trademark infringement remedies: obtaining compensatory and...

Trademark Infringement Remedies: Obtaining Compensatory and Enhanced Damages, Fees and Injunctive Relief Overcoming the Challenges of Inconsistent Court Treatment to Protect IP Rights

Today’s faculty features:

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THURDAY, JANUARY 9, 2014

Presenting a live 90-minute webinar with interactive Q&A

Bradley J. Walz, Shareholder, Winthrop & Weinstine, Minneapolis

Robert W. Payne, Partner, LaRiviere Grubman & Payne, Monterey, Calif.

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Trademark Infringement Remedies

Obtaining Compensatory and Enhanced Damages, Fees, and Injunctive Relief

Bradley J. Walz

Shareholder Intellectual Property

and Trademark and Brand Management

Winthrop & Weinstine, P.A. (612) 604-6725

[email protected] www.DuetsBlog.com

mailto:[email protected]


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Court Treatment

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Trademark Case Filings


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Court Treatment (cont’d)

TRADEMARK CASES TERMINATED COURT ACTION

During or After Trial Year Total No

Court Action

Total Before Pretrial

During or After Pretrial

Total Nonjury Jury Percent reaching trial

2001 3682 1084 2598 2223 331 44 24 20 1.2 2002 3308 896 2412 1987 360 65 60 35 2.0 2003 3415 950 2465 2046 365 54 28 26 1.6 2004 3490 1211 2279 1893 344 42 22 20 1.2 2005 3538 1376 2162 1739 372 51 27 24 1.4 2006 3693 1322 2371 1956 371 44 29 15 1.2 2007 3623 1164 2459 1976 415 68 31 37 1.9 2008 3460 1201 2259 1856 347 56 23 33 1.6 2009 3496 1063 2433 2018 362 53 22 31 1.5 2010 3424 1072 2363 1911 393 49 24 25 1.4 2011 3692 1088 2604 2108 443 53 22 31 1.4 2012 3402 1011 2391 1930 398 63 31 32 1.9


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• General Points about Monetary Damages under the Lanham Act o An award of plaintiff’s actual damages is a legal remedy.

o An accounting of defendant’s profits is an equitable remedy.

o Equitable relief is not available except when plaintiff's legal remedies are inadequate.

o The primary goals of the Lanham Act are to achieve equity between the parties, Seatrax, Inc. v. Sonbeck Int’l, Inc., 200 F.3d 358, 369 (5th Cir. 2000) (“The goal behind §§ 1116 and 1117 remedies is to achieve equity between or among the parties”), and make infringement unprofitable. Otis Clapp & Son, Inc. v. Filmore Vitamin Co., 754 F.2d 738, 744 (7th Cir. 1985) (“The trial court’s primary function is to make violations of the Lanham Act unprofitable to the infringing party”).

o Right to a jury trial applies only to legal claims, not equitable claims.

o Make sure to use the ® or other registration marking. Failing to do so could results in an inability to recover profits or actual damages unless the defendant had actual notice of the registration. Lanham Act § 29.

Court Treatment (cont’d)

Injunctive Relief in Trademark Disputes

Robert W. Payne LaRiviere, Grubman & Payne, LLP

[email protected]

Injunctions

• Main weapon against infringement • Likely confusion enough, actual confusion not required • Willful intent not required • Pre-eBay/Winter:

– Confusion re source created threat to mark owner’s reputation and goodwill

– Courts typically presumed irreparable injury once injury or likelihood of confusion was established

– Presumption rebuttable by defendant, however

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eBay v. MercExchange

• Injunctions are an extraordinary remedy • Presumption of irreparable injury does not automatically

apply in patent cases • As with other areas, plaintiff must demonstrate:

– Irreparable injury – Remedies at law are inadequate to compensate – Balance of hardships favors injunction – Public interest would not be disserved by injunction

• Winter v. Natural Resources Def. Council: no presumption for preliminary injunctions either

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Trademark – Presumption of Irreparable Injury • No

– 9th Cir (Herb Reed Ent. v. Florida Ent. Mgmt, 2013 US App. Lexis 23938 (Dec. 2013))

– 11th Cir (North Am. Med. Corp. v. Axiom Worldwide, 522 F.3d 1211 (2008))

– 6th Cir. (Audi AG v. D’Amato, 469 F.3d 534 (2006))

• Yes (Rebel Debutante v. Forsythe Cosmetic Group, 799 F.Supp.2d 558 (MDNC 2011) (4th Cir.))

