This blog is the seventh in a series that Finkel Law Group is publishing to provide our readers with a broad overview of trademark law in the United States. Once a trademark owner initiates an infringement claim, understanding the potential remedies and defenses is critical. Remedies for trademark infringement can include injunctive relief, monetary damages, and other means of legal recourse designed to protect trademark rights. At the same time, defendants have several legal defenses available to challenge an infringement claim, such as fair use, First Amendment protections, and equitable defenses like laches. In this post, we will explore the principal remedies available in trademark infringement cases and the key defenses that alleged infringers may use to contest such claims. Before you decide to take action to enforce your company’s trademarks you should consult an experienced trademark litigation attorney to discuss the most appropriate steps forward to protect your marks.
Principal Remedies for Infringement
The principal remedies available in trademark infringement and false advertising actions under the Lanham Act include: (1) injunctive relief, (2) actual damages, (3) profits of the infringer, (4) enhanced damages for willful infringement, and (4) attorneys’ fees in certain cases.
Seeking Injunctive Relief
Under the Lanham Act, federal courts can issue temporary restraining orders or preliminary and permanent injunctions to stop acts of trademark infringement and dilution. Injunctive relief is the most important remedy in these cases because monetary relief is often an inadequate remedy for harm to the trademark owner’s brand from continued infringement. This is particularly true for a preliminary injunction where it is issued to preserve the status quo pending a final decision of the case on the merits. Depending on the evidence and the issues in dispute, a trademark case may well settle after a court rules on a preliminary injunction motion because it often makes little sense to continue litigating once the court has found the plaintiff is likely – or unlikely – to succeed on the merits.
Each Federal circuit’s test to obtain a temporary restraining order (“TRO”) or preliminary injunction in a trademark case is unique. In most cases, however, a plaintiff seeking preliminary injunctive relief must provide evidence of the following: (1) likelihood of success on the merits, (2) likelihood of irreparable injury without the injunction, (3) a balance of hardships favoring the plaintiff, and (4) the public interest is best served by issuing the injunction.
Courts generally interpret likelihood of success on the merits to mean probability of success at trial. Some courts adjust the necessary degree of possibility of success on the merits according to their assessment of the other 3 injunctive factors. With enactment of the Trademark Modernization Act, a plaintiff seeking injunctive relief under the Lanham Act is entitled to a rebuttable presumption of irreparable harm upon a finding of likelihood of success on the merits for a TRO or preliminary injunction, and success on the merits for a permanent injunction.
When assessing the balance of hardships between a plaintiff and defendant in a trademark case where the plaintiff seeks injunctive relief, courts have reached varied conclusions depending on the evidence presented. For instance, the balance of the hardships is not affected by the fact the defendant can no longer run its business using a mark it was not entitled to use. Defendant’s financial difficulties do not outweigh the harm due to the plaintiff’s loss of control of the mark during the litigation. The balance of hardships tips in the plaintiff’s favor where it faces a loss of goodwill and reputation while the defendant faces no significant hardship because its U.S. sales are minimal. The balance of hardship cannot favor a defendant whose injury results from the knowing infringement on the plaintiff’s mark. These are just examples.
Courts have consistently found a strong public interest in preventing consumer confusion in the marketplace. Courts have also found that requiring compliance with the Lanham Act serves the public interest. Where a plaintiff establishes likely or actual success on the merits of an infringement claim, courts typically find the public interest is likely to be harmed by the defendant’s continued use of the mark. Injunctive relief in false advertising cases can include orders to stop the false advertising and orders to distribute corrective advertising.
Recovering Damages
The Lanham Act sets forth the various forms of monetary relief available in trademark cases brought under the Act. Depending on the circumstances of the case, a party that prevails on claims brought under the Act may be entitled to recover the following: (1) defendant’s profits, (2) plaintiff’s damages, (3) costs of suit, (4) attorneys’ fees, and (5) pre-judgment interest. A prevailing party may recover these monetary remedies for any violations of the Act, including: (1) registered trademark infringement and counterfeiting under section 32(1), (2) unregistered trademark infringement under section 43(a), (3) unfair competition under section 43(a), (4) false designation of origin under section 43(a), (5) false advertising under section 43(a), (6) dilution under section 43(c), and (7) cybersquatting under section 43(d). In counterfeiting and cybersquatting cases, a prevailing party may elect to recover statutory damages instead of damage or profit awards.
The Lanham Act requires a court to consider the equities of the case when deciding whether to award monetary relief. Courts generally evaluate whether and to what extent one or more of the following equitable principles justify such relief: (1) compensating plaintiff’s loss, (2) preventing defendant’s unjust enrichment, and (3) deterring defendant’s willful conduct. Monetary relief may not be punitive. While the Act allows a plaintiff to recover both its damages and defendant’s profits, courts usually reject an award of both remedies as an impermissible double recovery.
