Friday, May 04, 2012

5-Hour Energy and neverending litigation

Innovation Ventures, LLC v. N2G Distributing, Inc., 2012 WL 1402818 (E.D. Mich.)
Innovation claimed infringement of its 5-Hour Energy trade dress by defendants’ 6 Hour Energy Shot, Pure Energy, and Nitro2Go Pure Energy, as well as infringement of its 5-Hour Energy trademark by 6 Hour Energy Shot and variations of the products that used “up to 7 Hours of Energy,” “7 Hour Energy,” “7+ Hours of Fast Acting Energy,” and “14 Hour of Energy [sic]” on their labels.  A jury found trademark and trade dress infringement for many of the products, including a finding of intentional infringement with respect to certain products, and also found that defendants falsely described the characteristics of Nitro2Go Instant Energy and Firepower Extreme products.  It found that the infringement accounted for $1,750,000 of defendants' profits.
Defendants moved for a new trial; the court denied the motion.  Though there was no evidence of actual confusion, that’s unnecessary.  Defendants argued that the product names were sufficiently different to preclude likely confusion. The court: “Really! The only difference is the number preceding the words ‘hour’ and ‘energy.’”  Apparently the court considered the label and the name to be the same for these purposes: “Although the individual names of the products are different, it was reasonable for the jury to conclude that the overall impression of Defendants' products contributed to a likelihood of confusion with Plaintiff's product.”
What about descriptive fair use?  Defendants put “TM” after “6 Hour Energy Shot,” which showed intent to use the term as a mark, and there was testimony that defendants lacked clinical studies supporting their durational claims, “further indicated an intention to use the words ‘7 Hour Energy,’ ‘7 Hours of Energy,’ and ‘14 Hour Energy’ as trademarks.”  The court also gave an instruction that defendants couldn’t be liable if the terms accurately described the products and were used in good faith.
Likewise, the jury was able to consider the similarities and the differences in the parties’ trade dress (5-Hour Energy has a blue mountain design; defendants’ lacked any blue and also didn’t have a silhouette of a human figure running up the mountain, but did have a mountain silhouette and red-yellow-black like 5-Hour Energy).  The jury wasn’t unreasonable in reaching its verdict.
Further, the similarities in durational terms and appearance allowed the jury to infer bad intent.
The court also reaffirmed evidentiary rulings that (1) allowed defendants to introduce evidence about a prior trade dress infringement case they brought and lost, as evidence that there was no intent to infringe because defendants’ experience led them to believe they could copy closely without liability, but excluded the written opinion in that case; and (2) allowed evidence of a case brought by Hansen Beverage Co. (maker of Monster/Monster Energy) against defendants’ MONSTER Energy shot, as proof of motive, intent, or lack of mistake, but likewise excluded the legal filings.  Defendants were also given sufficient opportunity to portray Innovation’s general litigation tactics against other competitors as anti-competitive.
Innovation Ventures, LLC v. N2G Distributing, Inc., 2012 WL 1402980 (E.D. Mich.)
The court turned to Innovation’s motions for treble damages, attorneys’ fees, prejudgment interest, permanent injunction, etc.  The court found that defendants’ infringement was sufficiently willful to constitute an exceptional case warranting an attorneys’ fees award.  Innovation argued that defendants’ use was a “counterfeit,” entitling it to an additional award of treble damages ($7 million total), or in the alternative that the $1.75 million actual damage award should be increased to reflect defendants’ profits of over $4.4 million.  But Innovation didn’t present any trial evidence of lost profits, and the undisputed evidence was that profits were growing greatly during the period of infringement.  Thus, the requested awards would be a penalty and the jury’s award was appropriate.  This also disposed of the request for prejudcment interest: Innovation didn’t allege any lost opportunity cost or lost revenues; 5-Hour Energy is still the leading brand.
A permanent injunction was, however, appropriate.  Irreparable harm was presumed from infringement, and defendant N2G was apparently going to file for bankruptcy, leaving its president to sell the same energy shots through a different company.  However, Innovation didn’t name the president as a defendant or seek to hold him personally liable.  Thus, the court couldn’t enjoin him.

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