Joseph Paul Corp. v. Trademark Custom Homes, Inc., 2016 WL
4944370, No. 3:16-CV-1651 (N.D. Tex. Sept. 16, 2016)
JP Homes sued Trademark, its principal, and homeowners for
alleged violations of the Lanham Act and copyright infringement. JP Homes alleged that it designs and builds
custom homes, and that defendants copied and improperly appropriated original
elements of JP Homes’s copyrighted work in one such home design, The
Martinique. Further, Trademark allegedly used photos of a house designed by JP
Homes in advertising its own products. JP Homes sought to halt the construction
of the homeowners’ in-progress house and have it torn down or modified
sufficiently so as not to infringe.
The court first rejected defendants’ arguments that the
court lacked jurisdiction/JP Homes lacked standing. The court determined that
this was a statutory standing question, not an Article III question, and thus
governed by Lexmark under Rule 12(b)(6).
Although JP Homes alleged that it was in the Lanham Act’s zone of interests,
Trademark argued that JP Homes failed to plead facts showing injury or
proximate causation, and that its allegations were merely speculative. The
court disagreed. JP Homes alleged that
Trademark wrongly received recognition as a good builder because of its
copying; that the parties competed in the same area; and that the statements
were likely to materially mislead consumers.
This was a classic false advertising claim, and the allegations that JP
Homes suffered competitive or reputational injury as a result of Trademark’s
conduct were not too remote.
Further, while JP Homes didn’t specify an amount of actual
loss, that wasn’t required. Lexmark
says that “potential difficulty in ascertaining and apportioning damages is
not...an independent basis for denying standing where it is adequately alleged
that a defendant’s conduct has proximately injured an interest of the
plaintiff’s that the statute protects.” JP Homes might be entitled to
injunctive relief or disgorgement of defendant’s profits even if it couldn’t
quantify its losses with enough certainty to get damages.
Turning to JP Homes’ motion for TRO/Preliminary Injunction,
the court found that JP Homes failed to show irreparable injury. JP Homes argued that likely success on a
copyright claim raised a presumption of irreparable harm, but the Fifth Circuit
never adopted that rule. (No discussion
of eBay v. MercExchange.) JP Homes also argued that continuing
infringement/construction of the house exposed it to the permanent loss of
customers or lost goodwill. But JP Homes provided no evidence of this, only
conclusory assertions. JP Homes also
didn’t explain why its damages would be unquantifiable or why money wouldn’t be
adequate compensation. JP Homes
requested actual damages or statutory damages in its complaint, suggesting that
it could develop a basis for a damage award.
(Careful about pleading in the alternative when it comes to irreparable
harm.)
Reiterating its claims as arguments about damage to JP Homes’
“competitive position and brand” was unhelpful.
JP Homes didn’t allege wholesale copying of many of its key designs, but
copying of a single work that wasn’t even identical copying. Claims that harm to JP Homes in the community
where that house was being built would spread elsewhere were “purely
speculative.” “While courts are willing
to entertain a loss of customers or goodwill as a harm, the movant must come
forward with evidence that such an injury is irreparable by showing that the
loss cannot be measured in money damages and monetary damages would be
inadequate.”
Arguments that JP Homes would be harmed if Trademark builds
its designs at a lower price and quality, and that JP Homes’ reputation for
uniqueness would be damaged because potential customers would see its designs
as “common or run-of-the-mill” also failed. First, there was no evidencce that
Trademark’s building was
lower-quality. Also, the alleged use of
one design wasn’t enough to interfere with JP Homes’ “ability to market its
designs and building services to potential customers for other architectural
plans.” Moreover, its claims that
Trademark’s failure to attribute the design would cause JP Homes to lose
business contradicted its argument that JP Homes would lose customers if people
found out that Trademark was building a lower-quality version of the
Martinique.
Finally, JP Homes’ delay in seeking relief weighed against
an injunction. As early as December
2015, an employee of JP Homes learned that the homeowners were not going to
move forward with JP Homes building their home and had visited a real estate
agent who refers customers to builders that often use architectural plans
created by others. She allegedly warned them
(through their new real estate agent) to refrain from using any part of the
architectural plan created by JP Homes. The agent allegedly responded by asking
what percentage of the plan designed by JP Homes would have to be changed to
not be considered the same plan. Nonetheless, JP Homes waited until June 2016
before filing suit and seeking injunctive relief, after construction on the
McWhorters’ house was well underway.
Meanwhile, JP Homes submitted its registration materials for the
Martinique to the Copyright Office, and threatened to take legal action in
April 2016. JP Homes’ “unexplained and
undue delay of approximately six months strongly undercuts its claim of
irreparable harm and contention regarding the need for urgent relief.”
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