C O M M E R C I A L L I T I G AT I O N
Choose Your Battle
Plan Wisely
By Russel Myles
How you craft a claim
under the Lanham Act
may save your client
from invasive discovery
and disrupted customer
relationships.
False
Advertising
Cases
In all commercial litigation, it is critical that you and your
client assess the repercussions before threatening or
initiating a lawsuit. You must take the effects that your
legal decisions may have on your client’s business
relationships and operations into account.
Intellectual property cases involve sizable
risks because a business’s success depends
on zealously defending its commercial
secrets and market reputation. When combating unfair competition, a paramount
concern is whether filing a lawsuit against
a competitor will subject your client’s business to excessive, invasive discovery that
will only cause more harm. You may be
able, however, to protect your client and
control the scope of discovery by selecting the remedies that you pursue carefully.
This article considers how your client may
be able to avoid disclosing sensitive commercial information to its competitor in a
false advertising case by foregoing actual
marketplace damages.
The Lanham Act, 15 U.S.C. §1125, equips
businesses with a private cause of action to
stop false advertising when (1) a competitor has introduced an advertisement into
interstate commerce that makes a false
Russel Myles is an attorney with McDowell Knight Roedder & Sledge LLC
in Mobile, Alabama. Mr. Myles has been engaged in complex commercial
and business litigation for more than 20 years. He has defended and prosecuted partner and shareholder disputes, claims against officers and directors, professional liability claims, intellectual property disputes, franchise
termination suits, and claims arising out of mergers and acquisitions.
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© 2013 DRI. All rights reserved.
or misleading statement of fact concerning either the competitor’s own products
or the plaintiff’s products, (2) the statement actually deceives or has the capacity
to deceive consumers, (3) the statement is
material in that it is likely to influence purchasing decisions, and (4) the statement is
causally linked to the alleged harm. See,
e.g., Pizza Hut, Inc. v. Papa John’s Int’l,
Inc., 227 F.3d 489, 495 (5th Cir. 2000).
The Lanham Act provides statutory remedies, which include damages for actual
marketplace losses, such as lost profits
or customers and diminished goodwill,
disgorgement of the defendant’s ill­gotten
profits, injunctive relief, corrective advertising damages, attorneys’ fees, and costs.
15 U.S.C.A. §1117(a). See also Wesco Mfg.,
Inc. v. Tropical Attractions of Palm Beach,
Inc., 833 F.2d 1484, 1487 (11th Cir. 1987); J.
Thomas McCarthy, 5 McCarthy on Trade­
marks and Unfair Competition §27:40–
:44 (4th ed.). Certain claims and remedies
require proof of actual consumer deception, which exposes a claimant to discovery of customer and sales records. Whether
your client’s claims will require such proof
depends on the type of advertisement and
the remedy sought.
To recover actual marketplace damages, courts universally require a plaintiff
to demonstrate actual consumer deception
caused by the defendant’s advertisement.
United Indus. Corp. v. Clorox Co., 140 F.3d
1175, 1180 (8th Cir. 1998). The reason that
courts require a showing of actual deception is because actual marketplace losses
are generally very difficult to prove with
any degree of certainty, but proof of actual
deception tends to show that such losses
probably exist, which alleviates concerns
that speculation could result in overestimating the injury suffered by a plaintiff.
Balance Dynamics Corp. v. Schmitt Indus.,
Inc., 204 F.3d 683, 690–91 (6th Cir. 2000)
cert. denied, 121 S. Ct. 306 (2000) (mem.).
When a plaintiff seeks only injunctive
relief, however, the remedy does not involve
calculations susceptible to speculation.
