Last Thursday, a panel of the Fifth Circuit affirmed a ruling from the Northern District of Texas partially enjoining a Texas company’s sale of ceremonial paddles decorated with the unlicensed insignia of 32 fraternities and sororities. In the lower court, a jury found the college organizations were lax in seeking to enforce their trademark rights against the manufacturer, and were thus barred from recovering money damages in an infringement suit. See Thomas Kenneth Abraham d/b/a Paddle Tramps Manufacturing Co. v. Alpha Chi Omega et al., Case No. 12-10525 (5th Cir. Dec. 6, 2012) Opinion.

The case concerns wooden paddles that Thomas Kenneth Abraham designed and sold through his business, Paddle Tramps Manufacturing Co. Paddle Tramps was founded in 1961, and began selling its products through the Internet in 2001. Originally, Abraham marketed his products — long, flat wood paddles decorated with Greek letters and insignia — directly to college sororities and fraternities. Later he began wholesaling component parts to college bookstores or craft stores for customers to buy and assemble. The Greek organizations first contacted Abraham in 1990 complaining of licensing infringement. Over the next 17 years, Abraham received numerous cease and desist letters requesting that he stop manufacturing the paddles. Abraham ignored these letters or responded by refusing to enter a licensing agreement. Finally, in 2007, 32 sororities and fraternities sued Abraham in the Southern District of Florida. This suit was dismissed for improper venue. In 2008 Abraham brought a declaratory judgment action against the sororities and fraternities in Texas seeking a ruling that he was not infringing on the fraternities’ and sororities’ trademarks. The Greek organizations counterclaimed for trademark infringement, unfair competition and trademark dilution under federal and state law, seeking both monetary and injunctive relief. On summary judgment, the district court determined that Abraham had violated the Greek organization’s trademarks. However, the court allowed a jury to consider Abraham’s laches and acquiescence defenses, which absolve an infringer of wrongdoing if the trademark owner waits so long to assert its trademark rights that it causes prejudice to the infringer. The jury found that the Greek societies had no excuse for their 17 year delay in taking action. The court held that laches precluded an award of money damages, but permanently enjoined Abraham’s future use of the organizations’ marks. On appeal, the Greek organizations argued that Abraham should have been barred from asserting laches because he had unclean hands. They alleged that Abraham had acted in bad faith by trying to capitalize on the fraternities’ and sororities’ good will and to deceive or at least confuse potential paddle buyers. In affirming the district court’s judgment, the Fifth Circuit noted that just because an infringer is made aware of the trademark owner’s claim to the mark does not mean he abused the trademark to the point of having unclean hands; rather, the Greek organizations had to show Abraham knowingly and intentionally infringed upon the marks with a bad faith intent to benefit from or capitalize on the Greek organizations’ good will by confusing or deceiving buyers. The Fifth Circuit noted that Abraham had introduced evidence showing a lack of bad faith, specifically, that he had helped to create a market for fraternity and sorority paddles decades before the Greek organizations had created a licensing program. The Fifth Circuit also found sufficient evidence to support the jury’s finding that the Greek organizations had no excuse for their 17 year delay in bringing suit, and that Abraham was unduly prejudiced by the delay. The sororities and fraternities had argued that a trademark owner is excused from delay in taking action against de minimis infringements, and that Abraham’s infringement was always de minimus. The Fifth Circuit, however, noted that Abraham had presented evidence that he would not have made certain business decisions if he knew the Greek Organizations would later sue him to enforce their trademarks. Abraham also presented evidence that the infringing products sales, while small, were important to the sale of his non-infringing products because without them, customers might choose to purchase the parts to make their paddles from another source. Sources: Thomas Kenneth Abraham d/b/a Paddle Tramps Manufacturing Co. v. Alpha Chi Omega et al., Case No. 12-10525 (5th Cir. Dec. 6, 2012)

This article was prepared by Kathy Grant (kgrant@fulbright.com / 210 270 7182) of Fulbright’s’ Intellectual Property and Technology Practice.