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Tempur-Pedic North America, LLC v. Mattress Firm, Inc.

United States District Court, S.D. Texas, Houston Division

July 11, 2017

Tempur-Pedic North America, LLC, Sealy Mattress Company, Dan-Foam APS, and Sealy Technology LLC, Plaintiffs,
v.
Mattress Firm, Inc., Defendant.

          MEMORANDUM OPINION & ORDER

          Gray H. Miller United States District Judge

         Pending before the court are (1) the plaintiffs' second emergency motion for a preliminary injunction (Dkt. 34); (2) the plaintiffs' motion to strike portions of the defendant's supplemental brief (Dkt. 56); and (3) the plaintiffs' third emergency motion for preliminary injunction (Dkt. 60). After considering the motions, responses, the arguments made at the hearing, supplemental briefing, evidentiary record, and the applicable law, the court finds that (1) the plaintiffs' second motion for a preliminary injunction (Dkt. 34) should be GRANTED IN PART; (2) the plaintiffs' motion to strike portions of the defendant's supplemental brief (Dkt. 56) should be GRANTED IN PART AND DENIED IN PART; and (3) the plaintiffs' third motion for a preliminary injunction (Dkt. 60) should be DENIED AS MOOT.

         I. Background

         This case involves an on-going business dispute between the plaintiffs, Tempur-Pedic North America, LCC (“Tempur-Pedic”), Sealy Mattress Company (“Sealy”), Dan-Foam APS, and Sealy Technology LLC (collectively “Tempur-Sealy”), and the defendant Mattress Firm, LLC (“Mattress Firm”). Dkts. 1, 27, 40, 59-1. Tempur-Sealy is a mattress manufacturer and distributor which owns trademarks for Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, Sterns and Foster, and others (collectively, “Tempur-Sealy Marks”). Dkt. 3, Exs. A, B. Mattress Firm is a mattress retailer that sold Tempur-Sealy branded mattresses. Dkt. 7 at 9.

         In January 2017, the parties dissolved their retailer agreements. Dkt. 46-1 (Master Retailer Agreements); Dkt. 59-1 at 3. Subsequently, the parties reached Letter Agreements to allow Mattress Firm to continue to order inventory and sell Tempur-Sealy products through April 2017. Id.; Dkt. 48-1-48-4 (Letter Agreements).

         A. Procedural History

         Following the termination of the retailer agreements, the parties disputed whether Mattress Firm had a contractual right to continue using Tempur-Sealy's intellectual property as it wound down sales of its remaining Tempur-Sealy inventory. See Dkt. 23. On March 30, 2017, Mattress Firm filed suit against Tempur-Pedic and Sealy in Texas state court seeking damages for breach of the Letter Agreements, damages for tortious interference with prospective business relationships, and a declaratory judgment that it can use Tempur-Sealy's intellectual property for the sale of its remaining inventory. Dkt. 19 at 2, Ex. A (Mattress Firm v. Tempur-Pedic N. Am., LLC, No. 2017-22062, 165th Judicial District Court of Harris County, Texas).

         On April 7, 2017, Tempur-Sealy filed a complaint in the Southern District of Texas against Mattress Firm for breach of contract and trademark infringement under common law and the Lanham Act. Dkt. 1. Tempur-Sealy amended its complaint three times to incorporate the allegations associated with its requests for injunctive relief. Dkts. 27, 40, 59-1.

         With its initial complaint, Tempur-Sealy filed its first motion for a temporary restraining order and preliminary injunctive relief. Dkt. 6. Tempur-Sealy claimed that Mattress Firm was violating its trademarks by continuing to use its intellectual property in advertising despite the termination of their retailer agreements. Id. Mattress Firm responded that it was permitted to use Tempur-Sealy Marks, per their contracts, while it sold its remaining Tempur-Sealy inventory. Dkt. 18. The court denied Tempur-Sealy's request for a temporary restraining order, and scheduled a hearing on its motion for a preliminary injunction. Dkt. 23. However, the parties reached an agreement and Tempur-Sealy withdrew its motion for injunctive relief. Dkts. 31, 59-1 at 13. Both parties agree that, as of May 8, 2017, Mattress Firm is no longer a Tempur-Sealy retailer. Id.; Dkt. 38 at 3.

