- 1. 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 NealNeal & McDevitt
2. Presentation Highlights Overviewof damages under TheLanham Act Sands Taylor & Wood v. The QuakerOats Co. Trovan, Ltd. v. Pfizer, Inc. Lessons Learned 3. Overview of damages underThe Lanham Act, 15 U.S.C. 1117 Four bases for recovery Defendants profits Plaintiffs damages Costs Attorneys fees Only in exceptional cases Treble damages Only if willful/intentional 4. 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, attorneys fees and costs. 5. Sands I Rationalefor award of defendants profits Make Infringement Unprofitable Prevent Unjust Enrichment Deter Future Infringing Conduct But Avoid Awarding a Windfall to Plaintiff 6. Sands I Types of Monetary Relief Plaintiffs Actual Damages Corrective Advertising Reasonable Royalties Attorneys Fees Prejudgment interest and costs 7. Sands Taylor & Wood v. The Quaker Oats Co. (Sands II) Decided July 9, 1991by U.S. District CourtJudge PrenticeMarshall The court addressedthe terms of theinjunction, thecalculation of costs,attorneys feesprejudgment interestand defendants post-trial profits. 8. Sands II Defendantsprofits throughoutperiod of infringement (over $31million) Prejudgment interest (over $10million) Plaintiffs attorneys fees andexpenses (over $600,000) Defendants costs (over $30,000) 9. Sands Taylor & Wood v. The Quaker Oats Co. (Sands III) Decided on September 2,1992 by the U.S. Court ofAppeals, Seventh Circuit. Circuit Judge Cudahywrote the opinion of thecourt with Circuit JudgeRipple concurring andCircuit Judge Fairchilddissenting in part. The court reversed thedistrict courts award ofdefendants profits andremanded for arecalculation of damages. 10. Sands III Reversed of award of defendants profitsand remanded for redetermination ofdamages Affirmed award of attorneys fees andexpenses Affirmed Finding of Bad Faith 11. Sands III The Three Bears Judge Cudahy: $24 million is awindfall to Sands (too hot) Judge Ripple: reasonable royalty maynot be enough to act as deterrence (toocold) Judge Fairchild (dissent): exercise ofdiscretion should be affirmed (justright) 12. 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 13. Sands IV Calculation of reasonable royalty rate Rate previously paid by licensee Licensors policies Nature and scope of licensees 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 14. 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. 15. Sands V SeventhCircuit affirms the baseroyalty rate but reversesenhancement (doubling) Remand for further explanation ofthe enhancement (doubling) 16. 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. 17. Sands VI The enhancement is not a penalty. It reflects theinadequacy of the base royalty award in light of the"circumstances of the case," the extraordinaryprofits defendant realized as a consequence of itsdeliberate infringement. As now Chief Judge Posnerobserved in Gorenstein, the treble damage provisionof the Lanham Act is properly invoked when, as inthis case, the infringement is deliberate. 874 F.2d at436. Furthermore, I assure the court of appeals thatI did not "double-count" the factors which I used todetermine the base royalty. I can say no more. 18. Trovan, Ltd. v. Pfizer, Inc. TROVAN for transpondersused in animalidentification andTROVAN for antibioticpreparations Jury awarded $5 millionin compensatorydamages, $3 million inreasonable royalties and$135 million in punitivedamages The court denied anaward of profits Numerous post-trialmotions 19. TrovanPunitiveDamages 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. 20. 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 21. TrovanActual Damages 2. Corrective Advertising Evidence on this issue was stricken 22. Trovan Actual Damages3. Damage Award Excessive There is something basically unseemly andgrossly uneconomical in an award to a smallcompany of an amount of money severaltimes its net worth to use to resuscitate aninfringed trademark Held: Only direct evidence of value was$500,000 the most the jury could haveawarded. Court remits $500,000. If plaintiffsrefuse to accept this amount, new trialgranted. 23. Trovan Reasonable Royalties The Ninth Circuit does notrecognize this as measure ofdamages where there is noevidence that a party intendedthe license the trademark (unlikeSands v. Quaker). 24. Trovan The Issue of Willfulness The Ninth Circuit has not addressedbad faith in the context of reverseconfusion. The Sands decision is in directconflict with Trovan Held: Vacates jury finding of badfaith; alternatively, grants new trial.No bad faith, no punitive damages. 25. Trovan New Trial Ordered Misconduct of plaintiffsattorneys permeated the trial tosuch an extent that the Court isconvinced the jury wasinfluenced by passion andprejudice in reaching its verdict. 26. Lessons Learned BadFaith/Willfulness Required Reasonable Royalties May Not BeAvailable Be Prepared with Specific Proof ofDamage and Dont make the judge angry.