Trademark Infringement
Remedy of an Accounting and Disgorgement of Profits
Remedies of Accounting, Constructive Trust, and Restitution
Injunctive Relief
Jury Trial
Seventh Amendment Right to Trial by Jury
Common Law
Equity
Monetary Damages Available to a Lanham Act Trademark
Plaintiff
Fair Use Defense to Infringement
Likelihood of Confusion
Hard Candy filed a complaint in the United
States District Court for the Southern District of Florida against Anastasia,
claiming trademark infringement under § 32(a) of the Lanham Act, 15 U.S.C. §
1114(1); unfair competition under § 43(a) of the Lanham Act, 15 U.S.C. §
1125(a); common law trademark infringement; and common law unfair competition.
Hard Candy sought an accounting and the disgorgement of Anastasia’s profits,
statutory damages, a permanent injunction barring Anastasia’s use of its mark,
declaratory relief, and fees and costs. The complaint included a request for
actual damages, but, notably, Hard Candy dropped this application before trial.
The district court then struck Hard Candy’s jury trial demand because all of
the remaining remedies were equitable in nature.
To prevail on each of its claims, Hard Candy had
to establish that Anastasia’s use of the words “hard candy” created a
likelihood of confusion. See Tally-Ho, Inc. v. Coast Cmty. Coll. Dist., 889
F.2d 1018, 1026 & n.14 (11th Cir. 1989) (noting that the elements of
trademark infringement under common law and the Lanham Act “are the same,” and
that “an unfair competition claim based only upon alleged trademark
infringement is practically identical to an infringement claim”). Applying our
seven-factor likelihood of confusion test, the district court determined that
Hard Candy had not met its burden. The court also concluded that even if Hard
Candy could establish infringement, Anastasia had made out a fair use defense
because it used the term “hard candy” in good faith as a description of the
product, not as a mark.
This appeal requires us to decide whether the
Seventh Amendment right to trial by jury applies when a trademark plaintiff
attempts to recover the profits the defendant made by selling the allegedly
infringing goods.
A plaintiff is entitled to a jury trial in an
action that is “analogous” to a claim that would have been brought in the
English law courts at common law, but not if the claims sounded in equity or
admiralty. See Tull v. United States, 481 U.S. 412, 417 (1987).
The remedy of an accounting and disgorgement of
profits for trademark infringement is equitable in nature and has long been
considered that way, so we hold that a plaintiff seeking the defendant’s
profits in lieu of actual damages is not entitled to a jury trial.
The monetary damages available to a Lanham Act trademark plaintiff can be divided into five rough categories: recovery of the defendant’s profits, actual business damages and out-of-pocket losses (like corrective advertising), lost profits, punitive damages, and attorneys’ fees. “Actual damages” in this context covers everything from damages from lost sales or licensing fees due to the infringer’s sale of offending goods to intangible harm like reputational damage and loss of good will. As we have said, a trademark plaintiff “may recover for all elements of injury to the business of the trademark owner proximately resulting from the infringer’s wrongful acts.” Bos. Prof’l Hockey Ass’n, Inc. v. Dallas Cap & Emblem Mfg., Inc., 597 F.2d 71, 75 (5th Cir. 1979).
The Supreme Court has set out a two-part test to determine whether the Seventh Amendment’s guarantee applies to a particular claim: To determine whether a statutory action is more similar to cases that were tried in courts of law than to suits tried in courts of equity or admiralty, the Court must examine both the nature of the action and of the remedy sought. First, we compare the statutory action to 18th- century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature.
We begin, then, by examining the nature of the action, here trademark infringement and unfair competition based on infringement. “Trademarks and their precursors have ancient origins, and trademarks were protected at common law and in equity at the time of the founding of our country.” Matal v. Tam, 137 S. Ct. 1744, 1751 (2017). Trademark infringement claims began as common law actions for fraud or “deceit.” Sandforth’s Case, heard in an English court of law in 1584, may be the earliest trademark infringement action at common law. See Keith M. Stolte, How Early Did Anglo-American Trademark Law Begin? An Answer to Schechter’s Conundrum, 8 Fordham Intell. Prop. Media & Ent. L.J. 505, 509 (1998); 1 McCarthy § 5:2.
By the time the Seventh Amendment was ratified in 1791, the common law trademark infringement action was well established. See, e.g., Singleton v. Bolton (1783) 99 Eng. Rep. 661, 661; 3 Dougl. 293, 293 (stating that “if the defendant had sold a medicine of his own under the plaintiffs name or mark, that would be a fraud for which an action would lie”). Trademark actions also were brought in courts of equity during the same period. Blanchard v. Hill (1742) 26 Eng. Rep. 692; 2 Atk. 484, is the earliest reported trademark case brought in equity. See Mark P. McKenna, The Normative Foundations of Trademark Law, 82 Notre Dame L. Rev. 1839, 1852 (2007). Shortly thereafter, the accepted rule was “that equity could be invoked to protect the plaintiff’s title to his marks.” See id. at 1854. Early American case law likewise demonstrates that trademark rights could be enforced at equity. See, e.g., Taylor v. Carpenter, 23 F. Cas. 742, 744 (Story, Circuit Justice, C.C.D. Mass. 1844) (No. 13,784). Thus, because when the Seventh Amendment was ratified trademark rights had “been long recognized by the common law and the chancery courts of England,” Trade-Mark Cases, 100 U.S. 82, 92 (1879), this part of the Supreme Court’s test is indeterminate.
The second prong -- the nature of the remedy -- is the “more important” consideration and provides substantially more guidance here. Curtis, 415 U.S. at 196. Hard Candy does not seek actual damages, and it is undisputed that a plaintiff seeking only injunctive relief, costs, and fees would not be entitled to a jury trial. Thus, our analysis centers on Hard Candy’s request for an accounting of Anastasia’s profits and for the accompanying disgorgement of those gains. Our review is necessarily broader than the origins of the statutory remedy contained in the Lanham Act. As the Second Circuit recently explained, “the ancient remedies of accounting, constructive trust, and restitution have compelled wrongdoers to ‘disgorge’ -- i.e., account for and surrender -- their ill-gotten gains for centuries.” S.E.C. v. Cavanagh, 445 F.3d 105, 119 (2d Cir. 2006).
The remedy sought by Hard Candy, an accounting and disgorgement of profits, was historically a matter for courts of equity. (…) In other words, a court of law, limited to providing legal relief, would not be able to provide full redress to a trademark infringement plaintiff, but a court of equity could do so by providing an injunction along with ordering an accounting and disgorgement of the defendant’s profits -- precisely the remedy Hard Candy seeks here.
(…) Likelihood of confusion. The district court applied our seven-factor test (Op. III, A) (…) We look to the: (1) type of mark, (2) similarity of mark, (3) similarity of the products the marks represent, (4) similarity of the parties’ retail outlets and customers, (5) similarity of advertising media used, (6) defendant’s intent and (7) actual confusion.
(…) A defendant is entitled to the fair use defense if it establishes that it used the allegedly infringing term “(1) other than as a mark, (2) in a descriptive sense, and (3) in good faith.”
Secondary authorities: McCarthy on Trademarks
and Unfair Competition (5th ed. 2018).
(U.S. Court of Appeals for the Eleventh Circuit,
April 23, 2019, Hard Candy, LLC, v. Anastasia Beverly Hills, Inc., Docket No.
18-10877, Circuit Judge Marcus, for Publication)
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