Court Opinion

ID: 4537037
Source: CourtListenerOpinion
Date Created: 2020-05-27 21:00:26.421481+00
Date Added: 2024-06-11T12:41:14.265658
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       MAY 27 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

JL BEVERAGE COMPANY, LLC,                       No.    18-16597

                Plaintiff-Appellant,            D.C. No.
                                                2:11-cv-00417-MMD-CWH
 v.

JIM BEAM BRANDS CO.; BEAM INC.,                 MEMORANDUM*

                Defendants-Appellees.

                   Appeal from the United States District Court
                            for the District of Nevada
                  Miranda M. Du, Chief District Judge, Presiding

                      Argued and Submitted January 10, 2020
                            San Francisco, California

Before: WALLACE and FRIEDLAND, Circuit Judges, and LASNIK,** District
Judge.

      JL Beverage Company, LLC (“JL Beverage”) brought a trademark

infringement action against Jim Beam Brands Co. and Beam Inc. (“Jim Beam”).

JL Beverage appeals from the district court’s order granting Jim Beam’s motion to

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Robert S. Lasnik, United States District Judge for the
Western District of Washington, sitting by designation.
strike JL Beverage’s jury trial demand and from the district court’s judgment in

favor of Jim Beam. We affirm.

       1. The district court did not err by striking JL Beverage’s demand for a jury

trial. JL Beverage contends that it had a Seventh Amendment right to a jury trial

on its claim for disgorgement of profits under the Lanham Act. See 15 U.S.C.

§ 1117(a) (providing that a prevailing plaintiff is “entitled, . . . subject to the

principles of equity, to recover . . . defendant’s profits”). But we held in Fifty-Six

Hope Road Music, Ltd. v. A.V.E.L.A., Inc., 778 F.3d 1059 (9th Cir. 2015), that “[a]

claim for disgorgement of profits under § 1117(a) is equitable, not legal” and thus

does not “invoke[] [the] right” to a jury trial. Id. at 1074-76. Under Fifty-Six Hope

Road Music, the Seventh Amendment did not provide JL Beverage the right to a

jury trial in this action.

       2. As we previously held, the “likelihood of consumer confusion is central”

to JL Beverage’s claims. JL Beverage Co. v. Jim Beam Brands Co., 828 F.3d
1098, 1104 (9th Cir. 2016). The district court’s conclusion that there was no

likelihood of consumer confusion was not clearly erroneous.

       a. It was not clear error for the district court to conclude that the “similarity

of the marks” factor of the Sleekcraft test weighed against finding a likelihood of

confusion. See generally AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49

(9th Cir. 1979), abrogated on other grounds by Mattel, Inc. v. Walking Mountain

                                            2
Prods., 353 F.3d 792 (9th Cir. 2003). We acknowledge that the design of the lips

featured on Jim Beam’s product was very similar to the design of the lips featured

on JL Beverage’s product. And both Jim Beam and JL Beverage coordinated the

color of the lips with the flavor of the vodka. But the marks must be considered

“in their entirety and as they appear in the marketplace.” See Pom Wonderful LLC

v. Hubbard, 775 F.3d 1118, 1128 (9th Cir. 2014). On JL Beverage’s product, the

lips were used to spell “Johnny Love Vodka” (the name of JL Beverage’s vodka)

and were featured against a clean silver background. On Jim Beam’s product, the

lips appeared below “Pucker” (the name of Jim Beam’s vodka) and were featured

against a background with bright splotches of color. Cf. Cohn v. Petsmart, Inc.,

281 F.3d 837, 842 (9th Cir. 2002) (concluding that consumers “encounter[ed] the

trademarks differently in the marketplace” when two companies used the exact

same slogan “as a tagline to their distinctive business names”). The shapes of the

bottles were also different. In light of these dissimilarities, the district court’s

determination on the “similarity of the marks” factor was not clearly erroneous.

      b. The district court correctly summarized the relevant law on the “intent”

factor. With respect to JL Beverage’s forward confusion claim, the district court

quoted the legal standard outlined in Marketquest Group, Inc. v. BIC Corp., 862
F.3d 927 (9th Cir. 2017): “whether defendant in adopting its mark intended to

capitalize on plaintiff’s good will.” See id. at 934 (quoting Fortune Dynamic, Inc.

