Pengu Swim Sch. v. Blue Legend, LLC

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PENGU SWIM SCHOOL, LLC, et al., Plaintiffs, v. BLUE LEGEND, LLC, et al., Defendants.

No. 4:21-CV-1525

United States District Court, S.D. Texas, Houston Division

August 29, 2023

MEMORANDUM AND ORDER^[1]

Dena Hanovice Palermo United States Magistrate Judge

This is a trade dress infringement case.^[2] The parties are competing swimming schools offering swim lessons to children in the Greater Houston area.^[3] In this action, Pengu alleged that Blue Legend copied Pengu's distinctive trade dress and used it in its own swim schools, creating a likelihood of consumer confusion between Pengu and Blue Legend. A trial was held from May 16, 2023 through May 19, 2023, with the jury returning a verdict in favor of Pengu.

Thereafter the parties filed a series of posttrial motions. Pending before the Court are Pengu's motion for attorneys' fees, ECF No. 109,^[4] Pengu's motion for enhanced damages ECF No. 110,^[5] Pengu's motion for permanent injunction, ECF No. 111,^[6] Pengu's motion for entry of judgment on the jury verdict, ECF No. 112,^[7]Blue Legend's motion for judgment as a matter of law, or in the alternative, motion for new trial, ECF No. 113,^[8] and Blue Legend's motion for permanent injunction and setting aside or reducing award of profits, ECF No 114.^[9] Based on a thorough review of the briefing record,^[10]and applicable law, the Court finds that: (1) there is sufficient evidence to sustain the jury's findings that Pengu's trade dress acquired secondary meaning, there is a likelihood of confusion, and Pengu is entitled to disgorgement of Blue Legend's profits; (2) the jury's profit award should not be set aside, reduced, or increased; (3) Pengu is entitled to an award of attorneys' fees; and (4) Pengu is entitled to a permanent injunction enjoining Blue Legend from infringing upon Pengu's trade dress.

I. BACKGROUND

In 2013, Pengu swim schools opened for business in the Houston area. In 2020, Blue Legend opened two swim schools-one in Katy, Texas, and one in Sugarland, Texas, each within a few miles of Plaintiffs' schools in that area. Plaintiffs introduced evidence that Defendants used Pengu's total image and overall appearance in the Blue Legend swim schools, infringing on Plaintiffs' trade dress.

On May 19, 2023, a jury returned a verdict in favor of Pengu. Verdict, ECF No. 106. The jury found that Pengu proved that its trade dress was protected because it obtained secondary meaning as of August 2020, id. at 5, and Blue Legend willfully infringed Pengu's trade dress, id. at 6-7. The jury awarded Pengu Blue Legend's profits in the amount of $67,5000 from Blue Legend Sugar Land and $120,000 from Blue Legend Katy. Id. at 8.

II. STANDARD FOR JUDGMENT AS A MATTER OF LAW AND FOR NEW TRIAL.

“A motion for judgment as a matter of law . . . in an action tried by jury is a challenge to the legal sufficiency of the evidence supporting the jury's verdict.” Orozco v. Plackis, 757 F.3d 445, 448 (5th Cir. 2014) (quoting SMI Owen Steel Co. v. Marsh USA, Inc., 520 F.3d 432, 437 (5th Cir. 2008) (per curiam) (citation and internal quotation marks omitted)). Under Rule 50(b) “[a] motion for judgment as a matter of law should be granted if there is no legally sufficient evidentiary basis for a reasonable jury to find for a party.” Id. (citation and internal quotation marks omitted).

At this stage, a court's “review of a jury's verdict is ‘especially deferential.'” OneBeacon Ins. Co. v. T. Wade Welch & Assocs., 841 F.3d 669, 675 (5th Cir. 2016) (quoting SMI Owen Steel Co. v. Marsh U.S.A., Inc., 520 F.3d 432, 437 (5th Cir. 2008)). The court “view[s] the entire record in the light most favorable to the nonmovant, drawing all factual inferences in favor of the non-moving party, and ‘leaving credibility determinations, the weighing of evidence, and the drawing of legitimate inferences from the facts to the jury.'” Aetna Casualty & Surety Co. v. Pendleton Detectives of Mississippi, Inc., 182 F.3d 376, 378 (5th Cir. 1999) (quoting Conkling v. Turner, 18 F.3d 1285, 1300 (5th Cir. 1994)).

A court must deny a motion for judgment as a matter of law “unless the facts and inferences point so strongly and overwhelmingly in the movant's favor that reasonable jurors could not reach a contrary conclusion.” Baisden v. I'm Ready Prods., Inc., 693 F.3d 491, 498 (5th Cir. 2012) (quoting Flowers v. S. Reg'l Physician Servs. Inc., 247 F.3d 229, 235 (5th Cir. 2001)). “In deciding a Rule 50(b) motion, even if the court would reach a different conclusion as the trier of fact, the court is ‘not free to reweigh the evidence or to re-evaluate credibility of witnesses.'” United States ex rel. Montcrieff v. Peripheral Vascular Assocs., P.A., No. SA-17-CV-00317-XR, 2023 WL 139319, at *4 (W.D. Tex. Jan. 9, 2023) (quoting Brown v. Kinney Shoe Corp., 237 F.3d 556, 564 (5th Cir. 2001). In short, “[u]nless there was no credible evidence presented which might authorize the verdict, the jury's findings must stand.” Urban Developers LLC v. City of Jackson, Miss., 468 F.3d 281, 297 (5th Cir. 2006) (internal quotations omitted) (quoting Ham Marine, Inc. v. Dresser Indus., Inc., 72 F.3d 454, 461 (5th Cir. 1995)).

