Horseshoe Bay Resort Sales v. Lake Lyndon B. Johnson Improvement Corp.

Citation: Horseshoe Bay Resort Sales Co. v. Lake Lyndon B. Johnson Improvement Corp., 53 S.W.3d 799 (Tex. Ct. App., 3d. Dist., Austin 2001).

Factual Background
In 1971, appellee Lake Lyndon B. Johnson Improvement Corp. (“Lake LBJ”) began using the name HORSESHOE BAY to identify both its real-estate services and the new “Horseshoe Bay” residential community and golf-resort development. Lake LBJ federally registered the mark HORSESHOE BAY and design in 1986, but the registration disclaimed "HORSESHOE BAY" because the PTO Examiner found that name to be geographically descriptive. Lake LBJ did not challenge the PTO’s disclaimer requirement.

In 1987, Lake LBJ and the golf resort became separate entities, with both permitted to use the HORSESHOE BAY name and logo. In 1996, appellant Resort Sales Co. (“Resort”) registered and began using the domain name "horseshoebay.com" in 1996 to promote its real estate brokerage business within the same geographic area as the Horseshoe Bay community.

Trial Court Proceedings
Lake LBJ brought suit for common-law trademark infringement and dilution under the Texas Anti-Dilution Statute. The district court held that HORSESHOE BAY was a valid mark and that Resort's registration and use of the domain name “horseshoebay.com” infringed and diluted Lake LBJ’s mark.

The court also ordered Resort to transfer the domain name to Lake LBJ and awarded attorney’s fees of almost $40,000 to Lake LBJ.

Appellate Court Proceedings
The court of appeals affirmed the district court’s judgment in its entirety. Resort argued that the name HORSESHOE BAY was not entitled to trademark protection because it was geographically descriptive. In rejecting Resort’s argument, the appeals court distinguished situations where one coins an arbitrary name for a geographic locale from those who use the name of an already existing geographic locale in their mark. According to the court, arbitrary names coined for a geographic locale were entitled to protection absent a showing of secondary meaning.

Here, the court held that HORSESHOE BAY was an arbitrary name coined by Lake LBJ and thus was not geographically descriptive. Before Lake LBJ’s resort-development project, the land was previously known as “Lupton Ranch.” And the lower court did not err in failing to follow the PTO’s determination that HORSESHOE BAY was not geographically descriptive because the PTO’s finding was based only on the fact that the postmark on Lake LBJ’s application papers read “Horseshoe Bay.”

Resort next argued that even if the mark was protectable when coined, the success of the residential community and golf resort caused the mark to take on primary geographic significance in the same way a mark becomes generic. Relying on decisions of other courts involving community names, the court rejected the idea "that residential community developers could be the victims of their own success, forced to trade protection of their mark for success in the market."

As to trademark infringement, the court found that the strength of the HORSESHOE BAY mark, the similarity of the parties' marks, evidence of actual confusion, and Resort's bad faith in adopting the name established sufficient likelihood of confusion to support a finding of infringement. The evidence of bad faith included: (1) Resort never used HORSESHOE BAY to identify its business or services, (2) Resort knew about Lake LBJ's prior use of HORSESHOE BAY as a trade name, and (3) Resort also registered “horseshoebay.cc” and noted in internal correspondence, “I don’t know for sure that the .cc will really take off, but at least you know who doesn’t have it.”

Finally, the appeals court affirmed the district court’s finding that Resort's registration and use of “horseshoebay.com” diluted Lake LBJ's mark by lessening its capacity to identify and distinguish Lake LBJ and its services from others.

This page uses content from Finnegan’s Internet Trademark Case Summaries. This entry is available under the GNU Free Documentation License.