                                            3
v. Victoria’s Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1043 (9th Cir.

2010)). There is a presumption that such intent exists “whe[n] an alleged infringer

knowingly adopts a mark similar to another’s.” See Brookfield Commc’ns, Inc. v.

W. Coast Entm’t Corp., 174 F.3d 1036, 1059 (9th Cir. 1999) (quoting Official

Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1394 (9th Cir. 1993)). With respect to

JL Beverage’s reverse confusion claim, the district court accurately restated the

“indicia of intent” referred to in Marketquest Group: “evidence that a defendant

deliberately intended to push the plaintiff out of the market,” and evidence that a

defendant “culpably disregarded the risk of reverse confusion,” the latter of which

can be proved by showing that “the defendant knew of the mark [or] should have

known of the mark.” See 862 F.3d at 934-35.

      In applying these legal standards to the facts here, the district court did not

clearly err in holding that the “intent” factor “does not weigh in favor of a finding

of likelihood of confusion.” Jim Beam at least had constructive knowledge of one

of JL Beverage’s marks when Jim Beam received from its trademark counsel a

letter referring to the mark and a report containing the mark. And Jim Beam

eventually had actual knowledge of JL Beverage’s marks, such as through JL

Beverage’s cease and desist letter. However, Jim Beam’s mere knowledge of JL

Beverage’s mark does not warrant an inference that Jim Beam had an intent to

confuse in light of the district court’s not-clearly-erroneous determination that the

                                          4
marks were not similar. See Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135,

1148 (9th Cir. 2002) (holding that such an inference “may be drawn only” when an

alleged infringer uses a mark that is held to be “similar” to the plaintiff’s mark); cf.

Marketquest Group, 862 F.3d at 937 (“An inference of bad faith does not arise

from mere knowledge of a mark when the use is otherwise objectively fair, even in

a case presenting reverse confusion.”). Moreover, the evidence in the record

indicating that Jim Beam had a good faith belief that it was not infringing further

supports that it was not clear error for the district court to treat the intent factor as

indeterminate. Cf. M2 Software, Inc. v. Madacy Entm’t, 421 F.3d 1073, 1085 (9th

Cir. 2005) (not weighing the intent factor in the plaintiff’s favor when there was

evidence that the defendant’s “attorney believed that [the defendant] could ‘carve

out’ a non-infringing mark”).

       c. JL Beverage also challenges the district court’s holding that the “strength

of the mark” factor did not weigh in favor of finding a likelihood of confusion. “In

a reverse confusion case, . . . we must focus on the strength of the junior user’s

mark.” Dreamwerks Prod. Grp., Inc. v. SKG Studio, 142 F.3d 1127, 1130 n.5 (9th

Cir. 1998) (second alteration in original). Due to Jim Beam’s strong market

presence, it is possible that “consumers doing business with [JL Beverage] might

[have] mistakenly believe[d] that they [were] dealing with [Jim Beam].” See JL

Beverage, 828 F.3d at 1107 (quoting Dreamwerks Prod. Grp. Inc., 142 F.3d at

                                            5
1130). But this could only have been true in the year 2011, when both JL

Beverage’s vodka product and Jim Beam’s vodka product were being sold. It

appears to be unclear from the record whether Jim Beam’s trade dress design was

already commercially strong in 2011 (the year its vodka product launched), such

that consumers were likely to have been confused at that time.

      We need not decide, however, whether the district court’s “strength of the

mark” determination was clearly erroneous. Even assuming it was, when the

district court’s “errors are corrected and the totality of the facts is considered,”1 we

are not persuaded that the court’s overall likelihood of confusion finding was

clearly erroneous. See Pom Wonderful, 775 F.3d at 1132. The visual

dissimilarities between JL Beverage’s product and Jim Beam’s product, coupled

with the number of factors that do not clearly weigh in favor of finding a likelihood

of confusion, prevent us from having a “definite and firm conviction that a mistake

has been committed.” See id. (quoting Lahoti v. VeriCheck, Inc., 586 F.3d 1190,

1196 (9th Cir. 2009)).

      AFFIRMED.

