Opinion ID: 182337
Heading Depth: 2
Heading Rank: 3

Heading: Propriety of the Damages Award

Text: UHS next alleges that the monetary award is improper as a matter of law and presses a litany of reasons in support of its argument, three of which we deem worthy of discussion. First, UHS claims that an injunction, rather than monetary relief, should be the exclusive remedy available to Masters. Next, it claims that willful infringement is a necessary prerequisite to award damages and that insufficient evidence exists to support the jury's finding of willful infringement. Finally, UHS argues that a monetary award is improper because Mrs. Masters failed to prove that actual confusion resulted from its infringement of the mark.
Although injunctive relief is often the preferred remedy in resolving trademark disputes, it is not the exclusive remedy. We have acknowledged that all Lanham Act remedies are equitable in nature and that [t]here might be some situations in which a Lanham Act plaintiff would be entitled to monetary but not injunctive relief[.] Minn. Pet Breeders, Inc. v. Schell & Kampeter, Inc., 41 F.3d 1242, 1247 (8th Cir.1994). For example, the Lanham Act contemplates that a disgorgement or accounting of profits may be appropriate to remedy unfair infringement. 15 U.S.C. § 1117(a). We have recognized that upon proof of willful infringement, an accounting of profits may be based upon 1) unjust enrichment, 2) damages, or 3) deterrence of a willful infringer. Minn. Pet Breeders, Inc., 41 F.3d at 1247. Moreover, injunctive relief was not sufficient to do equity here. When Masters brought suit, the license term had ended and UHS maintained that it had cut off all association with the MASTERS AND JOHNSON mark. An injunction under these circumstances would enjoin activity that appears unlikely ever to occur again and would, therefore, amount to a remedy in name only. Accordingly, the district court did not err when it determined that monetary relief was appropriate, were the jury to conclude that UHS willfully infringed the mark.
The evidence was sufficient to support the jury's finding that UHS willfully infringed the mark. [2] UHS presented evidence that raised a reasonable inference that UHS executives and other employees knowingly elided the terms of the agreement to their advantage. This evidence included testimony from employees regarding the use of the mark as well as images from various webpages documenting the use of the mark to promote different treatment programs. Other evidence showed that UHS's marketing or branding activities evolved over time to expand the use of the mark and associate it with treatment programs unrelated to sexual dysfunction and sexual trauma. We cannot say that no reasonable jury would conclude that UHS willfully infringed the mark on the basis of the evidence. We therefore reject UHS's argument regarding the sufficiency of the evidence on this issue.
UHS next contends that Masters failed to prove actual confusion as between the parties or their business activities and therefore failed to establish a compensable claim. This issue presents a closer question. Our cases interpreting the Lanham Act state that actual confusion is a prerequisite of monetary damages and likelihood of confusion a prerequisite to injunctive relief. See, e.g., Woodsmith Publ'g Co. v. Meredith Corp., 904 F.2d 1244, 1247 n. 5 (8th Cir.1990) (citing Co-Rect Prods., Inc. v. Marvy! Adver. Photography, Inc., 780 F.2d 1324, 1329-30 (8th Cir.1985)). On closer examination, however, these cases do not yield the bright-line rule that UHS would have us apply here. UHS contends that the relevant case law precludes the award of monetary relief absent proof of actual confusion. Masters urges that such proof is unnecessary in light of the licensor-licensee relationship of the parties, the nature of the infringement alleged, and the remedy of disgorged profits. We agree. Neither the relevant statutes nor our previous case law dictates that we require actual confusion to support the jury's award in this case. Accordingly, we hold that the district court did not err in denying UHS's motion for judgment as a matter of law. The Lanham Act assigns civil liability to any company that uses in commerce any term or name that is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person. . . . 15 U.S.C. § 1125(a)(1)(A). Violation of this provision entitles a plaintiff, subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. 15 U.S.C. § 1117(a). The relevant statutory provisions do not expressly require proof of actual confusion, and the use of the conjunctive and in the delineation of remedies invites a distinction between an award of a defendant's profits and an award of plaintiff's damages. That distinction is helpful in understanding both the origins and the limited application of the actual confusion requirement. The rule requiring proof of actual confusion does not derive from the text of the Lanham Act itself, but from our prior cases. It is true that at least one of our prior cases has unequivocally stated by way of a footnote that actual confusion is required to support an award of damages. See Woodsmith Publ'g Co., 904 F.2d at 1247 n. 5. But in that case we affirmed the district court's summary judgment based on an absence of even a likelihood of confusion. Id. at 1250. The case did not require us to decide whether