Therefore, courts do not require proof of
actual consumer confusion in injunctive
relief cases, and the plaintiff has the burden to demonstrate only a tendency to
deceive. Balance Dynamics, 204 F.3d at
690; Osmose, Inc. v. Viance, LLC, 612 F.3d
1298, 1319–20 (11th Cir. 2010); Warner­
Lambert Co. v. Breathasure, Inc., 204 F.3d
87, 97 (3d Cir. 2000) (holding that attaining
injunctive relief does not require that purchasers actually be deceived, but only that
false ads have tendency to deceive); McCar­
thy on Trademarks and Unfair Competi­
tion §27:36 (“When a plaintiff seeks only
an injunction, there is no requirement that
it be proven that purchasers were actually deceived, only that the advertisement
has a tendency to deceive.”). This allows a
business to stop its competitor’s wrongful advertising activities before they cause
harm, rather than having to wait until
it has suffered irreparable damage to its
reputation. McCarthy on Trademarks and
Unfair Competition §30:10 (“One does not
have to await consummation of the threatened injury to obtain preventive relief. It is
the mainstay of equity jurisprudence that
one need not wait for actual injury to occur
if it is imminent and impending.”). See also
Osmose, Inc., 612 F.3d at 1320–21 (granting
injunction to prevent use of ads that could
seriously harm the plaintiff’s goodwill).
The type of falsity alleged, moreover,
affects the availability of the remedy. A
false advertisement is either literally false
on its face, or it is ambiguous or literally
true but misleading. See, e.g., Time War­
ner Cable, Inc. v. DIRECTV, Inc., 497 F.3d
144, 153 (2d Cir. 2007). For a literally false
ad, a plaintiff can prove liability without
evidence of actual consumer deception
because a court can infer that a false ad will
impact the buying public. Time-Warner
Cable, 497 F.3d at 153; Johnson & Johnson­
Merck Consumer Pharm. Co. v. RhonePounlenc Rorer Pharm., Inc., 19 F.3d 125,
129 (3d 1994); W.L. Gore & Assoc., Inc. v.
Totes, Inc., 788 F. Supp. 800, 805 & 811 (D.
Del. 1992) (“When the advertising claim is
false, the court may grant relief on its own
findings that the advertisements have a
‘tendency to deceive.’”). Your client, therefore, can obtain an injunction to prohibit
literally false advertising without having to
demonstrate consumer deception–not even
a tendency to deceive.
On the other hand, proving that an ad is
misleading requires extrinsic evidence of
either actual consumer deception or a tendency to deceive because a court cannot
infer how a misleading ad will influence the
buying public. Time­Warner Cable, 497 F.3d
at 153. A plaintiff can demonstrate a tendency to deceive with consumer surveys,
market research, expert testimony, or other
evidence. See Hickson Corp. v. Northern
Crossarm Co., 357 F.3d 1256, 1261 (11th Cir.
2004). Your client can obtain an injunction
for a misleading ad by showing only a tendency to deceive and does not have to prove
actual consumer deception.
To recover marketplace damages if an
ad is misleading, however, your client will
have to prove actual consumer deception
and present some evidence to calculate
losses. Proof of a tendency to deceive is not
sufficient. Even if an ad is literally false,
although a court’s inference that the ad
confused consumers can support liability, a
jury cannot award damages based on speculation or juror emotion so a plaintiff must
present some evidence of actual losses,
which can come full circle to proof of consumer deception. But see Balance Dynam­
ics, 204 F.3d at 694 n.3 (discussing a very
limited factual scenario that might support
awarding marketplace damages without
proof that literally false ads caused actual
deception because the literal falsity was
directly on the product packaging at the
point of sale, creating a reasonable inference that the false ads influenced sales).
Whether your client must prove actual
consumer deception and losses will shape
not only the evidence needed to prove your
client’s claims but the scope of discovery as
well. So, while your client’s goal may be to
pursue a take-all approach to damages, you
should urge greater deliberation. Counsel
your client to look beyond what the business has to gain monetarily from the litigation and to consider what it has to lose. If a
claim alleges lost profits, sales, customers,
Even if you couldfind
a way to garner sufficient
proof of deception without
dragging your client’s
customers into the melee or
exposing sensitive financial
information, your opponent
is likely to do just that in
the discovery phase.
or goodwill and seeks marketplace damages, actual consumer deception becomes
central to the case. Even if you could find a
way to garner sufficient proof of deception
without dragging your client’s customers
into the melee or exposing sensitive financial information, your opponent is likely
to do just that in the discovery phase. You
will have opened the floodgates of discovery and provided a mechanism for your client’s competitor, which has already acted
unscrupulously, to gain access to extremely
sensitive information under the guise of
disproving actual confusion and losses.
