Tesoros Trading Co. v. Tesoros Misticos, Inc.

Citations: 10 F. Supp. 3d 701; 2014 WL 1303001; 2014 U.S. Dist. LEXIS 44081Docket: Civil Action No. 3;12-CV-2478-L

Court: District Court, N.D. Texas; March 31, 2014; Federal District Court

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Defendant's Motion for Summary Judgment is denied, while Plaintiff's Motion for Partial Summary Judgment is granted in part and denied in part. Tesoros Trading Company (TTC) filed a complaint against Tesoros Místicos, Inc. (TMI) on July 23, 2012, alleging trademark infringement under 15 U.S.C. § 1114, unfair competition under 15 U.S.C. § 1125, common law trademark infringement and unfair competition, and state trademark dilution and injury to business reputation. TTC seeks injunctive relief, impounding of infringing products, damages, and attorney's fees.

TTC operates a retail store and wholesale distribution warehouse in Austin, Texas, specializing in folk or handmade art and related products. It holds two registered trademarks for the mark 'Tesoros,' both dating back to the late 1990s and based on first use in 1989. TTC claims TMI has engaged in unauthorized use of its mark, which TTC discovered at a trade show, and alleges TMI's actions are likely to confuse consumers regarding the source of the products. TTC sent three cease and desist letters to TMI in early 2012, asserting that TMI’s use dilutes the value of its mark.

TMI, a California corporation, operates as a retailer and wholesale distributor of spiritual products, with locations in Los Angeles and distribution centers in California and Texas. TTC contends that both companies market similar products through comparable channels, raising the potential for consumer confusion.

Defendant serves customers seeking spiritual, religious, or superstitious assistance, employing a 'spiritualist' to cater to their needs. The defendant holds a registered trademark for "Tesoros Míticos Cultural Heritage Candle Company," featuring a design with a horseshoe, heart, and four-leaf clover, registered on December 13, 2011, based on first use in January 2009. This trademark covers aromatic oils, cologne, incense, perfumes, and candles. Defendant claims to engage in no advertising or trade shows but operates a website, www.tesorosmisticos.com. In response to Plaintiff's allegations, Defendant argues: 1) its own registered trademark precludes claims of infringement; 2) no likelihood of confusion exists between the parties' marks or products; 3) the 'Tesoros' mark is generic and thus unprotected; 4) it uses 'tesoros' fairly to describe its products; and 5) there is no evidence of mark blurring or tarnishment. Defendant seeks summary judgment on all claims, while Plaintiff counters with a motion for partial summary judgment on its trademark infringement claim and on Defendant’s defenses of release, waiver, estoppel, and laches. The summary judgment standard requires that no genuine dispute exists as to material facts, with the court viewing evidence favorably toward the nonmoving party and not weighing evidence or making credibility determinations. The opposing party must present competent evidence to demonstrate a genuine dispute of material fact once the moving party shows a lack of supporting evidence.

When a movant has the burden of proof, whether as a plaintiff or a defendant asserting an affirmative defense, they must prove all essential elements of their claim or defense to obtain a favorable judgment. If the evidence does not allow a rational trier of fact to rule for the nonmoving party, there is no genuine dispute for trial. Conclusory allegations and unsubstantiated assertions are insufficient to oppose a motion for summary judgment. The nonmoving party must pinpoint specific evidence in the record and explain how it supports their claim; the court is not obligated to search the record for such evidence. Only disputes over material facts relevant to the case's outcome can prevent summary judgment. If the nonmoving party fails to demonstrate an essential element of their case, summary judgment will be granted.

Key undisputed facts include: 
1. The plaintiff, a Texas corporation established in 1989, specializes in retail and wholesale distribution of gift items from over twenty countries, with operations in Austin, Texas.
2. The plaintiff registered the trademark 'Tesoros' with the USPTO in 1995 for wholesale and retail services focusing on folk art and later expanded this trademark in 1997 for a broader range of handmade art and goods.
3. The defendant, a California corporation founded in 2009, distributes spiritual products and operates a retail store in Los Angeles, with additional distribution centers in California and Texas.
4. The defendant registered a trademark for 'Tesoros Místicos Cultural Heritage Candle Company' in 2011 for various aromatic and candle products.

