Court Opinion

ID: 8996378
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:39:37.025185+00
Date Added: 2024-06-11T17:11:03.645768
License: Public Domain

JOHNSON, Circuit Judge,
dissenting.
Regrettably, I cannot agree with the majority’s view of this case, and therefore must respectfully dissent.
To understand the essence of this dissent it is necessary to recite a number of critically important jury findings. The jury found that Hard Rock used an imitation of Texas Pig Stands’ registered trademark. The jury found that the imitation trademark used by Hard Rock was similar enough to Texas Pig Stands’ mark that it was likely to confuse consumers as to whether the product was sponsored or endorsed by Texas Pig Stands. The jury found that Hard Rock used the imitation of Texas Pig Stands’ mark willfully and in bad faith, maliciously, or fraudulently. All of these jury findings are amply supported by the evidence. None of these findings has been set aside or overturned.
Despite the majority’s attempt to diminish the jury’s finding of a knowing, deliberate infringement, the majority quotes with seeming approval the district court’s assessment of the evidence that the “defendant sold pig sandwiches knowing of plaintiff’s mark ... in simple disregard of plaintiff’s rights.” There can be no question that Hard Rock deliberately infringed on Texas Pig Stands’ trademark. It knew of that mark and openly refused to honor it. In such a case, trademark law demands that the infringer be penalized, lest such infringement be encouraged and the valuable protections of the trademark laws vitiated. Mistakenly, in this writer’s opinion, the majority today goes to great lengths to avoid imposing any penalty whatsoever on an admittedly willful and deliberate infringer.
Upon a finding of a knowing trademark violation, the victim of the violation is entitled to both injunctive and monetary relief. 15 U.S.C. §§ 1114, 1117. There is no question here that it was appropriate to enjoin Hard Rock from further use of Texas Pig Stands’ mark in the future. The question here is whether Texas Pig Stands should have been afforded any monetary recovery for previous violations. The prior cases of this Court and the purposes of the trademark laws demand that Hard Rock be required to pay a monetary penalty, in order to render its deliberate infringement unprofitable.
The possible monetary remedies for trademark infringement include
(a) the profits acquired by the defendant as a result of its infringement,
(b) the damages sustained by the trademark owner,
(c) the costs of the action, and
(d) in an “exceptional case,” reasonable attorneys’ fees.
15 U.S.C. § 1117(a) (emphasis added). See also Bandag, Inc. v. Al Bolser’s Tire Stores, 750 F.2d 903, 917 (Fed.Cir.1984). The district court is given great discretion to fashion an equitable remedy. 15 U.S.C. § 1117(a); Bandag, 750 F.2d at 917.
This is not the first time this Court has addressed the issue of whether a plaintiff *699should have any monetary recovery if it has not itself suffered any lost sales or other damages as a result of a defendant’s willful infringement. Just over a decade ago, this Court was faced with a similar case — one in which the infringer acted knowingly and deliberately, yet did not cause the victim to lose any sales. We there noted initially that the Lanham Act, and in particular 15 U.S.C. § 1117, “entitles a markholder to recover, subject to the principles of equity, the profits earned by a defendant from infringement of the mark.” Maltina Corp. v. Cawy Bottling Co., Inc., 613 F.2d 582, 584 (5th Cir.1980). The question, though, was whether the plaintiff should recover those profits even if it had not itself lost any profits or sales as a result of the infringement.
The courts have expressed two views of the circumstances in which an accounting is proper under 15 U.S.C. Section 1117. Some courts view the award of an accounting as simply a means of compensating a markholder for loss or diverted sales. Other courts view an accounting not as compensation for lost or diverted sales, but as redress for the defendant’s unjust enrichment and as a deterrent to further infringement. See Maier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 121 (9th Cir.), cert. denied, 391 U.S. 966, 88 S.Ct. 2037, 20 L.Ed.2d 879 (1968)_ Accordingly, we must decide whether diversion of sales is a prerequisite to an award of an accounting. We hold that it is not.
