Opinion ID: 4522754
Heading Depth: 3
Heading Rank: 2

Heading: Deterrence of a Willful Infringer

Text: Safeway also challenges the district court’s rejection of its request for an accounting of profits based on deterrence of a willful infringer. According to Safeway, the district court erred in concluding that an injunction was a sufficient remedy “because 1) [DPB] initially filed trademark registrations for the two marks in a deliberate effort to prevent Safeway Transit from using them and not to use the marks themselves; and 2) the court ignored Fernandez’s testimony that he’s ceased operating [DPB] and is trying to sell it.” Appellants’ Br. at 54–55 (internal citation omitted). Safeway asserts that “[t]he equities mandate a disgorgement of profits” based on the district court’s findings “that Fernandez acted out of a desire ‘to get even’ in a ‘vigilante attempt to wrest control of the marks from Safeway’ after Safeway Transit built its goodwill and reputation on those marks.” Id. at 56 (citation omitted). “[A] court may award a defendant’s profits solely upon a finding that the defendant fraudulently used the plaintiff’s mark.” George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1539 (2d Cir. 1992), cited with approval in Porous Media Corp. v. Pall Corp., 173 F.3d 1109, 1122 n.10 (8th Cir. 1999). The rationale for awarding profits based on the defendant’s fraudulent use of the plaintiff’s mark is “to protect -12- the public at large. By awarding the profits of a bad faith infringer to the rightful owner of a mark, we promote the secondary effect of deterring public fraud regarding the source and quality of consumer goods and services.” Id. (emphasis added). “[A] court may award a Lanham Act plaintiff an infringing defendant’s profits upon a finding of bad faith, without additional proof of actual consumer confusion.” 4 Pillar Dynasty LLC, 933 F.3d at 212. “The deterrence rationale for disgorgement of profits . . . focuses on the culpability of the willful infringer . . . .” Id. at 213. And, “[e]ven when a plaintiff sustains its burden of proving willfulness [under the deterrence theory], courts should consider not only whether an enhanced profits award is appropriate, but also whether the disgorgement of all profits attributable to the infringing product is necessary to achieve the desired deterrent effect.” 4 Pillar Dynasty LLC, 933 F.3d at 214. In addressing whether a disgorgement of profits was necessary to deter a willful infringer, the district court declined to address “whether DPB’s infringement was willful” because it found “that DPB does not need to be deterred.” Safeway Transit LLC, 334 F. Supp. 3d at 1008 & n.7. The court explained: [T]here is no evidence suggesting that an injunction prohibiting use of the marks is insufficient to satisfy the equities. To the contrary, the record—including Fernandez’s testimony that his goal in registering the marks was to thwart Safeway from using them—suggests that Fernandez either genuinely thought the marks were his or simply sought to get even for Safeway’s use of the DPB-related domains. Although the Court obviously cannot and does not condone such retaliation, it nonetheless concludes that an injunction is sufficient to deter DPB from future infringement of Safeway’s marks. Id. at 1008. -13- At first blush, the district court appears equivocal as to whether DPB acted in good faith when it registered the marks. Had this been the district court’s only comments concerning deterrence, we might find a remand necessary to clarify the district court’s position. However, when discussing whether to award attorney’s fees to Safeway, the district court further stated: [T]he Court cannot conclude that Fernandez deliberately acted unlawfully given the Court’s factual finding that DPB used the terms first. Fernandez testified that it was his understanding that he was entitled to resume use of the marks. Even if that conclusion was not the result of sound legal advice, the Court finds it a plausible explanation of the infringement. Id. (emphases added). These comments make clear that the district court actually found that DPB held a good faith belief in its right to use the trademarks. Thus, the district court’s findings, when taken in their totality, support the court’s conclusion that Safeway is not entitled to a disgorgement of profits based on deterrence.