Federal Rule of Civil Procedure 59(a) allows a party to move for a new trial. In deciding whether to grant a new trial, the court conducts an “assessment of the fairness of the trial and the reliability of the jury's verdict.” Wellogix, Inc. v. Accenture, LLP, 823 F.Supp.2d 555, 571 (S.D. Tex. 2011), aff'd sub nom. Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867 (5th Cir. 2013) (citing Seidman v. Am. Airlines, Inc., 923 F.2d 1134, 1140 (5th Cir. 1991)). Although Rule 59 does not specify or limit the grounds necessary to support such a decision, the court may grant a new trial if it finds that “‘the verdict is against the weight of evidence, the damages awarded are excessive, the trial was unfair, or prejudicial error was committed.'” Vargas v. Manson Gulf, LLC, 439 F.Supp.3d 809, 813 (E.D. La. 2020) (quoting Smith v. Transworld Drilling Co., 773 F.2d 610, 613 (5th Cir. 1985)). “The party asserting the error has the burden of proving that the error was prejudicial.” Ball v. LeBlanc, 792 F.3d 584, 591 (5th Cir. 2015) (citation omitted).

The decision as to whether to grant a new trial rests “within the sound discretion of the trial court[.]” Foradori v. Harris, 523 F.3d 477, 503-04 (5th Cir. 2008) (quoting Shows v. Jamison Bedding, Inc., 671 F.2d 927, 930 (5th Cir. 1982)). This discretion is even broader when the trial court denies, rather than grants, such a motion. See Cates v. Creamer, 431 F.3d 456, 460 (5th Cir. 2005) (“Where a motion for a new trial is granted, we scrutinize that decision more closely.”).

III. BLUE LEGEND'S MOTION FOR JUDGMENT AS A MATTER OF LAW IS DENIED.

Blue Legend challenges the sufficiency of the evidence to support the jury's finding on four grounds. First, Blue Legend claims that there was insufficient evidence for the jury to find that Pengu's trade dress was protectable. ECF No. 113 at 6-16. Second, Defendants argue there was insufficient evidence for the jury to find there was a likelihood of confusion. Id. at 16-19. Third, Defendants assert that there was insufficient evidence for the jury to find that Blue Legend's infringement was willful. Id. at 19. Finally, Blue Legend contends that Pengu is not entitled to a disgorgement of Blue Legend's profits. Id. at 19-24. The Court finds that a reasonable jury could have found in Pengu's favor on each of these issues and Pengu is entitled to entry of judgment on the verdict.^[11]

A. A Reasonable Jury Could Have Found That Pengu's Trade Dress Acquired Secondary Meaning.

Blue Legend argues that Pengu failed to present sufficient evidence for the jury to find that its trade dress acquired secondary meaning. ECF No. 113 at 12. According to Blue Legend, Pengu presented evidence relevant to only four of the seven factors considered in the Fifth Circuit. Id. Pengu responds that sufficient evidence was presented. ECF No. 116 at 8. The Court finds there is ample support for the jury's findings.

“Secondary meaning occurs when, in the minds of the public, the primary significance of a mark is to identify the source of the product rather than the product itself.” Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 247 (5th Cir. 2010) (quoting Bd. of Supervisors for Louisiana State Univ. Agric. & Mech. Coll. v. Smack Apparel Co., 550 F.3d 465, 476 (5th Cir. 2008)). In the Fifth Circuit, the seven Pebble Beach factors are considered in determining if a trade dress has acquired secondary meaning:

(1) length and manner of use of the mark or trade dress, (2) volume of sales, (3) amount and manner of advertising, (4) nature of use of the mark or trade dress in newspapers and magazines, (5) consumer-survey evidence, (6) direct consumer testimony, and (7) the defendant's intent in copying the trade dress.

Id.; Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 543 (5th Cir. 1998) (“Pebble Beach II”), abrogated on other grounds by TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23 (2001). “No one factor is dispositive, and a finding of a likelihood of confusion does not even require a positive finding on a majority of these digits of confusion.” T-Mobile US, Inc. v. AIO Wireless LLC, 991 F.Supp.2d 888, 914 (S.D. Tex. 2014) (quoting Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 329 (5th Cir. 2008)).

Blue Legend first argues that the length and manner of use factor does not favor a finding of secondary meaning. ECF No. 113 at 12-13. According to Blue Legend, this is because only one Pengu swim school used Pengu's trade dress for seven years prior to Blue Legend's entrance into the market in August 2020. Id. Blue Legend does not explain why the Court should view this as...