RESOLUTIONS SUPPORTING PROPOSED LEGISLATION
TO AMEND REMEDIES PROVISIONS OF THE LANHAM ACT
These resolutions are presented to propose amendment of the Lanham Act, 15 U.S.C. § 1051 et seq., to clarify, update, and modernize the remedies provisions of that Act, both with respect to monetary and injunctive relief.
Proposed Resolutions
RESOLVED, that the American Intellectual Property Law Association (“AIPLA”) favors, in principle, legislation to amend the provisions of the Lanham Act relating to monetary relief for the purposes of clarifying the availability of and prerequisites for awards of such relief in cases arising under that Act; promoting uniformity and predictability in the courts’ application of those provisions; and furthering the policies of that Act of protecting the public against likelihood of confusion, protecting businesses’ investments in trademarks and other commercial indicia from injury, and making trademark infringement and other acts of unfair competition unprofitable to the infringer; and it is further
RESOLVED, that AIPLA favors, in principle, legislation to amend the provisions of the Lanham Act providing for injunctive relief for the purpose of providing that, in trademark infringement cases where all other prerequisites for an injunction are met, proof of a likelihood of confusion shall give rise to a rebuttable presumption of irreparable injury sufficient to support entry of an injunction; and it is further
RESOLVED, that AIPLA specifically favors amendment of the remedial provisions of the Lanham Act for the purpose of effectuating these reforms, as follows:
· To provide that, upon a finding of likelihood of confusion and without requiring proof of actual confusion and/or willful or intentional infringement, a mark owner shall be entitled to an award of damages from the infringer in the amount of the infringer’s profits attributable to the infringement;
· To provide that, upon a finding of actual confusion and without requiring proof of willful or intentional infringement, a mark owner shall be entitled to an award of its lost profits on sales it would have made but for the infringement;
· To provide that, upon a finding of willful or intentional infringement and subject to the principles of equity, a court may enhance the amount of damages based on an infringer’s profits and/or the mark owner’s lost profits, up to three times the greater of those amounts;
· To provide that, upon a finding of infringement in cases where monetary relief measured by the infringer’s profits and/or the mark owner’s lost profits is not awarded, the mark owner shall be entitled to not less than a reasonable royalty for the infringement and/or statutory damages in an amount sufficient to put it in the position it would have been in but for the infringement;
· To provide that, upon a finding of an infringer’s reckless disregard of the mark owner’s rights, the fact finder (court or jury) may award punitive damages;
· To provide that, upon a finding of infringement in cases where appropriate in order to make the mark owner whole and without requiring proof of actual confusion and/or willful or intentional infringement, the court in its discretion may award attorney’s fees;
· To provide that, in cases where all other prerequisites for the entry of preliminary and/or permanent injunctive relief are met, a showing of likelihood of confusion shall give rise to a rebuttable presumption of irreparable injury sufficient to support entry of an injunction.
Past Action
The authors are aware of no past resolutions bearing on this proposal.
Discussion
The proposed resolutions address (1) perceived ambiguities, inconsistencies, and deficiencies in the monetary recovery regime under the current provisions of the Lanham Act; and (2) concerns that the Supreme Court's decision in eBay v. MercExchange, 547 U.S. 388 (2006), has threatened to undermine, or will impair, the availability of injunctive relief in cases where likelihood of confusion is shown.
I. The Confused, Inconsistent, And Unsatisfactory State Of The Law And Precedents Relating To Monetary Relief Under The Lanham Act
For decades, the provisions of the Lanham Act that provide for monetary remedies for trademark infringement have been widely debated and extensively criticized by practitioners[1] and academic writers,[2] and in scores of decided cases the courts have struggled with inconsistent and conflicting precedents relating to the availability of and prerequisites for particular forms of monetary relief under that Act.[3]
Among other things, commentators have pointed out that the case law dealing with awards of monetary recoveries under the Lanham Act is confused and inconsistent. The courts’ consideration of multiple factors, and exercise of their asserted discretion to fashion what they perceive to be the most appropriate remedies, have led to almost totally irreconcilable conflicts in the applicable precedents.