Plaintiffs most commonly seek an award of the defendant’s profits. Such awards are not automatic. If injunctive relief is adequate, a court may deny monetary relief. A court may award a plaintiff the defendant’s profits as a measure of damages to compensate the plaintiff for lost profits on the theory a sale gained by the infringing defendant is a sale lost by the plaintiff. A court may also award a plaintiff the defendant’s profits as an equitable remedy to prevent the defendant’s unjust enrichment, deter future misconduct, and compensate the plaintiff regardless whether it can prove its loss. Today, most profit awards are equitable, and do not depend on plaintiff’s proof of injury.
The Act also allows a plaintiff to recover damages. Because plaintiff’s damages can be difficult to prove, they are rare in trademark cases. To recover damages under the Act, a plaintiff must show: (1) actual damage caused by defendant’s conduct, (2) the amount of the damage, and (3) equity justifies a damages award. The same principles that apply to proving damages in tort cases apply to proving damages in trademark cases. The plaintiff must show it suffered actual harm, caused by defendant’s wrongful act, and the harm is not remote or speculative. A court will award damages if the plaintiff shows the defendant’s conduct caused the plaintiff’s harm and the plaintiff provides evidence that allows the court to make a fair and reasonable assessment of the amount of plaintiff’s damages. A court cannot award arbitrary or speculative damages, but a plaintiff does not need to show a precise calculation of its damages. It must, however, prove lost profits with reasonable certainty and provide a reasonable basis for their computation. Defendant bears the burden of any uncertainty about the amount of a damage award. A court may award monetary relief to compensate plaintiffs for a variety of financial harms, including lost profits, lost royalties, loss of goodwill or damage to reputation, and costs of corrective advertising.
The Act allows courts to grant statutory damages in counterfeiting and cybersquatting cases only. In a counterfeiting case, a plaintiff may prefer statutory damages to avoid the difficult task of proving its own damages or the profits earned by a counterfeiter who doesn’t keep organized records. For each counterfeit mark used on a good or service sold, offered for sale or distributed, a court may award statutory damages between $1,000 and $200,000, and up to $2,000,000, if use of the counterfeit mark was willful. In a cybersquatting case, a court may award a plaintiff statutory damages between $1,000 and $100,000 per domain name. When assessing the amount of an award within these limits, a court considers: (1) the willfulness of the defendant’s conduct, (2) defendant’s use of false contact information to conceal unlawful conduct, (3) defendant’s status as a serial cybersquatter, and (4) defendant’s conduct evidencing contempt for the proceeding.
The Lanham Act authorizes courts to provide enhanced monetary awards. In non-counterfeiting cases, the Act allows a court to increase a damage award up to 3 times the plaintiff’s proven damages, or increase or decrease an award of the defendant’s profits as necessary to prevent an inadequate or excessive award. In counterfeiting cases, the Act requires a court, absent extenuating circumstances, to increase or decrease monetary awards when the defendant knowingly and intentionally used a counterfeit mark, or knowingly and intentionally provided goods or services necessary to commit counterfeiting.
Recovery of Attorneys’ Fees and Costs
The Lanham Act authorizes courts to award the prevailing party’s attorneys’ fees in non-counterfeiting cases deemed exceptional. Absent extenuating circumstances, courts must award recovery of the plaintiff’s attorneys’ fees in cases of intentional counterfeiting.
Courts may award costs subject to equitable principles. Courts routinely award costs to the prevailing party. Some courts allow the prevailing party to recover reasonable out-of-pocket expenses normally charged to a client as part of an attorneys’ fee award, including costs for service of process, travel, computer research, photocopies and phone costs. Some trademark cases allow awards of pre-judgment interest. In counterfeiting cases, courts generally award pre-judgment interest from the date of service of the complaint. The Act is silent on whether courts may grant pre-judgment interest in non-counterfeiting cases. The courts are divided on whether to grant such relief. Some grant it. Some grant it only in exceptional cases. Some deny it.
Principal Defenses to Infringement Claims
Principal defenses to infringement claims include: (1) challenges to the ownership, validity, and enforceability of the plaintiff’s mark, (2) descriptive fair use, (3) nominative fair use, (4) First Amendment protections, and (5) equitable defenses, like laches.
Descriptive Fair Use
Section 33(b)(4) of the Lanham Act sets out the statutory defense of descriptive fair use, which permits any “use… of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin…” Under this provision, the owner of a mark may not prevent third parties from using the terms in the mark for their ordinary descriptive meaning. If the owner challenges that use, the defendant may assert the affirmative defense of descriptive fair use. Descriptive fair use is an affirmative defense to trademark infringement, unfair competition, and dilution claims. The defense only comes into play after the plaintiff has met its burden of proving likelihood of confusion by a preponderance of the evidence.
