A blog about patent, copyright and trademark law in the U.S. District Court
for the Southern District of New York

Court Reaffirms Willfulness Requirement for Recovery of Lanham Act Monetary Damages

In a January 16, 2014 ruling, Judge Katherine B. Forrest denied defendant ContextMedia, Inc.’s motion for summary judgment on plaintiff Guthrie Healthcare System’s Lanham Act and related state law claims, but ruled that Guthrie was not entitled to its actual d
amages or lost profits, and so struck its jury trial demand. With regard to the damages claim, Judge Forrest wrote that in “order for a plaintiff to recover its damages or defendants’ profits as to these [Lanham Act] claims, a plaintiff must show actual consumer confusion, bad faith, or willful deception.” The Court then found that “plaintiff has failed to raise a triable issue of fact as to these elements,” and dismissed the damages claim. In reaching its conclusion, the Court noted the split in District decisions as to whether a 1999 amendment to the Lanham Act damages provisions altered the willfulness requirement for an award of damages (which was especially strong in the Second Circuit). Judge Forrest found “the rationale of those courts continuing to require willfulness as more persuasive.” and continued the willfulness requirement.

With regard to the conclusion of no willfulness, the Court found that: (1) the defendant commissioned a third party designer to design its allegedly infringing logo; (2) neither the defendant’s principal nor the designer were aware of the plaintiff’s mark at the time, and (3) the Trademark Office registered three of the defendant’s marks that allegedly infringed the plaintiff’s mark, negating any inference that the defendant should have known of the infringement. Judge Forrest rejected as insufficient as a matter of law plaintiff’s supposedly contrary evidence that the defendant failed to conduct a trademark search before adopting its mark and that the defendant continued to use the mark after being sued. So the Court rejected the plaintiff’s claim for its lost profits, but did hold that the defendant could be liable for nominal damages and costs if infringement is found.

On the issue of liability for infringement, the Court examined the eight factors under the Polaroid test for likelihood of confusion, first noting that two of the factors relevant to the damages issue – lack of evidence of actual confusion and of willfulness – favored the defendant. Judge Forrest, however, found factual questions precluding summary judgment on “the first three and most important factors – strength of the parties’ mark, similarity of the parties’ marks, and proximity of the parties’ products – to require denial of summary judgment on liability” and also noted triable issues of fact concerning the other factors.

The Court also found a triable issue of fact about the defendant’s principal’s personal liability. Judge Forrest wrote that a “‘corporate officer may be held personally liable for trademark infringement and unfair competition if the officer is a moving, active conscious force behind [the defendant corporation’s infringement].’” The Court ruled that the allegations that the principal “is the CEO, president, controlling shareholder, 60% owner of ContextMedia, and that as ContextMedia’s principal contact with [the logo designer], he controlled the process of selecting the trademark at issue” are sufficient to raise a triable issue of fact as to individual liability.
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