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Category Archives: Damages

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Damages Awarded on Lanham Act Default Judgment

Posted in Damages

O.A. Cargo, Inc. v. OA Cargo Chicago, No. 12 C 5763, Slip OP. (N.D. Ill. Mar. 13, 2014) (Zagel, J.).

Judge Zagel awarded damages in this Lanham Act case after he and Judge Conlon entered default judgment against the defendants.

Pursuant to its “considerable discretion” to award damages based upon a default judgment, the Court awarded the following damages:

  1. Expenses incurred in setting up Defendants’ business – $36,826.24
  2. Franchise fee – $50,000
  3. Ongoing licensing fees of $8,633.33 per month for 16.5 months – $142,449.95 + $35,612.49 = $178,062.44
  4. Attorneys’ fees and costs – $35,816.47
  5.  Statutory interest

The Court did not award damages for the entire 26 month period for which plaintiff sought the ongoing licensing fees.  The Court held that the evidence did not support the full 26 months.  Instead, the evidence supported 16.5 months.  The Court awarded damages for 16.5 months.  The Court also held that there was evidence that defendants’ conduct was willful.  The evidence warranted a 25% increase in the award of ongoing licensing fees, but not the trebling sought by plaintiff.  Finally, the Court denied damages based upon plaintiff’s alleged reputational harm because the damages were “insufficiently supported.”

No Irreparable Harm Where Plaintiff Delays Seeking Injunction

Posted in Damages

Real-Time Reporters, P.C. v. Sonntag Reporting Servs., Ltd., No. 13 C 5348, Slip Op. (N.D. Ill. Der-Yeghiayan, J.).

Judge Der-Yeghiayan denied plaintiff Real-Time Reporters’ (“RTR”) preliminary injunction motion in this Lanham Act matter involving RTR’s REAL-TIME REPORTERS trademark.  Defendant Sontag Reporting Services (“SRS”) use of the name “Chicago-area Realtime Reporters” alleged infringed RTR’s REAL-TIME REPORTERS trademark. 

RTR’s slow actions belied its claims of irreparable harm.  RTR allegedly learned of SRS’s use of the mark in April 2013, but did not sue until late July 2013, did not seek a temporary restraining order and waited almost a month before filing the instant motion for preliminary injunction. 

The Court also held that in light of the Supreme Court’s eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) decision, it was unclear that the presumption of irreparable harm in trademark cases remained. 

Regarding RTR’s likelihood of success, the Court held that RTR’s REAL-TIME REPORTERS mark appeared to be generic.

Balancing the harms favored SRS because it would be harmed by an injunction, while RTR had already shown it would not be significantly harmed by its delay in filing suit and its delay in seeking a preliminary injunction.

TRO Partially Delayed for Impending Trade Show

Posted in Damages

Dental USA, Inc. v. McClellan, No. 13 C 260, Slip OP. (N.D. Ill. Aug. 16, 2013) (Zagel, J.).

Judge Zagel granted in part plaintiff Dental USA’s motion for a temporary restraining order and injunction in this trademark and design patent infringement case.  Dental USA had a trademark for DENTAL USA, as well as POWER ELEVATOR for a tooth extraction machine.  Dental USA also had a design patent for the tooth extraction machine.  Defendants are former employees of Dental USA who allegedly formed United Dental USA, which competed with Dental USA, including by selling a Misch Power Elevator that performs the same function as Dental USA’s Power Elevator.  Dental USA also alleged that defendants improperly used Dental USA’s copyrighted images on defendants’ website.  Dental USA sought an order enjoining defendants from:  1) using the United Dental USA name at upcoming trade shows; 2) selling Misch Power Elevators, along with any related tools; 3) selling infringing products on defendants’ website; and 4) using Dental USA’s copyrighted works on defendants’ website.  Dental USA also sough seizure of counterfeit goods. 

Defendants were barred from using the name United Dental USA at any future trade shows until the Court reached a decision on the merits.  Defendants had already agreed not to use the name at one, upcoming tradeshow in San Francisco.  Defendants were ordered to take down their uniteddentalusa.com website until at least a final judgment was issued in the case. 

The Court held that DENTAL USA and UNITED DENTAL USA were “self-evidently very similar marks.”  Adding “United” did little to change that analysis, particularly because the U in USA was an abbreviation for “united.”  Dental USA also had at least some evidence of actual confusion.  There was also evidence that Defendants were using Dental USA’s part numbers and product images, adding to the likelihood of confusion.  There was also at least some evidence of actual confusion.

The Court noted that Lanham Act violations are presumed to be irreparable harm, and the evidence in this case bolstered that — the similarity of the products and the fact that the parties compete at the same trade shows.

