throbber
REVISED, May 27, 1998
`IN THE UNITED STATES COURT OF APPEALS
`FOR THE FIFTH CIRCUIT
`_____________________
`No. 97-20096
`_____________________
`
`ELVIS PRESLEY ENTERPRISES, INCORPORATED,
`Plaintiff-Appellant,
`
`v.
`BARRY CAPECE, A United States Citizen; VELVET
`LIMITED, A Texas Limited Partnership; AUDLEY
`INCORPORATED, A Texas Corporation,
`Defendants-Appellees.
`_________________________________________________________________
`Appeal from the United States District Court
`for the Southern District of Texas
`_________________________________________________________________
`May 7, 1998
`Before REYNALDO G. GARZA, KING, and BENAVIDES, Circuit Judges.
`KING, Circuit Judge:
`Plaintiff-appellant Elvis Presley Enterprises, Inc. appeals
`the district court’s judgment that defendants-appellees’ service
`mark, “The Velvet Elvis,” does not infringe or dilute its federal
`and common-law trademarks and does not violate its right of
`publicity in Elvis Presley’s name. See Elvis Presley Enters. v.
`Capece, 950 F. Supp. 783 (S.D. Tex. 1996). Because the district
`court failed to consider the impact of defendants-appellees’
`advertising practices on their use of the service mark and
`misapplied the doctrine of parody in its determination that “The
`Velvet Elvis” mark did not infringe Elvis Presley Enterprises,
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`

`
`Inc.’s marks, we reverse the district court’s judgment on the
`trademark infringement claims and remand the case for entry of an
`injunction enjoining the use of the infringing mark.
`I. BACKGROUND
`Plaintiff-appellant Elvis Presley Enterprises, Inc. (EPE) is
`the assignee and registrant of all trademarks, copyrights, and
`publicity rights belonging to the Elvis Presley estate. EPE has
`at least seventeen federal trademark registrations, as well as
`common-law trademarks, for “Elvis Presley” or “Elvis” and other
`registrations for his likeness. However, none of these marks is
`registered for use in the restaurant and tavern business. Prior
`to trial, EPE announced plans to open a Memphis nightclub as part
`of a possible worldwide chain. The Memphis nightclub opened
`subsequent to trial. EPE licenses a wide variety of products and
`operates Graceland, Elvis’s home, as a tourist attraction with
`adjacent retail stores and restaurants. Over 700,000 visitors
`per year come from all fifty states and from around the world to
`visit Graceland. Merchandise sales have brought in over $20
`million in revenue over a five-year period and account for the
`largest portion of EPE’s revenue.
`In April 1991, defendant-appellee Barry Capece, operating
`through the limited partnership Beers ’R’ Us, opened a nightclub
`on Kipling Street in Houston, Texas called “The Velvet Elvis.”
`On August 28, 1991, Capece filed a federal service mark
`application for “The Velvet Elvis” for restaurant and tavern
`services with the United States Patent and Trademark Office
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`(PTO). In December 1992, the service mark was published in the
`Official Gazette of the United States Patent and Trademark Office
`as required by 15 U.S.C. § 1062(a). EPE was aware of this
`publication, but did not file an opposition to the mark’s
`registration within thirty days under 15 U.S.C. § 1063.
`Accordingly, the PTO issued a service mark registration to Capece
`for use of “The Velvet Elvis” mark on March 9, 1993. The Kipling
`Street nightclub closed in July 1993 for business reasons.
`After the Kipling Street location’s closing, Capece began
`soliciting investors to reopen the nightclub at a new location.
`The new nightclub, to be located on Richmond Avenue, would have
`the same name, “The Velvet Elvis,” but it would be run by a new
`limited partnership, Velvet, Ltd. Audley, Inc. is the general
`partner of Velvet, Ltd., and Capece is the sole shareholder of
`Audley, Inc.1 Capece began renovating the new location in
`January 1994. In July 1994, EPE contacted Capece by letter,
`threatening him with legal action if the bar opened with “Elvis”
`in its name. The Richmond Avenue location opened in August 1994
`under the name “The Velvet Elvis.”