• Copyright case, no presumption (2nd Cir.) • Ducked/unnecessary: 1st Cir & 5th Cir opinions • Pending: 3rd Cir (Ferring Pharm. v. Watson Pharm., 2013 U.S. Dist.

Lexis 49158 (2013), on appeal)

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Post-eBay Trademark Cases

• Requires equitable factors to be weighed • Irreparable injury argument based on loss of “goodwill”

or damage to/loss of control over reputation • Evidence of loss: Stuhlbarg Int’l Sales v. John D. Brush & Co, 240

F.3d 832 (9th Cir. 2001); Paulsson Geophysical Services v. Jaguar, 529 F.3d 303 (5th Cir. 2008)

• Presumption rebuttable – Unreasonable delay – Acquiescence

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Are Trademarks Different?

• Purpose in Lanham Act: protect public • Injury to reputation or loss of goodwill inherent in marks:

impossible to determine precise consequences • Confusion may cause injury to reputation and loss of

sales: not able to quantify?

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What Do INTA and AIPLA Say?

• INTA – presumption should apply • AIPLA – presumption should apply

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• Historically, whether a prevailing plaintiff is entitled to an accounting of the defendant’s profits has divided the courts.

• Section 35 makes an award of the infringing party’s profits subject only to the principles of equity.

• An accounting of an infringer’s profits is available if: o The defendant is unjustly enriched;

o To compensate the plaintiff; or

o To deter infringement.

• An award of profits may be denied where an injunction forbidding future infringing acts satisfies the equities of the case. A & H Sportswear Co., Inc. v. Victoria’s Secret Stores, Inc., 167 F. Supp. 2d 770, 801 (E.D. Pa. 2001).

Accountings for Profits


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• The majority of courts do not require a showing of actual confusion for an accounting of profits. Masters v. UHS of Del., Inc., 631 F.3d 464 (8th Cir.), cert. denied, 131 S. Ct. 2920 (2011); Gracie v. Gracie, 217 F.3d 1060 (9th Cir. 2000); Wynn Oil Co. v. American Way Service Corp., 943 F.2d 595 (6th Cir. 1991); Williamson-Dickie Mfg. Co. v. Davis Mfg. Co., 251 F.2d 924 (3d Cir. 1958); but see Getty Petroleum Corp. v. Island Transport Corp., 878 F.2d 650 (2d Cir. 1989).

• The circuits are split on whether a showing of willfulness is a prerequisite for an accounting of profits: o Circuits that do not require a showing of willfulness, but is a beneficial

element in deciding the equity of awarding profits: Banjo Buddies, Inc. v. Renosky, 399 F.3d 168 (3d Cir. 2005);

Synergistic Int’l, LLC v. Korman, 470 F.3d 162 (4th Cir. 2006);

Accountings for Profits (cont’d)


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Quick Techs., Inc. v. Sage Group PLC, 313 F.3d 338 (5th Cir. 2002);

Wynn Oil Co., 943 F.2d 595 (6th Cir. 1991);

Roulo v. Russ Bernie & Co., Inc., 886 F.2d 931 (7th Cir. 1989);

TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011); and

Safco Prods. Co. v. Welcom Prods., Inc., 799 F. Supp. 2d 967 (D. Minn. 2011).

o Circuits that do require a showing of willfulness: Fishman Transducers, Inc. v. Paul, 684 F.3d 187 (1st Cir. 2012);

George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532 (2d Cir. 1992);

W. Diversified Servs., Inc. v. Hyundai Motor Am., Inc., 427 F.3d 1269 (10th Cir. 2005); and

Alpo Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958 (D.C. Cir. 1990).