The balance of equities favored Dental USA.  In particular, defendants used two names — United Dental USA and Misch Instruments.  Because Misch Instruments was the dominant name, defendants were unlikely to be harmed by an injunction.

The public had a strong interest in enforcing intellectual property which was somewhat balanced by an interest in healthy competition.  If the Court felt that the injunction would put defendants out of business, it might have changed the analysis, but that was unlikely. 

The Court, however, denied Dental USA’s motion to enjoin sales of the Misch Power Elevator.  But the Court enjoined the use of the MISCH POWER ELEVATOR trademark or any other POWER ELEVATOR mark, for similar reasons.  The Court did, however, delay the injunction until after the San Francisco trade show.  Having enjoined the products so close to that trade show would have seriously harmed defendant’s business.

Parent Cannot Seek Lost Profits Based Upon Subsidiaries Sales

Posted in Damages

Fujitsu Ltd. v. Tellabs, Inc., No. 09 C 4530, Slip Op. (N.D. Ill. Dec. 21, 2012) (Holderman, C.J.).

Judge Holderman granted defendants (collectively “Tellabs”) summary judgment that plaintiff Fujitsu Limited was not able to seek lost profits in this patent litigation.  Fujitsu, the patent holder, did not sell a covered product in the United States (a requirement for lost profits), but its subsidiary Fujitsu Network Communications (“FNC”) did.  Fujitsu Limited argued that the profits of FNC inexorably flowed to Fujitsu Limited warranting lost profits. Fujitsu Limited argued that various payments from FNC to Fujitsu Ltd. represented profits from sales of patented goods.  The Court, however, held that the payments were for use of trademarks, employees working for FNC and part of a corporate tax planning.  Because the payments did not represent the profits from patented goods, Fujitsu Ltd. could not seek lost profits.

 

Attorneys Fees Reduced Based Upon Duplicative Work

Posted in Damages, Local Rules

Sloan Valve Co. v. Zurn Indus., Inc., No. 10 C 204, Slip Op. (N.D. Ill. Aug. 27, 2012) (St. Eve, J.).

Judge St. Eve granted in part plaintiff Sloan’s fee petition based upon the Court’s finding that defendant Zurn had “continually refused to produce relevant documents despite prior court intervention and a clear obligation to do so . . . .”  Here are the highlights:

  • Sloan’s counsel’s rates were reasonable, based in part upon the fact that Sloan paid the rates without expectation of indemnification or contribution by any third party.  The rates were between $550 and $735 for partners, $455 to $530 for senior counsel and $310 to $370 for associates.
  • Sloan’s 121 hours spent on a motion for sanctions, although it was more complex than the average motion, was not reasonable.  The Court awarded all of the fees for the two most junior attorneys and 20% of the senior attorneys’ fees, citing duplicative and excessive work being done, for a total of approximately $39,000.
  • The Court applied the same 80% reduction for senior attorney time spent on Sloan’s renewed motion for sanctions, resulting in a fee award of approximately $51,000.
  • The Court struck the most senior attorney’s time for Sloan’s reply brief in support of the renewed motion for sanction resulting in an award of approximately $26,500.
  • The Court cut the most senior attorney’s time by 50% for Sloan’s preparation of its response to Zurn’s supplemental submission.  The Court reasoned that many of the tasks could have been performed by a more junior attorney.

The Court’s total award was approximately $140,000.

 

Unrebutted Local Rule 56.1 Statement Leads to Summary Judgment

Posted in Damages

7-Eleven, Inc. v. Spear, No. 10 C 6697, Slip Op. (N.D. Ill. May 11, 2012) (Dow, J.).

 Judge Dow granted summary judgment to plaintiff 7-Eleven in this contract and Lanham Act case after defendants (collectively “Vianna”) failed to respond to 7-Eleven’s Local Rule 56.1 statements of fact or submit its own supplemental statements of fact.  The Court accepted all of 7-Eleven’s facts and found for 7-Eleven as to liability issues.  The Court, however, declined to grant summary judgment of injunctive relief or Lanham Act damages.

While 7-Eleven showed economic changes, neither party specifically addressed the permanent injunction factors.  So, additional briefing was required before a permanent injunction could be decided.

7-Eleven did not meet its burden of proof with respect to Lanham Act damages because it did not provide evidence of actual lost sales, profits or goodwill.  That would require detailed affidavits or evidence showing lost revenue, profits or goodwill.

Court Dismisses Case and Considers Unenforceability With Exceptional Case Motion

Posted in Damages

Gordon-Darby Sys., Inc. v. Applus Techs., Inc., No. 10 C 1863, Slip Op. (N.D. Ill. Dec. 23, 2010) (Zagel, J.).