When your company wants to use a descriptive term or phrase that is identical or similar to another company’s trademark, you should take steps to ensure your use is a descriptive fair use. For instance, avoid highlighting the designation by depicting it in boldface or distinguishing font or larger typeface or in titles or headlines. Use the designation in sentence text. Avoid capitalizing the designation. Avoid repeating the designation. Avoid using the designation in domain names. If you highlight the designation for any reason present it in a font and style different from the mark owner’s presentation of its mark. Avoid any suggestion you claim any trademark rights in the designation.
Normative Fair Use
Whereas a descriptive fair use is a defendant’s use of a designation to describe its own goods or services, a nominative fair use is a defendant’s use of the plaintiff’s actual trademark to refer to the plaintiff and its goods or services. The courts have taken different approaches to addressing this type of use. In New Kids on the Block v. News Am. Pub. Inc., 971 F.2d 302 (1992), the Ninth Circuit set out the first formal nominative fair use test. The defendant newspaper printed polls asking readers to vote for their favorite member of the musical group. Plaintiffs filed trademark infringement and related claims alleging defendant’s use of the group’s name implied plaintiffs’ endorsed the polls. The Ninth Circuit rejected the claims. It held the defendant’s nominative use of the name is the only reasonable way to identify the group in the polls. It set out three requirements for finding nominative fair use: (1) plaintiff’s good or service is not readily identifiable without use of the mark, (2) defendant may only use as much of the mark as reasonably necessary to identify the plaintiff’s good or service, and (3) defendant must do nothing that would, in conjunction with the mark, suggest the plaintiff’s sponsorship or endorsement.
When you want to make nominative use of another person’s trademark take steps to ensure your use is a clear nominative fair use. For instance, explain you have a legitimate need to refer to the trademark for comparative advertising or to describe how the mark’s owner’s product relates to your product. Clarify why the use is being made on the face of the use. Clarify the relationship between you and the mark’s owner. Include a disclaimer near the use stating the trademark is owned by someone else and your goods are not affiliated or endorsed by the mark’s owner. Avoid highlighting the mark by depicting it in bold or distinguishing typeface or in headlines. Avoid repeating the mark. Avoid using the mark in domain names.
First Amendment Protections
When a defendant uses the plaintiff’s mark in an expressive work, courts weigh the competing First Amendment and trademark interests and generally do not preclude the defendant’s use unless the public interest in avoiding consumer confusion outweighs the public interest in free expression. In Rogers v. Grimaldi, 875 F.2d 994 (1989), the U.S. Court of Appeal for the Second Circuit adopted a two-step rule that most courts use to evaluate the use of a plaintiff’s mark in an expressive work. Such use is permitted unless either: (1) the mark has no artistic relevance to the underlying work, or (2) the use of the mark explicitly misleads consumers about the source or the content of the work. The Rogers test applies to claims for trademark infringement under sections 32(1) and 43(a) of the Act, and false endorsement under section 43(a)(1)(A). The Ninth Circuit has adopted the Rogers test for use in California. The U.S. Supreme Court limited use of the Rogers test by holding it does not apply when a defendant uses the challenged mark or trade dress to identify the source of goods or services, even if the mark or trade dress carries a parodic or humorous message.
When your company wants to use another person’s trademark in an expressive work, you should consult your attorney to ensure your desired use is protected by the First Amendment. For instance, confirm the work qualifies as an expressive work. Ensure you’re not using the person’s mark as a trademark to identify the source of your own goods. Use the mark only if its meaning in the work is as a reference to the trademark owner or its goods under the mark. Ensure the mark’s meaning as a brand is relevant to the content of the work and its appearance is not gratuitous to get attention. Do nothing to suggest the mark owner’s authorization or sponsorship. Include a disclaimer stating the mark owner has not authorized or sponsored the work.
The First Amendment protects the right to use a trademark to parody the brand or brand owner. When a defendant claims its use of a plaintiff’s mark – or humorous variation of the mark – constitutes parody, courts try to strike a balance between the defendant’s interest in freedom of expression and the public’s and brand owner’s interests in preventing consumer confusion or dilution. Courts allow greater latitude for parodies where a defendant uses the plaintiff’s mark for expression rather than commercial exploitation. Parody is not an affirmative defense to an infringement claim. It’s just a basis for arguing defendant’s use of the plaintiff’s mark is not likely to confuse consumers because they understand it to be a parody. Courts have applied various analyses in parody cases, but generally look at (1) whether the use is an actual parody, and (2) the parody is likely cause consumer confusion.
