Opinion ID: 2780822
Heading Depth: 3
Heading Rank: 3

Heading: Increased profits

Text: Plaintiffs also argue that the district court abused its discretion by declining to award increased profits. The district court has discretion to increase the profit award above the net profits proven “[i]f the court shall find . . . the amount of the recovery . . . inadequate.” 15 U.S.C. § 1117(a). It must apply “principles of equity,” id., and ensure that the defendant “may not retain the fruits, if any, of unauthorized trademark use or continue that use [and the] plaintiff is not . . . [given] a windfall,” Bandag, Inc., 750 F.2d at 918. “The Lanham Act allows an award of profits only to the extent the award ‘shall constitute compensation and not a penalty.’” TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 831 (9th Cir. 2011) (quoting 15 U.S.C. § 1117(a)). The district court ought to tread lightly when deciding whether to award increased profits, because granting an increase could easily transfigure an otherwise-acceptable compensatory award into an impermissible punitive measure. See Skydive Ariz., Inc. v. Quattrocchi, 673 F.3d 1105, 1114–15 (9th Cir. 2012). Generally, actual, proven profits will adequately compensate the plaintiff. Because the profit disgorgement remedy is measured by the defendant’s gain, the district court should award actual, proven profits unless 32 FIFTY-SIX HOPE ROAD MUSIC V. A.V.E.L.A. the defendant infringer gained more from the infringement than the defendant’s profits reflect. Plaintiffs have not presented evidence or argument to inspire a “definite and firm conviction” that the district court “committed a clear error of judgement,” Playboy Enters., Inc., 692 F.2d at 1275, in declining to award increased profits. While Plaintiffs allude to Defendants accruing goodwill from their infringement, they cite no supporting evidence. Similarly, Plaintiffs only cursorily explain how putative sales abroad might fall within the Lanham Act’s coverage under Ocean Garden, Inc. v. Marktrade Co., 953 F.2d 500 (9th Cir. 1991). We will not manufacture arguments on their behalf or pick through the record without further direction. See Greenwood v. FAA, 28 F.3d 971, 977 (9th Cir. 1994). Nor do we find compelling the evidence Plaintiffs cited to show that Defendants concealed some of their profits. Given the district court’s “wide scope of discretion . . . in . . . fashioning . . . a remedy,” Faberge, Inc. v. Saxony Prods., Inc., 605 F.2d 426, 429 (9th Cir. 1979) (internal quotation marks omitted), it did not err by denying Plaintiffs an increased award of profits. III. The district court did not err in ordering A.V.E.L.A. Defendants to pay attorneys’ fees. “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). We review an attorneys’ fee award for abuse of discretion, except that “the district court’s legal determination that an action is ‘exceptional’ under the Lanham Act” we review de FIFTY-SIX HOPE ROAD MUSIC V. A.V.E.L.A. 33 novo. Secalt S.A. v. Wuxi Shenxi Constr. Mach. Co., 668 F.3d 677, 687 (9th Cir. 2012). A. Prevailing party The district court determined that Plaintiffs were the prevailing party. A party is a prevailing party for purposes of an attorneys’ fee award if it “achieved a material alteration in the legal relationship of the parties that is judicially sanctioned.” Klamath Siskiyou Wildlands Ctr., 589 F.3d at 1030 (internal quotation marks omitted).8 “The material alteration in the legal relationship of the parties must be relief that the would-be prevailing party sought.” Id. A party need not succeed in all of its claims to be the prevailing party. San Diego Police Officers’ Ass’n v. San Diego City Emps.’ Ret. Sys., 568 F.3d 725, 741 (9th Cir. 2009). Because Plaintiffs obtained an injunction against all Defendants and disgorgement of profits from A.V.E.L.A., Jem, and Freeze, Plaintiffs obtained “a material alteration in the legal relationship of the parties that is judicially sanctioned.” See Klamath Siskiyou Wildlands Ctr., 589 F.3d at 1030.9 Thus, the district court did not abuse its discretion in finding Plaintiffs were the prevailing party. 