Accountings for Profits (cont’d)


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• Plaintiff is required to prove defendant’s sales only.

• However, plaintiff must establish defendant’s sales through credible and admissible evidence. See Breaking the Chain Found., Inc. v. Capital Educ. Support, Inc., 589 F. Supp. 2d 25 (D.D.C. 2008).

• Defendant must prove all elements of cost or deduction claimed. o Fixed costs are rarely deducted. Fixed costs remain constant in total

dollar amount as the level of sales activity changes;

o Variable costs are generally deducted. Variable costs are those that change in direct proportion to changes in volume of activity; and

o Semi-Variable costs are sometimes deducted. Semi-variable are expenses that can be separated into fixed and variable components. The variable component increases or decreases with sales or production volume, while the fixed component does not vary.

Accounting Process


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• Defendant is also obligated to apportion its sales between infringing and noninfringing sources. o Apportioning will often require an analysis of market penetration and the

extent of any geographic overlap between the plaintiff’s mark and defendant’s mark. See Natural Footwear Ltd. v. Roots, Inc., 760 F.2d 1383, 1399 (3d Cir. 1985); Blue Ribbon Feed Co. v. Farmers Union Cent. Exch. Inc., 731 F.2d 415 (7th Cir. 1984); Truck Equipment Serv. Co. v. Fruehauf Corp., 536 F.2d 1210 (8th Cir. 1976); Minnesota Pet Breeders, Inc. v. Schell & Kampeter, 843 F. Supp. 506 (D. Minn. 1993). Market penetration generally requires consideration of the following factors: (1) the

volume of sales of the trademarked product; (2) the growth trends (both positive and negative) in the area; (3) the number of persons actually purchasing the product in relation to the potential number of customers; and (4) the amount of product advertising in the area. Natural Footwear, 760 F.2d at 1399-1400.

o Where there is no opportunity for confusion to occur, there should be no claim for defendant’s profits in those geographic areas.

Accounting Process (cont’d)


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• Section 35 also provides that “[i]f the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case.”

• However, this equitable power is qualified and the sum must constitute compensation and not a penalty.

Adjustments of Accountings


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• Section 35 treats plaintiff’s entitlement to actual damages is both mandatory and permissive. It says that plaintiff “shall be entitled” to its actual damages on the one hand, and says the award is “subject to the principles of equity” on the other hand.

• Causation is a prerequisite for an award of actual damages.

• The majority of courts recognize that the causal connection requires a showing of actual confusion. o Courts that do require a showing of actual confusion:

Int’l Star Class Yacht Racing Ass’n v. Tommy Hilfiger U.S.A., Inc., 80 F.3d 749 (2d Cir. 1996);

Parkway Baking Co. v. Freilhofer Baking Co., 255 F.2d 641 (3d Cir. 1958);

Web Printing Controls Co., Inc. v. Oxy-Dry Corp., 906 F.2d 1202 (7th Cir. 1990);

Brunswick Corp. v. Spinit Reel Co., 832 F.2d 513 (10th Cir. 1987);

Bandog, Inc. v. Al Bolser’s Tire Stores, Inc., 750 F.2d 903 (Fed Cir. 1984);

Actual Damages


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Am. Ass’n Justice v. Am. Trial Lawyers Ass’n, 698 F. Supp. 2d 1129 (D. Minn. 2010); and

Teaching Co. Ltd. Partnership v. Unapix Entm’t, Inc., 87 F. Supp. 2d 567 (E.D. Va. 2000).

o Courts that do not require a showing of actual confusion: Visible Sys. Co. v. Unisys Corp., 551 F.3d 65 (1st Cir. 2008); and

Bd. of Supervisors v. Smack Apparel Co., 550 F.3d 465 (5th Cir. 2008).

