Monday, September 11, 2023

5th Circuit holds that inquiries weigh less than lost sales but can still be evidence of actual confusion

Rex Real Estate I, L.P. v. Rex Real Estate Exchange, Incorporated, --- F.4th ----,  2023 WL 5735552, No. 22-50405 (5th Cir. Sept. 6, 2023)

Doctrinal evolution is so fascinating! Here, I think we might be starting to see what a post-Abitron, post-JDI world could look like: courts may begin to reestablish distinctions between registered trademarks and unregistered matter protected by unfair competition law, based this time on statutory interpretation rather than conceptual categories. Because the plaintiff doesn’t own the relevant registration, its §32 claims fail, but the court allows §43(a) claims to proceed, partially reversing the district court’s grant of summary judgment—but read on for more on what that might look like.

Plaintiff Rex Real Estate sued Rex Real Estate Exchange for trademark infringement.

Plaintiff is a real estate company founded by Rex and Sherese Glendenning that “specializes in the acquisition and sale of commercial, investment and development properties, both large and small, in the North Texas growth corridor.” Plaintiff only brokers real estate in the state of Texas, but it has clients throughout the United States and in other countries.

The Glendennings started in Texas real estate in 1987. Its marks: “REX,” “REX Real Estate,” and a logo showing a crown alongside the words “REX Real Estate.” In 2015, the crown mark was registered. Plaintiff mostly works with retail, office, industrial, and mixed-use properties; it’s brokered some single-family home sales, but almost all involving individuals related to it or its employees.

Meanwhile, Rex Exchange, founded in 2015, offers an online platform for homeowners and homebuyers to transact the sale of single-family homes. It first expanded into Austin in 2018. Rex Exchange purchased a “REX” trademark with a 2002 priority from a company called Azavea that had registered the mark for the following use: “computer software for use in search and displaying real estate information on a global computer network.”

At the close of plaintiff’s evidence at trial, the court granted a directed verdict.

Only an owner or a true assignee has statutory standing to bring a claim under §32. Section 43(a) reaches more broadly; the court here applies Lexmark to both false advertising and trademark claims.

Section 32 did not apply because Mr. Glendenning became the original owner of the marks when he first used them in commerce as a sole proprietor many years before the plaintiff Rex was formed. Although “an applicant seeking to register a trademark may benefit from its use by a related company,” “this does not displace the requirement that only the owner can seek registration.” Assignments of registered marks must be in writing. Assignments before registration need not be in writing, but the evidence must be clear.  “[R]equiring strong evidence to establish an assignment is appropriate both to prevent parties from using self-serving testimony to gain ownership of trademarks and to give parties incentives to identify expressly the ownership of the marks they employ.” There was no evidence at trial that there had been an assignment by Glendenning to plaintiff. Thus, the §32 claim failed as a matter of law.

However, §43(a)(1)(A) was available, and a reasonable jury could find that the marks were inherently distinctive, not merely personal names. The relevant evidence on plaintiff’s side, which the court thought went to public perception, was that Mrs. Glendenning testified that she “came up with the crown because Rex means king and that was that” and the mark is often accompanied by a crown, “reinforcing the translation of Rex as a king in Latin.” On the other side Mr. Glendenning testified that the name Rex has become synonymous with him as a person and founder of the company to consumers in the real estate industry, and plaintiff didn’t submit any evidence showing that the relevant consuming public associates the Rex marks with their purported Latin meaning. Still, the court of appeals found a fact issue because defendant

views its marks by their Latin translation. While Defendant is not necessarily a member of the “purchasing public,” the fact that some party outside of Plaintiff recognizes the Latin translation support its claims that the marks could be inherently distinctive. While there was strong evidence that the marks are perceived by the public as primarily a personal name, the record does not compel that conclusion.

This then meant that likely confusion was at issue. Although the mark was at most suggestive, and although many other entities in Texas have “Rex” names, and some of those businesses might be involved in real estate, there was not enough evidence of “Rex” in real estate. The jury saw evidence that only the parties appear in the first page of results in a Google search for “Rex Real Estate Texas.” Plaintiff also pointed to numerous calls it received from confused consumers as evidence that the callers assumed that it was the sole source of the advertising. “This is a plausible inference for a jury to make.”

Despite different fonts, colors, and design elements, a reasonable jury could find enough similarity to confuse.

Product/purchaser similarity: The court framed this as an issue of sponsorship, affiliation, or connection. “If consumers believe, even though falsely, that the natural tendency of producers of the type of goods marketed by the prior user is to expand into the market for the type of goods marketed by the subsequent user, confusion may be likely.” Although the parties operate in different corners of the real estate market and cater to different sets of prospective customers, plaintiff’s lack of actual intent to expand into the single-family sales market was not particularly probative of what a reasonable jury could find.

No reasonable jury could find the parties’ advertising to be similar: plaintiff’s was “high touch,” involving mainly a corporate suite at AT&T stadium and a dove hunt, and no digital marketing, whereas defendant was focused on digital marketing. Intent was neutral.

Plaintiff offered anecdotal instances of confusion. Addressing variation in the case law, the court found that the older precedent—which didn’t require any consumer purchases to have been swayed by confusion—had to control. (The other way to read those cases is that they (1) didn’t reach the issue or (2) were specific to bait-and-switch theories of initial interest confusion, in which the confusion is still a but-for cause of a sale.)

But the later cases weren’t irrelevant. Instead, the court reasoned, “very little proof is required when customer purchases were actually swayed. However, … more is required when the confusion did not or cannot sway purchases.” In particular:

isolated instances of confusion about the affiliation of two companies that do not result in redirected business are not enough to sustain a finding of actual confusion. Additionally, proof of actual confusion not involving swayed customer purchases should be weighed against the parties’ total volume of sales.

Also, courts should “look to the volume of each company’s advertising” and give actual confusion “more weight if it is a potential customer considering whether to transact business with one or the other.” Circuit “precedents give varying weight to evidence of actual confusion, depending on whether it is short-lived confusion by individuals casually acquainted with a business or lasting confusion by actual customers.”

With that background: Plaintiff identified two people who inadvertently contacted defendant while seeking plaintiff. Unlike initial interest confusion, “this confusion did not present the possibility of garnering the Defendant business before or after it was dissipated.” And there were three phone calls to plaintiff from people who’d seen or heard defendant’s ads, and one of defendant’s customers sent a letter to plaintiff complaining about defendant. “[P]roof that the plaintiff is receiving calls from people who are trying to do business with the other party can still be relevant even where there is no realistic possibility that business can be diverted.” Finally, there were two instances of third parties confusing the companies or their locations. “[T]hose anecdotes are relevant because proof of actual confusion is not limited to actual or potential customers.”

Although this wasn’t much, it was some relevant evidence of actual confusion, and a reasonable jury could weigh it in plaintiff’s favor. (How does this play into the statement above that isolated instances that don't result in sales "aren't enough"?) Question: what does a good instruction look like in light of this discussion? Another question: Given Lexmark, which does require a showing of likely harm for §43(a) cases, how should evidence of nonpurchaser confusion go to show likely harm?

Degree of care: No reasonable jury could weigh this in plaintiff’s favor.

Nonetheless, because a reasonable jury could conclude that some of these factors, including the important factor of actual confusion, weigh in plaintiff’s favor, a reasonable jury could also find a “probability of confusion.”

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