September 02, 2025|Publications
September 2, 2025 | U.S. District Court for the Northern District of Texas | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Ed Kinkeade of the Northern District of Texas entered default judgment in favor of JTH Tax LLC, better known as Liberty Tax Service, against operators who attempted to build competing tax businesses using Liberty’s marks. Liberty alleged infringement, unfair competition, dilution, and cybersquatting. The court permanently enjoined the defendants from using the Liberty name in tax preparation services, ordered the transfer of infringing domain names, and awarded $200,000 in damages plus attorneys’ fees. The ruling underscores Liberty’s decades-long investment in building a distinctive brand and illustrates how franchisors can protect their marks against competitors who attempt to confuse consumers.
Relevant Background
Liberty Tax is one of the country’s largest tax preparation service franchisors, with more than 2,200 offices and 21,000 professionals across the United States and Canada. Over nearly thirty years, Liberty has invested millions of dollars in advertising and system branding, securing federal registrations for LIBERTY TAX SERVICE®, LIBERTY TAX®, LIBERTY INCOME TAX®, and related design marks featuring the Statue of Liberty. These registrations, dating back to 2000, have achieved incontestable status.
In 2022, Tiffany Alphonse and Ebony Brown formed Liberty Taxes, LLC and began providing tax preparation services under a name virtually identical to Liberty’s. They registered libertytaxesllc.com and promoted their services in ways that suggested affiliation with Liberty’s system. When Liberty sent a cease-and-desist letter in February 2023, the defendants ignored it. Although Alphonse later transferred one domain name after Liberty initiated a Uniform Domain-Name Dispute-Resolution Policy proceeding, she promptly formed a new entity, Liberty Consultants, LLC, and registered libertyconsultants.net to continue the same operations.
Consumer confusion quickly followed. In January 2024, a customer visited defendants’ location believing it was a Liberty Tax franchise, later complaining to Liberty about the quality of services she received. This confirmed Liberty’s allegations that the defendants’ businesses created marketplace confusion and damaged the franchisor’s goodwill. Liberty filed suit in August 2024 and, after the defendants failed to respond, sought default judgment.
Decision
The court first confirmed that Liberty’s marks are valid and enforceable. Registration with the United States Patent and Trademark Office is prima facie evidence of validity and exclusive right to use the mark in commerce. Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 235–36 (5th Cir. 2010). Liberty’s marks, registered for decades and used extensively across thousands of franchise locations, had also become incontestable under the Lanham Act, giving them heightened protection.
On infringement, the court applied the Fifth Circuit’s “digits of confusion” test, which evaluates factors such as the strength of the mark, similarity between marks, similarity of services, identity of retail outlets, advertising channels, intent, actual confusion, and purchaser care. Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 329 (5th Cir. 2008). Because the defendants used Liberty’s exact word marks in the same industry, marketed services through identical online channels, and persisted after receiving a cease-and-desist letter, the likelihood of confusion was overwhelming. The Fifth Circuit has explained that when an identical mark is used in the same field, a full factor-by-factor analysis is unnecessary because confusion is inevitable. Paulsson Geophysical Servs., Inc. v. Sigmar, 529 F.3d 303, 310–11 (5th Cir. 2008).
The court also upheld Liberty’s dilution claim. Under 15 U.S.C. § 1125(c), a plaintiff must show that its mark is famous, that the defendant adopted the junior mark after fame was established, that the similarity between the marks creates an association, and that the association is likely to impair distinctiveness. See Nola Spice Designs, LLC v. Haydel Enters., Inc., 783 F.3d 527, 548 (5th Cir. 2015). Liberty satisfied these elements by demonstrating decades of use, nationwide recognition, and evidence of actual confusion, establishing dilution by blurring.
The cybersquatting claims were also sustained. Under the Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d), liability attaches when a party registers or uses a domain name that is identical or confusingly similar to a distinctive or famous mark with bad faith intent to profit. Courts recognize that domain names substantially the same as a trademark are confusingly similar and create a presumption of confusion. Real Est. Edge, LLC v. Campbell, No. SA-18-CV-01117-OLG, 2019 WL 830966, at *3 (W.D. Tex. Feb. 21, 2019). Defendants’ registration and use of libertytaxesllc.com and libertyconsultants.net fell squarely within that prohibition.
Finding willful infringement, the court entered a permanent injunction, ordered the transfer of infringing domains, and awarded $200,000 in statutory damages plus attorneys’ fees.
Looking Forward
This case illustrates the value of aggressive brand protection in franchising. Liberty prevailed because its marks were treated not as generic but as distinctive identifiers of a nationally recognized tax preparation system. The court credited Liberty’s long history of exclusive use, millions of dollars in advertising expenditures, and evidence of actual marketplace recognition, all of which elevated its marks to a level of strong enforceability.
The decision also demonstrates that competitors cannot justify infringement by pointing to the common meaning of a word such as “Liberty.” In the context of tax preparation, that term has acquired distinctiveness and is associated with Liberty Tax’s franchised system. The fact that consumers reported actual confusion reinforced the need for judicial intervention to prevent ongoing harm to both the brand and the public.
For franchisors, the lesson is clear: investment in brand development and prompt enforcement of marks pays dividends when imitators attempt to siphon goodwill. By pursuing not only injunctive relief but also domain transfers and monetary damages, Liberty Tax ensured that its system, franchisees, and consumers remain protected from confusion. Courts are willing to provide robust remedies when franchisors act decisively to safeguard their marks.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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