      1
         We agree with JL Beverage that the “type of goods and the degree of care
likely to be exercised by the purchaser” factor should be given little weight.

                                           6
                                                                            FILED
JL Beverage Company, LLC v. Beam, Inc., et al., No. 18-16597                 MAY 27 2020
                                                                         MOLLY C. DWYER, CLERK
FRIEDLAND, Circuit Judge, concurring:                                     U.S. COURT OF APPEALS

      I agree that JL Beverage had no Seventh Amendment right to a jury trial

under Fifty-Six Hope Road Music, Ltd. v. A.V.E.L.A., Inc., 778 F.3d 1059 (9th Cir.

2015). I write separately to highlight the tension between Fifty-Six Hope Road

Music, which concluded that a claim for disgorgement of profits under the Lanham

Act does not trigger the constitutional right to a jury trial, and Sid & Marty Krofft

Television Productions, Inc. v. McDonald’s Corp., 562 F.2d 1157 (9th Cir. 1977),

overruled on other grounds by Skidmore v. Led Zeppelin, 952 F.3d 1051 (9th Cir.

2020), which concluded that a claim for disgorgement of profits under the

Copyright Act of 1909 (“Copyright Act”)1 does trigger that right. In my view,

Fifty-Six Hope Road Music was correct, and Krofft was not.

      The Seventh Amendment right to a jury trial applies in “Suits at common

law,” U.S. Const. amend. VII, which the Supreme Court has “consistently

interpreted . . . to refer to ‘suits in which legal rights were to be ascertained and

determined, in contradistinction to those where equitable rights alone were

recognized, and equitable remedies were administered,’” Granfinanciera, S.A. v.

      1
       This Act has since been superseded by the Copyright Act of 1976, Pub. L.
No. 94-553, 90 Stat. 2541. Like the Copyright Act of 1909, the Copyright Act of
1976 permits a plaintiff to recover the infringer’s profits. See 17 U.S.C. § 504(b).
                                            1
Nordberg, 492 U.S. 33, 41 (1989) (quoting Parsons v. Bedford, 28 U.S. (3 Pet.)

433, 447 (1830)). To determine whether the Seventh Amendment provides a right

to a jury trial, the most important inquiry is whether “the remedy sought . . . is

legal or equitable in nature.” See id. at 42 (quoting Tull v. United States, 481 U.S.
412, 417-18 (1987)).

      Applying this inquiry would seem to indicate that disgorgement of profits is

an equitable remedy, not a legal one, whether sought under the Lanham Act (which

focuses on “the registration, use, and infringement of trademarks and related

marks,” Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 28-29

(2003)), or under the Copyright Act.

      In early trademark and copyright cases alike, disgorgement of profits (also

referred to as an “accounting” of profits, see Restatement (Third) of Restitution

and Unjust Enrichment § 51 cmt. a) was a remedy awarded by courts of equity. In

trademark cases, “[t]he infringer [was] required in equity to account for and yield

up his gains to the true owner.” Hamilton-Brown Shoe Co. v. Wolf Bros. & Co.,

240 U.S. 251, 259-60 (1916) (emphasis added); see also generally Romag

Fasteners, Inc. v. Fossil, Inc., No. 18-1233, 2020 WL 1942012, at *3-4 (U.S. Apr.

23, 2020). Likewise, “recovery of profits . . . had been allowed in equity . . . in

copyright . . . cases as appropriate equitable relief incident to a decree for an

injunction.” Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390, 399 (1940)

                                           2
(emphasis added); see also Tex. Advanced Optoelectronic Sols., Inc. v. Renesas

Elecs. Am., Inc., 895 F.3d 1304, 1324-25 (Fed. Cir. 2018) (“As for copyright and

trademark infringement, we have seen no support for concluding that disgorgement

of profits was available at law for those wrongs.”), cert. denied, 139 S. Ct. 2741

(2019).

      And in both the trademark and copyright contexts, the theoretical

justification for awarding profits was based on an analogy to the equitable remedy

of a constructive trust, also called a trust ex maleficio. “When property has been

acquired in such circumstances that the holder of the legal title may not in good

conscience retain the beneficial interest, equity converts him into a [constructive]

trustee” who is obligated to turn over the property to the constructive beneficiary.

