Monday, October 17, 2016

Initial interest confusion rides again: law school ordered to re-change name

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.
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.
old student handbook

2015 calendar

old merchandise

old logo

old merchandise: bright red?

old merchandise: crimson?

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 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.

1 comment:

James Grimmelmann said...

The Westlaw headline on the case is "University of Houston wins injunction in trademark spat with another Texas law school." Ouch!