Choice Hotels International, Inc. v. Goldmark Hospitality, LLC, 3:12-cv-00548

Background

Choice Hotels owns federally registered "Quality" family marks (including the ‘875 and ‘888 registrations) and franchised a Quality Suites at 13636 Goldmark Drive operated by Kroopa under a 2007 franchise agreement.
Kroopa defaulted, Choice terminated the franchise, and Goldmark (a deed-of-trust beneficiary) foreclosed and took title in July 2011.
After foreclosure Goldmark operated the property as "Amerigold Suites," but two signs displaying Choice’s exact Quality Suites marks (a large tower sign visible from the roadway and a smaller driveway sign) remained visible for months.
Choice Hotels notified Goldmark and received letters claiming the hotel had rebranded and that signs were covered or removal was cost-prohibitive; however, the tower sign remained uncovered through the filing of suit in February 2012.
Choice Hotels sued for federal trademark infringement (15 U.S.C. § 1114), false designation (§ 1125(a)), Texas common-law trademark infringement, and unfair competition, and moved for summary judgment on liability and remedies.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Goldmark "used" Choice’s marks in commerce (15 U.S.C. § 1114 use element)	Continued public display of Choice’s exact marks on property that was operating as a hotel constitutes use in commerce	Merely failing to remove preexisting signage during a repurposing period is not "use"; Goldmark actively disassociated by rebranding as Amerigold	Use satisfied: Goldmark operated a hotel and signs bearing Choice’s exact marks remained visible; display is use under § 1127
Likelihood of confusion	Exact use of Choice’s marks on-site makes confusion likely; digits-of-confusion analysis favors Choice	Context (interior Amerigold signage, different reservation system, alleged limited visibility) raises factual disputes	Likelihood of confusion established beyond peradventure: strength and identity of marks, service similarity, visible signage support finding of confusion
Permanent injunction and other injunctive relief	Entitled to injunction barring future use and requiring delivery/compliance statement	Signs already removed/painted; Goldmark’s removal delays were due to cost, not intent; no ongoing threat of irreparable harm	Injunctive relief denied at summary judgment: success on the merits shown, but disputed material facts (irreparable harm, balance of harms, intent) preclude granting permanent injunction now
Monetary remedies (profits, reasonable royalty, trebling)	Entitled to Goldmark’s profits, actual damages measured by franchise royalty (8.5% gross room revenue), and trebling	Disputes about profit accounting, applicability and amount of royalty, and willfulness make damages unresolved	Damages claims denied at summary judgment: legal theories viable (royalty method permissible) but genuine factual disputes prevent award now; trebling premature

Key Cases Cited

Paulsson Geophysical Servs., Inc. v. Sigmar, 529 F.3d 303 (5th Cir.) (district court need not analyze each likelihood-of-confusion factor mechanically when defendant uses the exact mark)
Xtreme Lashes, LLC v. Xtended Beauty, Inc., 576 F.3d 221 (5th Cir.) (likelihood of confusion requires probability, not possibility; multi-factor test)
Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188 (5th Cir.) (federal registration is prima facie evidence of mark validity and exclusive right)
Seatrax, Inc. v. Sonbeck Int’l, Inc., 200 F.3d 358 (5th Cir.) (factors for awarding defendant’s profits under § 1117)
Boston Prof’l Hockey Ass’n v. Dallas Cap & Emblem Mfg., 597 F.2d 71 (5th Cir.) (reasonable royalty method for damages may be applied even absent a prior licensing relationship)
eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (U.S.) (injunctive relief in patent/trademark context rests on traditional equitable principles)
Taco Cabana Int’l, Inc. v. Two Pesos, Inc., 932 F.2d 1113 (5th Cir.) (use of franchise/royalty metrics as a measure of damages in trademark cases)
Brennan’s, Inc. v. Dickie Brennan & Co., 376 F.3d 356 (5th Cir.) (reasonable royalty sometimes used to measure trademark damages)