         On May 16, 2017, Tempur-Sealy filed a second emergency motion for a preliminary injunction. Dkt. 34. In this motion, Tempur-Sealy argued that Mattress Firm was infringing on its trademarks with a web page designed to sell competing mattress products. Id.; Dkt. 35. Specifically, Tempur-Sealy complained that the Mattress Firm web page found at http://www.mattressfirm.com/Tempur-Pedic[1] (“Mattress Firm Web Page”)[2] uses Tempur-Sealy Marks in a way likely to confuse consumers. Dkt. 35 at 8. Tempur-Sealy also complained that Mattress Firm was purchasing advertisements on Google and Yahoo that incorporated Tempur-Sealy Marks to direct traffic to the Mattress Firm Web Page. Id. Mattress Firm responded, admitting to the existence and contents of its web page, but it asserted that its use of Tempur-Sealy Marks is allowable comparative advertising under the doctrine of nominative fair use. Dkt. 38 at 6-7.

         On May 23, 2017, the court held a preliminary injunction hearing. Dkt. 43. At the hearing, the court requested that the parties attempt to craft an agreed injunctive order within five days; if that failed, the court ordered the parties to provide supplemental briefings seven days later. Id. The parties failed to reach an agreement, and each filed supplemental briefings. Dkts. 54, 55. In its supplemental brief, Tempur-Sealy reasserted its request for injunctive relief barring Mattress Firm from using Tempur-Sealy Marks on its website or in any other advertising. Dkt. 54-1. In its supplemental brief, Mattress Firm, though expressing its opposition to an injunction, offered a proposed order that would limit its use of the Tempur-Sealy Marks while continuing to permit it to use the marks for comparative advertising. Dkt. 55 at 12 (referencing Dkt. 55-2).

         Mattress Firm's supplemental briefing also included evidence of a post-hearing revision to its web page. Dkt. 55, Ex. 1-A. Tempur-Sealy filed a motion to strike portions of Mattress Firm's supplemental brief. Dkt. 56. Mattress Firm responded. Dkt. 58.

         On June 16, 2017, Tempur-Sealy filed a third emergency motion for a preliminary injunction. Dkts. 60, 61. In its third motion, Tempur-Sealy complains that Mattress Firm is using the Tepur-Pedic name and mark in its advertising at http://www.sleepexperts.com (“Sleep Experts Web Page”) and through the purchase of advertisements on Google to direct traffic to the Sleep Experts Web Page. Dkt. 61 at 5-6. On the same day, Mattress Firm responded by filing a letter that it sent to opposing counsel explaining that the Sleep Expert Web Page belonged to a subsidiary company which merged with Mattress Firm on May 31, 2017. Dkt. 62, Ex. A. Mattress Firm's letter states that the advertisement for Tempur-Sealy products following the merger was inadvertent and that it was removed by the filing date of the third motion. Id.

         B. Websites and Web Advertising

         The subjects of the second and third motions for preliminary injunctions are the Mattress Firm Web Page and the Sleep Expert Web Page, which Tempur-Sealy alleges infringe on its marks. Dkts. 35, 61. Mattress Firm does not dispute any of the evidence presented regarding the contents of its web pages. Dkts. 38; 62. Rather, Mattress Firm argues that the court should consider its revisions to the two web pages to remove the alleged infringing conduct. Id.

         1. Mattress Firm Web Page

         The subject of Tempur-Sealy's second motion for a preliminary injunction is the Mattress Firm Web Page. Dkt. 35 at 11. This web page has gone through at least four revisions. Dkts. 35-2, Exs. A (“first revision”), C (“second revision”); Dkt. 38, Ex. A-3 (“third revision”); Dkt. 55-1, Ex. A (“latest revision”).[3] The Mattress Firm Web Page can be accessed by searching “Tempur-Pedic” with the Mattress Firm “Product Search” tool. Dkt. 35-2 (Fine Dec.). Beginning with the second revision, the Mattress Firm Web Page directs users to a second web page that advertises competing mattress brands. Dkt. 35-2, Ex. D; Dkt. 47-11.

         a. First and Second Revision

         The first and second revisions of the Mattress Firm Web Page contained a large banner at the top of the layout that headlines, in large font, “Tempur-Pedic Mattresses” and “Everything you need to know about Tempur-Pedic mattresses.” Dkt. 35-2, Ex. A. Above the banner, another smaller banner advertises “Same And Next Day Delivery.” Id. The first and second revisions of the web page contains several other banners that describe Tempur-Pedic mattresses, the Tempur-Pedic product lines, and the Tempur-Pedic company history. Id. Finally, at the bottom of the web page, there is a table comparing various Tempur-Pedic brand mattresses to competing brands. Id. These two revisions had similar features, but the second revision included more detailed graphics, added a “Learn More” button that directed users to different web page advertising competing mattress brands, and contained a small disclaimer of affiliation at the very bottom of the web page. Dkt. 35-2, Ex. C.

