Trademark Infringement Remedies: Overcoming the Challenges of Inconsistent Court Treatment to Protect IP Rights

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Trademark Infringement Remedies: Overcoming the Challenges of Inconsistent Court Treatment to Protect IP Rights WEDNESDAY, MAY 11, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Robert W. Payne, Esq., Payne IP Law, San Jose, Calif. Bradley J. Walz, Shareholder, Winthrop & Weinstine, Minneapolis The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 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) Winthrop & Weinstine, P.A.

6 Court Treatment Trademark Case Filings Winthrop & Weinstine, P.A.

7 Court Treatment (cont d) Year Total TRADEMARK CASES TERMINATED (ending June 30, 2015) COURT ACTION During or After Trial No Court Total Before During or Total Nonjury Jury Percent Action Pretrial After reaching trial Pretrial Winthrop & Weinstine, P.A.

8 Court Treatment (cont d) 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 Winthrop & Weinstine, P.A.

9 Accountings for Profits 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) Winthrop & Weinstine, P.A.

10 Accountings for Profits (cont d) 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 (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); Winthrop & Weinstine, P.A.

11 Accountings for Profits (cont d) 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) Winthrop & Weinstine, P.A.

12 Accounting Process Plaintiff is required to prove defendant s sales only, but statute is silent on whether sales means gross sales or infringing sales. Some courts put the burden on the plaintiff, [t]rademark holder has the burden to prove the defendant infringer s gross revenue from the infringement. Fifty-Six Hope Rd. Music, Ltd. v. A.V.E.L.A., Inc., 778 F.3d 1059, 1076 (9th Cir. 2015). Plaintiff also 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 Winthrop & Weinstine, P.A.

13 Accounting Process (cont d) Some courts require defendant 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 o Where there is no opportunity for confusion to occur, there should be no claim for defendant s profits in those geographic areas. o However, plaintiff may be entitled to all of defendant s profits if the defendant comingles infringing and non-infringing sales. Gutter Topper, Ltd. v. Sigman & Sigman Gutters, Inc., 115 U.S.P.Q.2d 1591 (S.D. Ohio 2015) Winthrop & Weinstine, P.A.

14 Adjustments of Accountings 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 Winthrop & Weinstine, P.A.

15 Actual Damages 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, which can be shown through evidence of an intent to deceive. 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); Winthrop & Weinstine, P.A.

16 Statutory Damages 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 Winthrop & Weinstine, P.A.

17 Taxation of Costs Section 35 permits the taxation of costs against the losing party. What constitutes a taxable cost is governed by 28 U.S.C 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; Winthrop & Weinstine, P.A.

18 Taxation of Costs (cont d) 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 Winthrop & Weinstine, P.A.

19 Thank you! Bradley J. Walz Shareholder Intellectual Property and Trademark Brand Management Winthrop & Weinstine, P.A Winthrop & Weinstine, P.A.

20 INJUNCTIVE RELIEF IN TRADEMARK DISPUTES ROBERT W. PAYNE PAYNE IP LAW, SAN JOSE

21 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 21

22 ebay v. MercExchange Injunctions are an extraordinary remedy Presumption of irreparable injury As with other areas, must demonstrate Irreparable injury Remedies at law inadequate to compensate Balance of hardships favor Public interest not disserved Winter v. Nat. Resources Def. Council: no presumption for prelim injunctions either 22

23 TRADEMARK PRESUMPTION OF IRREPARABLE INJURY NO 9th Cir Herb Reed Ent. V. Florida Ent. Mgmt, 2013 US App. Lexis (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 4th Cir - Rebel Debutante v. Forsythe Cosmetic Group, 799 F.Supp.2d 558 (MDNC 2011) 5th Cir - Abraham v. Alpha Chi Omega, 708 F.3d 614 (2013) 8th Cir - Community of Christ Copyright Corp. v. Devon Park Rest. Branch, 634 F.3d 1005, 1012 (2011) 23

24 POST-eBAY 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 Months from time of notice Settlement discussions Acquiescence 24

25 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? 25

26 WHAT DO INTA AND AIPLA SAY? INTA presumption should apply AIPLA presumption should apply 26

27 MONEY DAMAGES AND BOND Permanent injunction and future damages Proof of damages (and award of profits) to be addressed Bond TRO and preliminary injunction Bond Defendant s quantification 27

28 ENHANCED DAMAGES, ATTORNEYS FEES AND OTHER REMEDIES ROBERT W. PAYNE PAYNE IP LAW, SAN JOSE

29 ENHANCED DAMAGES STATUTE It s not your ordinary punitive/exemplary damages 15 U.S.C. 1117(a) slide 1: 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. 29

30 EXEMPLARY DAMAGES -- STATUTE 15 U.S.C. 1117(a) slide 2: 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. 30

31 EXEMPLARY DAMAGES -STATUTE 15 U.S.C. 1117(a) slide 3: Such sum in either of the above circumstances shall constitute compensation and not a penalty. 31

