Board of Regents of the Univ. of Houston Sys. v. Houston
College of Law, Inc., No. 16-CV-1839 (S.D. Tex. Oct. 14, 2016)
UH sought and received a preliminary injunction to prevent
the former South Texas College of Law from using the mark HOUSTON COLLEGE OF
LAW. UH has had a law school since 1947
and is ranked 50th in the USNWR law school rankings; defendant HCL
is a private, unranked law school. UH
had protectable marks in its names and also alleged common law rights in its colors,
red and white.
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| The parties' logos |
UH argued both initial interest source confusion and
association confusion.
UH’s mark was relatively strong commercially, especially
within the most relevant legal industry and geographic markets—both UH and HCL “overwhelmingly”
target prospective students in Texas and Florida. HCL argued that extensive third party use,
even use outside UH’s particular industry, was “impressive evidence that there
would be no likelihood of confusion,” relying on Florida International
University Board of Trustees v. Florida National University, Inc., 2016 WL
4010164, --- F.3d ----, No. 15-11509 (11th Cir. Jul. 26, 2016). More than 25,000 registered businesses use
the word “Houston” in their names. But
not all third-party uses have equal weight.
Though a number of Houston-based institutions of higher learning that
use either “University” or “Houston” in their name, “none has law schools and
there is no evidence that any are well known in the marketplace. To the extent
consumers are unaware of third-party
use, the logic behind the third-party use rule is inapplicable; the consumers
have not been conditioned to distinguish among the marks.”
Similarity of marks: strikingly similar. The word overlap
was obvious; “[f]ar more troubling, however, is the way in which Defendant
deploys its mark in the marketplace.”
HCL’s logo, like the UH logo, uses block letters, emphasizes the word
“HOUSTON,” and uses a red and white color
scheme, and the logo was “ubiquitous” in HCL’s marketing materials. Small differences, including the generic
image of the scales of justice, were insufficient to counter the overall
impression of similarity. Anyway, even
if the differences were enough to prevent source confusion, they weren’t enough
to prevent affiliation confusion.
The meanings of the marks were practically identical, “and
this alone presents a source of
potential confusion.” Compounding
the confusion was the fact that universities “often serve as umbrella
organizations to multiple colleges that are each responsible for educating
students within certain academic disciplines.” UH is home to, along with its Law Center, the
University of Houston College of Arts, the University of Houston College of
Education, and the University of Houston College of Pharmacy. “‘Houston College
of Law’ fits almost perfectly within this framework, creating a substantial
risk that potential purchasers will ‘think [Defendant’s] services [have] some
connection with [UH],’” especially given HCL’s use of “the red and white colors
commonly associated with UH.”
Similarity between the parties’ services: practically
identical, making affiliation confusion more likely. Customer base: the same. Marketing efforts: the same. All weighed heavily in favor of confusion.
HCL argued that advertising in the same media would help
students compare and contrast, as in the USNWR rankings. “But this argument would only apply to
instances where students see the two marks side-by-side, which would seem to be
exceedingly rare. Indeed, even Defendant’s example of the U.S. News rankings
seems inapplicable—the Law Center is ranked 50th, while Defendant is unranked
and referenced on a separate page.”
Intent: “[A] junior user’s knowledge or awareness of the
senior user’s trademark” is insufficient to create an inference of intent. HCL argued that it intended to align its name
with its location; a market survey it commissioned in 2013 favored a name
change because “South Texas College of Law” can
lead people to mistakenly believe that the school is located in the Rio
Grande Valley. When respondents were asked to suggest a new name, the most
frequently mentioned suggestion (32%) was to “include [a] reference to the
location in Houston.”
However, the most
common reason respondents gave to change the name was “that the name South
Texas College of Law is often confused with other schools, particularly Texas
Southern University.” This “detracts
from STCL’s prestige and national reputation.”
UH presented evidence that a perceived affiliation with UH would, by
contrast, enhance HCL’s prestige. The
survey included many respondents who mentioned a name change if HCL affiliated
with a university, and HCL had actually discussed doing so over the past two
decades. “The benefits of affiliation
were thrown into sharp relief for Defendant when the entity formerly known as
Texas Wesleyan University Law School leapfrogged South Texas in the U.S. News
rankings shortly after affiliating with Texas A&M.” Shortly after this event, when South Texas fell
out of the rankings entirely, it decided to change its name.