Judge Zagel granted plaintiff’s motion to dismiss its patent infringement claims regarding vehicle emissions testing with prejudice and to dismiss defendants’ noninfringement, invalidity and unenforceability claims without prejudice. After the parties engaged in some discovery, plaintiff determined that it no longer wanted to pursue its claims and gave defendants a covenant not to sue. Based upon that covenant, the parties agreed that all of their claims should be dismissed, except for defendants’ inequitable conduct claims. Defendants argued that those claims were related to its 35 U.S.C. Section § 285 claim to make the case exceptional and award defendants their attorney’s fees. Citing the Federal Circuit’s decision in Monsanto Co. v. Bayer Bioscience N.V., 514 F.3d 1229 (Fed. Cir. 2008), the Court held that, although the Federal Circuit had not squarely decided the issue, the precedent was clear that the covenant divested the Court of subject matter jurisdiction over the inequitable conduct declamatory judgment claim.

The Court, however, retained independent jurisdiction over defendants’ Section § 285 claim to make the case exceptional and award defendants their attorney’s fees. And the Court acknowledged that it could consider unenforceability as part of the exceptional case analysis, which could trigger a holding that the patents in suit were unenforceable due to inequitable conduct.

Patent Damages 25% Rule is Dead

Posted in Damages

The following is an article I wrote with my Holland & Knight colleague Ben Stern outlining the Federal Circuit’s Uniloc decision striking down the 25% rule for patent damages.

On January 4, 2011, the U.S. Court of Appeals for the Federal Circuit found that the so-called “25 percent rule of thumb” analysis long used by damages experts in patent cases to calculate a “reasonable royalty” is “fundamentally flawed.” Uniloc v. Microsoft (Fed. Cir. 2011). The Federal Circuit held that because the 25 percent rule merely applies a general theory that is untethered to the facts of a case, “[e]vidence relying on the 25 percent rule of thumb is thus inadmissible under Daubert and the Federal Rules of Evidence.” Slip op. at 41. The full decision can be found online.

Striking down the 25 percent rule has important implications for patent damages in both existing and future patent litigation. As a result, the Uniloc decision is critical for every company that faces any current or potential risk of patent litigation.

Background

The 25 percent rule of thumb has long been a “starting point” of a reasonable royalty analysis. The rule – which the Federal Circuit observed has “met its share of criticism” – is based on the idea that, in a hypothetical negotiation, a licensee generally agrees to pay the patentee a royalty rate equivalent to 25 percent of the licensees’ expected profits on products that incorporate the intellectual property at issue in the case.

In this case, the plaintiff, Uniloc, sued Microsoft, alleging that a certain feature of Microsoft’s Word XP, Word 2003 and Windows XP infringed Uniloc’s patent. The jury agreed and awarded Uniloc $388 million in damages (which was less than the approximately $564 million that Uniloc’s expert opined it was due, based upon the 25 percent rule). These damages represented a “reasonable royalty” that Uniloc and Microsoft would have hypothetically agreed upon at the time the infringement began. Following the jury verdict, the district court granted Microsoft’s motion for a judgment as a matter of law of noninfringement, thereby effectively nullifying the jury’s damage award.

The Appeal

On appeal, the Federal Circuit first observed that the “admissibility of the 25 percent rule has never been squarely presented to this court” but acknowledged that it has “passively tolerated” the rule’s use over the years. After first reviewing the standards for the admissibility of expert opinions, the Federal Circuit concluded that U.S. Supreme Court precedent requires experts to “justify the application of a general theory to the facts of the case.” Slip op. at 43. If an expert cannot do so, then the proffered theory is inadmissible. Id. Given that the 25 percent rule, according to the Federal Circuit, is based on generalized empirical evidence about licenses, the Court concluded that the rule is nothing more than “an abstract and theoretical construct that … does not say anything about a particular hypothetical negotiation or reasonable royalty involving any particular technology, industry or party.” Slip op. at 45. Furthermore, it “is of no moment” that the 25 percent rule is merely a “starting point” for a reasonable royalty analysis; damages experts used the rule as a baseline and then applied other case-specific factors to adjust the rate up or down. According to the Court, “[b]eginning from a fundamentally flawed premise and adjusting it based on legitimate considerations specific to the case nevertheless results in a fundamentally flawed conclusion.” Slip op. at 46. Because Uniloc’s expert’s damages opinion (which was based on the 25 percent rule) was unrelated to the facts of the case, it was “arbitrary, unreliable, and irrelevant.” Slip op. at 47.

Thus, the Federal Circuit held that Microsoft is entitled to a new trial on damages. Because the Federal Circuit also reversed the district court’s post-trial finding of noninfringement, ordering a new trial on damages means that Uniloc may yet obtain a damage award in the case.

