Hassan v. Greater Houston Transportation Co.

237 S.W.3d 727, 2007 WL 495242

• Court: Court of Appeals of Texas
• Decided: October 30, 2007
• Docket: 01-05-00494-CV
• Status: Published

Opinions

OPINION

SAM NUCHIA, Justice.

Appellees, Greater Houston Transportation Company d/b/a Yellow Cab (“Yellow Cab”), brought a trade dress¹ cause of action against appellants, Yahya Hassan, individually and d/b/a Safe Cab Co. a/k/a Safe Cab Company, and Kemal Mohammed, individually and d/b/a Safe Cab Co. a/k/a Safe Cab Company (“Safe Cab”), under United States Code title 15, section 1125(a),² commonly known as the Lanham Act, and Texas common law. After a jury trial, the trial court rendered judgment granting a permanent injunction in favor of Yellow Cab and prohibiting Safe Cab from operating any taxicab with a color scheme that predominantly used the color yellow. On appeal, Safe Cab asserts that (1) the trial court lacked subject-matter jurisdiction over Yellow Cab’s Lanham Act claim; (2) the trial court erred in rendering judgment for Yellow Cab because the jury did not find an element of its Texas common-law unfair competition claim; (3) the trial court erred by giving the jury an erroneous definition of “secondary meaning”; (4) the evidence was legally insufficient to support the jury’s finding of secondary meaning; (5) the evidence was factually insufficient to support the jury’s finding of secondary meaning; and (6) the evidence was factually insufficient to support the jury’s finding that Safe Cab’s use of the color yellow on its taxis caused a likelihood of confusion. We reverse the judgment and remand the case for further proceedings.

BACKGROUND

Since the 1940s, Yellow Cab has been operating yellow-colored taxicabs in the Houston metropolitan area. Today, on an average day, there are between 700 and 800 Yellow Cab taxis servicing greater Houston each day. While Yellow Cab is the dominant taxi company in Houston, there are about 120 other taxi companies. Thirty-six of these other taxicab companies use predominately yellow-colored taxis, but each has a different color scheme. As far back as 1993, there were more than 20 taxicab companies in Houston using a predominately yellow color scheme. As the name implies, Yellow Cab’s taxis are painted yellow. They have black lettering and crossed-sword logos on the side.

In 2003, Safe Cab received a license to operate in the City of Houston. Its choice of a yellow paint scheme for its taxi³ was approved by the Transportation Section of the City of Houston. In that same year, Yellow Cab complained to the Transportation Section about the existence of other yellow-colored taxis, at which point the city placed a moratorium on any further yellow-colored taxis. However, there were still over 100 yellow-colored taxis on the streets of Houston that were not associated with Yellow Cab.

Yellow Cab sent “cease and desist” demand letters to taxi companies with yellow color schemes, demanding that they stop using yellow-colored taxis and offering to paint their taxis another color at Yellow Cab’s expense. Two taxi companies, with a total of approximately 40 taxis, accepted Yellow Cab’s offer. After Safe Cab refused to comply with Yellow Cab’s demand, Yellow Cab filed suit under (1) the Lanham Act, the federal statutory scheme for trademark and trade dress infringement, and (2) a Texas common-law claim of unfair competition, contending that its yellow-colored taxis were protectable trade dress. Yellow Cab sought a permanent injunction enjoining Safe Cab from using yellow-colored taxis. The jury returned a verdict in favor of Yellow Cab, and the trial court rendered judgment permanently enjoining Safe Cab from using yellow-colored taxis. After the trial court denied Safe Cab’s motion for new trial, Safe Cab filed this appeal.

Subject-Matter Jurisdiction

In its first point of error, Safe Cab contends that the trial court lacked subject-matter jurisdiction over Yellow Cab’s Lanham Act claim because Yellow Cab did not prove that Safe Cab’s services were used “in commerce.” Yellow Cab responds that the “in commerce” requirement of the Lanham Act is not jurisdictional, but instead is simply an element of the cause of action, and therefore Safe Cab has waived this argument by failing to preserve the complaint.

The Lanham Act provides in pertinent part:

(1) Any person who, on or in connection with any goods and services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, ...

[[Image here]]

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C.S. § 1125(a)(1) (LexisNexis 2006) (emphasis added).