The court found that “UH’s theory is rooted in highly
circumstantial evidence that would [alone] be insufficient to meet the
substantial burden imposed at this procedural stage.” But an additional fact directly called HCL’s
intent into question: in conjunction with the name change, HCL also adopted a
new red and white color scheme closely resembling UH’s. HCL’s official school colors are red and
gold, but in practice, its use of red was inconsistent throughout the years and
in the past the red was dark crimson, accompanied by gold. Not so now. Even
accepting HCL’s argument that white provides a better contrast, the similarity
was striking. UH presented numerous
images of HCL promotions next to its South Texas College of Law merchandise,
and the current shade of red was “unmistakably brighter than the classic South
Texas crimson.” HCL argued that the
varied shade of red was the result of using a variety of vendors and
inconsistent paper quality. But it
lacked credible testimony from a witness about that and internal documents
corroborating that testimony.
HCL was at least aware of the likelihood of mistaken association;
though it was a close call, the court declined to find an intent to derive
benefit from UH’s reputation. “Defendant’s
rationale for emphasizing ‘Houston’ in its name is entirely plausible, and the
Court is wary of relying too heavily on select snapshots of promotions and
merchandise produced by various vendors on various types of materials.” Given the variety of merchandise that showed
up in my own search, the court’s caution seems more than justified.
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| old student handbook |
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| 2015 calendar |
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| old merchandise |
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| old logo |
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| old merchandise: bright red? |
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| old merchandise: crimson? |
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| old merchandise: red? |
Actual confusion: Initial interest confusion counts. So does confusion among people other than
prospective law students. So do
surveys.
UH’s expert, Hal Poret, found net confusion of 25%. HLC’s expert found a net confusion rate of
only 6%. HLC objected the way in which the survey participants in Poret’s
“Webpage Test Group” were questioned. These participants were shown an image
that was identical to the Houston College of Law homepage, but with one
exception: the image omits two banners that rotate prominently across the
webpage (“South Texas College of Law Changes to Houston College of Law” and
“Houston College of Law Stands Behind Name Change; Is Prepared to Defend Decision
in Court”). HLC argued that the survey
thus failed to “test the alleged infringing use as it’s actually seen in the
real world today.”
The court disagreed, given the multiple uses of the mark
outside the webpage; HLC has already begun “aggressively marketing its new name
by advertising on large billboards on major Houston highways, sending out
mailers to prospective law students and members of the legal community, and
selling merchandise bearing its new name and logo.” None of those uses
contained HLC’s purported disclaimers. Even people who clicked a direct link
from Google to the “Admissions” page would never see the banners. By contrast,
the only image of the webpage that respondents saw in HLC’s survey included the
prominent “South Texas . . . Changes to Houston College of Law” banner, and not
the two other rotating banners (one unrelated to the name change).
And the court didn’t think the banners worked as
disclaimers; though they were prominent, the most prominent feature was a
series of eight rotating banners that tout Defendant’s primary selling points. “[E]ven if a consumer’s initial-interest
confusion only persists long enough to lead him to the homepage, then Defendant
has ‘br[ought] the patrons in the door.
. . . [T]he confusion has succeeded.’” Poret’s survey was thus substantially
stronger.
UH also submitted anecdotal evidence of confusion. (1) The United
States Postal Service misdelivered a letter to HCL to UH. (2) A law firm
mistakenly changed a South Texas College of Law alumnus’s profile to indicate
that he graduated from UHLC and was on the Houston Law Review. (3) HLC sent an
email to the members of the Sunbelt Consortium, an organization comprised of
seventeen law schools in the region, informing them of the name change and
asking that the change be reflected on the organization’s website. The email
used HCL’s logo (including “formerly South Texas College of Law”), was sent
from an “@stcl” email address, and even included a link to www.stcl.edu.
Nevertheless, the Sunbelt Consortium thought the email came from UH and changed
UH’s name by mistake. (4) The Texas
Board of Law Examiners mistakenly sent UH an email regarding a student who
actually attends HCL. (5) SMU Law School hosted a workshop and provided a HCL
professor with a placard identifying him as a professor at “University of
Houston Law Center.” (6) A UH student mistakenly selected the HCL location
rather than the UH location when signing up for the Multi-State Professional
Responsibility Exam. (7) At the 2016
Graduate and Professional School Fair in Lubbock, Texas, an attendee approached
a representative from UH’s College of Social Work and mentioned that he had
just spoken to a representative from “your law school.” UH’s law school didn’t
attend the fair, but HLC did. (8) A prospective law student contacted UH’s
admissions department asking for a waiver of the application fee; UH doesn’t have
an applicatino fee, but the student “reiterated that she was on the Law School
Admission Counsel’s website and was being charged a $55 application fee.” When questioned, the student said she meant
to contact HCL.