         b. Third Revision

         Mattress Firm's response describes the third revision of the Mattress Firm Web Page. Dkt. 38, Ex. A at 4-5 (describing the May 20, 2017 re-launch of the Mattress Firm Web Page). The third revision changes the headline text in the large-font banner from “Tempur Pedic Mattresses” to the generic phrase “Memory Foam Mattresses” and it removes the “same day delivery” banner. Dkt. 38, Ex. A-3. The “Learn More” button was changed to “Learn About Options.” Id. Finally, the disclaimer of affiliation was re-positioned at the top of the web page, right beneath the headline banner. Id. The third revision retains multiple banners describing Tempur-Pedic from the previous revisions and it also continues to include a comparative list, comparing Tempur-Pedic products to other mattress brands. Id.

         c. Latest Revision

         Mattress Firm claims in its supplemental briefing that it revised its web page one more time. Dkt. 55-1, Ex. A. The latest revision further reduces the number of times Tempur-Pedic is mentioned, deletes many of the Tempur-Pedic product descriptions, modifies the disclaimer to remove references to the termination of the parties retailer agreements, and changes the format of the comparative information into a more tabular form. Id.

         d. Google and Yahoo AdWords

         Additionally, Tempur-Sealy alleges that Mattress Firm purchased Google and Yahoo AdWords (collectively, “AdWords”) to direct internet traffic to the Mattress Firm Web Page following searches for phrases containing Tempur-Sealy brand names. Dkt. 35-2, Ex. B. Mattress Firm does not dispute that it purchased AdWords; however, its representative claims that it has at least temporarily ceased this practice. Dkt. 49 at 36; Dkt. 55 at 8. Mattress Firm counters that Tempur-Sealy purchases AdWords containing the trademarked brand name “Mattress Firm.” Dkt. 38, Exs. A (Goodman Dec.), A-1, A-2; B (Hochman Dec.); Dkt. 42 at 22, 30.

         2. Sleep Experts Web Page

         The subject of the third motion for preliminary injunction is the Sleep Experts Web Page. Dkts. 60; 60-1 (Fine Dec.). Tempur-Sealy alleges that this website has content on the “Sale” tab that uses the Tempur-Pedic logo combined with an advertisement that says “Get $300 in accessories.” Dkt. 60-1 at 2. Further, Tempur-Sealy alleges that when a user selects the “click here” button under the Tempur-Pedic logo, it brings up another website that sells competing mattress brands. Id. Finally, Tempur-Sealy alleges Mattress Firm purchased AdWords for various phrases that include “Tempur” and “Sealy” to direct traffic to the Sleep Experts Web Page. Id.

         II. Legal Standards

         A. Injunctive Relief

         A party seeking a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure must demonstrate four elements: (1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable injury if the injunction is denied; (3) that the threatened injury outweighs any prejudice the injunction might cause the defendant; and (4) that the injunction will not disserve the public interest. Bluefield Water Ass'n, Inc. v. City of Starkville, Miss., 577 F.3d 250, 252-53 (5th Cir. 2009); Affiliated Prof'l Home Health Care Agency v. Shalala, 164 F.3d 282, 285 (5th Cir. 1999). Injunctive relief, particularly at the preliminary stages of litigation, is an extraordinary remedy that requires an unequivocal showing of the need for the relief to issue. Valley v. Rapides Parish Sch. Bd., 118 F.3d 1047, 1050 (5th Cir. 1997). Thus, injunctive relief should only be granted where the movant has “clearly carried the burden of persuasion.” Bluefield Water Ass'n, 577 F.3d at 252-53; Anderson v. Jackson, 556 F.3d 351, 360 (5th Cir. 2009).

         B. Trademark Infringement

         To prevail on a claim of trademark infringement under the Lanham Act, the plaintiff must show: (1) it possesses a valid mark; and (2) the defendant's use of its trademarks creates a likelihood of confusion as to source, affiliation, or sponsorship. Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 193 (5th Cir. 1998). However, “mere reproduction of a trademark does not constitute trademark infringement if there is no likelihood of confusion.” 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 25:28 (4th ed. 2009). And, “likelihood of confusion” is not possible confusion, it is probable confusion. Bd. of Supervisors for LSU A&M Coll. v. Smack Apparel Co., 550 F.3d 465, 478 (5th Cir. 2008). In this respect, “[c]ontext is especially critical, ” and a court is required to “consider the marks in the context that a customer perceives them in the marketplace.” Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 485 (5th Cir. 2004).

         When a mark is used in advertisement, the court must consider the “digits of confusion” in assessing whether the advertising “creates a likelihood of confusion as to affiliation or endorsement.” House of Vacuums Inc., 381 F.3d at 483 (citing Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 537 (5th Cir. 1998), abrogated on ...


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