Several federal circuit courts of appeals have held that the “in commerce” language is a jurisdictional prerequisite. See Starter Corp. v. Converse, Inc., 84 F.3d 592, 595 (2d Cir.1996) (holding that use of marks was sufficiently “in commerce” to sustain federal-question jurisdiction under Lan-ham Act); Ocean Garden, Inc. v. Marktrade Co., 953 F.2d 500, 505 (9th Cir.1991) (stating that act in commerce triggers subject-matter jurisdiction); Rickard v. Auto Publisher, Inc., 735 F.2d 450, 453 n. 1 (11th Cir.1984) (“In actions involving unregistered trademarks, the jurisdiction of the federal courts extends only to cases in which a false designation of origin has been ‘transported or used in commerce.’ ”). However, at least one circuit court has treated the requirement as a nonjurisdic-tional element of the cause of action. See World Carets, Inc. v. Dick Littrell’s New World Carpets, 438 F.2d 482, 488-89 (5th Cir.1971).

Decisions of the federal courts of appeals do not bind Texas courts, although they are received with respectful consideration. Hayes v. Pin Oak Petroleum, Inc., 798 S.W.2d 668, 672 n. 5 (Tex.App.-Austin 1990, writ denied). Texas state courts “are free to interpret federal law independently, though in the first instance we typically seek guidance from among the decisions of the lower federal courts.” Kiefer v. Continental Airlines, Inc., 882 S.W.2d 496, 502 (Tex.App.-Houston [1st Dist.] 1994), aff'd, 920 S.W.2d 274 (Tex.1996). Unless a federal statute provides for exclusive federal jurisdiction, state courts have the authority to render binding decisions based on their interpretation of federal law. ASARCO v. Kadish, 490 U.S. 605, 617, 109 S.Ct. 2037, 2045, 104 L.Ed.2d 696 (1989).

Unlike federal courts, in which the authority to adjudicate must be established for each case, Texas district courts are courts of general jurisdiction, and subject-matter jurisdiction over a cause of action is presumed unless a contrary showing is made. Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71, 75 (Tex.2000). In Kazi, our supreme court held that the statutory requirement in that case was not jurisdictional.⁴ Id. at 73. The court concluded that a plaintiffs failure to establish a statutory prerequisite does not deprive the trial court of subject-matter jurisdiction over the plaintiffs claim if the statutory prerequisite is merely a condition on which the plaintiffs right to relief depends. Id. at 76-77. Thus, a statutory requirement may be mandatory without being jurisdictional. Id. at 76. Compliance with nonjurisdictional, mandatory requirements can be waived if not timely asserted. Univ. of Tex. Sw. Med. Ctr. v. Loutzenhiser, 140 S.W.3d 351, 359 (Tex.2004). However, subject-matter jurisdiction may not be waived by the parties and may be raised for the first time on appeal. Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 445 (Tex.1993).

Appellant has made no showing that the “in commerce” requirement is jurisdictional, and we do not so interpret the language of the Lanham Act. Rather, here, as in Kazi, the right to maintain a suit for trade dress infringement goes to the right of the plaintiff to obtain relief, not to the right of the court to entertain the suit. See Kazi, 12 S.W.3d at 75, 76-77. Safe Cab did not object in the trial court that the alleged infringement of the Lanham Act did not occur “in commerce.” Therefore, Safe Cab waived its right to require Yellow Cab to prove that the alleged infringement affected interstate commerce.

Accordingly, we overrule Safe Cab’s first point of error.

Jury Charge⁵

In its third point of error, Safe Cab asserts that the trial court erred in submitting an erroneous definition of “secondary meaning” in the jury charge. Yellow Cab first contends that Safe Cab waived this point of error because it did not properly object.

The Texas Supreme Court has adopted the following test for preservation of charge error: Did the trial court know of and overrule the substance of the complaint at a time when the court could have, but did not, correct the problem in the charge? See State Dep’t of Highways & Pub. Transp. v. Payne, 838 S.W.2d 235, 241 (Tex.1992) (holding that there “should be but one test for determining if a party has preserved error in the jury charge, and that is whether the party made the trial court aware of the complaint, timely and plainly, and obtained a ruling”). Therefore, an objection to a defective instruction is sufficient to preserve error, and a request using substantially correct language is not required. Spencer v. Eagle Star Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex.1994).