Defendant claims that Plaintiff has not provided sufficient facts to support its trademark infringement claim under 15 U.S.C. § 1114. Key arguments from Defendant include: (1) the use of a federally registered mark, presumed valid under 15 U.S.C. § 1057(b), despite incorporating the term 'tesoros'; (2) the assertion that there is no likelihood of confusion between the respective marks; (3) the argument that Plaintiff’s 'Tesoro' mark is generic, referring to the Spanish word for 'treasures'; and (4) the position that Defendant's use of 'tesoros' falls under fair use as a description of its products, labeled 'Mystic Treasures.'

The court will evaluate these claims, starting with the presumptive validity of Defendant’s federally registered mark, which includes the full name 'Tesoros Místicos Cultural Heritage Candle Company.' Plaintiff contends that Defendant often abbreviates this to 'Tesoros Místicos' and uses it on its website, which does not align with the registered mark. Plaintiff also highlights that Defendant’s registration is limited to specific products and does not cover retail services, arguing that Defendant is improperly using its mark in a broader context. Furthermore, Plaintiff asserts its own mark is incontestable under 15 U.S.C. § 1065, providing conclusive evidence of exclusive rights.

The analysis will focus on whether Defendant’s mark is generic or merely descriptive, which would impact its protection. Generic terms receive no protection while descriptive terms require proof of secondary meaning to qualify for protection. The court will evaluate descriptiveness using criteria such as dictionary definitions, consumer perception, and the need for competitors to use the term. The court will treat the multi-word mark as a whole rather than dissecting individual terms. The initial assessment indicates that Defendant’s mark does not meet the threshold for being generic or lacking secondary meaning, as its dictionary definition does not align clearly with its contextual meaning. The term 'Tesoros Místicos' may not immediately convey the nature of Defendant’s goods to consumers.

When assessing the Defendant's trademark, the court finds that it requires some imagination to discern the nature of the Defendant's candle company and its products. Competitors do not need the specific terms in the mark to describe their offerings, although they may argue the necessity of individual words from the mark. However, the court evaluates the mark as a whole and notes that no others have used the combined logo and phrase in marketing similar products.

Even if the mark were deemed descriptive, it carries a secondary meaning due to its unique logo, which customers associate with a spiritual or religious context. The court acknowledges concerns regarding the Defendant's frequent use of the unregistered phrase 'Tesoros Místicos,' despite its distinctiveness. This aspect will be considered when analyzing the likelihood of confusion with the Plaintiff's mark.

The Plaintiff claims the Defendant has extended its use of the mark to include wholesale and retail services. The Defendant legitimately holds a valid mark for various aromatic products, thus retaining rights for wholesale or retail sales in that category. The Plaintiff has failed to prove that the Defendant has encroached upon the unique wholesale and retail services it offers. The court also clarifies that the Plaintiff's mark, while incontestable, does not affect the validity of the Defendant’s mark if they pertain to different product areas.

The court emphasizes that determining trademark infringement hinges on the likelihood of confusion, which requires the Plaintiff to demonstrate a probability rather than mere possibility. Key factors in this analysis include the type of trademarks, mark similarity, product similarity, overlap between outlets and purchasers, advertising media, the Defendant’s intent, instances of actual confusion, and the care exercised by potential consumers. While no single factor is decisive, the case may warrant summary judgment if the evidence supports a clear conclusion.

Regarding the types of trademarks, the Plaintiff's mark 'Tesoros' is classified as suggestive, implying qualities of the goods without directly describing them. For non-Spanish speakers, it may appear arbitrary, whereas Spanish speakers may find it suggestive. The Defendant’s mark, which includes an illustration and the phrase 'Tesoros Místicos Cultural Heritage Candle Company,' is also considered suggestive, indicating the sale of candles without detailing the specific types.

Defendant's use of the mark 'Tesoros Místicos' qualifies as a suggestive mark, as its meaning is not immediately clear to non-Spanish speakers and may still be ambiguous to Spanish speakers. For the purposes of summary judgment, both relevant marks are protectable since they are not general or descriptive and lack secondary meaning. 

In assessing trademark similarity, the court analyzes the appearance, sound, and meaning of the marks. The Defendant's mark includes a logo with a horseshoe and clover alongside the text 'Tesoros Místicos Cultural Heritage Candle Company,' while the Plaintiff's mark features only the word 'Tesoros.' Despite this, the potential for consumer confusion exists when 'Tesoros' and 'Tesoros Místicos' are compared side by side, favoring a finding of likelihood of confusion.

Regarding product similarity, Plaintiff's offerings—ranging from folk art to various handmade items—are argued to overlap with Defendant's products, which include aromatic oils, incense, and candles. The Plaintiff asserts that items marketed by Defendant could be perceived as related to its own products, especially given the cultural significance of folk art. Testimonies from individuals involved in the spiritual and folk art markets support this claim, indicating that there is a perceived connection between the two businesses, thereby favoring the Plaintiff in terms of confusion likelihood.