You may well have given the competitor,
regardless of its true motivations, a legally
legitimate claim to gain discovery of your
client’s financial records, sales and profit
reports, customer identities and contact
information, and customer purchasing histories in the name of building its defense.
Aside from these unwanted disclosures,
you can also expect your opponent to seek
direct contact with your client’s customers
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poenas seeking even further information.
Your client can then expect to sustain fractured customer relations.
Certain sensitive commercial information does have protection, and courts have
recognized the significant risk of disrupting business relationships if parties are
permitted to contact each other’s customers during the discovery stage. See, e.g.,
After weighingall
options, your client may
agree that injunctive relief
and corrective advertising
can achieve its goal,
emotions aside, of halting
the harmful activities and
repairing whatever damage
has already been done.
digEcor, Inc. v. e.Digital Corp., No. 2:06-cv437, 2008 WL 4335539, at *5 (D. Utah Sept.
16, 2008); Murata Mfg. Co. v. Bel Fuse, Inc.,
234 F.R.D. 175, 182 (N.D. Ill. 2006); Foxwor­
thy v. Sun Art Designs, Inc., No. 96-3372CIV, 1997 WL 196624, at *1–2 (S.D. Fla.
Mar. 4, 1997); Volkswagenwerk Aktienge­
sellschaft v. Westburg, 260 F. Supp. 636, 637
(E.D. Penn. 1966). On this authority, you
could object on confidentiality grounds,
to which your opponent will argue that
confidentiality agreements and protective
orders will sufficiently guard your client’s
interests. Your opponent will cite cases
stating that financial records are not privileged documents and that a court must
compel a plaintiff to disclose them when
the plaintiff alleges lost profits. You could
also assert privileges for trade secrets and
customer lists, to which your opponent will
argue that the protections are not absolute
in the face of a prevalent need for the information. After all, your client is the only one
with the information necessary to assess
the legitimacy of its damages claims, and
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your opponent cannot obtain the information from any other source.
While your arguments will be substantially convincing, the risk will remain that
a court will find your opponent’s needs are
greater than your client’s risks. You do not
want to explain to your client after the fact
that a court denied your motion for a protective order, and the court ordered your
client to hand over its most sensitive customer and sales information to the very
competitor that tried to destroy your client’s business through false advertising.
It will be of no comfort to your client that
its competitor has signed a piece of paper
agreeing not to use the information for
commercial purposes. This is a risk that
many businesses will recognize they simply should not take.
After weighing all options, your client
may agree that injunctive relief and corrective advertising can achieve its goal,
emotions aside, of halting the harmful
activities and repairing whatever damage
has already been done. The fact that plaintiffs typically find that proving damages
is extremely difficult and that recovery
of marketplace losses is negligible should
make the decision to forego these damages
all the easier. See McCarthy on Trademarks
and Unfair Competition §30:58 (“Some
plaintiff’s attorneys carefully counsel their
clients in advance that obtaining a strongly
worded injunction should be viewed as a
“win” in a trademark infringement case
and that recovery of a monetary award of
any kind is problematical.”).
Supporting Authority
This is not to say that your opponent will
concede to your efforts to limit discovery by limiting your client’s claims. You
may very well have a real dog fight on your
hands, but you have both sound reasoning
and authority in your arsenal. Indeed, a
few courts have expressly recognized that
by limiting their claims, plaintiffs can unilaterally limit the scope of a defendant’s
discovery. The Sixth Circuit in particular
follows this school of thought regarding
injunctive relief and corrective advertising damages:
Damage control expenses must be
treated differently from marketplace
damages because, like an injunction,
damage control is undertaken precisely
to prevent such things as lost sales, lost
profits, and lost goodwill. As is the case
with plaintiffs seeking injunctive relief,
plaintiffs engaging in damage control are still at a stage where substantial uncertainty exists as to the extent
of “business harm” being inflicted by
the false advertising. Cf. ALPO Pet­
foods, Inc. v. Ralston Purina Co., 997
F.2d 949, 952 (D.C. Cir.1993). In the
present case, Balance Dynamics first
heard about Schmitt’s March 16, 1993
letter when a customer faxed it to Mr.