`The Defendants’ bar serves a wide variety of food and
`liquor, including premium scotches and bourbons. The menu items
`range from appetizers to full entrees. Live music is regularly
`featured at the bar, and the bar claims to be the first cigar bar
`in Houston. Its decor includes velvet paintings of celebrities
`
` 1 Hereinafter, we will refer to Barry Capece; Velvet, Ltd.;
`and Audley, Inc. collectively as the Defendants.
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`and female nudes, including ones of Elvis and a bare-chested Mona
`Lisa. Other “eclectic” decorations include lava lamps, cheap
`ceramic sculptures, beaded curtains, and vinyl furniture.
`Playboy centerfolds cover the men’s room walls.
`In addition to the velvet painting of Elvis, the bar’s menu
`and decor include other Elvis references. The menu includes
`“Love Me Blenders,” a type of frozen drink; peanut butter and
`banana sandwiches, a favorite of Elvis’s; and “Your Football
`Hound Dog,” a hotdog. The menu bears the caption “The King of
`Dive Bars,” and one menu publicized “Oscar at The Elvis,” an
`Academy Awards charity benefit to be held at the bar. Numerous
`magazine photographs of Elvis, a statuette of Elvis playing the
`guitar, and a bust of Elvis were also among the decorations. By
`the time of trial, many of these decorations had been removed
`from the Defendants’ bar and replaced with non-Elvis items.
`Pictures and references to Elvis Presley appeared in
`advertising both for the Kipling Street location and for the
`Richmond Avenue location from the date it opened through early
`1995, and some ads emphasized the “Elvis” portion of the name by
`“boldly display[ing] the ‘Elvis’ portion of ‘The Velvet Elvis’
`insignia with an almost unnoticeable ‘Velvet’ appearing alongside
`in smaller script.” Elvis Presley Enters. v. Capece, 950 F.
`Supp. 783, 789 (S.D. Tex. 1996). The Defendants made direct
`references to Elvis and Graceland in advertisements with phrases
`such as “The King Lives,” “Viva la Elvis,” “Hunka-Hunka Happy
`Hour,” and “Elvis has not left the building.” Advertisements
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`also included a crown logo above the “V” in “The Velvet Elvis”
`mark. Advertised promotional events at the Defendants’ bar have
`included parties commemorating Elvis’s birth and death and
`appearances by Elvis impersonators and Elvis Presley’s drummer.
`Some advertisements publicizing the opening of the Richmond
`Avenue location included direct references to Elvis and used the
`tag-line “the legend continues” without using “The Velvet Elvis”
`mark.
`
`In April 1995, EPE filed suit against the Defendants,
`alleging claims for federal and common-law unfair competition and
`trademark infringement, federal trademark dilution, and violation
`of its state-law rights of publicity in Elvis Presley’s name and
`likeness. EPE sought injunctive relief, costs, attorneys’ fees,
`and an order to the Commissioner of Patents and Trademarks to
`cancel Capece’s registration for “The Velvet Elvis.” The case
`was tried to the district court, which ruled in favor of EPE on
`its claims of trademark infringement and unfair competition
`relating to the Defendants’ advertising practices, but not those
`claims relating to their use of “The Velvet Elvis” service mark.
`Id. at 796-97. In addition, the court ruled in favor of EPE on
`its right of publicity claim in relation to the use of Elvis’s
`name and likeness, but again not in relation to the use of “The
`Velvet Elvis” service mark. Id. at 801-02. As to the claims
`upon which EPE succeeded, the district court granted injunctive
`relief barring the use, in connection with the promotion or
`advertising of the bar, of “the image or likeness of Elvis
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`Presley, phrases that are inextricably linked to the identity of
`Elvis, or from displaying the ‘Elvis’ portion of their service
`mark in print larger than that used for its counterpart
`‘Velvet.’” Id. at 803. Upon all other claims, the district
`court ruled in favor of the Defendants and denied all other
`relief. Id. EPE now appeals.
