






Tiffany Strikes Out In Bid To Hold eBay Contributorily Liable For Trademark
Infringement On The eBay Website
In a well-reasoned, albeit lengthy opinion, Judge Richard Sullivan of the United States District Court for
the Southern District of New York recently tackled the question of whether an on-line marketplace,
namely eBay, could be held liable for trademark infringement based solely on the generalized
knowledge that infringement is occurring as a result of sales made via the site. In Tiffany (NJ), Inc. and
Tiffany and Company v. eBay, Inc., 2008 U.S. Dist. LEXIS 53359 (S.D.N.Y., July 14, 2008), Judge
Sullivan determined that Tiffany, as the trademark owner, had the responsibility for policing its marks,
and that eBay, despite being generally aware that counterfeit TIFFANY silver jewelry was routinely sold
by third parties over its on-line marketplace, could not be held accountable for trademark infringement
simply because it did not do more to prevent the activities of the infringing third parties.
By way of brief background, in June 2004, after becoming aware of sales of counterfeit TIFFANY silver
jewelry on the eBay website, Tiffany filed suit against eBay alleging, inter alia, trademark infringement,
unfair competition, and dilution under both federal and state law. Tiffany alleged, in general terms, that
eBay was aware that counterfeit TIFFANY items were being sold over its website, that eBay facilitated
such sales, and that because eBay did not do more to identify and prevent these counterfeit sales,
eBay was contributorily liable for trademark infringement and was thus liable for the harm caused to
Tiffany by those sales. eBay countered by pointing out that it sold no goods (infringing or otherwise)
itself; rather, it merely provided the means by which others could sell their products. Moreover, eBay
explained that it went to great lengths to detect and stop fraudulent transactions on its web site, and
pointed out that when it learned about specific instances of counterfeit merchandise being sold, it
promptly removed the items from its site and made it clear to the seller that such activity would not be
tolerated.1
Tiffany’s key theory of liability on its claims against eBay was one of contributory infringement. The
court explained that under a contributory infringement theory, which grows out of the Supreme Court’s
decision in Inwood Labs., Inc. v. Ives Labs, Inc., 456 U.S. 844 (1982), the plaintiff must establish either
that the accused party has intentionally induced another to infringe its trademark, or that the accused
party has continued to supply product to one whom it knows or has reason to know is engaging in
trademark infringement. The “reason to know” element can in turn be satisfied where the accused
party is “willfully blind” to the infringing activity.
1
Judge Sullivan’s opinion provides a detailed analysis of the eBay on-line marketplace model, as well as the steps that eBay
has put in place to deal with the ongoing issue of counterfeit and other fraudulent sales. The opinion also dissects and rejects
Tiffany’s direct infringement, false advertising, and dilution claims against eBay, as well as its corresponding state claims.