Implications of the Decision

The implications of the Uniloc decision on damages analysis for patent cases are tremendous. Because most patentees seek “reasonable royalties” (rather than lost profits, the other general mode of analysis), damages opinions, up until now, often began with the 25 percent rule of thumb and then “adjusted” the royalty rate up or down in light of the facts of the case.

Now that the 25 percent rule has been repudiated, the future promises to bring new and creative modes of analysis to arrive at a “reasonable royalty” in patent cases, which will likely result in new disputes about the admissibility of damages opinions.

New Algorithm Not Relevant to Hypothetical Reasonable Royalty Calculation

Posted in Damages

Chamberlain Group v. The Lear Corp., No. 05 C 3449, Slip Op. (N.D. Ill. Jul. 13, 2010) (St. Eve, J.).

Judge St. Eve granted in part plaintiff Chamberlain’s Fed. R. Civ. P. 26(c)(1) motion for a protective order in this patent case involving garage door opening systems. The Court denied a protective order as to defendant Lear’s request for Chamberlain’s financial information. While Chamberlain claimed the sales information was not relevant because Chamberlain did not seek lost profit damages, Chamberlain’s interrogatory response said it did seek lost profit damages. Additionally, the financial information was relevant as it was reasonably calculated to lead to admissible evidence related to Chamberlain’s commercial success and its lost profits. 

The Court granted a protective order as to discovery related to Chamberlain’s new garage-door-opening algorithm. Chamberlain had not sold a product embodying the algorithm. So, it was irrelevant to a reasonable royalty calculation which looked to a hypothetical negotiation when infringement began. Furthermore, the algorithm was not relevant to an obviousness analysis. Finally, Chamberlain’s decision to produce more information related to the same algorithm did not make the algorithm relevant. 

The Court also entered a protective order preventing further deposition of a Chamberlain employee. The employee had already been deposed twice – once for two hours and once for a full day. To the extent Lear wanted to depose the employee about the new algorithm, the Court had already determined it was irrelevant. And despite repeated warnings to stop, Lear had already repeatedly questioned the employee about the algorithm. 

Evidence of Marking Required for Constructive Notice

Posted in Damages

Von Holdt v. A-1 Tool Corp., No. 04 C 4123, Slip Op. (N.D. Ill. May 17, 2010) (Manning, J.).

Judge Manning granted defendants (collectively "A-1 Tool") summary judgment as to plaintiff’s (collectively "Plas-Tool") patent claims based upon a lack of notice and as to the plaintiff’s Computer Fraud and Abuse Act ("CFAA") claims, and chose not to exercise supplemental jurisdiction over the remaining state law claims. A-1 Tool sought summary judgment of a lack of pre-suit notice of the alleged patent infringement. The issue was dispositive because Plas-Tool’s patent expired before the suit was filed. So, pre-suit-notice – actual or constructive – was required in order for Plas-Tool to have any damages.

Plas-Tool’s general statements that they would sue A-1 Tool if it ever infringed Plas-Tool’s patents did not create actual notice. And the alleged patent knowledge of Plas-Tool’s former employee who joined A-1 Tool could not be imputed to A-1 Tool for purposes of actual notice. A-1 Tool’s burden was to make an evidentiary showing that could lead a reasonable person to find that Plas-Tool complied with the marking requirements by marking substantially all of Plas-Tool’s relevant product. Plas-Tool did not meet its burden of proof. Plas-Tool’s only evidence of marking compliance was testimony from Plas-Tool’s 30(b)(6) witness. The witness testified that Plas-Tool’s policy was to mark its products, but had no recollection of what specifically was marked. And the Court held that evidence of a company policy to mark without any other evidence of marking compliance was insufficient to overcome summary judgment. Beyond the 30(b)(6) testimony, Plas-Tool’s only marking evidence was having sent a customer two molds including patent markings. But when the molds were returned, one of them had the patent marking covered up, suggesting the product was made from the mold had not been marked. The Court, therefore, granted A-1 Tool summary judgment on Plas-Tool’s patent claims for lack of notice.

The Court also granted A-1 Tool summary judgment on Plas-Tool’s CFAA claim. Plas-Tool alleged that its former employee improperly accessed and damaged CAD files related to the patented products. But Plas-Tool was not able to identify any damage to the allegedly accessed files and the CFAA was not designed to deal with disgruntled former employees that took electronic files as they left. Also, Plas-Tool was unable to show the required $5,000 in damages within one year of the alleged damage. The loss Plas-Tool was able to show was not related to fixing damaged files, as required by the CFAA. Plas-Tool’s alleged damage was related to a forensic review that allegedly showed that the former employee tampered with the files.