`II. DISCUSSION
`EPE has appealed that portion of the district court’s
`judgment denying relief on its trademark infringement claims, its
`federal dilution claim, and its right of publicity claim based
`only upon the Defendants’ use of “The Velvet Elvis” mark and the
`district court’s denial of an accounting of profits and
`attorneys’ fees. Because it ruled in favor of the Defendants,
`the district court did not reach their defenses of laches or
`acquiescence. The Defendants reassert these defenses on appeal
`as alternative bases for affirming the district court’s
`judgment.2 We consider each issue in turn.
`A.
`Trademark Infringement
`The district court clearly stated EPE’s claim:
`[EPE] claims the inclusion of its “Elvis” trademark in
`the service mark “The Velvet Elvis” coupled with
`Defendants’ use of the image and likeness of Elvis
`
` 2 The Defendants asserted a First Amendment defense to
`trademark infringement below, but they do not reassert it on
`appeal, thus abandoning the defense. See Brinkman v. Dallas
`County Deputy Sheriff Abner, 813 F.2d 744, 748 (5th Cir. 1987)
`(“We will not raise or discuss legal issues that [appellant] has
`failed to assert.”); Fehlhaber v. Fehlhaber, 681 F.2d 1015, 1029
`(5th Cir. Unit B 1982) (noting that a failure to brief and argue
`a constitutional defense is grounds for finding that the defense
`has been abandoned).
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`Presley in advertising, promoting, and rendering bar
`services creates confusion as to whether EPE licensed,
`approved, sponsored, endorsed or is otherwise
`affiliated with “The Velvet Elvis,” constituting unfair
`competition and trademark infringement under the common
`law and Lanham Act.
`Id. at 789. The district court also correctly stated the
`generally applicable law in this circuit to a trademark
`infringement claim. Id. at 789-91. First, we will summarize
`this applicable law and then examine the district court’s
`decision.
`Applicable law
`1.
`For EPE to prevail on its trademark infringement claim, it
`must show that the Defendants’ use of “The Velvet Elvis” mark and
`image, likeness, and other referents to Elvis Presley creates a
`likelihood of confusion in the minds of potential consumers as to
`the source, affiliation, or sponsorship of the Defendants’ bar.
`See Society of Fin. Exam’rs v. National Ass’n of Certified Fraud
`Exam’rs, Inc., 41 F.3d 223, 227 (5th Cir.), cert. denied, 515
`U.S. 1103 (1995); Oreck Corp. v. U.S. Floor Sys., Inc., 803 F.2d
`166, 170 (5th Cir. 1986); see also 15 U.S.C. §§ 1114(1),
`1125(a)(1)(A). Liability for trademark infringement hinges upon
`whether a likelihood of confusion exists between the marks at
`issue. See Society of Fin. Exam’rs, 41 F.3d at 227. Likelihood
`of confusion is synonymous with a probability of confusion, which
`is more than a mere possibility of confusion. See Blue Bell Bio-
`Med. v. Cin-Bad, Inc., 864 F.2d 1253, 1260 (5th Cir. 1989); see
`also 3 J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION
`§ 23:3 (4th ed. 1997). A determination of a likelihood of
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`confusion under federal law is the same as the determination of a
`likelihood of confusion under Texas law for a trademark
`infringement claim. See Zapata Corp. v. Zapata Trading Int’l,
`Inc., 841 S.W.2d 45, 47 (Tex. App.--Houston [14th Dist.] 1992, no
`writ) (applying Texas law to a trademark infringement claim); see
`also Blue Bell Bio-Med., 864 F.2d at 1261 (citing Chevron Chem.
`Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d 695, 706 (5th
`Cir. Unit A Oct. 1981) (applying Texas law to an unfair trade
`practices claim)).3
`In determining whether a likelihood of confusion exists,
`this court considers the following nonexhaustive list of factors:
`(1) the type of trademark allegedly infringed, (2) the similarity
`between the two marks, (3) the similarity of the products or
`services, (4) the identity of the retail outlets and purchasers,
`(5) the identity of the advertising media used, (6) the
`defendant’s intent, and (7) any evidence of actual confusion.
