Fifth Circuit Issues Opinion in Trademark Dispute Regarding Fraternities and Sororities

by Jay Pate

Paddle Tramps was founded in 1961 in Lubbock, Texas by Kenneth Abraham to manufacture wooden paddles and decorations for fraternity and sorority members. Since then, Paddle Tramps has always sold products bearing the names of fraternities and sororities and has always used the names of fraternities and sororities to advertise its products.

In 2007, numerous fraternity and sorority organizations (the “Greek Organizations”) sued Abraham for patent infringement and unfair competition in Florida. The case was dismissed for improper venue. Then, in 2008, Abraham sued the Greek Organizations in Texas for a declaratory judgment that he was not infringing on their marks. The Greek Organizations asserted counterclaims for trademark infringement and unfair competition under the Lanham Act, 15 U.S.C. § 1051 et seq., and for unfair competition and trademark dilution under Texas state law. They sought monetary and injunctive relief.

Abraham defended the claims of infringement by arguing the Greek Organizations’ claims were barred by laches. Laches has three elements: (1) delay in asserting one’s trademark rights, (2) lack of excuse for the delay, and (3) undue prejudice to the alleged infringer caused by the delay. Following a trial, the jury found that Abraham had proved his laches defense.

The evidence at trial showed that Abraham began selling the paddles in 1961 by showing samples and taking orders at fraternity and sorority house visits. By the late 1960s, Abraham began wholesaling the component parts of paddles, such as wooden Greek and Roman letters and wood-carved crests, to college bookstores or craft stores for customers to buy and assemble. Also in the late 1960s, Abraham began distributing catalogues with fraternity and sorority names and crests to advertise his products. Abraham invested heavily in equipment, advertising, and employees. He had to completely rebuild his business three times—once after a fire in 1966, then after a tornado in 1970, and still again after another fire in Paddle Tramps’ manufacturing plant in 1980.

In 1997, Abraham established a website for Paddle Tramps. The website initially only advertised Paddle Tramps’ products, but in 2001 it began allowing customers to purchase items online. At all times the website displayed fraternity and sorority names, as well as Paddle Tramps’ products that reproduced fraternity and sorority crests. Abraham testified Paddle Tramps continued to sell almost exactly the same products it had been selling in the 1960s after the creation of the website in 1997.

In 1990, 29 years after Abraham founded Paddle Tramps, the Greek Organizations contacted him for the first time about licensing. The entity that contacted him was called Greek Properties, and the letter invited Abraham to join their group. Abraham did not respond. Then, in 1995, Dan Shaver sent a letter to Abraham on behalf of Sigma Chi threatening to sue Paddle Tramps for trademark infringement. Abraham’s son Kyle responded, saying Paddle Tramps was not interested in licensing Sigma Chi’s marks after continuously using Sigma Chi’s name and crest on its products for 34 years without complaint. Over the next 13 years, Shaver periodically sent additional letters to Abraham on behalf of an entity called Affinity Marketing Consultants. Then, the present litigation commenced.

Based on the jury verdict, the trial court granted Abraham’s motion for judgment, finding the laches defense precluded the monetary relief sought by the Greek Organizations. However, the court also determined laches did not bar entry of a permanent injunction on Abraham’s future use of the Greek Organizations’ marks. The court permanently enjoined Abraham from some future uses of the marks, concluding the “degree of prejudice” such an injunction would impose on Abraham was not significant enough to bar injunctive relief.

Both parties appealed and the Fifth Circuit Court of Appeals has now affirmed the judgment below. In Abraham v. Alpha Chi Omega, No. 12-10525 (5th Cir. Dec. 6, 2012), the court of appeals found that the jury had been properly instructed on the laches defense and found that the court properly weighed the relevant factors in fashioning its injunction.

As to the injunction, the Fifth Circuit explained that “once trademark infringement is shown, which Abraham does not dispute on appeal, the burden should be on Abraham to show why his conduct should not be enjoined.” In crafting an injunction, the trial court focused on “the degree of prejudice [Abraham] would suffer in the event the infringing use is enjoined.” The court of appeals held that “[t]he district court did not abuse its discretion in crafting an injunction to balance the equities.” First, the court rejected Abraham’s argument that the injunction was too broad:

The injunction prevents Abraham from selling products that make up less than 2.44% of his total sales. This will not put Abraham out of business. The infringing item Abraham can continue to sell, the double raised crest backing, is the product Abraham contended drove his sales of other non-infringing products—the only item that if enjoined from selling, would cause Abraham substantial prejudice.

Then, the court rejected the argument that it was not broad enough:

The Greek Organizations assert they deserve a comprehensive injunction that covers the double raised crest backing. As we have discussed, however, the district court properly balanced the equities in resolving this dispute and did not abuse its discretion in fashioning injunctive relief.

The full opinion is available online.

Intellectual Property Law and Our Law Firm

At Heygood, Orr & Pearson, our attorneys have handled numerous patent matters including prosecuting claims for infringement. Our lawyers have handled claims brought by a large local company for infringement of its rail car patent, claims by a local inventor for infringement of her patent for a childcare product and claims by an Israeli company against a Fortune 500 company for infringement of its wireless technology patent. Our firm has also represented a client suing a large American pharmaceutical company for interfering with his patent rights to liposome technology.

Our attorneys are capable of litigating patent infringement claims throughout the country. In addition, firm attorney John “Jay” Pate is licensed to prosecute patents before the U.S. Patent and Trademark Office.

Beyond our specific experience in the field of intellectual property, our ability to prosecute patent infringement action is aided by our extensive trial experience in general. While technical knowledge and familiarity with patent rules is a must for attorneys handling patent infringement claims, there is no substitute for courtroom experience. At Heygood, Orr & Pearson, our seasoned litigators have the experience to take even the most complex patent case and explain it in terms a jury can understand. We have a track record of proven success representing businesses large and small. Several of our trial lawyers are board certified* and many of them have been selected as Super Lawyers in the State of Texas for several years in a row.** Our firm is AV-rated, the highest legal and ethical ranking available from the leading law firm ranking service, Martindale-Hubbell.

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Michael Heygood, James Craig Orr, Jr. and Eric Pearson are all Board Certified in Personal Injury Trial Law — Texas Board of Legal Specialization.

** Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2012.