Wednesday, April 04, 2012

Plaintiff is going to want a stiff drink with this opinion

Tony's Taps, LLC v. PS Enterprises, Inc., 2012 WL 1059956 (D. Colo.)
Plaintiff d/b/a Pagosa Brewing Company sued defendants, d/b/a Pagosa Pub Works Brewpub, for trademark infringement and false advertising (because defendant didn’t actually brew its own beer on premises).  The jury returned a verdict for plaintiff on both claims, but awarded only $82.  Plaintiff sought a permanent injunction against the use of “Pagosa” and “Brewpub,” as well as its fees.  The court declined. 
The key issue was trademark, since defendant had since begun brewing its own beer and was therefore no longer falsely advertising.
After eBay, a complete injunction against an infringer no longer automatically follows.  But can irreparable harm be presumed from the finding of infringement?  eBay again suggests the answer is no.  The better course is to avoid an injunction based solely on presumptions and examine the likelihood that the plaintiff will lose control of its reputation, lose trade, and/or lose goodwill.  There was trial evidence that customers seeking plaintiff went to defendant’s location and vice versa.  But the record suggested that confusion was due primarily to factors other than similarity of the marks.
As it happens, both businesses are in a small town, and they are directly across the street from each other.  But when defendant opened, plaintiff’s business had no entry or exit directly to or from the common street, and was identified by a sign on a nondescript fence.  Meanwhile, defendant was readily accessible and clearly visible.  “To attempt to cure this situation, in November 2008,” plaintiff acquired an adjacent parcel for a parking lot and added a more conspicuous sign.  Plaintiff’s principal testified that despite “monstrous” initial confusion, these efforts “definitely reduced some of the confusion.”  He acknowledged that, until then, it was “challenging—not impossible, but challenging” for customers to access his location.  Using the street address wouldn’t get you there; you had to make a turn, then turn into an alley and drive a few hundred feet down the alley.  For customers traveling from the main artery through town, this required them to pass directly by defendant’s “readily-accessible” business. 
Evidence of continuing confusion after the parking lot and bigger sign came in was minimal.  The court pointed to evidence that “although there certainly was—and continues to be—confusion between the two entities, it is not correlated directly to similarity in the business' names.”  Defendant distributed cups at a St. Patrick’s Day parade entitling the bearer to a free drink at its establishment; plaintiff’s principal testified that a “large number” of customers brought the cups to it instead.  But the name on the cups wasn’t particularly similar to plaintiff’s mark—it read “Pagosa Pub Works, 165 N. Pagosa Blvd,” without the allegedly confusing “brew,” demonstrating that an anti-“Brewpub” injunction wouldn’t have helped.
The court concluded that confusion “stems, in some substantial part, from the more mundane fact that the businesses are geographically close, that they compete in the same field (food and drink service), and that they have chosen to specialize in similar niches (microbrewed beer).”  It wasn’t clear that more distinct marks would help much, at least as long as defendant used a geographically descriptive word and a word connected to beer.  As such, future irreparable injury was small, and so was the likely benefit of equitable relief.
Did plaintiff have an adequate remedy at law?  Well, plaintiff’s customers might be lost to defendant, and vice versa.  In the latter case, there was not much injury to remedy.  If customers presented coupons or vouchers, and plaintiff honored them, there would be a monetary loss, but that could be easily calculated, and this was apparently the basis of the jury’s money award.  Thus, there was an adequate remedy at law for mixed-up coupons.
It’s more difficult to quantify lost goodwill when plaintiff’s customers mistakenly patronize defendant, especially since defendant might permanently gain a customer, or if the customer has a bad time the plaintiff might take the blame.  But it was difficult to say that this happened with any frequency now.
The court turned to the public interest in avoiding customer confusion “and the public interest in protecting the property interests of holders of protectible marks” (!).  This tipped in favor of equitable relief, but only a bit.  There was also a public interest in protecting the use of noninfringing marks.  To the extend that confusion arose from geographic proximity, competition in market niche, etc., equitable relief wouldn’t necessarily serve the public interest.
At this point the plaintiff was somewhat ahead, but then the court turned to the balance of equities.  First, defendant never sought a ruling on the legal sufficiency of the trademark claim, and the court questioned whether it could have survived such a challenge.  (Yowch.)  “Pagosa Brewing Company” is entirely descriptive, with a geographic descriptor plus a generic phrase.  Even assuming secondary meaning, other people can continue to use a geographic term for its geographic meaning, as defendant did.  The court noted that this wasn’t a fair use case, both because defendant was using the term as part of its own mark, and arguably because the jury found willful infringement, but concluded that the principle was still relevant. 