`See Conan Properties, Inc. v. Conans Pizza, Inc., 752 F.2d 145,
`149 (5th Cir. 1985). No one factor is dispositive, and a finding
`of a likelihood of confusion does not even require a positive
`
` 3 The district court found that Texas law applied in its
`discussion of EPE’s statutory right of publicity. Elvis Presley
`Enters., 950 F. Supp. at 800-01. No explicit choice-of-law
`determination was made in relation to the state trademark or
`unfair competition claims. For the same reasons that the
`district court stated in its opinion in relation to the right of
`publicity, id., it would have determined that Texas law applied
`to the trademark infringement claims. Because EPE does not
`dispute this determination by the district court, we will follow
`the district court and apply the laws of Texas to all the state
`law claims. See Snydergeneral Corp. v. Continental Ins. Co., 133
`F.3d 373, 375 (5th Cir. 1998).
`
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`finding on a majority of these “digits of confusion.” Id. at
`150; see also Society of Fin. Exam’rs, 41 F.3d at 228 & n.15. In
`addition to the listed factors, a court is free to consider other
`relevant factors in determining whether a likelihood of confusion
`exists. See Armco, Inc. v. Armco Burglar Alarm Co., 693 F.2d
`1155, 1160-61 (5th Cir. 1982). Parody is one such other relevant
`factor that a court may consider in a likelihood-of-confusion
`analysis. See Dr. Seuss Enters. v. Penguin Books USA, Inc., 109
`F.3d 1394, 1405 (9th Cir.), cert. dismissed, 118 S. Ct. 27
`(1997); Nike, Inc. v. “Just Did It” Enters., 6 F.3d 1225, 1231
`(7th Cir. 1993) (holding that parody is not an affirmative
`defense to trademark infringement but that it can be an
`additional factor in a likelihood-of-confusion analysis);
`Jordache Enters. v. Hogg Wyld, Ltd., 828 F.2d 1482, 1486 (10th
`Cir. 1987) (considering parody as a factor in determining whether
`a likelihood of confusion exists).
`Neither the trademark and service mark registrations of EPE
`or the service mark registration of Capece disposes of EPE’s
`trademark infringement claim. Proof of registration of a service
`mark or trademark is only prima facie evidence of the
`registrant’s exclusive right to use the mark in commerce for the
`services specified in the registration. 15 U.S.C. § 1115(a).
`However, such proof does “not preclude another person from
`proving any legal or equitable defense or defect . . . which
`might have been asserted if such mark had not been registered.”
`Id. A registration only becomes conclusive evidence of a
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`registrant’s exclusive right to use a mark after five consecutive
`years of continuous use in commerce, subject to a few enumerated
`defenses. Id. §§ 1065, 1115(b). “The Velvet Elvis” mark has not
`become incontestable, but Capece’s registration of the mark
`constitutes prima facie evidence of the mark’s validity and that
`there is no likelihood of confusion with previously registered
`marks. See id. § 1115(a). EPE’s registration of the Elvis and
`Elvis Presley marks establishes that it is entitled to protection
`from infringement by junior users, thereby meeting the threshold
`requirement that the plaintiff must possess a protectible mark,
`which must be satisfied before infringement can be actionable.
`Id. §§ 1052(d), 1057, 1115(a); see also Soweco, Inc. v. Shell Oil
`Co., 617 F.2d 1178, 1184 (5th Cir. 1980).
`2.
`The decision below
`After correctly summarizing the applicable law, the district
`court then proceeded to consider EPE’s trademark infringement and
`unfair competition claims. In doing so, the court explicitly
`isolated its consideration of “The Velvet Elvis” mark and the
`bar’s decor from any consideration of the Defendants’ advertising
`and promotional practices. Elvis Presley Enters., 950 F. Supp.
`at 791, 797.
`Service mark and the bar’s decor
`a.