Schulte. The letter contained disparaging remarks which, if true, would ruin
Balance Dynamics’ business.… Balance
Dynamics then investigated the veracity of the claims made in the letter and
found they were false.
At this point, with 3,200 letters in circulation, must Balance Dynamics wait
to take action until a customer actually
tells someone at Balance Dynamics that
she will not buy the halon balancer? Is
Balance Dynamics limited to seeking
injunctive relief to stop future letters
being mailed out, when 3,200 people
are reading statements about the halon
balancer that, if believed, will be fatal to
Balance Dynamics’ business? At such a
juncture, an injunction may be a mere
palliative. We think it appropriate that
Balance Dynamics, upon recognizing
the reasonable likelihood of confusion,
would undertake to protect its business.
Cf. ALPO Petfoods, Inc. v. Ralston Purina
Co., 997 F.2d at 952. We also think it
appropriate that Schmitt, having violated the Lanham Act and thereby being
responsible for “any damages” caused by
such violation, should compensate Balance Dynamics for any reasonable and
necessary expenses incurred in mitigating the detrimental effects of that transgression. Id.
Consequently, similar standards as
apply to injunctive relief should also
apply to recovery of damage control
expenses. That is, damage control
expenses should be recoverable upon a
showing of the likelihood of actual confusion, rather than upon a showing of
actual confusion itself. This rule recognizes that it is unreasonable to expect
a businessperson faced with a Lanham
Act violation to sit idly by until a cus-
tomer manifests actual confusion. The
law should encourage quick responses
and the mitigation of damage, and
should not require parties to suffer an
injury before trying to prevent it. Moreover, a rule allowing recovery for damage control costs upon the likelihood of
actual confusion does not risk an “undeserved windfall” to the plaintiff since
such an award would not speak to the
underlying marketplace damages. Cf.
Podiatric Physicians, 185 F.3d at 618.
Distinct from Schmitt’s argument
that damage control costs are not recoverable without a showing of actual
confusion is its assertion that damage control costs are not recoverable
in the absence of “actual damages” or,
we assume, marketplace damages. But
we find that argument similarly unacceptable. No court has excluded damage control costs from its definition of
damages that are considered “actual.”
And several courts have awarded damages for the expense of responsive or
reparative advertising quite apart from
an award of marketplace damages.
See, e.g., ALPO Petfoods, Inc. v. Ralston
Purina Co., supra [sic]; U-Haul Int’l, Inc.
v. Jartran, Inc., 793 F.2d 1034, 1041 (9th
Cir.1986); Otis Clapp & Son, Inc. v. Film­
ore Vitamin Co., 754 F.2d 738, 745 (7th
Cir.1985). Although none of these courts
have awarded damage control costs in
the absence of marketplace damages,
none have treated marketplace injury
as a prerequisite to recovery of damage control costs either. Moreover, a
rule that predicated recovery of damage
control expenses on a showing of marketplace damages would penalize successful efforts at mitigating damages.
That is, under such a rule, a plaintiff who
is successful in preventing marketplace
damages would not be able to recover
under the Lanham Act, but a plaintiff
who is unsuccessful would be permitted
to recover. That would be an anomaly.
We also note that the practical realities of business litigation favor a rule
that damage control costs should be
recoverable even where plaintiffs do not
demonstrate actual confusion or marketplace injury. For one, marketplace
damages and actual confusion are notoriously difficult and expensive to prove.
See PPX Enterprises, Inc. v. Audiofidel­
ity Enterprises, Inc., 818 F.2d at 272–73;
U-Haul Int’l, Inc. v. Jartran, Inc., 793
F.2d at 1041. More importantly, however,
even where marketplace damages or
actual confusion are provable in theory,
such proof often requires that a plaintiff solicit its own customers for affidavits, which puts the customers at risk
of being subpoenaed by the defendant.
Plaintiffs are justifiably hesitant to alienate or upset their customers in this way.