8 The term “prevailing party” is interpreted consistently throughout the U.S. Code. Klamath Siskiyou Wildlands Ctr., 589 F.3d at 1030. 9 Also, the record does not support A.V.E.L.A. Defendants’ surmise that the district court relied on a media headline stating Plaintiffs were prevailing parties in making its determination. 34 FIFTY-SIX HOPE ROAD MUSIC V. A.V.E.L.A. B. Exceptional case The district court also held that the instant action was an exceptional case within the meaning of § 1117(a) as to all Defendants. A case is considered exceptional “when the infringement is malicious, fraudulent, deliberate, or willful.” Gracie, 217 F.3d at 1068 (internal quotation marks omitted). Egregious conduct is not required. TrafficSchool.com, Inc., 653 F.3d at 833. Nor is bad faith. See Earthquake Sound Corp. v. Bumper Indus., 352 F.3d 1210, 1218 (9th Cir. 2003). We consider the relief obtained, see TrafficSchool.com, Inc., 653 F.3d at 832, and whether the relevant area of law was unclear when the defendant’s conduct occurred, Tamko Roofing Prods., Inc. v. Ideal Roofing Co., 282 F.3d 23, 32–33 (1st Cir. 2002). The district court properly considered the relevant evidence and held that Defendants had acted willfully. See id. at 31. A.V.E.L.A. Defendants argue that the uncertainty of the law makes A.V.E.L.A.’s infringement not willful. In this case, the uncertainty of the law weighs in A.V.E.L.A. Defendants’ favor, but that consideration is only one aspect of the willfulness inquiry. There was significant evidence that A.V.E.L.A. Defendants were aware their conduct conflicted with Plaintiffs’ rights. Rohan Marley testified that Valencia (president and CEO of both A.V.E.L.A. and X One X) approached him seeking a license to sell Marley merchandise, which neither Rohan nor Hope Road granted. Roberto Rabanne, a photographer who took pictures of Bob Marley, testified that Valencia had convinced him to write a false email to help Valencia negotiate with the Marley family for a license. The email falsely stated that Rabanne had used photographs of Marley on merchandise during Marley’s lifetime. Rabanne also testified that he refused Valencia’s FIFTY-SIX HOPE ROAD MUSIC V. A.V.E.L.A. 35 request to backdate a 2006 photograph licensing agreement between them to 2003 or 2004. According to Rabanne, Valencia claimed that backdating the agreement would help him in “negotiations.” Valencia also asked Rabanne to delete emails from him and files on his hard drive and said he would flood the market with Marley merchandise so that Plaintiffs could not use the photographs of Marley anymore. Liza Acuna, A.V.E.L.A.’s licensing agent and Valencia’s girlfriend, testified that she had known since 2005 that Zion had the license for Marley. Thus, even considering the uncertainty of the law, this conduct exhibits a subjective belief that A.V.E.L.A. Defendants’ conduct infringed Plaintiffs’ intellectual property rights. A.V.E.L.A. Defendants also assert that the district court erred in finding the case “exceptional,” because (1) Plaintiffs achieved only limited success, and (2) Plaintiffs’ other awards make A.V.E.L.A.’s infringement unprofitable. We reject these contentions. While it is true that Plaintiffs only prevailed on two of their five claims, they successfully enjoined Defendants from any future merchandising of Marley’s image and disgorged profits. The five claims were merely different means to that end. Regarding the next issue, whether A.V.E.L.A.’s conduct was rendered unprofitable is inapposite. The attorneys’ fee award served the separate purpose of encouraging the enforcement of trademark rights by more fully compensating Plaintiffs. See id. at 34. Thus, we affirm the district court’s award of attorneys’ fees against A.V.E.L.A. Defendants. 36 FIFTY-SIX HOPE ROAD MUSIC V. A.V.E.L.A.