Master in Chancery Kim E. Ayvazian issued a final report in Ambient Heating & Cooling LLC v. Shepard, Jr., C.A. No. 9596-MA (Del. Ch. March 28, 2017), recommending that the Court of Chancery grant injunctive relief to a Delaware limited liability company seeking to enjoin a Delaware partnership from operating a heating, ventilation, and air conditioning (“HVAC”) business under a name and mark similar to its own.

In 2007, Petitioner Ambient Heating & Cooling, LLC (“Ambient LLC”) was formed to provide HVAC services in Kent and New Castle Counties. Ambient LLC’s mark, displayed on the company’s white truck and clothing, prominently features the word “Ambient” above the words “heating & cooling” in smaller letters. The company’s invoices and yard signs display the words “Ambient Heating & Cooling LLC”.

In January 2013, Respondents Ernest Shepherd and Christopher Ferguson formed a partnership to provide HVAC services in New Castle County under the name “Ambient” (the “Ambient Partnership”). The Ambient Partnership’s mark, displayed on its white truck, clothing, invoices, and yard signs prominently features the word “AMBIENT” in capital letters, with the image of a thermometer replacing the letter “I”. The words “heating” and “cooling” are below in smaller letters.

In April 2013, the managing member of Ambient LLC contacted Shepherd and asked him to change the name used by the Ambient Partnership, but Shepherd refused. Shepherd then attempted to register the name “Ambient” with the United States Trademark and Patent Office (“USTPO”). In the years that followed, customers and suppliers were confused by the presence of two Delaware HVAC businesses bearing the name “Ambient”. For example, Ambient LLC received invoices for parts ordered by the Ambient Partnership, and customers would call Ambient LLC’s phone number asking for Shepherd or Ferguson.

Ambient LLC contended that common law and the Delaware Deceptive Trade Practices Act (“the Act”) should prevent the Ambient Partnership from operating under the name Ambient. Under common law, a trademark is entitled to protection through prior exclusive use in the same market or from having acquired a secondary meaning. Respondents contended that Ambient LLC had not demonstrated exclusive use of the word “Ambient” in its trade name, because Ambient LLC had done no advertising since 2010 to associate the word “ambient” with Ambient LLC in the public’s mind. Additionally, they argued the word “Ambient” could not be trademarked, claiming that it is used often in the HVAC business and is merely descriptive, referring to the surrounding air. Ambient LLC responded that the word is not merely descriptive, because it does not describe the actual HVAC services that Ambient LLC offered. Respondents further argued that Ambient LLC had presented no market evidence that would support a finding of secondary meaning, but Ambient LLC claimed that Delaware case law does not require that small businesses procure a market survey to prove secondary meaning.

Master Ayvazian focused on Ambient LLC’s claims under the Act, which provides that a person engages in a deceptive trade practice if he engages in acts that cause a “likelihood of confusion” as to the source of services. To determine whether the names and marks of the Petitioner and the Respondents created a likelihood of confusion, Master Ayvazian needed to consider: (1) the degree of similarity between the names and marks; (2) the similarity of products for which the names and marks are used; (3) the area and manner of concurrent use; (4) the degree of care likely to be exercised by consumers; (5) the strength of the names and marks; (6) whether there has been actual confusion; and (7) the intent of the Respondents to benefit from the Petitioner’s good will and reputation.

Master Ayvazian found that the first three factors were satisfied, noting that the two marks used the same words, and that both businesses engaged in the HVAC trade, predominately to residential customers in New Castle County.

Regarding the fifth factor, Master Ayvazian found that “Ambient” was a strong mark. Until January 2013, Ambient LLC was the only Delaware HVAC business with a trade name and mark containing the words “ambient,” “heating,” and “cooling”. Although generic or descriptive names of products are not protected, when used as an adjective, the word “ambient” requires perception on the part of a customer to determine that the company is providing entire systems for controlling a physical environment, rather than just air conditioners and heaters. Regarding the sixth factor, Master Ayvazian noted the evidence of actual customer and supplier confusion.

Given that Shepherd refused to change the trade name of the Ambient Partnership, despite commencing operations just a few months earlier, and that he then attempted to register the trade name “Ambient Heating and Cooling” with the USTPO, Master Ayvazian found at least some intent to trade on the good will and reputation of Ambient LLC. Although no evidence was presented for the fourth factor, Master Ayvazian considered all the factors together and concluded that the Ambient Partnership infringed Ambient LLC’s trade name and violated the Act.

Master Ayvazian then found that the requirements for a permanent injunction were met, noting that Ambient LLC demonstrated that (1) its claim had actual merit; (2) it would suffer irreparable harm if injunctive relief were not granted; and (3) the balance of hardships favored Ambient LLC. Ambient LLC had suffered harm from actual confusion in the market, which likely would worsen over time. Addressing the third factor, Master Ayvazian reasoned that although the Ambient Partnership was the larger of the two businesses, it had the opportunity to change the name of its business before it became successful.