Property, intangible

a blog about ownership of intellectual property rights and its licensing

Who Do You Associate “BorderFest” With?

There’s an interesting trademark ownership fact pattern as described by a Texas state appeals court in Vera v. City of Hidalgo. I find it interesting in two ways. First, there is no mention of the statutory or common law basis for the claim. It’s characterized as ownership of a cultural festival name, but the court does not mention the Lanham Act or any Texas statutory or common law. I find it curious to read an opinion where the standard of law for the underlying claim plays virtually no role.

The opinion is a review of cross-motions for a temporary injunction. The standard of review is described thus (citations omitted):

A temporary injunction’s purpose is to preserve the status quo of the litigation’s subject matter pending a trial on the merits. A temporary injunction is an extraordinary remedy and does not issue as a matter of right. To obtain a temporary injunction, the applicant must plead and prove three specific elements: (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. An injury is irreparable if the injured party cannot be adequately compensated in damages or if the damages cannot be measured by any certain pecuniary standard. Whether to grant or deny a temporary injunction is within the trial court’s sound discretion.

Second, the facts themselves are an interesting conundrum. The dispute is about who owns the mark “BorderFest” for an event held in the town of Hidalgo, Texas beginning sometime in the 1980s. Three months before the 2016 event, media outlets reported that the event would be in the neighboring town of McAllen instead. Plaintiff Joe Vera had been the city manager of Hidalgo but, lo and behold, had become the assistant city manager of McAllen. The interesting wrinkle was that the trademark had been federally registered in 2006 by “BorderFest Association,” an “unicorporated nonprofit association.” This incontestable registration, conclusive evidence of the Association’s ownership, played no role in the decision.

Trademarks associated with a locale, like a restaurant, are vexing, fact-specific ownership problems. Add to the mix the fact that it is an event, where many volunteers from many different entities pitch in to make it happen. Add here, add in that Joe Vera had been the executive director of the BorderFest Association while also the Hidalgo city manager. It’s quite the puzzle.

The testimony on the side of Hidalgo was that the city picked up a substantial part of the cost of hosting the event, including advertising expenses, sound and lighting expenses, and equipment rentals. The Association gave the city some money to defray expenses but not all of the cost. The city also provided support in the way of city workers during the festival. The city’s IT director said he helped create and design the website but Vera decided what information would be on the website. City employees built floats, built and manned food booths (under Vera’s direction), prepared the grounds, and erected perimeter fencing.

The former mayor of Hidalgo testified for the BorderFest Association, relating that BorderFest was brought about by the Association and that the city contributed cash and in-kind donations in exchange for the “fame.” Vera confirmed the same with his testimony. Vera also testified that the city demanded that it be named the owner of BorderFest after the 2015 event, after which the Association looked for a new city. The Association then learned that the city formed “Texas BorderFest LLC” and thereafter the Association contracted with McAllen for the festival.

The full analysis by the appeals court is this:

With regard to the trial court’s ruling granting Hidalgo’s temporary injunction, the record shows that Hidalgo sought a declaratory action seeking numerous declarations, including a judgment that it is the exclusive owner of BorderFest due to the actions of Vera. In the alternative, Hidalgo seeks judgment for “recovery of all additional personal property purchased with Hidalgo taxpayer money” which was misappropriated by Vera and the Association. Hidalgo also put forth evidence that it had expended a sizable amount of taxpayer money, manpower, and other efforts in planning and preparation for the 40th anniversary of BorderFest, which was eventually held shortly after the trial court’s temporary injunction order. The preliminary record further shows that BorderFest has been held exclusively in Hidalgo for the previous thirty-nine years and has brought the city “fame” over these years. The record further shows that the 40th anniversary of the festival being held in Hidalgo was threatened by the actions of the Association agreeing to hold the BorderFest festival in McAllen. Based on these facts, we hold that the trial court was within its discretion to grant Hidalgo’s temporary injunction application because Hidalgo plead and proved that it had (1) a cause of action against Vera and the Association; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim.

The court also affirmed the denial of the Association’s motion for temporary injunction, but we don’t have any insight into the trial court’s reasoning:

With regard to the Association’s separate application for temporary injunction, we note that the trial court found that the Association had “one or more causes of action” against the city, but also found that the Association “did not use the BorderFest registered trademark designation” and had “no assumed name certification” on file with Hidalgo County. While these findings are not as robust as we would prefer when engaging in this type of review, we nevertheless hold that the trial court could have reasonably—and within its discretion—concluded that the Association would not suffer “a probable, imminent, and irreparable injury” while its case remained pending for a trial on the merits and the 40th anniversary of BorderFest proceeded as originally scheduled in Hidalgo.

Maintaining the status quo established over the prior 39 years until there has been a full legal review is a rational outcome on a preliminary injunction. But to get to the heart of who actually owns the trademark we need more detail on the facts. From the court’s description, it’s hard to tell what the city did as part of its function as a municipality, performing tasks it would perform for any outdoor event, like fencing off the grounds, and what it did as a owner of the event. Did the city build a number of floats to be used by others, or did it just build floats for its own city departments?

San Antonio Express-News
San Antonio Express-News

Were the food booths that were manned by city employees sponsored by the city or was it city-paid labor for the benefit of others? When the IT director “helped create and design” the website, did he do the work or did he provide oversight to an outside contractor? Who hosted the website?

Also palpable but never a directly discussed were Vera’s conflict of interest while working for Hidalgo (and McAllen, for that matter), his self-serving testimony, and the extent to which he might have engineered what Hidalgo later claimed were its contributions to the event. Just a mess.

Vera v. City of Hidalgo, No. 13-16-00088-CV (Tx. App. Ct. Jan. 5, 2017).

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