CASE SUMMARY

FACTS

America’s Best Franchising, Inc. (“ABF”) provides hotel franchising and other services to several hundred hotels in the United States. ABF began use of the 3 PALMS mark in 2008 in Florida, which expanded to at least eight 3 PALMS hotels in California, Georgia, South Carolina, Michigan, and Indiana. ABF promoted its 3 PALMS hotel services at trade shows, marketed the brand through its Internet website, and received reservations for 3 PALMS through the Internet. ABF sought concurrent-use registrations for three 3 PALMS design marks for hotel and motel services, claiming exclusive rights in the United States, except in Arizona where Roger Abbott (“Abbott”) had used his 3 PALMS mark for a single hotel located in Scottsdale, Arizona, since 2004. Abbott denied that ABF was entitled to the registration on the ground that “the Internet marketing, advertising and promotion of hotels by necessity has expanded [Abbott’s] territory nationwide or to something significantly greater than the state of Arizona,” with the Internet being the primary way his hotel rooms were sold. Abbott had also actively but unsuccessfully sought to expand his use to forty-fifty other hotels in Arizona, California, and New Mexico. The TTAB granted ABF’s concurrent use registrations.

ANALYSIS

After reviewing the law, burdens, and jurisdiction for concurrent-use proceedings, the TTAB found that the parties’ marks covered the same services offered in the same channels of trade (specifically, the Internet), and that the marks were at least somewhat similar due to their literal elements and use of palm trees. The proper question, though, was whether likelihood of confusion could be avoided by a geographic restriction. In answering that question “yes,” the TTAB focused on the numerous coexisting third-party uses of PALMS for hotel services, including: OCEANA PALMS, ROYAL PALMS, ROYALE PALMS, THE PALMS HOTEL, and THE PALMS HOTEL & SPA. Many of the hotels operating under the marks coexisted in the same state, advertised on the Internet, and many had valid and subsisting federal registrations without any geographic restrictions. Thus, Abbott’s mark was “quite weak” due to widespread third-party use throughout the country, thereby minimizing any likelihood of confusion.

The TTAB also found that a geographic restriction would make confusion unlikely because purchasers had been conditioned, when faced with PALM-formative hotel marks and names, to consider other factors when choosing a hotel. Because a hotel’s physical location is one of its most important features, hotel services are necessarily tied to a particular geographic location, even if offered by the same ultimate source. The TTAB found confusion was not likely since customers looking for a 3 PALMS hotel in Arizona would not find any of ABF’s hotels, all of which are outside of Arizona. Thus, extensive use of Internet marketing, even if it results in overlapping advertising, does not diminish the effect of a geographic restriction, since the Lanham Act’s concurrent use proviso is still valid even in the Internet age. Noting that Abbott sold hotel rooms only at his sole Arizona location under the mark, the TTAB concluded that most confusion would be eliminated once the location was understood by the consumer. Notably, the record reflected no instances of actual confusion, despite overlapping Internet advertising for about four years, and that Abbott’s hotel was familiar to consumers outside of Arizona.

Having found confusion unlikely with an appropriate geographic limitation, the TTAB proceeded to analyze and affirm the restriction proposed by ABF: all of the United States except Arizona. The TTAB found no persuasive evidence that Abbott had intended, or would in the future intend, to operate a 3 PALMS hotel outside of Arizona, particularly since none of his forty-fifty offers to operate such a hotel had been accepted. Abbott presented no documentary evidence of any expansion efforts, and his only evidence of future plans was through his own testimony and the testimony of friends and colleagues. ABF, on the other hand, had expanded steadily across the United States since adopting its mark in 2008, and was the first to file for federal registration of a 3 PALMS mark, making its restriction appropriate.

CONCLUSION

In many location-specific industries, like hotels and perhaps also restaurants, Internet advertising may not be not enough to establish a reputation beyond the home market or to serve as a strong basis for likelihood of confusion for even highly similar marks. Documentary evidence may be important to corroborate expansion efforts, even failed ones. Finally, filing for federal registration may provide a useful signal to the TTAB and others of a user’s intention to expand outside an initially limited geographic area.