`Beginning with the bar’s decor and “The Velvet Elvis” mark,
`the district court considered each of the digits of confusion in
`turn. First, on the type of mark, the district court found that
`EPE has strong marks, but that the “Defendants’ use of the
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`service mark ‘The Velvet Elvis’ when combined with the bar’s
`gaudy decor form[s] an integral part of Defendants’ parody of the
`faddish, eclectic bars of the sixties.” Id. at 792. The
`district court found that the mark “symbolizes tacky, ‘cheesy,’
`velvet art, including, but not limited to velvet Elvis paintings”
`and that “the image of Elvis, conjured up by way of velvet
`paintings, has transcended into an iconoclastic form of art that
`has a specific meaning in our culture, which surpasses the
`identity of the man represented in the painting.” Id. Despite
`EPE’s strong marks which would normally be accorded broad
`protection, the bar’s parody of “faddish, eclectic bars of the
`sixties” led the district court to find that the name and decor
`of the bar would not mislead consumers and that this digit
`weighed against a likelihood of confusion. Id. at 793.
`Second, on the similarity of the marks, the district court
`found that “The Velvet Elvis” has a meaning independent from
`Elvis Presley. Specifically, the district court concluded that
`“The Velvet Elvis” “is symbolic of a faddish art style” that “has
`no specific connection with the singer other than the coincidence
`of its use to portray him.” Id. The district court noted that
`“‘[t]he proper test is whether the average consumer, upon
`encountering the allegedly infringing mark in the isolated
`circumstances of the marketplace . . . would be likely to confuse
`or associate the defendant or his services with the plaintiff.’”
`Id. (quoting American Auto. Ass’n v. AAA Ins. Agency, 618 F.
`Supp. 787, 792 (W.D. Tex. 1985)). Because of the dissimilarity
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`in the meanings of the Defendants’ and EPE’s marks, the district
`court found that this digit of confusion weighed against a
`likelihood of confusion. Id.
`Third, on the similarity of the products and services, the
`district court noted that, at the time of trial, there was some
`overlap between the parties’ services, but that the services were
`not directly competitive because they served different clienteles
`and had different purposes. Id. at 794. While noting that EPE’s
`plan to open a chain of Elvis Presley nightclubs might weigh in
`favor of a likelihood of confusion, the district court found that
`“the relative clarity of ‘The Velvet Elvis’’ parodic purpose”
`made it dissimilar from any business that EPE currently operates
`or has plans to operate. The district court thus concluded that
`this digit weighed against a likelihood of confusion. Id.
`Fourth, on the identity of the retail outlets and
`purchasers, the district court found that the majority of EPE’s
`customers are “middle-aged white women” and that the Defendants’
`customers are generally “young professionals, ranging in age from
`early twenties to late thirties.” Id. at 794. In the district
`court’s analysis, this disparity between the customers weighed
`against a likelihood of confusion. Id. (relying upon Amstar
`Corp. v. Domino’s Pizza, Inc., 615 F.2d 252, 262 (5th Cir.
`1980)).
`Fifth, on the identity of the advertising media, the
`district court found that this digit of confusion was irrelevant
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`to the determination of a likelihood of confusion because the
`parties operate in different geographic markets and because EPE
`admits that it rarely advertises because of the strength of its
`marks and Elvis’s image. Id. at 795.
`Sixth, on the Defendants’ intent, the district court found
`that the Defendants intended to parody “a time or concept from
`the sixties--the Las Vegas lounge scene, the velvet painting
`craze and perhaps indirectly, the country’s fascination with
`Elvis.” Id. The district court noted that the references to
`Elvis are indirect, but that the “use of his name is an essential
`part of the parody because the term, ‘velvet Elvis,’ has become a
`synonym for garish, passe black velvet art.” Id. The district
`court found that the Defendants’ intent weighed against a
`likelihood of confusion because the “clarity” of the Defendants’
`parody showed that they did not intend to confuse the public.
`Seventh, on actual confusion, the district court found that
`EPE failed to show any actual confusion because “each witness
`acknowledged that once inside ‘The Velvet Elvis’ and given an
`opportunity to look around, each had no doubt that the bar was
`not associated or in any way affiliated with EPE.” Id. at 796.