The case law on monetary recovery in trademark infringement cases is a confusing melange of common law and equity principles, sometimes guided (and misguided) by analogies to patent and copyright law, and finding little statutory guidance in the Lanham Act. The courts have balanced several factors such as: whether defendant was willful, negligent, or innocent; whether plaintiff suffered losses in any provable amount; whether there is proof of actual confusion of some customers; and whether defendant realized profits from its infringing actions. In various cases, different courts have given widely disparate emphasis to one or more of these factors, making predictability of result a dangerous undertaking. In modern cases, courts have occasionally awarded monetary recovery on the rationales of preventing unjust enrichment and/or deterrence of defendant and others. One commentator, after an exhaustive review of the cases, concluded that the public policy and theoretical basis underlying monetary awards in trademark cases have received inadequate judicial attention and have remained confused and undefined.[4]
These inconsistencies and conflicts have had the unfortunate result that judgments entered in cases under the Lanham Act often do not appear to serve the policy objectives of that Act, i.e., to protect the public against the likelihood of confusion, to protect the trademark owner from injury to its investment in its mark and from losses to its business, and to make infringement unprofitable so as to deter the defendant and third parties from acts of unfair competition.
Accountings should be awarded to remedy unjust enrichment. The goal should be to render trademark infringement unprofitable, while adhering to equitable principles. At least a part of the infringer's profits should be awarded in many cases, including some cases where the infringement is innocent.[5]
Commentators have criticized the current remedial scheme for condoning outcomes in which, despite real economic injury to their mark and/or their business, plaintiffs in trademark cases receive no monetary compensation of any kind.
Actual damages should be used to compensate injured trademark owners. The current scheme is unacceptable because prevailing plaintiffs routinely go uncompensated, despite the general agreement that trademark infringement causes real economic injury.[6]
This often appears to stem from courts’ unwarranted refusals to award any monetary relief absent proof of actual confusion or willful infringement:
[C]ourts interpret the Lanham Act as requiring the plaintiff to prove actual confusion or willfulness or both before that plaintiff is eligible for monetary relief. … [But] the current model is flawed. First, neither the history nor text of the Lanham Act requires either actual confusion or willfulness before a successful plaintiff is entitled to monetary relief. Second, and contrary to those arguments advanced by certain courts, the rationales behind the current model do not support either requirement. Third, the current model has caused jurisprudential problems.[7]
The current model for awarding monetary relief in trademark infringement cases, at least in several circuits, requires the plaintiff to prove actual confusion or willfulness or both. This model is broken. It contravenes the text and history of the Lanham Act, it fails to achieve its own objectives, and it causes a host of jurisprudential problems. If the point of the current model was to create a formal and simple regime, the current model has done a rather poor job. Nor is the current model, despite its complexity, sufficiently versatile to address the diverse facts that give rise to trademark infringement. The law in place now, therefore, provides neither the determinateness one would expect from a formal system, nor the versatility that modern trademark litigation demands. A disappointing hybrid of law and equity, the current regime reflects the virtues of neither.[8]
On the other end of the remedial spectrum, cases have arisen in which plaintiffs have enjoyed potential awards of “windfall” monetary recoveries, sometimes in the guise of excessive unjust enrichment awards and/or corrective advertising awards:
There is something basically unseemly and grossly uneconomical in an award to a small company of an amount of money several times its net worth to use to resuscitate an infringed trademark [through corrective advertising]. When such an award is many times the value of the trademark property, then it appears that plaintiff has received a windfall, not compensation.[9]
In addition to failing to serve the policy goals of federal trademark law, ambiguities in the present statute have resulted in inconsistent precedents relating to requirements of actual confusion or willful infringement as prerequisites to awards of defendant’s unjust enrichment and/or plaintiff’s damages.
