court enjoins company's claim to be another company's founder

Galvotec Alloys, Inc. v. Gaus Anodes Intern., LLC, 2014 WL 2918581, No. 7:13–CV–664 (S.D. Tex. June 26, 2014)

Galvotec was founded in 1984 by Rogelio Garza and brothers Luis Miguel and Ramon Galvan. Gaus was founded in 2005 by a third Galvan brother, Juan Antonio. They compete to produce sacrificial anodes for corrosion protection of structures used in the oil and gas industries; there are 3-4 US-based competitors. Galvotec has about 70% of the market, and Gaus now has about 15%. Galvotec owns registrations for GALVOTEC and GA.

Galvotec challenged Gaus’s use of the Galvotec mark “only insofar as Gaus has claimed corporate affiliation with and prior ownership of Galvotec in its advertisements and personal dealings with customers.”  A Gaus witness testified that the three Galvan brothers, plus a fourth, formed a Mexican parent company that used the name Galvotec and was involved with producing sacrificial anodes.  Galvotec disputed that the name was used to refer to that parent company.  But regardless, Galvotec provided uncontested evidence that it was separately formed as a US company in 1984, that the two Galvans who helped found it sold their shares, and that those shares were transferred to Garza in 1987.  Gaus, however, claimed on its website that it founded and sold “Galvotec,” and evidence was offered that it continued to claim that Gaus or Juan Antonio Galvan previously owned Galvotec.

The court found that this claim, in the US market, was likely to be interpreted by customers to mean plaintiff Galvotec rather than the Mexican parent formed by the Galvan brothers.  Allowing the claim to continue “would perpetuate Gaus’s ability to divert to itself the reputation and good will created by Galvotec.”  A preliminary injunction against this misleading representation wouldn’t hurt Gaus.  (Is this a trademark claim or a false advertising claim?  What’s the role of Dastar?  If this is a false advertising claim—which it might have to be under Dastar—is this explicit or implicit falsity?  I’d be willing to go for falsity by necessary implication, given the ordinary meaning of Galvotec to the US marketplace.)

However, the court denied an injunction as to the GA trademark.  Garza testified that Galvotec used the GA logo since 1996 as an abbreviation of Galvotec Alloys, Inc., and that customers have come to refer to Galvotec-produced anodes as “GA” anodes.  Gaus’s witness testified that the Gaus logo, using “Ga” or “GA,” signified the element gallium, the fact that sacrificial anodes are also known as galvanic anodes, and the Galvan family name. “GA” is followed in the logo by “US,” to signifiy Gaus’s US base.  Gaus has marketed itself as GaUS and GAUS.

Galvotec failed to show irreparable harm.  Its substantial delay in seeking a preliminary injunction demonstrated that there was no urgency.  Gaus has been one of only 3-4 US-based competitors since 2006, so Galvotec couldn’t claim only recent knowledge of its existence or use of GA.  Garza admitted that he learned about Gaus in 2008, and then registered GA as a mark, advising Gaus of its alleged infringement in 2010.  Galvotec then waited until December 2013 to seek an injunction.

Relatedly, “given that Gaus has been operating under its name and logo since 2006, an order essentially requiring that it change its name to continue operating would result in damages, especially if liability issues are resolved in Gaus’s favor.”  Given the harm to the defendant from a preliminary injunction plus the delay, the preliminary injunction would be denied.