`Additionally, the district court considered the fact that the
`Defendants’ bar had been in operation at the Richmond Avenue
`location without any complaints or inquiries about the
`affiliation of the bar with EPE. Id. Relying upon this
`evidence, the district found that this digit of confusion weighed
`against a likelihood of confusion.
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`Having found none of the digits of confusion weighing in
`favor of a likelihood of confusion, the district court found no
`likelihood of confusion in relation to the bar’s decor or “The
`Velvet Elvis” mark, and therefore found that the use of the
`Defendants’ mark caused no infringement.
`b. The Defendants’ advertising practices
`The district court next turned to the Defendants’
`advertising practices and found that their advertising scheme
`would leave the ordinary customer with
`the distinct impression that the bar’s purpose was to
`pay tribute to Elvis Presley or to promote the sale of
`EPE related products and services. Consequently, use
`of this [advertising scheme] can only indicate a
`marketing scheme based on the tremendous drawing power
`of the Presley name and its ability to attract consumer
`interest and attention.
`Id. at 797. Further, the district court noted that the
`advertising, without the backdrop of the parody, “will cause
`confusion, leading customers to wonder if they might find [Elvis]
`memorabilia” in the bar and that the Defendants’ emphasis of the
`“Elvis” portion of the mark over the “Velvet” portion focusses
`attention on Elvis and “creat[es] a definite risk that consumers
`will identify the bar with Presley or EPE.” Id. Additionally,
`the district court found that the Defendants’ advertising caused
`actual confusion. Based upon the above findings the district
`court found that the Defendants’ advertising practices, including
`the actual configuration of the mark emphasizing “Elvis,”
`constituted trademark infringement and unfair competition. Id.
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`Despite the facts that the Defendants had discontinued the
`activity that the district court found to be infringing and that
`Capece stated that they would not resume the activity, the
`district court believed that “there [was] a definite possibility
`that ads including the image or likeness of Elvis Presley,
`references to Elvis, or his name disproportionately displayed may
`be used in connection with ‘The Velvet Elvis’ again.” Id. at
`803. Even after acknowledging that the cessation of activity
`might make an injunction unavailable, the court issued an
`injunction barring the use in the Defendants’ advertising of “the
`image and likeness of Elvis Presley, phrases that are
`inextricably linked to the identity of Elvis, or from displaying
`the ‘Elvis’ portion of their service mark in print larger than
`that used for its counterpart ‘Velvet.’” Id.
`3.
`Standard of review
`We review questions of law de novo and questions of fact for
`clear error. Joslyn Mfg. Co. v. Koppers Co., 40 F.3d 750, 753
`(5th Cir. 1994). Likelihood of confusion is a question of fact
`reviewed for clear error. Society of Fin. Exam’rs, 41 F.3d at
`225; Blue Bell Bio-Med., 864 F.2d at 1260. However, “the
`‘clearly erroneous’ standard of review does not insulate factual
`findings premised upon an erroneous view of controlling legal
`principles.” Johnson v. Hospital Corp. of Am., 95 F.3d 383, 395
`(5th Cir. 1996) (citing Johnson v. Uncle Ben’s, Inc., 628 F.2d
`419, 422 (5th Cir. 1980), vacated on other grounds, 451 U.S. 902
`(1981)); see also In re Auclair, 961 F.2d 65, 69 n.7 (5th Cir.
`
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`1992) (“Factual findings made under an erroneous view of the law
`are not binding on the appellate court.” (citing 1 STEVEN ALAN
`CHILDRESS & MARTHA S. DAVIS, FEDERAL STANDARDS OF REVIEW § 2.16, at 2-116
`(2d ed. 1992))). When a likelihood-of-confusion factual finding
`is “inextricably bound up” in, or infected by, a district court’s
`erroneous view of the law, we may conduct a de novo review of the
`fully-developed record before us. See Anheuser-Busch, Inc. v.
`Balducci Publications, 28 F.3d 769, 773 (8th Cir. 1994) (applying
`de novo review where the district court misapplied the First
`Amendment in relation to parody in its likelihood-of-confusion
`determination); see also Roto-Rooter Corp. v. O’Neal, 513 F.2d
`44, 46-47 (5th Cir. 1975) (reviewing the district court’s fact-
`finding on a likelihood of confusion de novo where it applied the
`incorrect legal standard).