Courts are divided on whether to require willfulness before a plaintiff is eligible for monetary relief. As one commentator noted, this division has “resulted in a schizophrenic view of the remedy of an accounting of profits.” Several circuits hold that evidence of bad faith or willfulness is required for a recovery of profits. Others hold that evidence of bad faith or willfulness is not required for a recovery of profits. Still others have adopted their own complex rules.[10]
The courts are split on the propriety of requiring actual confusion before they award monetary relief. Several circuits hold that evidence of actual confusion is not necessary for a recovery of profits or damages. Others take the opposite view, holding that evidence of actual confusion is a prerequisite for any recovery of profits or damages. … But perhaps the dominant view is that actual confusion is necessary to recover damages, but not an accounting of profits.[11]
A direct conflict between the circuits has ensued:
By 2005, a split of authority developed such that while most circuits required some showing of willfulness, the Third and Fifth Circuits held that while relevant, willfulness was not essential or indispensable to a recovery of profits. SecuraComm Consulting Inc. v. Securacom Inc., 166 F.3d 182 (3d Cir. 1999) (when profits are awarded, not as compensation for damages, but to deter “egregious misconduct,” there must be proof of willful infringement). Overruled by Banjo Buddies, Inc. v. Renosky, 399 F.3d 168 (3d Cir. 2005) (overruling SecuraComm Consulting and holding that willfulness is a factor, not an indispensable prerequisite); Synergistic Intern., LLC v. Korman, 470 F.3d 162, n.13 (4th Cir. 2006) (“[W]e agree that willfulness is not an essential prerequisite for a [sic] damages award, but that it remains a highly pertinent factor.”)[12]
Nevertheless, despite multiple petitions on questions that would address these issues, the Supreme Court has not granted certiorari in any case that would resolve the split.[13]
The policy failure resulting from some courts’ refusals to award any monetary relief is compounded by widespread reluctance to award attorney’s fees under the current “exceptional case” standard, and extreme variability in the interpretation and application of that standard.
What is an “Exceptional Case”? A Variety of Standards. The Seventh Circuit, in reviewing the state of the law in 2010 noted “the surprising lack of agreement” among the federal circuits as to what kinds of cases qualify as “exceptional” for attorney fees, the court characterizing the state of the law as a “jumble.” Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, 626 F.3d 958, 960–961 (7th Cir. 2010) (surveying and summarizing the rules used in each of the federal circuits).
Courts in the various circuits use a variety of different word formulations, usually characterized by open-ended vagueness. Id. (“It is surprising to find so many different standards for awarding attorneys' fees in Lanham Act cases. … But whether the difference in standards generates actual differences in result is unclear because the opinions avoid commitment by using vague words and explicit escape clauses, with the Tenth Circuit's catchall (“perhaps for other reasons as well”) taking the prize. To decide whether the standards differ more than semantically would require a close study of the facts of each case.”).
Some circuits apply the same standard to both prevailing plaintiffs and defendants, others apply a different standard. As Judge Ponsor observed: “A rainbow of standards has been promulgated to define the word ‘exceptional’ in the Lanham Act, some seemingly requiring bad faith or other culpability, others following a less stringent approach.” Yankee Candle Co., Inc. v. Bridgewater Candle Co., LLC, 140 F. Supp. 2d 111, 120 (D. Mass. 2001), judgment aff'd, 259 F.3d 25 (1st Cir. 2001) (Attorney's fees awarded where plaintiffs' trade dress claims were “unfounded” and “lacked any reasonable foundation.”).[14]
Overall, these inconsistencies, ambiguities, and limitations under the current remedial provisions of the Lanham act providing for monetary relief, strongly suggest that an overall revision of those provisions is appropriate. The proposed resolutions are intended to suggest amendments for the purpose of modernizing, clarifying, and rationalizing those provision in order to better serve the overall policy goals of the federal trademark statutory regime.
II. Uncertainty About The Presumption Of Irreparable Injury Stemming From Proof Of A Likelihood Of Confusion In Trademark Cases
Since the Supreme Court’s decision in eBay v. MercExchange, 547 U.S. 388 (2006), it has been debated but is not yet certain whether the rule of that case precludes entry of injunctions in trademark infringement cases in the absence of affirmative proof of irreparable injury.
Is the Presumption of Irreparable Injury in Doubt? Both the Eleventh Circuit and the First Circuit have raised the question of whether the U.S. Supreme Court’s 2006 decision in eBay eliminates the traditional presumption of irreparable injury if a likelihood of success on the merits of trademark infringement is proven. … [But this author] do[es] not believe that the presumption … is in any way inconsistent with the letter or the spirit of the Supreme Court’s eBay decision.[15]