Seattle Trademark Lawyer has been following the case. Gamber-Johnson lost a trial about its comparative advertising about the parties’ emergency vehicle laptop mounting systems. It moved for and received judgment as a matter of law on damages, reducing the jury’s $10 million award to a little under $500,000. NPI received a permanent injunction and attorneys’ fees and costs, but not prejudgment interest.
A jury verdict will be upheld if supported by substantial evidence, though the district court has discretionary power to modify monetary awards under the Lanham Act, which are “subject to the principles of equity.” 15 U.S.C. § 1117(a). The Lanham Act allows (1) disgorgement of defendant’s profits; (2) plaintiff’s actual damages (lost sales); and (3) the cost of the action. The court can increase damages up to three times actual damages found and can only decrease them if the award wasn’t based on substantial evidence, but it can adjust profit awards “according to the circumstances of the case” if the initial award is inadequate or excessive, as long as its award constitutes “compensation and not a penalty.”
Here, NPI didn’t seek actual damages, so its theory was based on unjust enrichment/disgorgement of profits. Relief is not a matter of right and must be based on the totality of the circumstances, avoiding a windfall to the plaintiff and pure punishment for the defendant: actual evidence of injury is the touchstone. But the court also needed to take into account the jury’s finding that Gamber-Johnson deliberately engaged in false advertising.
NPI was entitled to a presumption of actual deception and reliance because Gamber-Johnson’s statements were intentionally false/misleading. The presumption of damages, however, didn’t extend to sales diversion. NPI disavowed reliance on injury to goodwill and reputation in its post-trial motions on damages. Because it wasn’t claiming actual damages, it had to prove that it was entitled to any profits Gamber-Johnson earned that were attributable to the false advertising. At that point, the burden would shift to Gamber-Johnson to prove its expenses and profits attributable to factors other than false advertising.
The problem was that there was a dearth of evidence proving that all Gamber-Johnson’s sales and profits during the relevant period were attributable to false advertising. After trial, the court requested evidence from NPI connecting the false video to the profits, and NPI responded with evidence from trial proving that at least two companies chose to purchase the Gamber-Johnson product after reviewing the video. But NPI never offered any evidence at trial quantifying Gamber-Johnson’s profits from those sales, and considering evidence outside the trial record was improper. Without evidence of profits attributable to those sales, the court couldn’t award damages based on Gamber-Johnson’s profits from those sales.
NPI’s expert witness opined that Gamber-Johnson’s profits during the relevant period were $22,570,826. However, his analysis of how much was attributable to false advertising was based on anecdotal evidence about unidentified customers. The court couldn’t connect his calculations to the jury verdict of $10 million, despite NPI’s argument that one could use the profit margin offered by Gamber-Johnson (nearly 30%) on revenue of $54 million, plus “a few additional deductions,” to reach that figure. Gamber-Johnson’s expert testified that the best indication of its profits from sales diverted from NPI was approximately $350,000. Using a higher profit margin estimate as posited by NPI, the court calculated that an award of nearly $500,000 “would serve the policy considerations behind the Lanham Act.” Even though other vendors were mentioned in the video and some of Gamber-Johnson’s profits therefore probably didn’t represent sales taken from NPI, equity—including the jury’s finding of Gamber-Johnson’s intent—supported the award.
NPI argued that its burden was simply to identify the pool of sales attributable or related to the false advertising, and that it had done so by identifying the sales of the falsely advertised goods. The court disagreed. It’s necessary to segregate profits from sales associated with the infringing/false activity from sales that don’t involve infringement/falsity. Another infringement case involved a presumption that profits from jeans bearing a counterfeit Playboy mark were attributable to the infringing mark. But unlike that case, where every purchaser would have seen the infringing mark, the evidence here was that only some of Gamber-Johnson’s customers would have even seen the video, so NPI needed more evidence.
NPI was still entitled to a permanent injunction. NPI wanted it to include a requirement that Gamber-Johnson notify everyone to whom it had sent the video that the statements in the video are false. Gamber-Johnson argued that injunction was unnecessary because it already ceased distribution. But it admitted that it never attempted to retract any copies and still encouraged its distributors to use the video. The only question was how much activity to enjoin. Gamber-Johnson argued that explicit notification about the falsity was unnecessary, but the court was “concerned that Gamber-Johnson continues to assert that the statements in the video were not false and thus it was not going to publicize the jury’s findings.”
Thus, the court ordered Gamber-Johnson to send by first class mail a copy of the jury’s findings in this case to each of the vendors or distributors that received the video.
NPI also got a fee award because the jury’s finding that Gamber-Johnson’s false advertising was deliberate naturally supported a finding that this was an exceptional case under 15 U.S.C. § 1117(a). The court denied prejudgment interest because that’s for cases in which the plaintiff won’t be made whole without additional compensation, and NPI didn’t meet that standard (though I’m not really clear why).
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