In support of its claim that eBay had “reason to know”, Tiffany argued that through its efforts to bring
infringing and/or counterfeit sales to eBay’s attention over the years, eBay had “reason to know” that
such sales were going on and thus had an obligation to take affirmative steps to seek out and stop such
activities. Unfortunately for Tiffany, the court disagreed. Judge Sullivan concluded that the “reason to
know” standard means more than merely being aware of the infringing activities. True, as a result of
Tiffany’s efforts – including “demand letters to eBay articulating its belief that large quantities of
counterfeit TIFFANY merchandise were being sold through the eBay website” – eBay technically
“knew” about infringing sales. However, the judge concluded that for liability and an affirmative duty to
remedy the problem to attach, the knowledge must be more than merely generalized knowledge. Here,
eBay did not have the identities of the infringers and, indeed, could not even be sure which, if any, of
the many TIFFANY items offered on eBay at any given time were counterfeits. While eBay arguably
could have dedicated time and money to more diligently identifying counterfeits, the court concluded
that it was not eBay’s responsibility to do so. Rather, Tiffany, as the owner of the marks being infringed,
was the party that bore the burden to police.
As to whether eBay was “willfully blind” to the infringing activities, Judge Sullivan concluded that “willful
blindness” requires “‘more than mere negligence or mistake’ and does not lie unless the defendant
knew of a high probability of illegal conduct and purposefully contrived to avoid learning of it . . ..” Here,
eBay could not be said to have purposefully contrived to avoid learning of counterfeiting on its website
or that it had failed to take appropriate steps to shut down infringing auctions when it was provided (by
Tiffany or other trademark owners) with specific intelligence regarding infringing activities. The fact that
eBay did not go the extra mile to ferret out infringers itself did not equate to eBay being “willfully blind”
to the activity of its site. Indeed, the anti-infringement protocols that eBay had put in place to deal with
identified counterfeit situations were evidence that eBay was clearly not blind to the problem, and that
eBay was indeed doing its part to address it.
Finally, the court took on the question of whether eBay could be held liable because it “continued to
supply” certain infringers with on-line marketplace services notwithstanding Tiffany’s efforts to bring
those infringers to eBay’s attention. In refusing to hold eBay liable, the court disagreed with Tiffany’s
assertion that eBay failed to act appropriately after notice of an infringement by Tiffany. The court
pointed out that eBay routinely suspended sellers upon receipt of information from trademark owners
that certain goods being offered via the eBay marketplace were infringing. Indeed, Tiffany conceded at
trial that whenever it brought an infringing auction to eBay’s attention, eBay shut it down. Thus, the
court held that eBay’s efforts to cut off the supply of its services to infringers were appropriate steps
under the circumstances.
Judge Sullivan ultimately concluded that “generalized knowledge” of the type provided by Tiffany to
eBay was insufficient to impute to eBay knowledge of any and all instances of infringing activity
occurring on the eBay online marketplace. Moreover, the mere fact that eBay had the ability to screen
out potential counterfeiters (and, indeed, to do so more efficiently and cheaply than could Tiffany), did
not shift the burden to police the TIFFANY trademarks to eBay. Rather, Tiffany, like all corporate
trademark owners, had a duty to protect its trademarks “through vigilant policing and appropriate acts of
enforcement.” (citation omitted).







Fair Use Doctrine Trumps Owner's Rights in "Love Potion" Trademark
In Dessert Beauty Inc. v. Fox, 568 F. Supp. 2d 416 (S.D.N.Y. 2008), Judge Chin of the Southern District
of New York found that cosmetics company Dessert Beauty, Inc.’s descriptive use of the terms “love
potion fragrance” and “belly button love potion fragrance” was a fair use of Mara Fox’s LOVE POTION
trademark for perfumed essential oils.
By way of background, Fox’s LOVE POTION mark was registered in 1995. In 2001, it became
incontestable.Fox’s “Love Potion Perfume” was sold through her website, www.lovepotionperfume.com,
and was described as “the first Magical, Mystical, Wearable Love Potion.” Fox also claimed that her
Love Potion Perfume “REALLY IS a Love Potion.”
Dessert Beauty (“DBI”) launched a line of beauty products in 2004 that was endorsed by pop singer
Jessica Simpson, and consisted of a wide range of edible beauty products including scrubs, bubble
baths, and perfumes. Two of the fragrance products in the line were described as “love potion
fragrance” and “belly button love potion fragrance”, respectively, and like the other products in the line,
were sold under the DESSERT trademark, with a “TM” symbol next to the word DESSERT. DBI’s logo,
which also appeared on all DBI products, was a pink lipstick stain with the mark DESSERT inside a
black circle. Beneath the circle was the phrase “Sexy Girls Have Dessert.”
Upon learning of the DBI use of “love potion”, Fox took aggressive action to protect her LOVE POTION
trademark, including sending cease and desist letters to DBI as well as Sephora USA LLC, a large
cosmetics chain that carried DBI’s products. Fox also waged a public campaign against DBI on her
website and issued a negative press release concerning DBI’s activities. DBI commenced an action
against Fox in the Southern District of New York, seeking, inter alia, a declaratory judgment of noninfringement.
The court concluded that DBI’s use of the term “love potion” was a fair use within the meaning of
section 33(b)(4) of the Lanham Act, 15 U.S.C. § 1115(b)(4). The court noted that the fair use doctrine,
which is a complete defense to infringement liability, permits the use of protected marks to describe
certain aspects of goods, but not as marks to identify those goods. In order to avail itself of the fair use
defense, the court stated that DBI must be able to establish that its use of the “Love Potion” term (1)
was other than as a mark, (2) in a descriptive sense, and (3) in good faith.
The court found all three conditions met. First, DBI’s use of “love potion” within the phrases “love
potion fragrance” and “belly button love potion fragrance” was found to be a non-trademark use of “love
potion” because DBI did not use the term to identify the source of its products – that function was