When your company wants to use another person’s trademark as parody, you should again consult your attorney to ensure the use you are contemplating is protected as parody under the First Amendment. For instance, ensure the use is an actual parody by targeting the trademark owner or its brand, goods or services. The use is not solely for the purpose of getting attention for your product. The parodic nature of the use is obvious at the moment the consumer sees the challenged designation. Take steps to avoid a risk of consumer confusion by using designs and slogans that differentiate your use from the trademark owner’s use of its mark. Take steps to avoid use in connection with goods that are competitive with the trademark owner’s goods. Avoid affirmative statements in the work that emphasize the trademark owner or suggest sponsorship. Include a disclaimer of any approval or sponsorship by the trademark owner. Avoid uses that can cause actual injury to the trademark owner or its reputation.
Equitable Defenses May Apply
The Lanham Act expressly states all injunctive and monetary relief obtainable under the Act is subject to principles of equity. Courts routinely apply equitable principles in trademark cases to deny or limit relief when equity requires. Courts recognize numerous equitable defenses.
Laches
A defendant may assert the defense of laches when the plaintiff has unreasonably delayed taking legal action and the defendant is unfairly prejudiced by the delay. Laches is an equitable doctrine so courts consider all relevant facts and interests to determine a fair result, including the public’s interest in avoiding confusion. To prevail on a laches defense, the defendant must show the plaintiff (1) delayed in asserting its trademark rights, (2) the delay is inexcusable, and (3) the delay caused defendant undue prejudice. When assessing overall equity, federal district courts in the Ninth Circuit also consider six additional factors, including: (1) strength and value of the trademark rights asserted, (2) plaintiff’s diligence in enforcing its mark, (3) harm to plaintiff if the court denies relief, (4) defendant’s good faith ignorance of the plaintiff’s rights, (5) competition between the parties, and (6) harm to defendant resulting from the plaintiff’s delay.
Acquiescence
The equitable defense of acquiescence may apply when, for an extended period, a defendant detrimentally relies on a plaintiff’s affirmative words or conduct indicating it would not assert its trademark rights against the defendant. To prove acquiescence, the defendant must show (1) plaintiff’s affirmative words or conduct amount to an express or implied assurance the plaintiff would not assert a claim against the defendant, (2) delay between the assurance and the claim is not excusable, and (3) delay caused the defendant undue prejudice. When a defendant asserts an acquiescence defense, the plaintiff may attempt to withdraw any consent given to the defendant because consent is ordinarily revocable. For an acquiescence defense to overcome the general rule, the defendant must show sufficient delay and prejudice that it would be inequitable to allow the plaintiff to withdraw its assurance. Courts rarely uphold an acquiescence defense.
Equitable Estoppel
The defense of equitable estoppel rarely succeeds in a trademark case. It’s similar to an acquiescence defense, but plaintiff’s delay is not an element, and plaintiff’s silence may be grounds for the defense. To prevail on an equitable estoppel defense, a defendant must show (1) misleading conduct by the plaintiff indicating it is not asserting its trademark rights against the defendant, (2) the defendant relies on the plaintiff’s conduct or inaction, and (3) the defendant would be materially prejudiced if the plaintiff is permitted to pursue its claim. Although it’s implied in every court’s statements of equitable estoppel, some courts expressly require the defendant show (1) the plaintiff knew of defendant’s conduct, and (2) the defendant did not know the plaintiff actually objected to defendant’s conduct. Even if the defendant proves all of the elements of the defense, it fails if the defendant intentionally infringed the plaintiff’s mark and has not acted with the utmost good faith.
Unclean Hands
The equitable doctrine of unclean hands allows a court to deny relief to a party that itself has acted in bad faith or inequitably. Under this doctrine, a court may deny a claim or counterclaim or an equitable defense like laches and acquiescence. To prevail on the defense of unclean hands, a party must show that the opposing party engaged in misconduct and the misconduct relates to the claim or defense it seeks to assert. As with all equitable defenses, however, courts consider all relevant circumstances when evaluating an unclean hands defense, including: (1) the public’s interest in the outcome, (2) extent of the harm caused by the opposing party’s misconduct, and (3) whether the party asserting unclean hands acted fairly and without deceit.
About Finkel Law Group
Finkel Law Group P.C., with offices in San Francisco and Oakland, has more than 25 years of experience helping our clients navigate the requirements for registering their trademarks through the U.S. Trademark Office, licensing those trademarks for commercial gain, and enforcing trademark rights in administrative proceedings before the TTAB and in judicial proceedings in federal court. When you need intelligent, insightful, conscientious and cost-effective legal counsel to assist you in understanding new laws that may affect your company’s intellectual property rights, please contact us at (415) 252-9600, (510) 344-6601, or info@finkellawgroup.com to speak with one of our attorneys about your matter.