Having granted summary judgment on the federal patent claim and the CFAA claim, the Court declined to exercise supplemental jurisdiction over Plas-Tool’s state law claims.

No Equitable Estoppel Where Parties Never Communicated

Posted in Damages

Integrated Cards, L.L.C. v. McKillip Indus., Inc. d/b/a USA/Docufinish, No. 06 C 2071 (N.D. Ill. Nov. 19, 2009) (Kendall, J.). 

Judge Kendall, following a bench trial, held that pre-suit damages were barred by laches, but that the claims were not barred by equitable estoppel, in this patent case involving integrated labels.  Laches was presumed because plaintiff and its founder/predecessor entities were aware of defendant’s alleged infringement for more than six years before filing.  And defendant was prejudiced by plaintiff’s delay because defendant purchased more than $1M in machines for producing the allegedly infringing integrated labels.  Laches, therefore, barred pre-suit damages.

Equitable estoppel, however, did not apply and bar all damages because plaintiff never suggested to defendant that plaintiff would not sue.  There was no evidence that plaintiff or its predecessors ever threatened litigation or otherwise misled defendant into believing it would not get sued.  And when litigation has not been threatened, courts typically will not estop patentee’s suit.  Plaintiff’s suit, therefore, was not equitably estopped.

Click here for more on this case in the Blog’s archives. 

Court Enters Judgment on Trademark Damages and Attorneys Fees in Accordian Case

Posted in Damages

Gabbanelli Accordions & Imports, L.L.C. v. Italo-Am. Accordion Mfg. Co., No. 02 C 4048, Slip. Op. (N.D. Ill. Sept. 21, 2009) (Zagel, J.).

Judge Zagel entered judgment on behalf of plaintiffs in the amount of $151,200 in lost profits after the Seventh Circuit affirmed the Court’s judgment.* The Court also held defendants jointly and severally liable for $147,576.12 in plaintiff’s attorneys’ fees.

* Click here for more on this case in the Blog’s archives.

Default Ends in Injunction & Award of Defendants’ Gross Sales

Posted in Damages

American Taxi Dispatch, Inc. v. American Metro Tax & Limo Co., __ F. Supp.2d __, 2008 WL 4616855 (N.D. Ill. Oct. 20, 2008) (St. Eve, J.).

 Judge St. Eve permanently enjoined defendants’ (collectively “Metro”) use of trademarks infringing plaintiff American Taxi’s American Taxi marks, and awarded American Taxi damages in the amount of Metro’s gross sales as well as attorney’s fees. American Taxi began using its marks in 1975. Metro incorporated and began using their American Metro Taxi marks in early 2007. American Taxi filed the instant suit for trademark infringement, Lanham Act unfair competition and related state law claims. Metro initially defended itself, but after repeatedly missing deadlines th Court entered a default judgment and allowed American Taxi to submit proofs, which led to this opinion.

Pursuant to Fed. R. Civ. P. 54(c), the award could not exceed in form or amount what was demanded in the pleadings. The Court held that the complaint justified a permanent injunction. American Taxi alleged that Metro’s infringing acts harmed American Taxi’s goodwill, and the Seventh Circuit has held that damage to goodwill can constitute irreparable harm. And American Taxi backed up its complaint with an affidavit detailing actual confusion between the marks. Furthermore, a tailored injunction would not put Metro out of business. In fact, Metro’s owner claimed that Metro had been dissolved. So, the balance of harms weighed in American Taxi’s favor. And finally, there is a public interest in knowing whom they conduct business with, which favored an injunction. The Court, therefore, permanently enjoined Metro and its affiliates, successors and assigns from using its marks or any others that were confusingly similar to the American Taxi marks.

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Court Awards Injunction, Actual Damages and Costs, Not Attorney’s Fees

Posted in Damages

Hyundai Construc. Equip. U.S.A., Inc. v. Chris Johnson Equip., Inc., No. 06 C 3238, Slip Op. (N.D. Ill. Oct 21, 2008) (Leinenweber, Sen. J.).

Judge Leinenweber, having previously granted plaintiff summary judgment of Lanham Act unfair competition and deceptive trade practices,* enjoined defendant’s continued sale of gray market goods and use of plaintiffs’ trademarks and awarded plaintiffs damages and costs.  The Court awarded plaintiffs defendant’s profits from sales of gray market construction equipment (equipment made abroad for sale abroad that was imported to the United States without authority for resale), but the Court held that awarding plaintiffs a multiple of defendant’s actual damages would be inappropriately punitive.  Additionally, the Court gave defendant an opportunity to prove its costs before entering a final damages amount. 