See Trust, Black’s Law Dictionary (11th ed. 2019) (quoting Beatty v. Guggenheim

Expl. Co., 122 N.E. 378, 380 (N.Y. 1919)). Applied to trademark and copyright

cases, “[t]he theory was that it was unconscionable for an infringer to retain a

benefit which he had received by the appropriation and use of the plaintiff’s

property right; and to prevent unjust enrichment the infringer was treated as a

trustee ex maleficio of his ill gotten gains.” See Sammons v. Colonial Press, 126
F.2d 341, 345 (1st Cir. 1942) (italicization added) (copyright); see also Hamilton-

Brown Shoe Co., 240 U.S. at 259 (trademark); Sheldon, 309 U.S. at 405-06

(copyright); Hard Candy, LLC v. Anastasia Beverly Hills, Inc., 921 F.3d 1343,

                                          3
1357 (11th Cir. 2019) (trademark); Mark A. Thurmon, Ending the Seventh

Amendment Confusion: A Critical Analysis of the Right to a Jury Trial in

Trademark Cases, 11 Tex. Intell. Prop. L.J. 1, 97 (2002).

      Moreover, as Fifty-Six Hope Road Music explained, both the Supreme Court

and our court have indicated that “actions for disgorgement of improper profits are

equitable in nature.” See 778 F.3d at 1075; see also Feltner v. Columbia Pictures

Television, Inc., 523 U.S. 340, 352 (1998) (observing that the Supreme Court has

described “actions for disgorgement of improper profits” as “equitable”); Tull, 481
U.S. at 424 (stating that “an action for disgorgement of improper profits” is

“traditionally considered an equitable remedy”); SEC v. Rind, 991 F.2d 1486, 1493

(9th Cir. 1993) (“[A]ctions for disgorgement of improper profits are equitable in

nature.”); Smith v. Barton, 914 F.2d 1330, 1337 (9th Cir. 1990) (“[D]amages may

be equitable where they are restitutionary, ‘such as in action[s] for disgorgement of

improper profits.’” (second alteration in original) (quoting Chauffeurs, Teamsters

& Helpers, Local No. 391 v. Terry, 494 U.S. 558, 570 (1990))).2

      2
          In a recent case involving a claim for disgorgement of profits under the
Copyright Act of 1976, the Supreme Court stated: “Like other restitutional
remedies, recovery of profits ‘is not easily characterized as legal or equitable,’ for
it is an ‘amalgamation of rights and remedies drawn from both systems.’ Given
the ‘protean character’ of the profits-recovery remedy, we regard as appropriate its
treatment as ‘equitable’ in this case.” Petrella v. Metro-Goldwyn-Mayer, Inc., 572
U.S. 663, 668 n.1 (2014) (citations omitted) (quoting Restatement (Third) of
Restitution and Unjust Enrichment § 4 cmts. b, c)). This statement is consistent

                                          4
      The foregoing suggests that Fifty-Six Hope Road Music was right to

conclude that disgorgement of profits is an equitable remedy, and that Krofft was

wrong to conclude that it is a legal remedy. And nothing in Krofft itself persuades

otherwise.

      Krofft concluded that an accounting of profits was “basically a money claim

for damages” and thus a legal remedy which made the Seventh Amendment right

applicable. See 562 F.2d at 1175 (quoting Swofford v. B & W, Inc., 336 F.2d 406,

411 (5th Cir. 1964)); see also generally Bayer v. Neiman Marcus Grp., Inc., 861
F.3d 853, 866 (9th Cir. 2017) (explaining that “compensatory damages” are “the

classic form of legal relief”). But Krofft did not explain why an accounting of

profits was tantamount to a legal claim for “compensatory damages.” See 562 F.2d

at 1175 (quoting Swofford, 336 F.2d at 411).

      In fact, Krofft itself acknowledged that “[a]n accounting for profits” was “a

creature of equity.” Id. (emphasis added) (quoting Swofford, 336 F.2d at 411).