In this case, the proposed jury charge stated that “ ‘secondary meaning’ means that the color at issue has acquired a meaning beyond the primary meaning, by having become associated by use, promotion or advertising, in the public mind with the business of YELLOW CAB.” At the charge conference, Safe Cab objected to the definition of secondary meaning, stating,

In addition to Question No. 1, the defense has previously submitted for inclusion a definition of secondary meaning, additional information regarding color; and we would ask that our definition of color — or the portion of secondary meaning relating to color — specifically that color may acquire secondary meaning — may have — I’m sorry — that—the portion we have submitted previously to the Court that talks in terms of for color [sic] to acquire secondary meaning requires in the minds of the consuming public the color has become uniquely linked with only one provider of the service to the exclusion of all other providers of the service as causes confusion to its origin. We think that should be included in the “secondary meaning” definition in Question No. 1, Your Hon- or. We ask that it be included.

The trial court then stated, “Court notes your objection to the lack of inclusion of the terminology regarding color. Court overrules said objection.” The trial court clearly understood Safe Cab’s complaint and ruled on it. Therefore, we conclude that Safe Cab preserved its complaint.

Yellow Cab argues, in support of the jury charge in this case, that the definition provided by the trial court is more faithful to the Supreme Court opinion in Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 766 n. 4, 112 S.Ct. 2753, 2756 n. 4, 120 L.Ed.2d 615 (1992), and “accepted jury submission practice” than Safe Cab’s proposed language.

In Two Pesos, the Supreme Court noted that secondary meaning “is used generally to indicate that a mark or dress ‘has come through use to be uniquely associated with a specific source.’” Id. (citing Restatement (Third) of Unfair Competition § 13 cmt. e (1990)).⁶ The Court, relying its own precedent, then stated, “To establish secondary meaning, a manufacturer must show that, in the minds of the public, the primary significance of a product feature or term is to identify the source of the product rather than the product itself.” Id. (citing Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 851, n. 11, 102 S.Ct. 2182, 2187 n. 11, 72 L.Ed.2d 606 (1982)) (emphasis added). Yellow Cab suggests that the charge given in this case is correct when compared with the model charge in a treatise on federal pattern jury charges. That model charge states,

A word or phrase that is merely descriptive can still become a trademark if such a secondary meaning has been developed for it by usage in the marketplace. It is not necessary for plaintiff [] to prove that all or even a majority of the consuming public understands this secondary meaning. What must be shown by the evidence is that a significant number of the consuming public have associated [term ] with plaintiff [ ] before [idate ].

3A Kevin F. O’Malley, Jay E. Grenig & William C. Lee, FedeRal JURY Practice & Instructions § 159.63 (5th ed.2001). The same treatise also states that trade dress acquires secondary meaning “when it has been used in such a way that its primary significance in the minds of the prospective purchasers is not the [dress] itself, but the identification of the [dress] with a single source.” Id. Clearly, the latter definition is relying on Supreme Court precedent. Two Pesos, 505 U.S. at 766 n. 4, 112 S.Ct. at 2756 n. 4; see also Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 210, 120 S.Ct. 1339, 1343, 146 L.Ed.2d 182 (2000) (defining secondary meaning as occurring “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.”).

The instruction given to the jury in this case did not track either the instruction in the federal model charge or the language found in Two Pesos or Wal-Mart. The jury charge asked only that the “color at issue has acquired a meaning beyond the primary meaning, by having become associated by use, promotion or advertising, in the public mind with the business of YELLOW CAB.” The definitions propounded by the Supreme Court ask for more than the “association” of a color through advertising and other promotional activities; the correct definition requires that the trade dress be “uniquely associated with a specific source” and “identify the source of the product rather than the product itself.”

We conclude that the jury charge definition strayed from the definition of secondary meaning as set out by the Supreme Court. We further conclude that the erroneous definition was harmful because it probably caused the rendition of an improper judgment. See Tex.R.App. P. 41.1(a). Here, there was no evidence of a unique association with a specific source— a specific taxicab company. There was evidence that approximately 40 taxicab companies in Houston used a predominately yellow color scheme and that some of those companies had operated in the City of Houston for at least 10 years. This evidence was uncontested. The evidence also established that Yellow Cab was, by far, the largest of these companies, having in excess of 700 cabs on the streets of Houston daily. Therefore, it is possible that the public may have come to associate the color yellow with Yellow Cab. However, it is equally possible that the public is aware that not all yellow cabs are Yellow Cabs.