Lastly, the court considers outlet and purchaser identity. Plaintiff's clientele comprises a diverse demographic, including locals and tourists from various backgrounds, and extends to over a thousand retail stores nationwide for its wholesale business. This broad customer base suggests potential overlap with Defendant’s customers, further supporting the likelihood of confusion between the marks.

In the past decade, the Plaintiff has sold products to over 1,400 stores in California, primarily small, independently owned gift stores, museum shops, and galleries, while also supplying larger businesses like Pottery Barn and Whole Foods. The Plaintiff also caters to companies in the spiritual supply and folk art sectors. Its sole retail store is located in Austin, Texas, although it participates in numerous trade shows nationwide, such as the California Gift Show and New York Gift Show.

Conversely, the Defendant targets spiritual, religious, and superstitious customers who believe in the special properties of its products. The Defendant operates a retail store in Los Angeles and a wholesale distribution center in Hayward, California, and Dallas, Texas. Although both parties market to similar customer bases, the Plaintiff serves a wider audience due to its diverse product offerings. However, the lack of a retail presence in California for the Plaintiff may weigh against a finding of confusion. 

The court notes that while there may be some overlap in customers, the Plaintiff's unawareness of shared customers with the Defendant implies limited direct competition. The analysis of advertising media reveals that the Plaintiff employs a variety of marketing strategies, including a website, catalogs, trade shows, and sponsorships, whereas the Defendant does minimal advertising, primarily relying on existing customer outreach. This disparity in advertising methods suggests that there is less likelihood of confusion between the two entities. Overall, the court finds that the factors regarding customer overlap and advertising media weigh differently in assessing the likelihood of confusion.

Defendant’s intent is a critical factor in assessing the likelihood of confusion between the trademarks of Plaintiff and Defendant. Although Defendant claims ignorance of Plaintiff at the time of selecting the name "Tesoros Místicos, Inc.," actions by Gershon, the owner, suggest a possible intention to connect to Plaintiff. Gershon's previous involvement with Indio Products, which sold similar esoteric and religious items, raises concerns about intent. Despite a lack of direct evidence, the court finds sufficient facts to indicate a genuine dispute regarding Defendant's intent, which leans towards a likelihood of confusion.

Regarding actual confusion, Plaintiff asserts that there is no evidence of customers mistakenly identifying Tesoros Místicos with Tesoros Trading Company, suggesting this factor does not support a finding of confusion. 

The level of care exercised by potential purchasers is also relevant. Since the products of both parties are generally inexpensive, consumers are likely to exercise less care in their selections, increasing the potential for confusion. 

In summary, the following factors favor a finding of confusion: trademark similarity, product similarity, outlet and purchaser identity, Defendant’s intent, and consumer care. Neutral factors include the type of trademarks and advertising media identity, while the absence of actual confusion weighs against it. The court concludes that there is a genuine dispute regarding the likelihood of confusion.

Defendant also argues that Plaintiff's mark "Tesoros" is generic, claiming it simply refers to "treasures" in Spanish. The court rejects this argument, explaining that while "Tesoros" is a general term, it does not generically describe the goods sold. The mark requires consumer imagination to associate it with the specific products, which are distinct and not merely common descriptive terms. Thus, Plaintiff's mark is deemed valid and not generic.

Defendant argues that its use of the term 'Tesoros' falls under fair use as it describes its products as 'Mystic Treasures.' The court rejects this defense, stating that the term is used suggestively rather than descriptively, as it does not explicitly describe the goods offered by either party, thereby not qualifying for the fair use defense outlined in 15 U.S.C. § 1115(b)(4). This creates a genuine dispute of material fact regarding Plaintiff's trademark infringement claim.

In relation to the federal unfair competition claim under 15 U.S.C. § 1125(a)(1)(A), the court finds a similar genuine dispute of material fact concerning the likelihood of confusion between the parties' offerings, stemming from the earlier findings on trademark infringement.

The court also addresses the common law claims of trademark infringement and unfair competition, concluding that the likelihood of confusion remains disputed, thereby sustaining Plaintiff's claims in these areas as well.

Finally, regarding the state trademark dilution and injury to business reputation claim, Plaintiff asserts that Defendant's unauthorized use of its mark dilutes its distinctiveness. However, Defendant contends that the mark lacks distinctiveness and denies any evidence of blurring or tarnishment. The court acknowledges these points, implying that a dispute exists concerning the dilution claim.