And historically, while “[d]amages [we]re awarded to a copyright proprietor on the

conventional legal principle of affording compensation[,] . . . an infringer’s profits

from his wrongful act [we]re awarded to the copyright proprietor” on a different

with a general rule treating disgorgement of profits as an equitable remedy—while
also suggesting that there could be exceptions on a case-by-case basis where there
are “peculiarly legal considerations at play.” See 3 Melville B. Nimmer & David
Nimmer, Nimmer on Copyright § 12.06[B][3][d][i].
                                          5
rationale: “prevent[ing] the infringer’s unjust enrichment.” F.W. Woolworth Co. v.

Contemporary Arts, Inc., 193 F.2d 162, 167-68 (1st Cir. 1951), aff’d, 344 U.S. 228

(1952); Kenneth E. Burdon, Note, Accounting for Profits in a Copyright

Infringement Action: A Restitutionary Perspective, 87 B.U. L. Rev. 255, 269

(2007). Thus, “if the infringer [made] greater profits than the copyright owner

lost,” the owner would be “allowed to capture the additional profit even though it

[would] not [compensate any] loss to him.” Taylor v. Meirick, 712 F.2d 1112,

1120 (7th Cir. 1983); see also Sammons, 126 F.2d at 345-46. Krofft did not

mention this distinction between profits and damages, much less provide a reason

for analogizing the former to the latter despite it.

      Krofft also considered the Supreme Court’s decision in Dairy Queen, Inc. v.

Wood, 369 U.S. 469 (1962), to be “controll[ing]” on the jury trial question. See

Krofft, 562 F.2d at 1175 & n.22. But Krofft’s interpretation that Dairy Queen held

there is a right to a jury trial on a claim for disgorgement of profits has been

repudiated in the years since Krofft was decided. Both the Supreme Court and our

court have observed that Dairy Queen’s holding was about a claim for damages,

not a claim for disgorgement of profits. See Feltner, 523 U.S. at 346 (describing

Dairy Queen as an “action for damages for trademark infringement”); Fifty-Six

Hope Road Music, 778 F.3d at 1075 (noting that “the Supreme Court characterizes

                                           6
the Dairy Queen claim as a legal claim for damages (not disgorgement of profits)”

(citing Feltner, 523 U.S. at 346)).

      Since Krofft was decided, we have not relied on its jury trial analysis in any

published decision. And other courts have declined to apply Krofft’s conclusion on

the Seventh Amendment right. See Fair Isaac Corp. v. Fed. Ins. Co., 408 F. Supp.
3d 1019, 1029 & n.9 (D. Minn. 2019) (rejecting the reasoning of Krofft and

observing that “[i]t is telling that, in the more than forty years since [Krofft], no

court has cited, much less adopted, its analysis”); Siegel v. Warner Bros. Entm’t

Inc., 581 F. Supp. 2d 1067, 1073-74 (C.D. Cal. 2008) (distinguishing Krofft and

holding that “an accounting of profits between co-owners of a copyright” is an

equitable remedy that does not trigger the jury trial right). By contrast, in the

trademark context, other courts are in accord with Fifty-Six Hope Road Music that

there is no right to a jury trial if the only monetary relief sought by the plaintiff is

disgorgement of profits. See 6 J. Thomas McCarthy, McCarthy on Trademarks

and Unfair Competition § 32:124.

      Our decision in this trademark action applies that rule and reaches what I

think is the right result under governing Seventh Amendment doctrine: JL

Beverage sought an equitable remedy and therefore had no constitutional right to a

jury trial. Although I think the contrary rule in Krofft is incorrect, we have no

occasion in this trademark case to decide the applicability of the jury trial right in

                                            7
copyright cases.3 But if and when we are presented with an appeal in which a

copyright plaintiff’s right to a jury trial on a claim for disgorgement of profits is

contested, I think the rule we adopted more than forty years ago in Krofft would be

worth revisiting.

      3
         The question whether a plaintiff seeking disgorgement of profits in a
copyright infringement action has a constitutional right to a jury trial may be raised
in few cases. In the overwhelming majority of copyright cases, the plaintiff does
not seek profits and instead elects to seek statutory damages (for which there is a
right to a jury trial under Feltner, 523 U.S. at 355). See Ben Depoorter, Copyright
Enforcement in the Digital Age: When the Remedy Is the Wrong, 66 UCLA L. Rev.
400, 407, 418 & tbl. 1 (2019).
                                           8