Though a lot of this was not evidence from prospective students,
“evidence of confusion in others permits the inference of confusion in
purchasers.” The first two instances
deserved “relatively little weight—they involved individuals who are unfamiliar
with the legal education industry.” But “mistakes
made by individuals who are active participants in the field” were much more
noteworthy, and the last two instances of actual confusion by prospective law
students were even more important, and “even suggest that the confusion is not
quickly dispelled…. The fact that confusion could persist at the point of
paying to apply for admission is particularly significant in the context of
initial-interest confusion.”
Degree of care exercised by purchasers: not enough to
overwhelm the other factors:
Prospective law students are not
endowed with an inbuilt knowledge of the legal education industry. It is only
after their interest in legal education is first piqued that they begin the
process of becoming sophisticated. In other words, there exists a period of time in every prospective law
student’s career where, not only is he unsophisticated, he knows practically
nothing about the industry and is particularly susceptible to confusion.
The court focused on how to weigh the factors in the context
of initial interest confusion. There was
no need to show that a sale occurred as the result of the confusion. Fifth Circuit precedent suggests that competition
isn’t required; “a plaintiff need only show that the junior user achieved some
financial benefit as a result of the confusion, regardless of any potential
pecuniary effects on the senior user.”
But here, even imposing a competition/ “possibly precluding the
plaintiff from being considered by the purchaser” requirement would lead to a
finding in UH’s favor. [Note contrary
precedent, developed to cabin the scope of IIC, in cases such as the Third
Circuit’s Checkpoint v. Checkpoint.]
Multiple factors favored finding likely confusion, and only
degree of care cut against UH’s case. UH
cautioned against a broad application of IIC, and its point was “well taken.”
There is a difference between initial interest confusion and initial
interest. But UH offered more here: “Prospective
students are likely to further
investigate Houston College of Law not necessarily because of their initial
interest in the law school, as Defendant suggests, but rather because the mark
seemingly bears the imprimatur of UH’s
well-known brand—in other words, because of initial-interest confusion.” And the stronger brand from whose goodwill
HCL benefited was a direct competitor, which was particularly relevant to IIC.
Indeed, “the most prominent portion of the webpage is essentially a list of the
best reasons to choose Defendant’s law school over UH’s.”
The court rejected the cases HLC offered to show that the
sophistication of purchasers rebuts initial-interest confusion, but the
authority is unpersuasive. Three of the four cases involved commercial
purchasers, “who are far more likely to be familiar with the relevant market at
the outset of their purchasing process, and therefore less susceptible to
confusion throughout it.” Also, in each
case, the courts rejecting IIC theories also relied on several additional
factors, none of which supported HLC here.
If sophistication were enough, “sellers of goods or services that
involve extended purchasing processes would be effectively outside the ambit of
the Lanham Act’s protection, leaving competitors free to appropriate the senior
user’s goodwill with impunity, and allowing them to gain ‘credibility during
the early stages of a transaction.’” But it’s the early stages of the
transaction that prospective law students “are the least sophisticated and most
susceptible to confusion.” Nor is intent
required to win on IIC, and, anyway, intent didn’t weigh against HLC, but that didn’t mean it weighed for HLC.
Regardless of any presumption of irreparable harm, the court
found that monetary damages wouldn’t adequately compensate UH. First, lack of control over the quality of
HLC’s conduct, which prospective law students would likely attribute to UH, was
irreparable injury. [Not clear why this would
be irreparable if it is literally corrected before purchase, or that HLC’s
conduct has caused or is likely to actually cause any harm in need of repair.] HLC’s law professors may speak to audiences
that include prospective law students, and HLC’s recruiting department attended
school fairs at which its representatives directly interacted with prospective
law students. Second, UH’s “time, effort, and expense exerted to create and
define its brand has been unfairly exploited,” which monetary damages cannot
compensate. [Note that this isn’t about harm
to UH but benefit to HLC. Does this
require a finding that UH would be entitled to disgorgement? If not, where is the harm to UH?]
Anyway, the court wasn’t impressed, given HLC’s own
motivation for the name change: if confusion with other schools, particularly
Texas Southern University, was a problem for HLC, then it was a problem for UH.
The court also was unimpressed by the costs of an injunction
to HLC. In June 2016, HCL’s Dean said,
“I feel safe in saying we haven’t spent $35,000 to $40,000 extra over anything
we would have spent anyway. And so the biggest cost that we see going forward
is changing the external signage.” True,
those subsequent changes proved costly: $458,000 in additional costs to
publicize the name change. But that had little weight given that HLC knew about
UH’s objection—indeed, its intent to sue—and proceeded anyway. Only after news of UH’s objection did HCL destroy
“[m]uch of the older stationary and signage bearing the name ‘South Texas
College of Law.’” HCL “opted to double
down, yet cites to the high stakes of the game as a reason to call off the bet.”
Since the public interest is always served by avoiding
confusion, the court issued the requested injunction against the renaming.
