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A Texas court considered whether a trademark infringement occurred when a brokerage used a URL address with the name of a development created by another company.
In 1970, Lake Lyndon B. Johnson Improvement Corporation ("Developer") developed a resort community along Lake Lyndon B. Johnson, which it named "Horseshoe Bay." The Developer registered its logo with the United States Patent and Trademark Office ("PTO") as a service mark for commercial real estate brokerage and property management services. The Developer did not claim an exclusive right to the name because an examiner from the PTO found the mark to be geographically descriptive. The Developer used "Horseshoe Bay" as the title for all of its business ventures.
In 1988, Resort Sales Company ("Brokerage") began its operations as a real estate brokerage in the same county as the Horseshoe Bay development. In 1996, the Brokerage registered the URL address "horseshoebay.com" for its website and began using the address. In 1999, the Developer brought suit against the Brokerage for infringement, dilution, and for use of the "horseshoebay.com" URL. The trial court ruled in favor of the Developer and ordered the Brokerage to transfer the URL to the Developer, prohibited the Brokerage from using either "horseshoe" or "bay" in any future domain name without the entire name of the Brokerage. The court also awarded the Developer almost $40,000 in attorney's fees. The Brokerage appealed.
The Court of Appeals of Texas, Austin, affirmed the trial court's rulings. The court first reviewed the infringement claim. To establish a claim for infringement under the common law (or judge-made standards and not federal trademark laws, since this mark was not federally registered), a party seeking protection must show: that the name was entitled to trademark registration; that the party was the senior user of the name; there was a likelihood of confusion between its mark and the one in question; and, when seeking to enjoin the use of the other mark, the party must demonstrate that the likelihood of confusion will cause "irreparable injury" for which there is no adequate legal remedy. The court then reviewed each of these areas except for the question of whether the Developer was the senior user of the mark, which was undisputed since the Developer was the creator of the term.
A trade and service mark enables consumers to distinguish a company's goods and services. To determine whether a mark is distinctive enough to receive trademark protection, courts will define a mark in the five following five ways: fanciful; arbitrary; suggestive; descriptive; or generic. A mark that is fanciful, arbitrary, and suggestive is distinctive and therefore is entitled to protection, while a generic mark is not entitled to protection. A geographically descriptive mark will only receive protection when the mark has acquired a secondary meaning relating to a good or service, not simply referring to a place. The court ruled that the mark "Horseshoe Bay" was not a geographically descriptive mark because the term was created by the Developer and had not been used prior to that time. Therefore, the mark was arbitrary and so could receive trademark protection. The court rejected the argument made by the Brokerage that the success of the development had transformed the name "Horseshoe Bay" from an abstract name into an actual geographic description. The court ruled that the Developer should not be punished because of the success of its development, since "Horseshoe Bay" did not identify this location prior to its use by the Developer. Thus, the mark was entitled to trademark protection.
The court next considered the potential "likelihood of confusion" caused by the Brokerage's use of the URL "horseshoebay.com." The court found that there was a reasonable likelihood of confusion that could be caused by the Brokerage's use of the URL, since both companies offered real estate services and so consumers who typed in the URL may not realize that they were not on the Developer's website. Further, the court found that there was evidence produced before the trial court of actual confusion by consumers caused by the URL. Thus, the court ruled that the Developer had established that the there was a sufficient likelihood of confusion and so affirmed the ruling of the trial court in favor of the Developer on its trademark infringement claim against the Brokerage for its use of "horseshoebay.com."
The court next considered the alleged violations of the state's anti-dilution statute. To establish a dilution claim, a party must show ownership of a distinctive mark and a likelihood of dilution. The court had already decided that the Developer owned a distinctive mark and the court also determined that the Brokerage's use of "horseshoebay.com" diluted Developer's mark because it prevented the Developer from using its distinctive mark on the Internet. Thus, the court also affirmed the trial court's ruling in favor of the Developer on the dilution claim.
Horseshoe Bay Resort Sales Co. v. Lake Lyndon B. Johnson Improvement Corp., 53 S.W.3d 799 (Tex. App. 2001).