The Court also entered a permanent injunction.  The Court, however, denied plaintiffs’ request that defendant have to provide plaintiffs and the Court a report proving defendants’ compliance with the injunction.  Such a requirement was unduly burdensome.

Finally, the Court awarded plaintiffs their costs, but held attorney’s fees were not appropriate because the case was not exceptional.  Among other reasons the case was not exceptional, the Court noted evidence that defendants "apparent pains" to warn customers that defendants’ products lacked a warranty and came from overseas.  And the Court held that no actual confusion had yet been proven.

*  Click here for the prior decision in the Blog’s archives.

Court Does Not Order Sale of LLC to Satisfy Judgment, But May Appoint Receiver

Posted in Damages

 Bobak Sausage Co. v. Bobak Orland Park, Inc., No. 06 C 4747, Slip Op. (N.D. Ill. Nov. 3, 2008) (Kennelly, J.).*

Judge Kennelly denied without prejudice plaintiff Bobak Sausage Co.’s ("Bobak") motion to compel defendant’s interest in Bobak Fifty Third Street LLC (“Bobak 53”). Bobak makes and sells meat products and operates a related restaurant in Chicago.  Bobak’s founder, Frank Bobak, transferred ownership of Bobak’s to his sons.  In early 2006, Bobak’s reorganized, leaving two of the sons owning Bobak’s and a third, defendant, owning a grocery store that Bobak’s had been building.  All of the brothers maintained as interest in Bobak 53. As part of the reorganization, Bobak’s granted two entities rights to use Bobak’s trademarks at retail locations for a six month period.  After the six month period ended, Bobak’s filed suit against defendants (including the third son and the licensed retail locations) for, among other things, trademark infringement based upon the continued use of the Bobak’s marks.  The parties settled that dispute based at least in part upon a stipulated permanent injunction, which the Court entered, setting various limits on what marks each defendant could use, requirements that the defendants remove and change their signage and requirements that defendants use disclaimers that they were not affiliated with Bobak’s.  The Court later held certain defendants in contempt for violating the permanent injunction and entered a remedial fine of $150,000. When defendants failed to pay the fine, the Court added interest to it.

Because defendants continue not to pay the fine, Bobak moved the Court for an order compelling the transfer of defendant’s interest in Bobak 53 pursuant to Fed. R. Civ. P. 69(a) and 70. The Court, however, held that Rule 70 only allows for enforcement of money judgment in very narrow circumstances, circumstances that were not yet met in this case.

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Trademark Plaintiff Entitled to All Defendants’ Revenue

Posted in Damages

WMS Gaming Inc. v. WPC Gaming Prods. Ltd., No. 07-3585, Slip Op. (7th Cir. Sep. 8, 2008) (Wood, J.).*

Judge Wood delivered the Seventh Circuit’s opinion reversing and revealing Judge Manning’s damages award. Plaintiff-Appellant WMS Gaming (“WMS”) alleged that defendants (collectively “PartyGaming”) infringed its JACKPOT PARTY and SUPER JACKPOT PARTY marks. Defendants chose not to participate in the suit. The Northern District, therefore, entered a default judgment for WMS and a permanent injunction. WMS sought $287M in damages, an amount equal to PartyGaming’s reported U.S. revenues during the relevant period. The Court, however, held that WMS was entitled to damages, not an equitable accounting of all of defendants revenues and awarded approximately $900K per year, or $2.7M total. As an initial matter, the Seventh Circuit held that Fed. R. Civ. P. 54(c) requires that in the case of a default judgment the award cannot differ from or exceed the type and amount of requested damages. Because WMS’s complaint and its subsequent pleadings all requested both an equitable accounting and actual damages, either were an allowable damages award.

Having determined that an equitable accounting was an appropriate remedy, the Court explained that WMS was entitled to an award of PartyGaming’s revenues attributable to PartyGaming’s trademark infringement. Further, WMS’s burden was only to prove PartyGaming’s revenue. WMS did that by proving PartyGaming’s $287M of U.S. revenues during the relevant period. The burden then shifted to PartyGaming to prove which portions of its revenue were not attributable to its infringement. The Seventh Circuit, therefore, reversed and remanded to the Northern District.

Click here for the opinion and click here for a podcast of the oral argument.

Should Apologies be Added to Trademark Damages?

Posted in Damages

Mike Atkins at the Seattle Trademark Lawyer has an interesting post — click here for the post — about a pending Chinese trademark infringement suit, in which plaintiff seeks monetary damages and a public apology to be published in newspapers.  IP Dragon follows up Atkins’s post, explaining that an apology is a Chinese trademark remedy and that an apology is a punishment in a "face saving culture," as IP Dragon describes China and Japan, the nationalities of the two entities involved in the suit.  Click here for IP Dragon’s post.