In addition, plaintiffs may hesitate to put
marketplace damages at issue because
that would entitle a defendant to discover information about plaintiff’s business. As may have been the case here,
oftentimes the rational business decision is for a plaintiff to embark on a campaign of damage control and forego a
demonstration of injury in the marketplace or actual confusion of their customers. Such a plaintiff should not be
required to give up compensation for
its damage control expenses when the
defendant’s wrongful action necessitated those expenses in the first place.
Nor should plaintiffs who are unwilling or unable to prove marketplace damages or actual confusion be limited to
seeking injunctive relief. An injunction can halt a wrongful activity but
it will not correct its effects. Responsive advertising may be the quickest,
most effective way to mitigate damages
or prevent them altogether. Further,
limiting a plaintiff to injunctive relief
is especially unfair where a plaintiff’s
inability to prove marketplace damages
or actual confusion may merely reflect
an understandable unwillingness to irk
customers as the plaintiff pursues proof
of harm.
Therefore, because a company may
justifiably act before it actually sustains
injury, standards similar to those applicable to injunctive relief are appropriate
where plaintiffs seek to recover damage
control expenses.
Balance Dynamics, 204 F.3d at 691–92. See
also Universal Motor Oils Co. v. Amoco Oil
Co., 809 F. Supp. 816, 821–23 (D. Kansas
1992) (denying the defendants’ motion for
summary judgment on corrective advertisement damages despite the plaintiff’s
candid admission that it could not estab-
lish a loss of sales); Bellagio v. Denham­
mer, No. CV-S-00-1475-RLH-PAL, 2001
WL 34036599, at *4–5 (D. Nevada July
10, 2001) (finding that the Lanham Act
permits an award for corrective advertising expenses regardless of whether actual
damages are proved when equity justifies it
and awarding corrective advertising damages despite the plaintiff’s admission that it
In additionto injunctive
relief and corrective
advertising, a plaintiff may
be able to recover the
defendant’s profits and
attorney’s fees under the
Lanham Act without the risk
of having to comply with
harmful discovery requests.
was impossible to ascertain how many consumers may have been diverted).
Likewise, the U.S. District Court for
the District of Massachusetts limited discovery in Nexxus Products Co. v. CVS New
York, Inc., in which the plaintiff amended
its claims to eliminate allegations of actual
marketplace losses for the express purpose
of avoiding intrusive discovery. Nexxus
Products, 188 F.R.D. 11 (D. Mass. 1999).
Nexxus filed a lawsuit to stop CVS from
distributing and selling Nexxus hair care
products, which Nexxus sold exclusively
to salons, without authorization. Nexxus
sought injunctive relief, as well as costs and
attorneys’ fees. Id. at 13. The question before
the court was whether CVS would receive
access to materials bearing on whether
Nexxus had sustained any actual damages
or had suffered any demonstrable harm to
reputation as a result of CVS’s actions. Id.
at 14. CVS sought detailed financial information, such as records of annual sales,
profits and profit margins, expenditures
on marketing and promotions, forecasts,
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annual purchases, cost of inventory, and
product pricing, among other things. The
court recognized that the likelihood of consumer confusion is the focus of false advertising claims, and, therefore, Nexxus was
not required to show actual present harm
to obtain injunctive relief against CVS. Id.
at 14–15, 17.
Although Nexxus originally sought
A plaintiffthat obtains
injunctive relief may
recover attorneys’
fees without having to
prove actual losses.
damages for lost sales and injury to reputation and goodwill, it amended its complaint
and removed allegations of those losses so
that it could avoid intrusive discovery of its
financial records. Id. at 18. The court correctly concluded that discovery of information that “would allow [CVS] to refute a
claim that [Nexxus] ha[s] sustained actual
damages, or allow [CVS] to demonstrate
the existence of causal factors other than
[its] alleged conduct that might be responsible for any actual harm to [Nexxus]”
became improper the moment that Nexxus
took the issue of actual harm off the table
by dropping its demand for such damages.
See Nexxus Prod. Co., 188 F.R.D. at 18 (recognizing the plaintiff’s right to choose from
available damages and forgo others to protect its business). See also Jenkins v. Camp­
bell, 200 F.R.D. 498, 501 (M.D. Ga. 2001).