The court also doubted that the evidence was sufficient to establish secondary meaning, as a matter of law.  (Double yowch.)  Plaintiff’s evidence was basically that its beer had won recognition at beer festivals.  “This might be sufficient to demonstrate that persons procuring the Plaintiff's beer from, say, a crowded beer aisle in a far-flung supermarket might view the term ‘Pagosa’ in the Plaintiff's mark as descriptive of an particular award-winning entity, not as a location. But the same logic does not follow with regard to the relevant market here—consumers visiting restaurants in Pagosa Springs, Colorado.”  There was no evidence that such people would perceive other than geographic meaning. 
Given the protection for truthful descriptive uses, infringement had to depend on the commonality of a “brew” derivation.  But both marks’ uses, “brewing company” and “brewpub,” were generic.  A plaintiff can’t monopolize a generic term by grabbing it first.  Even taken as a whole, plaintiff’s mark was no greater than the sum of its parts, and should enjoy very little protection, “particularly against a mark that is making only descriptive or generic use of the same terms.”  KP Permanent makes clear that this is true even if the mark had secondary meaning and confusion was likely.  “[T]he Lanham Act anticipates some degree of customer confusion when even a distinctive mark—i.e. one possessing secondary meaning—consists of words that others may (indeed, must) use to fairly describe their own product.”
So, defendants could probably have made a successful motion for judgment as a matter of law.  They didn’t, and the court wasn’t going to set aside the verdict sua sponte. But it also wouldn’t impose equitable relief, a matter committed to its sound discretion, on a claim whose legal sufficiency was in “considerable doubt.”
In any event, the court also noted the jury verdict as evidence of the degree of harm that injunctive relief would be needed to prevent.  Plaintiff argued passionately that defendant was liable for hundreds of thousands of dollars in damages.  The jury’s verdict unambigously rejected these contentions and awarded $82 for three years of injury.  Any equitable relief would have to be commensurate with these de minimis economic consequences.
There might be cases where injunctive relief would be appropriate even when the economic losses were “so ephemeral as to evade meaningful proof. But this is not one of those cases.”  Here, damages and injunctive relief go hand in hand, since the injunction was claimed to be necessary to avoid lost sales through confusion and the damages theory—“which the jury apparently rejected outright”—was based on lost sales through confusion.  De minimis equitable relief, here, meant no equitable relief.
In addition, the court referenced a note sent by the jury just before it reached its verdict: “we are wondering if we can recommend an action i.e. name change and/or dollar amount?”  (Not bad—a court can occasionally make a party elect a remedy; why couldn’t a jury, all else being equal?)  The court told the jury to answer the questions on the verdict form, and the jury did so.  One possible interpretation of the note is that the jury wanted a name change, and thus that injunctive relief would be appropriate.  This was a plausible scenario, though not the only one, but it wasn’t clear that the jury would have wanted the name change sought by plaintiff.
What about that finding of intentional infringement?  (This may have been based on evidence that one of defendant’s principals sought to federally register several marks, including “Pagosa Brewing Company,” at a time when the evidence suggested that he was aware of plaintiff’s use, even though he denied knowledge.)  This would normally tip the balance significantly in favor of equitable relief, but the court found that neither party had clean hands with respect to the names.  Each sought to hamper the other’s choice of names.  Plaintiff’s principal deliberately registered, a domain name similar to defendant’s, and for a while had it redirect to plaintiff’s site.  This apparently drove no traffic at all, and that might have been why the jury found against defendant on its counter/crossclaim for deceptive trade practices, but it didn’t make plaintiff look good.  The balance of the equities therefore tipped strongly against injunctive relief.
Plaintiff also sought an attorney’s fees award.  The court said no.  Along with procedural issues, this wasn’t an exceptional case; willfulness is not necessarily exceptional and there’s a reason the fee award is committed to the discretion of the court and not the jury, plus a “reasonable” fee takes success into account, and under the circumstances the only reasonable fee is no fee.  (There appear to have been some dropped balls on both sides of this case.)

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