But punishment or not, this raises an interesting question for US trademark law.  It seems to me that a public apology (or acknowledgement of the infringement) would be a more powerful tool for the consumers that trademark law intends to protect than just monetary damages and an injunction.  An acknowledgement of the infringement would warn consumers who might still unwittingly purchase items based upon the infringing marks after the injunction is in place.  Maybe it is time to amend the Lanham Act.

Counterfeiting Statutory Damages are up to $1M/Trademark

Posted in Damages

Lorillard v. Montrose Wholesale Candies & Sundries, Inc., No. 03 C 5311 & 4844, 2008 WL 1775512 (N.D. Ill. Apr. 17, 2008) (Aspen, J.).

Judge Aspen adopted Magistrate Judge Cole’s Report and Recommendation, denying defendants’ Fed. R. Civ. P. 59(e) motion to alter the Court’s judgment against defendants – click here to read more about that Report and click here to read more about this case in the Blog’s archives. The Court awarded plaintiff Lorillard $2.5M in statutory damages for defendants’ sales of counterfeit cigarettes using Lorillard’s trademarks. Defendants objected to, among other things, a statutory damages award in excess of $1M. Defendants argued that 15 U.S.C. § 1117(c)(2) only allowed $1M in statutory damages per type of goods sold. Because this case only involved one type of goods, cigarettes, defendants argued statutory damages could not exceed $1M. But the Court held that the limitation was $1M per counterfeit mark per type of good. Because Lorillard alleged five counterfeit marks were used, the statutory damages limit was $5M. 

Willfulness Post-Seagate

Posted in Damages

Brian Higgins at the Maryland IP Law Blog posted an analysis of significant willfulness decisions post-In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007) — click here for the post and click here for a subsequent post discussing Se-Kure Controls, Inc. v. Diam USA, Inc., No. 06 C 4857, 2008 WL 169029 (N.D. Ill. Jan. 17, 2008) (Cox, Mag. J.).  Of the eleven decisions Higgins identified, three were Northern District decisions and one was a Federal Circuit decision analyzing a Northern District case.  Here are my posts on the Northern District decisions:

As you can infer from the relatively small number of cases identified by Higgins, there remains a lot of law to be written about Seagate before the standard is well settled.  I suspect that within 18-24 months there will be a relatively large body of law, including numerous Federal Circuit decisions exploring the new standard’s outlines.  Until then, patent litigants will face a degree of uncertainty regarding willfulness.  Of course, defendants will generally be glad to have some uncertainty in exchange for plaintiffs’s higher willfulness hurdle.

Trading Technologies v. eSpeed: Damages Remittitur

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Trading Techs. Int’l, Inc. v. eSpeed, Inc., No. 04 C 5312, Slip Op. (N.D. Ill. Feb. 5, 2008) (Moran, Sen. J.).*

Judge Moran denied defendants’ Fed. R. Civ. P. 59 motion for a new trial of damages on the condition that plaintiff Trading Technologies (“TT”) accepted a remittitur of defendant eSpeed’s portion of the damages. After a trial, the jury returned a verdict for TT and awarded $3.5M in compensatory damages, split $2M against defendant Ecco and $1.5M against defendant eSpeed. At trial, TT’s damages model was based upon a proposed reasonable royalty of between $.15 and $.25 per trade and a total of approximately 18M to 23M trades for a damages range of about $3.5M to $4.6M. TT argued that the apportionment of damages was irrelevant because the total award was within the argued range and because eSpeed purchased Ecco and, therefore, would be paying the full amount. But the Court noted that Ecco’s award would be paid from an escrow account set up for because of TT’s patent claims when eSpeed purchased Ecco. Additionally, eSpeed’s $1.5M judgment was well beyond the highest award that could be supported by TT’s evidence. The evidence showed that during the relevant time, eSpeed completed approximately 2.1M trades. Even at $.25 per trade, TT’s highest proposed royalty, the possible damages were only $539,468. The Court, therefore, offered TT a remittitur of $539,468 or a new trial on damages.

The Court also awarded TT prejudgment interest set at the average prime rate for the period compounded monthly, because TT collected license fees monthly.

Click here to read much more about this case in the Blog’s archives and click here for a copy of this opinion.

Will eBay v. MercExchange Lead to Compulsory Licensing?

Posted in Damages

In a recent post on the University of Houston Law Center Faculty Blog (another LexBlog site), Ray Nimmer asks whether the Supreme Court’s recent eBay v. MercExchange permanent injunction decision will lead to compulsory licensing.  Nimmer discusses two alternatives when a permanent injunction is not granted after a patent infringement finding:

One response is simply to assess damages as to past infringement, leaving any future use of the patent for a voluntary agreement of the parties (a license) or a subsequent infringement suit for the subsequent infringements. That is clearly the preferable option, although it does raise limited issues of judicial economy.