• Actual damages can be measured by lost sales, profits, present value, or lost royalties.

Actual Damages (cont’d)


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Two bases for awards of statutory damages under the Lanham Act: • Section 35(c) involving the trafficking of goods bearing counterfeit marks.

• Plaintiff may elect to receive “not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services sold.”

• This amount can be increased to $2,000,000 per counterfeit mark per type of goods or services sold in the case of willful counterfeiting.

Section 35(d) – the Anticybresquatting Consumer Protection Act

Plaintiff may elect to receive not less than $1,000 or more than $100,000 per domain name.

Courts have wide discretion in determining an award of statutory damages.

Generally, courts will look to evidence that supports actual damages or a claim for profits, and willfulness to determine the amount of an award for statutory damages.

Statutory Damages


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• Section 35 permits the taxation of costs against the losing party.

• What constitutes a taxable cost is governed by 28 U.S.C. § 1920.

• Courts may decline to award costs permitted by Section 1920, but they may not award costs that are not specifically listed in the statute.

• Courts may tax the following costs: – Fees of the clerk and marshal;

– Fees for printed or electronically recorded transcripts necessarily obtained for use in the case;

– Fees and disbursements for printing and witnesses;

– Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case;

Taxation of Costs


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– Docket fees under 28 U.S.C. § 1828; and

– Compensation of court-appointed experts and interpreters, and salaries, fees, expenses, and costs of special interpretation services under 28 U.S.C. § 1828.

Taxation of Costs (cont’d)


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Bradley J. Walz Shareholder

Intellectual Property and Trademark Brand

Management

Winthrop & Weinstine, P.A. [email protected] www.DuetsBlog.com

Thank you!

Enhanced Damages, Attorneys’ Fees and Other Remedies


[email protected]

Remedies – Impact on Right to Jury Trial

• To determine whether a jury trial is available, a court considers whether the claim was historically tried to juries and whether the relief sought is “legal” or equitable in nature. See, Tull v. United States , 481 U.S. 412, 417-418, 107 S.Ct. 1831, 1835 (1987).

• A claim for damages -- such as for lost profits -- is legal in nature.

• A request for an award of defendant’s wrongful profits or for injunctive relief is wholly equitable. Ringling Bros. v. Utah Div’n of Travel, 955 F.Supp. 598, 605 (E.D. Va. 1997).

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Enhanced Damages - Statute

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15 U.S.C. §1117(a): “In assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount.”

Enhanced Damages – Statute (2)

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“If the court shall find the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for any sum as the court shall find to be just, according to the circumstances of the case. Such sum in either of the above circumstances shall constitute compensation and not a penalty.”

Enhanced Damages – Damages vs. Profits

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• Damages (Plaintiff’s damages, in tort) - At Law - Proof of actual loss, causation - Up to 3 times – discretion - Compensation only, not penalty

• Profits (Defendant’s profits) - Equity - No proof of actual causation - Adjust up or down in court’s discretion - Compensation only, not penalty

• No “punitive damages” awarded

Goals of Enhanced Damages

• Protecting trademarks, securing to the owner the goodwill of his business

• Protecting the public against spurious and falsely marked goods

• Making infringement and piracy unprofitable

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Enhanced Damages -- Inconsistencies

• Courts agree: Basis must be specifically explained • Courts disagree:

– Willfulness required? – Compensation vs. deterrence – Factors considered

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Inconsistency – Willfulness?

• Is finding willfulness a condition precedent to enhanced damages?

• 9th Cir. – compensation only; willfulness not considered • Many courts – enhanced damages appropriate if Def

acted willfully and damages are not punitive • CAFC – Def can avoid enhanced damages with a

“meritorious good faith defense and substantial challenge to infringement” (evid of specific type of non-willfulness to avoid enhancement)

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Inconsistency -- Compensation Only?

