United States Court of Appeals for the Fifth Circuit ____________ United States Court of Appeals Fifth Circuit

No. 23-50413 FILED June 21, 2024 ____________ Lyle W. Cayce Appliance Liquidation Outlet, L.L.C., Clerk

Plaintiff—Appellee,

versus Axis Supply Corporation,

Defendant—Appellant. ______________________________

Appeal from the United States District Court for the Western District of Texas USDC No. 5:21-CV-768 ______________________________ Before Smith, Haynes, and Douglas, Circuit Judges. Jerry E. Smith, Circuit Judge: This appeal arises from a trademark dispute between two appliance companies in San Antonio. Appliance Liquidation Outlet, L.L.C. (“ALO”), owns and operates a store named Appliance Liquidation Outlet. For over two decades, ALO has used that name to refer to its business. In 2021, Axis Supply Corporation (“Axis”) opened an appliance store adorned with a large banner that prominently displayed the words “Appliance Liquidation” and used a digital version of that banner in online advertising. In the wake of Axis’s new store, ALO experienced a rush of customers Case: 23-50413 Document: 69-1 Page: 2 Date Filed: 06/21/2024

No. 23-50413

who failed to differentiate between the stores and believed that ALO oper- ated both. When Axis refused to change its name, litigation ensued. After a bench trial, the district court found that ALO had valid trademarks in the words “Appliance Liquidation Outlet” and “Appliance Liquidation” and that Axis’s banner infringed those marks. The court entered judgment for ALO, enjoined Axis from using ALO’s marks or otherwise causing confusion with ALO’s brand, and awarded ALO attorney’s fees. Axis appealed, averring that (1) “Appliance Liquidation Outlet” and “Appliance Liquidation” were not valid marks; (2) even if both marks were valid, its banner did not infringe those marks; and (3) the district court erred in awarding ALO attorney’s fees. We agree in part. The district court clearly erred in finding that “Appliance Liquidation” is a valid trademark but did not err in finding that “Appliance Liquidation Outlet” is a valid mark that Axis’s banner infringed. Thus, we reverse the judgment as to the “Appliance Liquidation” mark, affirm as to the “Appliance Liquidation Outlet” mark, and modify the injunction accordingly to remove reference to the “Appliance Liquidation” mark. Finally, the district court abused its discretion in award- ing attorney’s fees, so we vacate the fee award.

I. As stated, ALO’s store has gone by the name “Appliance Liquidation Outlet” for over twenty years. 1 The store displays that name prominently on a large billboard on top of its physical location.

_____________________ 1 Occasionally, ALO employees refer to the business in shorthand as “Appliance Liquidation.”

2 Case: 23-50413 Document: 69-1 Page: 3 Date Filed: 06/21/2024

No. 23-50413

In addition to displaying its billboard, ALO engages in promotional activities to boost recognition of its brand in San Antonio. For example, ALO partners with local spor