A Caution About Your
Opponent’s Arguments
Beware of arguments by your opponent
that conflate proof of liability with proof
of damages, sometimes also found in
reported cases. See Web Printing Controls,
Inc. v. Oxy-Dry Corp., 906 F.2d 1202, 1205–
06 (7th Cir. 1990) (“To collapse the two
inquiries of violation and remedy into one
which asks only of the plaintiff’s injury…
is to read out of the Lanham Act the remedies that do not rely on proof of ‘injury
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caused by actual confusion.’ And this, of
course, is improper.”); Balance Dynamics,
204 F.3d at 689 (holding that determining
liability and the remedy involve separate
inquiries). Courts have recognized several
presumptions to satisfy or replace proving
actual consumer deception for recovery of
marketplace damages. The way that courts
use these presumptions differs from circuit
to circuit so you will want to make sure to
pinpoint the controlling law in your circuit, but because they are presumptions,
courts often have treated them as rebuttable, which may open the door to discovery aimed at uncovering information to
disprove actual harm. Balance Dynam­
ics, 204 F.3d at 694–95 (noting presumption of damages when literal falsity and
deliberate intent were found but that even
if this presumption applied, evidence that
there were no lost customers defeated the
presumption).
Additionally, literally false claims that
directly compare competing products have
often led to a “presumption” of irreparable
harm supporting an injunction. The cases
often refer to this as a “presumption,” but
my analysis has found it to be a reasonable
inference, rather than a rebuttable presumption. See, e.g., Osmose, Inc., 612 F.3d
at 1320 (finding literally false indictments
of a product’s efficacy and safety were reasonably inferred to cause irreparable harm
to goodwill and market position); W.L.
Gore & Assoc., Inc., 788 F. Supp. at 805,
811 (“When the advertising claim is false,
the court may grant relief on its own findings that the advertisements have a ‘tendency to deceive.’”). The disputed effects of
eBay Inc. v. MercExchange, L.L.C., 547 U.S.
388 (2006), on the use of presumptions to
obtain injunctive relief in intellectual property cases are beyond the scope of this article but should not be overlooked. See, e.g.,
Seed Serv., Inc. v. Winsor Grain, Inc., 868
F. Supp. 2d 998, 1004–05 (E.D. Cal. 2012)
(recognizing the longstanding presumption of irreparable harm and recent cases
casting doubt on its continued viability).
These presumptions are unnecessary,
though, in cases seeking purely injunctive
relief because a plaintiff is not required
to prove actual consumer deception. See
Osmose, Inc., 612 F.3d at 1319–20. See also
Keg Technologies, Inc. v. Laimer, 436 F.
Supp. 2d 1364, 1372–75 (N.D. Ga. 2006)
(granting injunctive relief and ordering
disgorgement of the defendants’ profits
despite finding that not only did the plaintiff fail to make a showing of actual marketplace injury—lost sales, lost profits,
or damage to goodwill—but also that the
record affirmatively showed that the defendants’ actions led to no actual confusion
at all). Therefore, when consumer deception is not an element of your prima facie
case, your opponent should not be able to
conduct discovery to disprove it.
Disgorgement of a Competitor’s
Ill­Gotten Profits
In addition to injunctive relief and corrective advertising, a plaintiff may be able to
recover the defendant’s profits and attorney’s fees under the Lanham Act without
the risk of having to comply with harmful
discovery requests. Generally, a plaintiff
may recover the defendant’s profits without a showing of actual marketplace losses.
See McCarthy on Trademarks and Unfair
Competition §30:59; Wesco Mfg., Inc., 833
F.2d at 1487. But see Balance Dynamics,
204 F.3d at 695 & n.6 (representing the
6th Circuit position, which requires proof
of actual damages to recover defendant’s
profits). This is because several courts have
held that disgorgement of a defendant’s ill­
gotten profits can be obtained for purely
equitable reasons. See Howard Johnson Co.
v. Khimani, 892 F.2d 1512, 1521 (11th Cir.