Enhanced damages “shall constitute compensation and not a penalty”

• 9th Cir., D. DC, ND Tex – only awarded if necessary to compensate Plf (e.g., damages difficult to calculate)

• 5th Cir., ND Fla – where the monetary damages did not fully compensate Plf and Def intentionally infringed

• Deterring future infringement (vary on whether compensatory)

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Inconsistency – Factors Considered

Usual factors: • Whether Def had intent to confuse or deceive • Whether sales have been diverted • Adequacy of other remedies • Unreasonable delay by Plf in asserting rights • Public interest in making the misconduct unprofitable • Whether case is one of palming off

Synergistic Int’l LLC v. Korman, 470 F3d 162, 175 (4th Cir. 2006).

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Other Factors, Other Courts

• Impact on Plf and systemic distortion of market • Refuse to consider factors if already considered

in awarding compensatory damages • Many do not list factors considered Overall result: little predictability in enhanced

damages awards; undermining courts’ integrity

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Attorneys’ Fees -- Statute

“The court in exceptional cases may award reasonable attorneys’ fees to the prevailing party.”

15 U.S.C. §1117(a)

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Attorneys’ Fees – “Exceptional” Inconsistencies

• “A surprising lack of agreement” Nightingale Homes Healthcare Inc. v. Anodyne Therapy, LLC, 626 F.3d 958, 960-61 (7th Cir. 2010)

• “A jumble . . . .” Id.

• “A rainbow of standards” Yankee Candle Co., Inc. v. Bridgewater Candle Co., LLC, 140 F.Supp.2d 111, 120 (D. Mass. 2001)

• Courts follow their own tests • Some apply same standards to plaintiffs and defendants;

some apply different standards • Some courts unwilling to award attorneys’ fees • Bad faith or different culpability required? Less stringent

(“willful”?)

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Attorneys’ Fees – Amount

• Reasonable amount – lodestar, etc. – “Trademark litigation is a particularly difficult

field of specialization and is recognized as meriting greater than average rate of pay.” Clairol, Inc. v. Save-Way Ind., 1980 U.S. Dist. Lexis 16914 (SD Fla 1980)

• Apportioned among claims (e.g. design patent counts or copyright, using different standard)

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Other Remedies – TTAB Proceedings

• Oppositions to registrations • Cancellation of registrations • Relief available: denial or cancellation of registration • Relief not available

– Damages or profits – Attorneys’ fees – Injunctive relief – Monetary sanctions

• Can use as cheap vehicle to resolve bigger issues, including licensing and monetary payments

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TTAB Proceedings – Procedural Considerations

• Standing broad – petitioner believes it will be harmed, commercial/monetary interest

• Petitioner refused registration because of respondent’s registration/pending application is enough

• Opposition and likely confusion – not as actually used (limits re channels, common law use)

• Grounds for cancellation generally • Grounds for cancellation after 5 yrs -- Generic,

functional, abandonment, obtained fraudulently, misrepresents source of goods

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Other Remedies – Federal Court

• If an underlying infringement action, – Cancellation of registration; restoration of

cancellation; rectify register re registration – Determine that party is entitled to registration

• Damages caused by fraudulently obtained registration (attorneys’ fees to cancel registration?)

• Corrective advertising • Disclaimers • Destruction of articles

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Corrective Advertising

• Actual or estimated cost of corrective advertising • Actual confusion needed? • Compensatory • Big O Tire Dealers v. Goodyear Tire & Rubber, 561 F.2d

1365 (10th Cir. 1977) awarded $ equal to 25% of defendant’s advertising expenses on infringing product

• Limitations – Proof of actual harm caused by advertisements – Requirement for “self-help” advertising – Actual market overlap?

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Other Remedies – State Courts

• Concurrent jurisdiction – trademark infringement • State court remedies can be greater than federal relief

(e.g., punitive damages) • No double recovery – same set of operative facts • Unfair business practices statutes also • E.g., Cal. Bus. & Prof. §17200

– Any unfair, unlawful or fraudulent business practice – Suffered actual injury for standing – Injunctive relief and restitution only

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Thank You


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