article or service, such as its color, odor, function, dimensions, or ingredients."Zatarains, Inc. v. Oak Grove Smokehouse, Inc.,698 F.2d 786, 790(5th Cir.1983)(citations omitted).Because descriptive marks do not inherently identify a source, they cannot be protected unless they acquire distinctiveness through secondary meaning.Id.The "likelihood of confusion" is the basic test for both common-law and federal statutory trademark infringement.2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition§ 23:1 (4th ed.1992)[hereinafter McCarthy].A descriptive mark must develop secondary meaning to be afforded trademark protection because, without an association between the mark and a seller in the minds of buyers, its use by multiple sellers is not likely to cause confusion.See2 McCarthy§ 15:11.A descriptive mark can become distinctive if over time "it has developed secondary meaning, which occurs when, `in the minds of the public, the primary significance of a [mark] is to identify the source of the product rather than the product itself.'"Wal-Mart Stores, Inc. v. Samara Bros., Inc.,529 U.S. 205, 211, 120 S.Ct. 1339, 146 L.Ed.2d 182(2000)(quotingInwood Labs., Inc. v. Ives Labs., Inc.,456 U.S. 844, 851, n. 11, 102 S.Ct. 2182, 72 L.Ed.2d 606(1982)).

Registration is prima facie proof that the registered mark is distinctive.Vision Ctr. v. Opticks, Inc.,596 F.2d 111, 119(5th Cir.1979).However, this presumption can be overcome by showing that the mark is merely descriptive.Id.The burden then shifts to the registrant to prove that its mark has secondary meaning.Id.The burden is substantial and requires a high degree of proof.Bank of Tex. v. Commerce Southwest, Inc.,741 F.2d 785, 787(5th Cir.1984);Sugar Busters,177 F.3d at 269.

A.Original Litigation

Neither party knew of the other until 1999.In March 1999, Singh received a trademark registration from the U.S. Patent and Trademark Office("PTO") for the mark "TESTMASTERS."Subsequently, Singh tried to set up a website for his company only to learn that TES had acquired the rights to the domain name testmasters.com in October 1995.Singh's attorney sent a demand letter to TES and threatened to sue it for violating Singh's trademark rights if it did not relinquish the rights to the domain name.Instead, TES filed suit in the federal district court in Texas seeking a declaratory judgment of non-infringement, or in the alternative, a judgment that Singh's trademark was invalid because "TESTMASTERS" does not have a secondary meaning.TES also claimed that Singh committed fraud on the PTO.Singh brought a separate action against TES in the federal district court in California, alleging infringement and unfair competition under California law.Singh's California suit was transferred to the district court in Texas and the two suits were consolidated.The district court granted summary judgment to Singh on TES's fraud claim.The remaining claims went to trial in February 2001.

After a five-day trial, the jury found that "TESTMASTERS" was a descriptive mark but it had acquired a secondary meaning.The jury also found that TES had infringed the mark, but that TES was not subject to liability because it was an innocent prior user.The jury concluded that TES had engaged in unfair competition in California because the domain name could cause confusion with Singh's TESTMASTERS mark.The district court issued judgment for Singh on its unfair competition claim and ordered TES to transfer the website domain name to Singh.The district court also ordered the director of the PTO to modify Singh's trademark registration to exclude Texas so that TES would have the exclusive right to use the mark within Texas.

Both parties appealed to this court.On July 24, 2002, we held that Singh failed to provide sufficient evidence to support a finding that his mark had acquired secondary meaning.Test Masters Educ. Servs., Inc. v. Singh,46 Fed.Appx. 227(Testmasters I)(5th Cir.2002)(unpublished).In support of his declaration that his mark had acquired secondary meaning, Singh introduced as evidence four "Testmasters" advertisements that appeared in the "Daily Bruin," the student newspaper of the University of California at Los Angeles.Id. at *3.The ads compared Singh's product to those of his competitors Kaplan and Princeton Review; two ads also contained testimonials from satisfied customers.Id.In addition, Singh testified that Kaplan and Princeton Review have referred to his company "hundreds of times" in their ads.Id.We noted that "the...