Charter schools not immune from trademark lawsuit, U.S. appeals court says

A classroom sits empty ahead of the statewide school closures in Ohio, inside Milton-Union Exempted Village School District in West Milton, Ohio
A classroom sits empty in Ohio inside Milton-Union Exempted Village School District in West Milton, Ohio, U.S., March 13, 2020. REUTERS/Kyle Grillot
  • Appeals court said charter, public schools not 'arms of the state'
  • Concurrence proposes originalist sovereign immunity test

(Reuters) - A Texas charter school operator and a public school district in the state are not automatically immune from trademark lawsuits brought by an education company over their reading promotion programs, a U.S. appeals court said Wednesday.

The 5th U.S. Circuit Court of Appeals in New Orleans said the schools were not "arms of the state" entitled to sovereign immunity, but it still ruled for the schools in rejecting the trademark claims brought by Springboards to Education Inc.

U.S. Circuit Judge Andrew Oldham agreed but said in a concurring opinion that the court should do away with its "cumbersome and indeterminate" method for testing assertions of sovereign immunity, a legal doctrine under which U.S. states and related entities cannot be sued without their consent.

"I propose a new single-factor test: Was the entity asserting state sovereign immunity considered 'the State' in 1789?" Oldham said. "If yes, then sovereign immunity. If no, then none."

Joe Hoffer, an attorney for the charter school operator IDEA Public Schools, said Thursday that they were pleased with the decision and that the immunity ruling could have "wide ranging impact" for charter schools.

The decision "will impact a host of other federal laws that are currently being challenged nationally involving charter schools and whether they are state actors or not," Hoffer said.

Roger Williams, a lawyer representing the McAllen Independent School District, said the district's public schools were "grateful" that the court found no infringement.

Springboards attorney Valerie Yanaros of Yanaros Law said her client was pleased with the sovereign immunity opinions and would appeal the infringement decision.

Springboards' "Read a Million Words" campaign encourages students to read a million words over the course of a school year. Springboards sued IDEA and McAllen in 2016 over their use of terms like "Million Dollar Reader" and "Millionaire Reader" for their reading programs.

The U.S. District Court for the Southern District of Texas found that IDEA had sovereign immunity but McAllen did not. It also ruled for McAllen after finding its program was not likely to cause confusion with Springboard's campaign.

U.S. Circuit Judge Kyle Duncan wrote for the appeals court Wednesday that the lower-court decision that a charter school is a state entity but a public school is not was "puzzling, to put it mildly."

The 5th Circuit instead found that none of the schools were arms of the state. It said sovereign immunity did not apply because Texas would be unlikely to pay for rulings against the schools, the schools benefit specific localities instead of the state as a whole and the schools can hold their own property.

The cases are Springboards to Education Inc v. McAllen Independent School District, 5th U.S. Circuit Court of Appeals, No. 21-40333, and Springboards to Education Inc v. IDEA Public Schools, 5th U.S. Circuit Court of Appeals, No. 21-40334.

For Springboards: Valerie Yanaros of Yanaros Law, Ruben DeLeon of DeLeon Law Group, Melanie Finch of the Law Office of Melanie Finch

For McAllen: Roger Williams of Richards Rodriguez & Skeith

For IDEA: Joe Hoffer and Ricardo Lopez of Schulman Lopez Hoffer & Adelstein

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Blake Brittain reports on intellectual property law, including patents, trademarks, copyrights and trade secrets, for Reuters Legal. He has previously written for Bloomberg Law and Thomson Reuters Practical Law and practiced as an attorney. Contact: 12029385713