32 ENHANCED DAMAGES DAMAGES vs PROFITS 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, down in court s discretion Compensation only; not penalty No punitive damages awardable 32

33 GOALS OF ENHANCED DAMAGES Protecting trademarks, securing goodwill Protecting public against falsely marked goods Making infringement/piracy unprofitable 33

34 ENHANCED DAMAGES -INCONSISTENCIES Courts agree: Basis must be specifically explained Courts disagree: Willfulness required? Compensation vs. deterrence as goal Factors to consider 34

35 INCONSISTENCY WILLFULNESS? Willfulness finding: a condition precedent? 9th Cir compensation only; willfulness not considered Many courts enhanced damages appropriate if defendant acted willfully (and damages not punitive) 35

36 INCONSISTENCY COMPENSATION ONLY? Enhanced damages shall constitute compensation and not a penalty 9th Cir, D.DC only awarded if necessary to compensate (e.g. damages difficult to calculate) 2nd Cir, 5th Cir, ND FL where monetary damages did not fully compensate Plf, and Def intentionally infringed 7th Cir trebling as punitive allowed if deliberate infringement and purpose to deter, especially when compensation amount difficult to assess (Sands, Taylor & Wood v. Quaker Oats) 36

37 INCONSISTENCY FACTORS CONSIDERED Usual factors: Whether Def had intent to deceive, confuse Whether sales have been diverted Adequacy of other remedies Unreasonable delay by Plf in asserting rights? Public interest in making misconduct unprofitable Whether case is one of palming off 37

38 OTHER FACTORS, OTHER COURTS Impact on Pf and systemic distortion of market Refuse to consider factors if already considered for compensatory damages Many do not list factors considered Overall result: little predictability in enhanced damages awards 38

39 ATTORNEYS FEES -- STATUTE The court in exceptional cases may award reasonable attorneys fees to the prevailing party. 15 U.S.C. Section 1117(a) 39

40 ATTORNEYS FEES EXCEPTIONAL INCONSISTENCIES A surprising lack of agreement Nightingale Homes Healthcare v. Anodyne Therapy, 626 F.3d 958 (7th Cir 2010) A jumble.... Id. A rainbow of standards Co., 140 F.Supp.2d 111, 120 (D. Mass. 2001) Yankee Candle Co. v. Bridgewater Candle Courts follow their own tests Some apply same standards to both successful plfs and defs; some don t Bad faith, willfulness or other culpability required? 40

41 ATTORNEYS FEES -- AMOUNT Reasonable amount lodestar, etc. Trademark litigation is a particularly difficult field of specialization and is recognized as meriting a greater than average rate of pay. Clairol, Inc. v. Save-Way Ind., Dist. Lexis (SD FL 1980) 1980 U.S. Apportioned among claims (e.g., design patent counts, copyright, using different standard) 41

42 MISC. REMEDIES REMEDIES AN AFTERTHOUGHT? Do we litigators focus too much on liability and too little on remedies? Are remedies issues simple? Not principled (enough)? Lack of consistency, guidance Equity Fact specific difficult to apply precedent McCarthy: 30 chapters. Damages, profits, enhanced damages take up 1/3 of one chapter 42

43 MISC. REMEDIES JURY ISSUES Remedy sought determines right to jury Issue is whether claim was historically tried to juries or not: is relief legal or equitable? Tull v. United States, 481 U.S. 412, (1987) Claim for damages legal in nature Have fun with the jury instructions with inconsistent case law Request for injunctive relief/defendant s profits equitable Both: try legal issue first before jury, then equitable before bench 43

44 MISC. REMEDIES -- TTAB Registration and cancellation no monetary awards, no injunction Cheap means to resolve entire dispute? 44

45 MISC. REMEDIES IN FEDERAL COURT Corrective advertising Disclaimers Destruction of articles Cancellation 45

46 MISC. REMEDIES CORRECTIVE ADVERTISING Actual or estimated cost of corrective advertising Actual confusion needed? Source of confusion? Big O Tire Dealers Awarded $ equal to 25% of Def s advertising expenses on infringing product Limitations Proof of actual harm caused by ads Requirement for self help ads Actual market overlap? 46

47 MISC. REMEDIES STATE COURTS Concurrent jurisdiction State remedies may be greater (punitive damages) No double recovery Unfair business practices statutes (Cal B&Prof Sec 17200) 47

48 ABOUT ME: ROBERT W. PAYNE Payne IP Law, San Jose Chair, AIPLA Trademark Remedies Study Group, Chair, AIPLA Patent Litigation Committee, Chair, California State Bar Intellectual Property Section Executive Committee, Intellectual property litigation, including unauthorized dealer disputes 48

49 RELEVANT PUBLICATIONS Payne, Trademark Monetary Remedies -- It's Time for a Change, State Bar of California Intellectual Property Institute paper (2013) Payne, Actual Confusion and Trademark Damages: Through the Looking Glass, AIPLA Spring Meeting paper (2013) Visit 49