Monday, August 10, 2015

7th Amendment provides jury right for TM profits as proxy for damages

Black & Decker Corp. v. Positec USA Inc., --- F.Supp.3d ----, 2015 WL 4656749, No. 11–cv–5426 (N.D. Ill. Aug. 5, 2015
The parties compete to sell power tools.  B&D alleged that Positec infringed their patents and trademarks in the yellow-and-black color combination appearing on B&D products and packaging. The court denied Positec’s motion to strike B&D’s jury demand as to its trademark-related claims for Positec’s profits.
There’s a right to jury trial where the Seventh Amendment or a statute requires.  The court found that the language of §1117, which provides that a court “shall assess such profits and damages or cause the same to be assessed under its direction,” “at least suggests the possibility of a jury determination in the first instance, even if a court may adjust the jury award as it ‘shall find to be just.’”
But other cases indicate that there’s no jury right.  Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962), held that the trademark plaintiffs had a Seventh Amendment jury right as to their demand for an accounting of the defendant’s profits, reasoning that the complaint’s request for an accounting was “wholly legal in its nature.” Because of the doctrine of constitutional avoidance, the use of constitutional grounds suggested that the Court believed that the statute didn’t create a jury trial right, and lower courts have followed that suggestion.
History wasn’t much guide either, because “[t]he history of trademark actions and remedies lies in the murky overlap of law and equity.” The court turned to precedent and functional considerations.  An accounting is a “typical” kind of equitable relief; in the trademark context, it may be awarded to serve the goals of preventing unjust enrichment, furthering deterrence, and providing compensation.  As for compensation, profit awards may function as a proxy for damages because of the difficulty of proving those damages.
Courts have split over whether there’s a Seventh Amendment jury right in these circumstances.  One line of cases interprets Dairy Queen to find a right to jury trial regardless of the theory behind the plaintiff’s claim for profits.  A second evaluates the theory of profits and finds a jury trial right where profits are a proxy for damages, but not where profits are designed to prevent unjust enrichment. A third line of cases characterizes disgorgement as equitable, distinguishing Dairy Queen on the ground that it also involved contract damages.
The weight of authority supported the first or second view over the third. To the extent that the law was ambiguous, courts resolve doubts in favor of finding a jury right.
Here, B&D had at least some evidence that would support an award of profits as a proxy for damages: evidence that the parties sold their products in the same retail stores to the same customers, and its survey, which showed respondents a photograph of the products side-by-side in a store. The survey asked respondents if they believed that the products were produced by the same company, and 47% of respondents said yes.  (If this is an accurate description of the survey, it sounds leading in the extreme.)  If believed, surveys can support a finding of actual confusion, which then supports a theory of profits as a proxy for damages.

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