A second alternative is to permit subsequent use by the defendant subject to the payment of a reasonable royalty imposed by the court. This is a form of compulsory licensing that rewards the wrongdoer, unless the remedy has been requested by the patent owner. Nevertheless, a panel of the Federal Circuit indicated that such a remedy may be appropriate. One wonders why.

Nimmer concludes that courts should not impose compulsory licensing for future infringement absent substantial public policy reasons:

The preconditions should be both an opportunity to negotiate a license and, failing a bargain, a request by both parties for the court to impose a royalty as part of the remedy for infringement. A patent creates a right to exclude and, where the patent owner prefers to exercise that right, it should not be forced into a licensing arrangement resulting from a case in which it prevailed on the infringement claim. There may be some cases in which vital public policy interests justify this result, but those cannot be grounded simply in the fact that the court denied a permanent injunction or the parties have not agreed to license terms. A remedy should not penalize the person to whom the remedy is awarded. 

“Negligence and Recklessness” Does Not Warrant Discovery Sanctions

Posted in Damages

RRK Holding Co. v. Sears, Roebuck & Co., No. 04 C 3944, Min. Order (N.D. Ill. Sep. 10, 2007) (Coar, J.).*

Judge Coar denied the parties’ damages motions in limine.* First, the Court held that defendant Sears, Roebuck & Co. (“Sears”) could have its damages expert Catherine Lawton testify regarding her analysis of a hypothetical September 2001 negotiation between the parties. Plaintiff RRK Holding (“RRK”) argued that the misappropriation began in March 2000, not when Sears began selling its product in September 2001. As a result, Sears contended that Lawton’s September 2001 hypothetical negotiation should not be allowed into evidence. But the Court held that the timing of the misappropriation was a question of fact for the jury and, therefore, allowed Lawton’s testimony.

Second, the Court held that Sears could introduce the 2003 sale of some of RRK’s assets for $17M as part of Sears’s damages case. The Court held that the value of the sale was relevant to RRK’s alleged injury based upon the alleged misappropriation.

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Rare Summary Judgment of Damages is Doubled/Trebled

Posted in Damages

Ball Aerosol & Specialty Container, Inc. v. Limited Brands, Inc., No. 05 C 3684, 2007 WL 2570351 (N.D. Ill. Sep. 4, 2007) (Der-Yeghiayan, J.).

Judge Der-Yeghiayan granted plaintiff Ball Aerosol & Specialty Container (“BASC”) summary judgment on the issue of patent damages, held that the case was exceptional and then doubled some of the damages and trebled the remainder. The Court previously construed the claims of BASC’s patent for a candle tin with a cover that can be used as a base and granted plaintiff summary judgment of infringement. In this opinion, the Court weighed the Georgia Pacific factors and held that they warranted a royalty rate of 20%. This rate represented an increase over the 17% rate BASC argued it would have granted in an arms-length negotiation to compensate BASC for the compulsory license. The Court then found that the case was exceptional because, among other reasons, defendants continued selling infringing product after the Court granted summary judgment of infringement. Based on the exceptional case holding, the Court doubled the damages from sales before the Court granted BASC summary judgment of infringement and trebled the damages for all sales after summary judgment.

Summary judgment of damages is a fairly rare occurrence. A quick review of the docket does not suggest that the parties waived their right to a jury. So, the facts in this case must have been very strong.

$2.5M Statutory Damages Award Set Without Hearing

Posted in Damages

Lorillard Tobacco Co. v. Montrose Wholesale Candies & Sundries, Inc., No. 03 C 5311 & 4844, 2007 WL 2580491 (N.D. Ill. Sep. 10, 2007) (Cole, Mag. J.).

Judge Cole recommended awarding plaintiff $2.5M in statutory damages. The Court had previously entered a Fed. R. Civ. P. 37(b) default judgment against defendants for sales of counterfeit Newport cigarettes in violation of the Lanham Act.* The Court recommended that a damages hearing was not necessary because of defendants’ four year pattern of avoiding discovery obligations leading to a default judgment, including failing to produce damages documents. Having actively avoided producing the information for four years, defendants were not now entitled to seek opportunities to present evidence in their defense. Furthermore, the Court reported that a $2.5 M award was reasonable. $2.5M was half of plaintiff’s estimate of defendants’ infringing sales and it was half of the potential $1M statutory award for each of the five marks defendants infringed.

* For more on this case, see the Blog’s archives.