Damages for Trademark Claims UnderThe Lanham Act: Lessons Learned FromSands Taylor & Wood v. The Quaker Oats Co. and Trovan, Ltd. v. Pfizer, Inc. Susan Somers Neal Neal & McDevitt®
Presentation Highlights Overview of damages under The Lanham Act Sands Taylor & Wood v. The Quaker Oats Co. Trovan, Ltd. v. Pfizer, Inc. Lessons Learned
Overview of damages underThe Lanham Act, 15 U.S.C. §1117 Four bases for recovery – Defendant’s profits – Plaintiff’s damages – Costs – Attorney’s fees Only in exceptional cases Treble damages Only if willful/intentional
Sands Taylor & Wood v. The Quaker Oats Co. (Sands I) Decided December 18, 1990 by U.S. District Court Judge Prentice Marshall THIRST-AID registered mark vs. GATORADE IS THIRST- AID advertising slogan. The court held that there was a likelihood of confusion. Plaintiff was awarded nearly $25 million plus pre-judgment interest, attorney’s fees and costs.
Sands I Rationale for award of defendant’s profits – Make Infringement Unprofitable – Prevent Unjust Enrichment – Deter Future Infringing Conduct – But Avoid Awarding a Windfall to Plaintiff
Sands I Types of Monetary Relief – Plaintiffs Actual Damages – Corrective Advertising – Reasonable Royalties – Attorney’s Fees – Prejudgment interest and costs
Sands Taylor & Wood v. The Quaker Oats Co. (Sands II) Decided July 9, 1991 by U.S. District Court Judge Prentice Marshall The court addressed the terms of the injunction, the calculation of costs, attorneys fees prejudgment interest and defendants post- trial profits.
Sands II Defendant’s profits throughout period of infringement (over $31 million) Prejudgment interest (over $10 million) Plaintiffs attorneys’ fees and expenses (over $600,000) Defendant’s costs (over $30,000)
Sands Taylor & Wood v. The Quaker Oats Co. (Sands III) Decided on September 2, 1992 by the U.S. Court of Appeals, Seventh Circuit. Circuit Judge Cudahy wrote the opinion of the court with Circuit Judge Ripple concurring and Circuit Judge Fairchild dissenting in part. The court reversed the district court’s award of defendants profits and remanded for a recalculation of damages.
Sands III Reversed of award of defendants profits and remanded for redetermination of damages Affirmed award of attorneys’ fees and expenses Affirmed Finding of Bad Faith
Sands III The Three Bears – Judge Cudahy: $24 million is a windfall to Sands (too hot) – Judge Ripple: reasonable royalty may not be enough to act as deterrence (too cold) – Judge Fairchild (dissent): exercise of discretion should be affirmed (just right)
Sands Taylor & Wood v. TheQuaker Oats Co. (Sands IV) Decided on June 7, 1993 by U.S. District Court Judge Prentice Marshall The case was on remand from the Seventh Circuit The court used a “reasonable royalty rate” to calculate damages and awarded plaintiff over $26 million in damages and pre-judgment interest
Sands IV Calculation of reasonable royalty rate – Rate previously paid by licensee – Licensor’s policies – Nature and scope of licensee’s use – Special value to infringer – Profitability of infringing use – Lack of viable alternatives – Opinions of experts – Amount parties would have agreed upon voluntarily – Rate previously received by licensor
Sands Taylor & Wood v. The Quaker Oats Co. (Sands V) Decided on September 13, 1994 by the U.S. Court of Appeals, Seventh Circuit. Circuit Judge Cudahy wrote the opinion of the court with Circuit Judge Fairchild concurring. The court affirmed the base royalty rate but reversed the doubling of the base rate and remanded to the district court for further explanation of the basis for the doubling.
Sands V Seventh Circuit affirms the base royalty rate but reverses enhancement (doubling) Remand for further explanation of the enhancement (doubling)
Sands Taylor & Wood v. TheQuaker Oats Co. (Sands VI) Decided on April 11, 1995 by U.S. Court Judge Prentice Marshall The court further explained its basis for doubling of the base royalty rate and re- entered judgment on remand for the amount reversed by the Seventh Circuit.
Sands VI “The enhancement is not a penalty. It reflects the inadequacy of the base royalty award in light of the "circumstances of the case," the extraordinary profits defendant realized as a consequence of its deliberate infringement. As now Chief Judge Posner observed in Gorenstein, the treble damage provision of the Lanham Act is ‘properly invoked when, as in this case, the infringement is deliberate.’ 874 F.2d at 436. Furthermore, I assure the court of appeals that I did not "double-count" the factors which I used to determine the base royalty. I can say no more.”
Trovan, Ltd. v. Pfizer, Inc. TROVAN for transponders used in animal identification and TROVAN for antibiotic preparations Jury awarded $5 million in compensatory damages, $3 million in reasonable royalties and $135 million in punitive damages The court denied an award of profits Numerous post-trial motions
TrovanPunitive Damages – California common law requires proof of competition and no punitive damages under the Lanham Act. – In any event, the amount is excessive. – The court finds that $1,500,000 (3 times the value of the mark) is the most that could be awarded.
TrovanActual Damages 1. Injury to reputation or goodwill Must be direct evidence Cannot be inferred Analogy to defamation Held: Sufficient showing to warrant award of damages
TrovanActual Damages 2. Corrective Advertising Evidence on this issue was stricken
Trovan Actual Damages 3. Damage Award Excessive “There is something basically unseemly and grossly uneconomical in an award to a small company of an amount of money several times its net worth to use to resuscitate an infringed trademark” Held: Only direct evidence of value was $500,000 – the most the jury could have awarded. Court remits $500,000. If plaintiffs refuse to accept this amount, new trial granted.
Trovan Reasonable Royalties – The Ninth Circuit does not recognize this as measure of damages where there is no evidence that a party intended the license the trademark (unlike Sands v. Quaker).
Trovan The Issue of Willfulness – The Ninth Circuit has not addressed “bad faith” in the context of reverse confusion. – The Sands decision is in direct conflict with Trovan – Held: Vacates jury finding of bad faith; alternatively, grants new trial. No bad faith, no punitive damages.
Trovan New Trial Ordered – Misconduct of plaintiff’s attorneys permeated the trial to such an extent that the Court is convinced the jury was influenced by passion and prejudice in reaching its verdict.
Lessons Learned Bad Faith/Willfulness Required Reasonable Royalties May Not Be Available Be Prepared with Specific Proof of Damage and Don’t make the judge angry….