actual confusion is a prerequisite for an award of damages, and the statement on that issue is dicta we are not bound to follow. See Passmore v. Astrue, 533 F.3d 658, 661 (8th Cir.2008) ([W]e need not follow dicta.) (quotations omitted). Likewise, in Co-Rect Products, Inc. v. Marvy! Advertising Photography, Inc., 780 F.2d 1324 (8th Cir. 1985), upon which Woodsmith relied, we disposed of the issue on the merits without considering whether actual confusion existed. The court stated that a showing of actual confusion entitles the owner of the mark to damages . . . and that [i]f . . . the use of that mark by another . . . causes actual confusion, the owner is entitled to damages. Id. at 1330. This is a positive statementactual confusion entitles plaintiff to damagesand does not imply the converse: a plaintiff cannot recover damages without a showing of actual confusion. Finally, in Minnesota Pet Breeders, Inc. v. Schell & Kampeter, Inc., 41 F.3d 1242, 1247 (8th Cir.1994), our court did not resolve the question of the necessity of actual confusion because it disposed of the case on other grounds. Consequently, none of those cases binds us to require actual confusion to support an award for monetary relief, including disgorgement of profits. Moreover, the facts of this case illustrate why requiring actual confusion would undermine the equitable nature of the Lanham Act's remedial scheme. In a typical trademark case, the plaintiff alleges that the defendant's mark or trade dress is confusingly similar to its own. See, e.g., Minn. Pet Breeders, Inc., 41 F.3d at 1247; Woodsmith, 904 F.2d at 1244; Co-Rect Prods., Inc., 780 F.2d at 1324. The plaintiff may prove actual confusion through the use of direct evidence, i.e., testimony from members of the buying public, as well as through circumstantial evidence, e.g., consumer surveys or consumer reaction tests. Conopco, Inc. v. May Department Stores Co., 46 F.3d 1556, 1564 (Fed.Cir. 1994) (citation omitted). The analysis compares the two products or services in search of some objective characteristic that provides an empirical basis for assessing the plaintiff's claim. This case involves a different kind of comparison, i.e., between the use of the mark the licensing agreement grants and UHS's actual use of the mark. In undertaking this comparison, it is difficult to discern what extrinsic proof of actual confusionwhether in the form of direct testimony or consumer surveyscould possibly contribute to the analysis. There are no objective characteristics by which to compare UHS and Masters because they were not competitors in the marketplace, but parties to a contract for use of a single mark. Accordingly, the degree of similarity is simply not a relevant criterion. Instead, the relevant criterion is the degree to which each party remained faithful to the terms of the license agreement. Masters alleged, and the jury found, that UHS willfully infringed the mark by 1) using it to promote programs unrelated to sexual trauma or dysfunction, such as chemical dependency and eating disorders; and 2) using it to promote treatment techniques, such as yoga, expressive dance, and t'ai chi, that are unrelated to the methodology for which the mark and its namesakes, Dr. and Mrs. Masters, had become well-known. The jury determined that disgorgement of UHS's profits was appropriate in light of such willful infringement. Proof of actual confusion is not necessary to sustain that conclusion. Section 1117 makes an award of the infringing party's profits subject only to the principles of equity. Disgorgement exists to deter would-be infringers and to safeguard against unjust enrichment. Where the jury disgorges profits to remedy a willful infringement that was likely to cause confusion, to cause mistake, or to deceive as to the relationship between the parties' services, equity does not require adherence to the putative judge-made rule requiring actual confusion. This interpretation sensibly connects the unique facts of this case to the underlying equitable principles that animate the Lanham Act. Other circuits have rejected the notion that actual proof of confusion is always necessary to recover profits under the Lanham Act. See Gracie v. Gracie, 217 F.3d 1060, 1068 (9th Cir.2000) (holding that eligibility for monetary relief under 15 U.S.C. § 1114 of the Lanham Act requires only a likelihood of confusion combined with willful infringement) (emphasis in original); Wynn Oil Co. v. Am. Way Serv. Corp., 943 F.2d 595, 606-07 (6th Cir. 1991) (rejecting claim that plaintiff must prove actual confusion before he can recover profits from an infringer). It stands to reason that UHS's unauthorized use of the MASTERS AND JOHNSON mark lent credence and legitimacy to programs and methods divorced from the intellectual theories that the mark symbolized. Using the mark to promote unrelated treatment programs and methods necessarily adulterates what the mark represents, i.e., a discrete approach for treating sexual dysfunction. By branding with Masters's mark treatment offerings that did not fall within the terms of the agreement, UHS acted in a way likely to cause confusion, to cause mistake, and to deceive others (including physicians and their patients) as to Masters's approval of those unauthorized programs. Such a violation entitles Masters to a disgorgement of UHS's profits, subject to principles of equity.