performed by the DESSERT name, the logo, and the “Sexy Girls Have Dessert” slogan. Rather, the
court concluded that DBI used the “Love Potion” phrases merely to identify particular products within its
line, and not to distinguish them from non-DBI products. Also relevant was the fact that DBI did not
include a “TM” symbol next to the “Love Potion” phrases, but instead displayed the “TM” next to the
word DESSERT.
Second, the court found that DBI’s use of “love potion” was descriptive, even though it described a
product that was not, in actuality, a true “love potion”. The court stated that use of a mark is descriptive
if it is used in a “descriptive sense,” citing Cosmetically Sealed Indus., Inc. v. Chesebrough-Ponds USA
Co., 125 F.3d 28, 30 (2d Cir. 1997). The words “love potion” were intended not to describe the literal
nature of the product, but rather in a broader sense to describe how DBI hoped consumers would make
use of its product. The court also noted that “love potion” is a common term in the English language,
defined in several dictionaries as a product used for the purpose of attracting the opposite sex. The
court also pointed out that there is no other reasonably available word to describe the meaning
captured by the term “love potion.”
Third, the court found that DBI had clearly acted in good faith. Fox had argued that DBI’s bad faith was
shown by the fact that it did not conduct a trademark search prior to the launch of its beauty products,
and did not discontinue the sale of its allegedly infringing products after receiving Fox’s cease and
desist letters. The court dismissed both of these arguments. First, with respect to the trademark
search, the court pointed out that it is well established that failure to perform a trademark search does
not, standing alone, prove bad faith. As to the cease and desist letters, the court was not persuaded
that DBI’s decision to proceed in the face of the letters amounted to bad faith. Indeed, the court noted
that DBI believed that it was proceeding in a fair manner, and that that belief turned out to be correct.
Accordingly, the court held that on the record before it no reasonable jury could find bad faith on the
part of DBI, and thus found in favor of DBI on its motion for summary judgment.







“Duck Tours” Determined To Be Generic For Sightseeing Tours Using Amphibious
Vehicles – Preliminary Injunction Reversed
The United States Court of Appeals for the First Circuit recently handed down its decision in Boston
Duck Tours LP v. Super Duck Tours LLC, 531 F.3d 1 (1st Cir. 2008), reversing the district court’s grant of
a preliminary injunction because the district court applied the incorrect legal standard for determining
that the phrase “duck tours” is not generic for sightseeing tours using amphibious vehicles -- vehicles
that can function as both trucks and boats.
“Duck tours” using amphibious vehicles have become increasingly popular in many cities in the United
States and abroad. Since 1994, Plaintiff Boston Duck has offered sightseeing tours of the Boston area
and Charles River using amphibious vehicles. The term “duck” is derived from the term “Dukw”, which
was used to designate certain amphibious vehicles used in the Second World War.
Boston Duck owns several state and federal trademark registrations for the composite word mark
BOSTON DUCK TOURS, and for a composite design mark consisting of the company’s name together
with a logo featuring the image of a cartoon duck splashing in water. Importantly, both of Boston Duck’s
federal registrations were subject to disclaimers for the terms “duck” and “tours”, meaning that Boston
Duck does not possess exclusive rights to use either term separately and apart from the composite
marks as a whole.
Defendant Super Duck Tours began offering sightseeing tours using amphibious vehicles in 2001 in
Maine and began its Boston operation in late 2006-early 2007. Super Duck owns a federal trademark
registration for SUPER DUCK TOURS. That mark was registered on the Supplemental Register after
the application for registration on the Principal Register was rejected in light of the merely descriptive
nature of the mark.
In July 2007. Boston Duck filed a complaint in the district court against Super Duck alleging, inter alia,
trademark infringement in violation of Lanham Act Section 32(1). In connection with its complaint,
Boston Duck asked the court for a temporary restraining order and preliminary injunction to prevent
Super Duck from using the “Duck Tours” term. The district court granted Boston Duck’s motion in part,
finding the term “duck tours” to be non-generic for amphibious sightseeing tours in the Boston area, and
therefore capable of trademark protection. Further, the district court concluded that Boston Duck had
established a likelihood of confusion on the merits of its trademark infringement claim, and enjoined
Super Duck from using the term “duck” in a two-word or three-word trademark in conjunction with either
“Boston” or “tours.”