`EPE argues that the district court erroneously applied
`parody to its likelihood-of-confusion analysis and that this
`error permeated its entire analysis, infecting nearly all of its
`findings of fact. Within EPE’s discussion of the digits of
`confusion, it also argues that the district court erred in
`isolating its consideration of the Defendants’ advertising from
`its consideration of whether “The Velvet Elvis” mark infringes
`EPE’s marks. If the district court erred as EPE argues, then we
`would review the likelihood-of-confusion finding de novo, rather
`than for clear error. We will consider the district court’s
`isolation of the advertising evidence from its analysis first.
`a.
`Isolated consideration of advertising
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`The use of a mark in advertising is highly probative of
`whether the mark creates a likelihood of confusion in relation to
`another mark. “Evidence of the context in which a mark is used
`on labels, packages, or in advertising material directed to the
`goods is probative of the reaction of prospective purchasers to
`the mark.” In re Abcor Dev. Corp., 588 F.2d 811, 814 (C.C.P.A.
`1978). Courts consider marks in the context that a customer
`perceives them in the marketplace, which includes their
`presentation in advertisements. See The Sports Auth., Inc. v.
`Prime Hospitality Corp., 89 F.3d 955, 962 (2d Cir. 1996)
`(considering the appearance of the mark in advertising in
`determining similarity of marks); Nikon Inc. v. Ikon Corp., 987
`F.2d 91, 94-95 (2d Cir. 1993) (same); Oreck Corp., 803 F.2d at
`171 (considering the presentation of the marks in advertising in
`determining the similarity of the marks and the defendant’s
`intent); Sun Banks of Fla., Inc. v. Sun Fed. Sav. & Loan Ass’n,
`651 F.2d 311, 318 (5th Cir. 1981) (considering the presentation
`of the marks in advertising in determining the similarity of the
`marks); National Ass’n of Blue Shield Plans v. United Bankers
`Life Ins. Co., 362 F.2d 374, 378 (5th Cir. 1966) (comparing marks
`as used in advertising in newspapers and on television where the
`black and white format did not allow for color distinctions); see
`also Sun-Maid Raisin Growers v. Sunaid Food Prods., Inc., 356
`F.2d 467, 469 (5th Cir. 1966) (“[I]t is the labels that the
`prospective purchaser sees. The trademarks cannot be isolated
`from the labels on which they appear.”).
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`In the case of a service mark, advertising is of even
`greater relevance because the mark cannot be actually affixed to
`the service, as a trademark is to the goods. Many prospective
`purchasers first encounter the mark in advertising, rather than
`on the product; therefore, the service mark cannot be isolated
`from the advertising in which it appears. See RESTATEMENT (THIRD)
`OF UNFAIR COMPETITION § 21(a)(i) (1995) (stating that “the overall
`impression created by the [marks] as they are used in marketing
`the respective goods and services” is relevant to how similar two
`marks are (emphasis added)). The Lanham Act itself makes
`advertising relevant to a service mark infringement claim. In
`order to infringe another’s mark, the infringing mark must be
`used in commerce. 15 U.S.C. § 1114. By definition, a service
`mark is used in commerce “when it is used or displayed in the
`sale or advertising of services.” Id. § 1127 (emphasis added).
`In summary, advertisements used by the alleged infringer, which
`incorporate the allegedly infringing mark, are relevant in
`determining whether a mark has been infringed. Advertisements
`are therefore relevant to the likelihood-of-confusion analysis.
