Opinion ID: 169778
Heading Depth: 5
Heading Rank: 1

Heading: Apportionment of the Bank’s Profit

Text: The district court found TenBrook’s reliance on Ocwen Advisors’ general net profit percentage, as opposed to the profitability of its BPO line, was improper. Cartel contends the consolidated net profit percentage was the best evidence available because Ocwen Advisors asserted it did not retain records allocating the profits within its product lines. Therefore, according to Cartel, it -28- could rely on the consolidated information in Ocwen Advisors’ SEC filings and the burden of proof apportioning any profit not attributable to misappropriation was Ocwen’s. 13 In W ynn Oil Company v. American W ay Service Corporation, the Sixth Circuit held the district court abused its discretion when it refused to aw ard damages in a trademark action because the plaintiff could not prove defendant’s profits with sufficient certainty. 943 F.2d 595, 607 (6th Cir. 1991). The plaintiff’s efforts to ascertain the defendant’s profits were frustrated by the defendant’s insistence that its profits from the infringement were commingled with other sales and flow-through money and therefore could not be provided in discovery. Based on “common sense” as w ell as statutory language, the court held the burden of apportioning profits should be placed on the defendants once the plaintiff has proved gains to the defendant from the infringement. Id. at 606. The same premise has been applied in copyright actions. Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1173 (1st Cir. 1994). In Data 13 The district court further determined Cartel did not establish profits could be made from the sale of BPOs because it did not present evidence of the profitability of other national vendors and Cartel, itself, lost money from 1999 through 2002. However, the damages theory was not the loss to Cartel, but the benefit to the Bank. The testimony of W illiam Erbey established the Bank bought BPOs for approximately $50.00 and sold them to third parties for anywhere between $90 and $125. (R. Vol. 9 at 3204-05.) He also affirmed the creation of a retail vendor database was a key part of the strategy to turn the new division into a profit center. (Id. at 3201-02.) Based on this testimony, the jury could reasonably infer the Bank made a net profit on the sale of B POs to third parties. -29- General, the First Circuit stated: In the context of [a copyright] infringer’s profits, the plaintiff must meet only a minimal burden of proof in order to trigger a rebuttable presumption that the defendant’s revenues are entirely attributable to the infringement; the burden then shifts to the defendant to demonstrate what portion of its revenues represent profits, and what portion of its profits are not traceable to the infringement. 36 F.3d at 1173; see also Bucklew v. Hawkins, 329 F.3d 923, 932 (7th Cir. 2003). Data General also recognized this principle has been applied in trade secrets actions: Citing 17 U.S.C. § 504(b) as persuasive authority, the M assachusetts Supreme Judicial Court has set forth the following rule for apportionment in trade secrets cases: Once a plaintiff demonstrates that a defendant made a profit from the sale of products produced by improper use of a trade secret, the burden shifts to the defendant to demonstrate those costs properly to be offset against its profit and the portion of its profit attributable to factors other than the trade secret. USM Corp. v. M arson Fastener Corp., 392 M ass. 334, 467 N.E.2d 1271, 1276 (1984). See also Jet Spray Cooler, Inc. v. Crampton, 377 M ass. 159, 385 N.E.2d 1349, 1358-59 n.14 (1979) (citing, inter alia, Sheldon v. M etro-G oldwyn Pictures Corp., 106 F.2d 45, 48 (2d Cir.1939), aff'd, 309 U.S. 390, 60 S.Ct. 681, 84 L.Ed. 825 (1940)). 36 F.3d at 1174, n.48. Comment (f) to the Restatement (Third) of Unfair Competition § 45 (1995) sets forth a similar burden of proof: The traditional form of restitutionary relief in an action for the appropriation of a trade secret is an accounting of the defendant's profits on sales attributable to the use of the trade secret. The general rules governing accountings of profits are applicable in trade secret actions. The plaintiff is entitled to recover the defendant’s net profits. The plaintiff has the burden of establishing the defendant's sales; the defendant has the burden of establishing any portion of the sales not attributable to the trade secret and any expenses to be deducted in determining net profits. -30- Ocwen Advisors does not refute that the burden of proof may shift. Rather, it argues the burden never shifted because Cartel did not present sufficient evidence of the fact a sale was made from the misappropriated information. As discussed above, the jury was given sufficient evidence to reasonably infer such profit and the parties do not dispute the fact that the Ocwen Advisors division reported net profits. Therefore, the district court erred in placing the onus on Cartel to provide specific net profits from the sale of BPOs. Ocwen Advisors is in the best position to rationally apportion its net profits between its product streams and the costs associated with its BPO business. Because the absence of evidence is directly attributable to Ocwen’s failure to provide the data, it was not unreasonable for TenBrook to apply the same profit ratio for all product lines to one product. See Electro-M iniature Corp. v. W endon Co., 771 F.2d 23, 27 (2d Cir. 1985) (“W here, as here, there is a clear showing of injury that is not susceptible to exact measurement because of the defendant’s conduct, the jury has some latitude to ‘make a just and reasonable estimate of damages based on relevant data.’” (quoting Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264 (1946))).