Chapter 1-14 Intellectual Property—Misuse of a Trade Name

• Jurisdiction: United States

1-14 Intellectual Property—Misuse of a Trade Name

1-14:1 Overview

Trade names are not permitted to be registered with Texas or the Patent and Trademark Office unless they also qualify as a trade or service mark. However, the common law recognizes a property interest in a trade name and the corollary cause of action for Misuse of Trade Name. The common law cause of action is nearly identical to that for common law trademark infringement, with the most significant difference being that descriptive names are not eligible for protection. Courts, and the authors of this publication, cite trademark and trade name cases for the same propositions.

1-14:1.1 Related Causes of Action

Common Law Trademark Infringement, Texas Trademark Act, Federal Trademark Infringement,³⁹³ Misappropriation of Trade Secrets

MUST READ CASES

Union Nat'l Bank of Tex., Laredo, Tex. v. Union Nat'l Bank of Tex., Austin, Tex., 909 F.2d 839 (5th Cir. 1990)

All Am. Builders, Inc. v. All Am. Siding of Dallas, Inc., 991 S.W.2d 484 (Tex. App.—Fort Worth 1999, no pet.)

Zapata Corp. v. Zapata Trading Int'l, Inc., 841 S.W.2d 45 (Tex. App.—Houston [14th Dist.] 1992, no writ)

1-14:2 Elements

(1) The proposed name is eligible for protection.³⁹⁴

• Whether a proposed name is eligible for protection turns on which of four categories it belongs in:

• Arbitrary/Fanciful;
• Suggestive;
• Descriptive; or
• Generic.³⁹⁵

• The categorization of a proposed name is a question of fact³⁹⁶ which seeks to answer where on the spectrum each proposed name lies.³⁹⁷
• Arbitrary and suggestive marks are given the greatest amount of protection because they are distinctive; they require no proof of secondary meaning.³⁹⁸
• Descriptive terms are not eligible for trade name protection.³⁹⁹
• Generic terms are not eligible for trade name protection.⁴⁰⁰

(2) The plaintiff is the senior user of the name.⁴⁰¹

• The first person to use the name is deemed to be the senior user. Registration of a trade name as a trade or service mark is not determinative.⁴⁰²

(3) There is a likelihood of confusion between the plaintiff's name and that of the other user.⁴⁰³

• Whether a defendant's use is likely to deceive or cause confusion is a factor-based test which looks to:

• Type of name;

• Arbitrary, suggestive, descriptive or generic;

• The similarity of design;
• The similarity of the product;
• The identity of retail outlets and purchasers;

• The identity of advertising media utilized;
• The defendant's intent;
• Whether actual confusion occurred.⁴⁰⁴

• A finding of likelihood of confusion does not need to be supported by a majority of these factors.⁴⁰⁵
• The First Amendment requires a court to inquire into whether the complained-of use was a parody. Parody is an additional factor to consider in whether a likelihood of confusion exists.⁴⁰⁶
• An individual may use his legal name in all instances, unless such use operates as a fraud, is contractually barred, or he is estopped from so using it.⁴⁰⁷

• Fraud means a use which is calculated to mislead the public as to the identity of the businesses.⁴⁰⁸

(4) The likelihood of confusion will cause irreparable injury for which there is no adequate legal remedy.⁴⁰⁹

• Likely damage to the plaintiff's goodwill and reputation are sufficient to prove irreparable injury.⁴¹⁰

1-14:3 Damages and Remedies

1-14:3.1 Injunction

The exclusive remedy for Misuse of Trade Name is an injunction.⁴¹¹

1-14:4 Defenses

1-14:4.1 Statute of Limitations

The two-year limitations period controls.⁴¹²

Trade name infringement is a continuing tort.⁴¹³

1-14:4.2 Laches

Laches is an available affirmative defense.⁴¹⁴

Laches consists of three elements:

• An unreasonable delay in asserting a right or claim;
• That is not excused; and
• That results in undue prejudice to the defendant.⁴¹⁵

1-14:4.3 Abandonment

Abandonment of a trade name is a defense to a trademark infringement suit.⁴¹⁶

Abandonment is established by proof:

• That the plaintiff discontinued use of the name; and
• Intended to abandon the name.⁴¹⁷

A person is presumed to have not intended to abandon the use of his own legal name as a trade name.⁴¹⁸ There must be express language establishing the intention to abandon one's own legal name.⁴¹⁹

1-14:4.4 Acquiescence

Acquiescence is an available defense.⁴²⁰

Acquiescence occurs if the plaintiff makes implicit or explicit assurances to the defendant which induces the defendant's reliance.⁴²¹

1-14:4.5 First Amendment Concerns

Parody, although not an affirmative defense, is a factor to be considered in determining whether a likelihood of confusion exists.⁴²²

1-14:4.6 Fair Use

Fair use is an affirmative defense.⁴²³

Fair use allows for:

• The ability of a copyist who legally copied to tell the public that he has copied;⁴²⁴ and
• The ability of a person to compare his goods and services with that of the name holder.⁴²⁵

Fair use is limited by these principles:

• The defendant may only use so much of the mark as necessary to identify the product or service; and
• The defendant may not do anything that suggests affiliation, sponsorship or

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