Opinion ID: 660173
Heading Depth: 2
Heading Rank: 3

Heading: Overhead Charge

Text: 23 Overhead expense is also a proper deduction from the profits of an infringer, who has the burden of proving that each item of general expense contributed to the production of the infringing items, and of further offering a fair and acceptable formula for allocating a given portion of overhead to the particular infringing items in issue. Nimmer & Nimmer, supra, Sec. 14.03[B], at 14-34. K-Mart offered--and the district court accepted as reasonable--an overhead formula of 26.89 percent of gross sales. 24 On its cross-appeal, Hukafit contends the overhead charge is without a basis in the record because K-Mart failed to show how a portion of the 26.89 percent--a 13.87 percent net rent component--related to the rent paid on the actual store space used to display and sell the Damask sweaters. This argument confuses the concepts of renting store space with overhead expense. Net rent paid by K-Mart to its parent includes selling and administrative costs in addition to the cost of renting space. According to the testimony of K-Mart controller Philips, the overhead charge of 26.89 percent of sales covers expenses such as rent, advertising, payroll, shipping and store supplies. 25 We cannot say it was clearly erroneous for the district court to accept K-Mart's overhead formula. K-Mart met its burden of offering a reasonable formula, and the absolute certainty Hukafit requests is not required. See Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45, 52-53 (2d Cir.1939) (L. Hand, J.) (overhead calculated as a proportion of the cost of movie production), aff'd, 309 U.S. 390, 60 S.Ct. 681, 84 L.Ed. 825 (1940); see also Love v. Kwitny, 772 F.Supp. 1367, 1371 (S.D.N.Y.1991) (overhead calculated as proportion of net sales), aff'd, 963 F.2d 1521 (2d Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 181, 121 L.Ed.2d 127 (1992); Dolori Fabrics, Inc. v. Limited, Inc., 662 F.Supp. 1347, 1356 (S.D.N.Y.1987) (Lumbard, J.) (overhead calculated as a percentage of total sales revenues). The deduction for K-Mart's overhead expense therefore was proper.