1990) (noting that a defendant’s profits may
be awarded (1) when the defendant’s conduct is deliberate and willful, (2) to answer
for defendant’s unjust enrichment, or (3) to
deter future similar behavior); Marshall v.
Treadwell, 595 F.3d 478, 495 (3d Cir. 2009)
(noting and upholding that an award may
include a defendant’s profits if a defendant
was unjustly enriched or to deter future
behavior).
The 11th Circuit and other courts have
pointed out that to abide by the Lanham
Act’s prohibition against awarding profits to penalize, some connection must exist between the harm and recovery. Trilink
Saw Chain, LLC v. Blount, Inc., 583 F. Supp.
2d 1293, 1323 (N.D. Ga. 2008). Some courts
interpret this to mean that a plaintiff must
demonstrate that the defendant has benefitted from the false advertisement. See id.
See also St. Charles Mfg. Co. v. Mercer, 737
F.2d 891, 893 (11th Cir. 1983) (discussing
the relationship between causation and recovery of a defendant’s profits). It is unclear
how such a requirement comports with the
general rule that a plaintiff is required to
show only the defendant’s gross sales, which
then shifts the burden to the defendant to
prove that those profit sums did not result
from false advertising. See, e.g., Trilink Saw
Chain, 583 F. Supp. 2d at 1323 (resolving
any doubts against the infringing party).
See also McCarthy on Trademarks and Un­
fair Competition §§30:59, 30:65 (noting that
even though a profit accounting is usually
a rough approximation, courts accept it in
competitive relationships because “as between the victim and the wrongdoer, the
burden is placed on the wrongdoer” to prove
that unfair competition did not cause the
sales); Wesco Mfg., Inc., 833 F.2d at 1488
(finding the defendant’s tax return sufficient proof of sales even though the exact
amount of sales attributable to the Lanham
Act violation could not be determined from
the tax return because exactness was not
required and noting that the defendant is
in best position to disprove sales resulted
from violation).)
Attorneys’ Fees
A plaintiff that obtains injunctive relief
may recover attorneys’ fees without having to prove actual losses. See Nexxus, 188
F.R.D. at 13; Virdi v. DeKalb County Sch.
Dist., 216 Fed. Appx. 867, 871 (11th Cir.
2007) (noting that the party obtaining an
injunction ordinarily is entitled to prevailing party status as a matter of course);
Audi AG v. D’Amato, 469 F.3d 534, 550–51
(6th Cir. 2006) (holding that the plaintiff
obtaining injunctive relief under Lanham
Act was prevailing party and entitled to
attorneys’ fees); Montgomery v. Noga, 168
F.3d 1282, 1304-05 (11th Cir. 1999) (holding that as the prevailing party the plaintiff was properly awarded attorneys’ fees
under the Lanham Act having obtained
a permanent injunction and $30 nominal damages). But see NY State Soc’y of
Certified Public Accountants v. Eric Louis
Assoc., Inc., See 79 F. Supp. 2d 331, 334–37
(S.D.N.Y. 1999) (holding that whether the
plaintiff is a prevailing party for these purposes is fact question when the defendant
agrees by consent decree to abide by an
injunction). Attorneys’ fees can be awarded
to the prevailing party in a Lanham Act
case when the wrongful act is found to be
willful, malicious, or in bad faith. See 15
U.S.C. §1117(a); McCarthy on Trademarks
and Unfair Competition §30:100.
Conclusion
When your client’s competitor has disseminated literally false advertisements and
perhaps, in some cases, ambiguous or literally true advertisements having a tendency
to deceive, you and your client must weigh
the consequences associated with the relief
that you choose to pursue. A claim for mar-
ketplace damages or injury to reputation
will generate lots of invasive discovery
requests and may even drag your client’s
customers into the fray. On the other hand,
without having to turn over confidential
customer and financial information to a
competitor that has already demonstrated
untrustworthiness, your client should be
able to obtain permanent injunctive relief
and recover corrective advertising costs
and attorneys’ fees, and in some courts,
the judges even will order disgorgement of
profits.
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Go to www.dri.org/Online
For The Defense July 2013 27
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