An individual may initiate legal action to prevent acts that could harm a business's reputation or dilute a registered mark or valid common law trade name, irrespective of competition or source confusion (Tex. Bus. Com. Code § 16.29). The court has established that the Plaintiff's mark is distinctive, noting that while "Tesoros" can describe many items, it is suggestive in this context, linking to folk art and housewares. Likelihood of dilution can occur through blurring (reducing the mark's uniqueness) or tarnishment (damaging the goodwill associated with the mark). The court identified a genuine dispute regarding whether the Defendant’s mark could confuse consumers, indicating possible blurring.

Regarding the Plaintiff's trademark infringement claim, the court found that a genuine dispute of material fact exists, denying the Plaintiff’s motion for summary judgment on this claim. The Plaintiff also sought summary judgment on the Defendant’s affirmative defenses, including release, waiver, estoppel, and laches. The Defendant argued that the Plaintiff delayed over two years in asserting its trademark rights and waived its claim by not objecting to the Defendant's use of "tesoros" in the Trademark Official Gazette. The Plaintiff received communications from the Defendant in 2009 but deemed the business nonviable. In 2012, the Defendant contacted the Plaintiff, leading to cease and desist letters.

Laches, which involves an unreasonable delay causing prejudice to the defendant, has three components: delay in asserting rights, no valid excuse for the delay, and undue prejudice to the infringer. The Defendant claimed that operating as "Tesoros Misticos" for over two years would lead to significant prejudice if forced to change. The Plaintiff contended that the Defendant failed to prove undue prejudice, while also citing a "doctrine of gradual encroachment," which the cited Fifth Circuit case law does not support, nor does the additional case from the Seventh Circuit apply.

The court declines to apply the laches doctrine at this time due to disputes regarding the plaintiff's delay in asserting trademark rights, the justification for that delay, and the undue prejudice to the defendant. A genuine dispute of material fact exists concerning the defendant's laches defense. For equitable estoppel, the defendant must prove intentional deception or gross negligence by the plaintiff. The defendant presented two pieces of evidence: the plaintiff's inaction after receiving a catalog from the defendant and the plaintiff's failure to object to the defendant's mark in the Official Gazette. The court finds these insufficient to prove intentional deception or gross negligence, leading to the conclusion that there is no genuine dispute of material fact regarding the estoppel defense. Furthermore, the court sees no evidence for waiver or release, resulting in a similar determination for those defenses. Consequently, the plaintiff's motion for summary judgment regarding the defendant's laches defense is denied, allowing the defense to be asserted at trial. Conversely, the plaintiff's motion for summary judgment regarding the defendant's estoppel, waiver, and release defenses is granted, preventing the defendant from asserting these at trial. A genuine dispute of material fact exists regarding the plaintiff's claims of trademark infringement and related issues, thus denying the defendant's motion for summary judgment and the plaintiff's motion for partial summary judgment on the trademark infringement claim. The court plans to issue an Amended Scheduling Order next month, and there are ongoing discussions about whether the registration certificate provides sufficient prima facie evidence to affect summary judgment.

The Fifth Circuit in *Amazing Spaces, Inc. v. Metro Mini Storage* established that the mere issuance of a federal trademark registration does not automatically create a jury issue regarding the validity of the mark in trademark infringement cases. The court emphasized that a plaintiff's motion for summary judgment can proceed even if the defendant possesses a registered mark. Additionally, the doctrine of foreign equivalents applies, which requires translating foreign terms to assess their genericness or descriptiveness. The court determined that "Tesoros," while potentially generic in English, functions as a suggestive mark in the context of services specializing in folk or handmade art, not merely as a descriptor of treasure.

The court addressed the defendant's objections to third-party declarations supporting the plaintiff’s motion. It sustained objections regarding legal conclusions but overruled those asserting confusion, as the declarations indicated individuals perceived the plaintiff as a provider of folk and religious art. The court noted that while the defendant's federally registered mark was presumed valid, the prominence of the text on the website was questioned. Although the plaintiff conceded there was no actual confusion, anecdotal evidence showed a potential for misunderstanding, which was later clarified.

The court denied the defendant's request to take judicial notice of documents regarding the use of "tesoros" by other entities, stating that such evidence would not change its decision. The plaintiff argued that trademark owners can tolerate minor infringements but still act against more substantial encroachments, citing *Abraham v. Alpha Chi Omega* to support this principle.