The definition in the court’s charge permitted the jury to find that the color yellow had acquired a secondary meaning if it was merely “associated by use, promotion or advertising with Yellow Cab,” as opposed to being “uniquely associated ” with only Yellow Cab (the single source). It is quite a different thing to tell a jury it must find an association through advertising and promotion as opposed to finding a unique association with a specific source of the product and identifying the source rather than the product. The charge definition did not require a rigorous enough inquiry on the part of the jury, in line with Supreme Court precedent, and therefore the jury would probably have reached a different result had it been given the correct definition.

We hold that the trial court erred in providing an erroneous definition of secondary meaning in the jury charge and that Safe Cab was harmed by that error. Accordingly, we sustain Safe Cab’s third point of error.

CONCLUSION

Because we have sustained Safe Cab’s challenge to the jury charge definition of secondary meaning, we need not reach its second point of error complaining that there was no finding of irreparable harm— an element of an unfair competition claim.⁷ Likewise, because Safe Cab’s fourth, fifth, and sixth points of error challenging the legal and factual sufficiency of the evidence are remand points, we need not reach them.

We reverse the judgment of the trial court and remand the case for further proceedings.

Justice KEYES, dissents.

1 . Trade dress under section 43(a) of the Lan-ham Act consists of the total image of a product or service, including product features such as design, size, shape, color, packaging labels, color combinations, graphics, or service business features such as retail decor, architectural features, menus, restaurant layouts, styles of service, costumes, and occasionally marketing techniques as well. 2 Anne G. Lalonde, Karen Green & Jerome Gilson. Trademark Protection & Practice § 2A.01[1] (59th ed.2006).

2 . See 15 U.S.C.S. § 1125(a) (LexisNexis 2006).

3 . Safe Cab had only one taxi.

4 . In so holding, Kazi overruled Mingus v. Wadley, 115 Tex. 551, 285 S.W. 1084, 1087 (1926), which held that "where the cause of action and remedy for its enforcement are derived not from the common law but from the statute, the statutory provisions are mandatory and exclusive, and must be complied with in all respects or the action is not maintainable.” Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71, 76 (Tex.2000). Thus, Kazi abolished the jurisdictional distinction drawn in Mingus between common law and statutory causes of action.

5 . Generally, a reviewing court must consider rendition points before considering remand points. Tex.R.App. P. 43.3; Pruitt v. Republic Bankers Life Ins. Co., 491 S.W.2d 109, 112 (Tex. 1973). Therefore, we would usually consider Safe Cab’s legal sufficiency point of error first. However, Safe Cab did not move for a directed verdict, file a motion for judgment notwithstanding the verdict, or otherwise preserve its no-evidence complaint except in its motion for new trial. See Horrocks v. Tex. Dep’t of Transp., 852 S.W.2d 498, 499 (Tex. 1993) (holding that appeals court can only remand for new trial when that is only relief asked for by parties below). Therefore, because Safe Cab asked only for a new trial, we can only remand for a new trial.

6 . Although the federal courts of appeals’ holdings are not binding on Texas appellate courts, Hayes v. Pin Oak Petroleum, Inc., 798 S.W.2d 668, 672 n. 5 (Tex.App.-Austin 1990, writ denied), the definition of secondary meaning involves a federal question under the Lanham Act. Therefore, we are bound by the United States Supreme Court’s holding in this area. See Sharp v. Caterpillar, Inc., 932 S.W.2d 230, 235 (Tex.App.-Austin 1996, writ denied) (holding same).

7 . Liability for unfair competition requires a “finding of some independent substantive tort or other illegal conduct.” Schoellkopf v. Pledger, 778 S.W.2d 897, 904 (Tex.App.-Dallas 1989, no writ). Because there was error in the jury charge submission of Yellow Cab’s trade infringement cause of action (the independent tort supporting the unfair competition claim), we need not reach this point of error relating to unfair competition. Id.