`In addition, the context of the presentation of a mark,
`including advertising, is relevant to the meaning that the mark
`conveys. McGregor-Doniger Inc. v. Drizzle Inc., 599 F.2d 1126,
`1133 (2d Cir. 1979) (“‘[T]he setting in which a designation is
`used affects its appearance and colors the impression conveyed by
`it.’” (brackets in original) (quoting RESTATEMENT OF TORTS § 729
`cmt. b, at 593 (1938))). The Supreme Court has said that “[t]he
`
`18
`
`

`
`protection of trade-marks is the law’s recognition of the
`psychological function of symbols.” Mishawaka Rubber & Woolen
`Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 205 (1942). To
`understand a symbol’s psychological function, one must consider
`it in the context in which it is used and not in a vacuum. See
`American Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494
`F.2d 3, 11 & n.7 (5th Cir. 1974) (“[W]ords are chameleons, which
`reflect the color of their environment.”); 2 JEROME GILSON, TRADEMARK
`PROTECTION AND PRACTICE § 5.09[1], at 5-137 n.1 (Jeffrey M. Samuels
`ed., 1997) (noting that advertising is used by the holders of
`marks to “establish[] a sufficient aura of desirability to induce
`the public to purchase” their products and services). Courts
`have recognized this fact in determining whether a mark has
`developed a secondary meaning as an indicator of source
`independent from its everyday meaning, entitling the mark to
`protection under the Lanham Act. See, e.g., G. Heileman Brewing
`Co. v. Anheuser-Busch, Inc., 873 F.2d 985, 994-95 (7th Cir.
`1989); American Heritage Life Ins. Co, 494 F.2d at 12;
`Volkswagenwerk Aktiengesellschaft v. Rickard, 492 F.2d 474, 478
`(5th Cir. 1974). In an extreme example of a word taking on
`meaning from the context of its use, the Court of Customs and
`Patent Appeals found that the word “stain” connoted a “a state of
`relative cleanliness”--a meaning contrary to its normal meaning--
`when used in connection with a cleaning product, making marks
`that included “stain” and “clean” similar despite the aural and
`optical dissimilarity of the marks. See Proctor & Gamble Co. v.
`
`19
`
`

`
`Conway, 419 F.2d 1332, 1335-36 (C.C.P.A. 1970) (finding that
`“Mister Stain” infringed “Mr. Clean”).
`In this case, we are dealing with a service mark, “The
`Velvet Elvis,” which the Defendants have used at their business
`location and extensively in advertising. To consider only the
`Defendants’ use of the mark at their business location would
`ignore highly probative evidence of the meaning of the mark as
`the public encounters it in commerce and of the Defendants’
`intent in using the mark. By placing the mark in an Elvis
`context and in configuring the mark to highlight the “Elvis”
`portion of the mark, the Defendants have placed the mark in a
`context that does not alone connote tacky, cheesy art as the
`district court found. This contrary context of the mark has the
`ability to alter the psychological impact of the mark and must be
`considered in determining whether the Defendants’ mark creates a
`likelihood of confusion in relation to EPE’s marks. In failing
`to consider the Defendants’ presentation of “The Velvet Elvis”
`mark to the public in advertising in determining whether the
`Defendants’ use of their mark created a likelihood of confusion,
`the district court failed to consider the mark as perceived by
`the public. In addition, by isolating the advertising, the
`district court failed to consider how the Defendants configured
`the mark in emphasizing the “Elvis” portion of the name, which is
`highly probative of the impression they intended to convey.
`The fact that the Defendants ceased many of the problematic
`advertising practices after receiving the cease and desist letter
`
`20
`
`

`
`and shortly before EPE filed suit does not make the advertising
`any less relevant to the question of whether the Defendants’ use
`of the “The Velvet Elvis” mark infringes EPE’s marks. The
`cessation of infringing activity does not affect the
`determination of liability, but it may make an injunction
`unnecessary. See M-F-G Corp. v. Emra Corp., 817 F.2d 410, 411
`(7th Cir. 1987); see also Blisscraft v. United Plastics Co., 294
`F.2d 694, 702 (2d Cir. 1961) (finding it necessary to fully
`consider the liability issue and issue an injunction despite
`cessation of infringing use); Esquire, Inc. v. Esquire Slipper
`Mfg. Co., 243 F.2d 540, 542, 546 (1st Cir. 1957) (reversing a
`decision dismissing an action based upon the defendant’s promise
`to cease infringing conduct because the plaintiff was entitled to
`an enforceable judgment). In this

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