Appeal from the United States District Court for the Southern District of Texas.
For PENNZOIL QUAKER STATE COMPANY, Plaintiff - Appellant: Tracey Noblitt Ellison, Kelley Maria Keller, Ellison & Keller, P.C., Houston, TX.
For MILLER OIL AND GAS OPERATIONS, MILLER OIL & GAS OPERATIONS, LIMITED, METRON MANAGEMENT COMPANY, L.L.C., WILLIAM CYLVESTOR WILLIAMS, JR., BILL LINCOLN, Defendants - Appellees: Walter Andrew Boyd, III, Esq., Law Offices of Walter A. Boyd, III, Houston, TX.
Before JOLLY, HIGGINBOTHAM, and OWEN, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
The holder of a trademark has certain rights, among them the power to prohibit another entity from using its mark without its consent. Those rights are subject to equitable defenses, including acquiescence, where the markholder affirmatively represents to another that it may use its mark, who then relies on that representation to its prejudice. This case requires us to clarify the role that undue prejudice plays in the analysis of acquiescence. Concluding that the defendant here failed to demonstrate that it was unduly prejudiced by any representations made by the markholder, we reverse.
This is a dispute about a commercial relationship, one largely defined by the use of another's intellectual property, gone bad. Pennzoil-Quaker State Company (" Pennzoil" ), makes and sells automotive lubricants, including motor oil. As part of its business, Pennzoil owns several federally recognized trademarks and trade dress, notably the name " Pennzoil," the " Pennzoil Across the Bell" logo, and a color scheme involving the use of yellow with black accents. Pit Stop U.S.A. (" Pit Stop" ) is a quick-stop oil change and state inspection facility located in Houston. It is owned and operated by Miller Oil and Gas Operations (" Miller Oil" ).
The relationship between the parties began in November 1997, when Pennzoil and Miller Oil entered into a five-year agreement (the " 1997 Agreement" ). Pennzoil agreed to loan Miller Oil equipment for use at Pit Stop, including storage tanks, delivery hoses, pumps, and an external Pennzoil sign. Pennzoil also provided Miller Oil with six plastic panel inserts, bearing Pennzoil marks, to be placed in Pit Stop's pre-existing outdoor pylon sign pole. In exchange, Miller Oil agreed that at least 85% of its monthly motor oil and fluid purchases would be from Pennzoil. The agreement expired in mid-2003.
Pennzoil did not request that Miller Oil return the equipment. Rather, in August 2003, Pennzoil and Miller Oil negotiated a second, three-year agreement (the " 2003 Agreement" ). Pennzoil granted Pit Stop a " non-exclusive license during the term of th[e] agreement to use and display" the Pennzoil marks. In return, Miller Oil agreed that it would not blend any Pennzoil products with non-Pennzoil products, or represent a non-Pennzoil liquid as one produced by Pennzoil.
Next, in 2004, Pennzoil and Miller Oil began discussions about a " re-imaging" of Pit Stop, whereby the facility would be painted and re-designed to emphasize Pennzoil's trademarks and trade dress. These conversations went nowhere, and
the 2003 Agreement expired by its own terms in March 2006, with no renewal.
Three years later, Pennzoil made a new proposal, whereby Pit Stop would be a " prototype site" for Pennzoil's broader corporate re-imaging efforts. Miller Oil agreed, though it was not required to sign a contract before re-imaging started. It did, however, report a " general understanding" that Pit Stop had a " continuing dut[y]" to sell Pennzoil products as a condition of keeping its Pennzoil signage and dress. The re-imaging itself was substantial and took four to six weeks, though Pit Stop only had to close for one weekend. In sum, as found by the district court, Pennzoil paid for:
1. The installation of a new 48-square-foot freestanding pylon sign and readerboard that replaced the Pennzoil pole sign provided under the 1997 Agreement.
2. The removal (or permanent over-paint as applicable) of existing Pit Stop logo signage and its red, white, blue, and yellow trade dress, which covered the building.
3. The installation of four new steel-framed lit Pennzoil signs -- one for each exterior wall of the building.
4. The installation of a steel-framed " awning" that encircles the building and is covered with the Pennzoil Trade Dress. The " 10 Minute Oil Change" mark and the words " Pit Stop USA" are painted directly on the front and back of the awning.
5. The installation of a three-dimensional painted metal accent (the " mid stripe" ) that encircles the middle of the building and is yellow and black to match the awning -- Pennzoil's Trade Dress.
6. The alteration of an existing ground-mounted Pennzoil sign located in the front of the building, which was ...