In Maier Brewing the Ninth Circuit awarded an accounting to a plaintiff who was not in direct competition with a defendant and who, accordingly, had not suffered any diversion of sales from the defendant’s infringement. The court noted that the defendant had wilfully and deliberately infringed. It reasoned that awarding an accounting would further Congress’ purpose in enacting 15 U.S.C. Section 1117 of making infringement unprofitable. This Court is in accord with this reasoning.
Id. at 584-85 (emphasis added). This Court observed that an accounting “serves two purposes: remedying unjust enrichment and deterring future infringement.” Furthermore, the Court recognized that because an accounting alone does not render infringement unprofitable, it “will not adequately deter future infringement.” Id.
In this case there were two potential penalties which might, in equity, have been imposed on Hard Rock for its deliberate violation of federal law. Either would have rendered Hard Rock’s infringement unprofitable and provided an appropriate deterrent. Based on the facts found by the jury, the district court in this case could have either 1) forced Hard Rock to disgorge the profits it made selling food under Texas Pig Stands’ trademark, or 2) compelled Hard Rock to pay Texas Pig Stands’ attorneys’ fees. The district court, exercising its discretion to fashion an equitable result, chose the second of these options. The majority of this panel, substituting its judgment for that of the district court, now refuses to allow the imposition of any penalty and allows Hard Rock to keep whatever profits accrued from Hard Rock’s willful and deliberate infringement.
There should be no question that the district court could have either awarded Texas Pig Stands the profits earned by Hard Rock or could have awarded Texas Pig Stands its attorneys’ fees. Section 1117 plainly allows an award of the infringer’s profits upon a showing of a knowing violation, and the majority acknowledges that Texas Pig Stands need not have proved that it lost any sales in order to recover Hard Rock’s profits. Suyra, at 695. Thus, while the district court was not required to do so, it certainly had the authority to award Hard Rock’s profits to Texas Pig Stands. In the judgment of the district court, however, such an award was not required to reach an equitable result, and the district court thus exercised its discretion to deny such an award.
At the same time, however — and as part of its equitable resolution of this matter— the district court determined that it would be inequitable and unjust to require Texas Pig Stands to bear the expense and burden of defending its mark, when the only result would be an injunction forbidding contin*700ued infringement. After all, while the injunction might restore the status quo ante, the victim of the infringement, Texas Pig Stands, has had to bear the entire burden of the past infringement. Refusing to inflict such a Pyrrhic victory on Texas Pig Stands, the district court required Hard Rock to pay Texas Pig Stands’ attorneys’ fees. The majority now sets aside the judgment of the district court, makes its own determination of the equities of this fact sensitive case, and decrees a new and different result. The majority’s proffered reason is that this is not an “exceptional” case and Texas Pig Stands therefore does not qualify for attorneys’ fees. The short answer to this assertion is that, as the majority seemingly acknowledges, the legislative history of section 1117 makes plain that an exceptional case is one in which the infringement is “deliberate” or “willful.” Supra, at 696. Here the jury made a specific finding that the infringement was willful. Furthermore, the majority admits that the infringement was knowing and deliberate. Supra, at 697. Clearly, this case not only qualifies as one in which attorneys’ fees are available but also calls out for such a result.
The majority’s oft-expressed concern about a “windfall” for the plaintiffs has led it to an unjust and unwarranted result. For one thing, there would be no windfall here. Awarding attorneys’ fees to Texas Pig Stands would not in any way constitute a windfall — such fees would do no more than provide appropriate compensation to Texas Pig Stands for its efforts to vindicate its protected economic rights. Moreover, even if there were a windfall, certainly it is far better to allow a windfall to the innocent victim than to place the entire burden of the litigation on that victim and allow the culpable party to profit from its infringement.
The message conveyed by the majority’s determination here is that despite what this Court has heretofore written, it may now be permissible and profitable to infringe on the trademark of another. While the Fifth Circuit might eventually put a stop to that illegal infringement, that infringement nonetheless still could be profitable. The trademark laws generally, and section 1117 in particular, do not countenance such a result. The message this Court should send is that infringement — and particularly the knowing, deliberate, and willful infringement — will have two consequences. It will be enjoined and it will be made unprofitable.
As the majority does not send that message, I must respectfully dissent.