Super Duck appealed the district court’s grant of the preliminary injunction, arguing that the phrase
“duck tours” and the image of a cartoon duck are generic for the services that both companies provide.
Super Duck further argued that because of the district court’s error in inappropriately characterizing the
“duck tours” term, the court gave undue weight to the term and the image of a cartoon duck when
comparing the parties’ marks. As such, Super Duck argued that the district court improperly found a
likelihood of confusion between the BOSTON DUCK TOURS and SUPER DUCK TOURS names.
To succeed on its claim for trademark infringement, the appeals court noted that it was necessary that
Boston Duck first establish that its BOSTON DUCK TOURS and its duck design marks were entitled to
trademark protection, and then for it to establish that the allegedly infringing use was likely to cause
consumer confusion.
With respect to the protectability of the BOSTON DUCK TOURS mark, the starting point was whether
the term “duck tours” was generic for amphibious vehicle tour services. A generic term such as “car” or
“pizza” is one that does not have the capacity to serve as a source-identifier because it designates the
class or “genus” of the goods or services. More specifically, generic terms are incapable of becoming
trademarks because they serve primarily to describe products or services, rather than to identify the
source of the products or services. The court’s goal in undertaking a genericism analysis is to assess
the “‘primary significance’ of the phrase at issue ‘to the relevant public’.” In reaching a conclusion on
this issue, courts are instructed to consider several factors, including: “(1) consumer surveys; (2) the
use of the term in media publications; (3) use of the term by competitors in the industry; (4) purchaser
testimony concerning the term; and (5) the plaintiff’s use of the term.”
The appeals court concluded that the district court erred in finding the “duck tours” phrase not generic
because it had based its opinion on the dictionary definition of the term “duck”, which while relevant to
the assessment of how the public viewed the term, was merely one of many factors that ought to have
been considered. In reaching its conclusion, the appeals court ruled that the lower court had also
improperly focused on the separate terms “duck” and “tours”, and not on the entire, combined phrase.
By focusing exclusively on the individual elements of the phrase and each word’s respective dictionary
definition, the district court had removed the inquiry from its proper context, thereby tainting the overall
analysis. Moreover, the appeals court also concluded that the district court had failed to consider
evidence in the record suggesting that the phrase “duck tour” was generic for the tour services at issue.
Specifically, the appeals court found error in the failure of the district court to consider generic uses of
the phrase by the media and other third parties; within the industry itself; and by the plaintiff itself.
Turning to the likelihood of confusion analysis, the appeals court concluded that there was no likelihood
of confusion between the word marks BOSTON DUCK TOURS and SUPER DUCK TOURS. The
appeals court analyzed the strength of the composite mark BOSTON DUCK TOURS and concluded
that despite the generic nature of the “duck tours” element, the mark was reasonably strong in the
Boston area as a result of the secondary meaning that the composite mark had acquired. Nonetheless,
the court found that the only non-generic portions of the parties’ respective marks (BOSTON and
SUPER) looked and sounded completely different; that these terms had different meanings; and that
they each described different features of the parties’ products. Further, the court found that there was




no evidence of bad faith on the part of the defendant. Interestingly, despite Boston Duck Tour’s
allegations that actual confusion had in fact occurred -- evidence that in an ordinary trademark
infringement context might even have been determinative -- the court of appeals looked the other way
and found it to be “largely irrelevant”. This conclusion was based on the fact that the alleged confusion
arose out of the use of the generic phrase “duck tours” and thus was not true trademark “confusion”.
Finally, the appeals court turned to the analysis of the parties’ composite design marks, both of which
contained an image of a cartoon duck splashing in water. Unlike the composite word marks discussed
above, the appeals court concluded that there was insufficient evidence to conclude that the image of a
duck splashing in water was generic for duck tour services. Nonetheless, the appeals court concluded
that the splashing duck images used by the parties were highly descriptive for the services provided,
and thus that the image had weak source-identifying attributes. This fact, together with what the
appeals court called “the designs’ overall dissimilarity” led the court to reverse the lower court’s
conclusion that confusion was likely between the parties’ logos.







Trademarks & the Internet: Meta tag Use Leads To An Award Of Profits And
Attorney’s Fees
The Court of Appeals for the First Circuit recently took on the issue of whether the unauthorized use of
a trademark as a “meta tag” is use upon which a finding of trademark infringement liability can be
based. Answering “yes”, and affirming the decision of the district court, the appeals court in Venture
Tape Corporation v. McGills Glass Warehouse, et al., 540 F.3d 56 (1st Cir. 2008), went on to find the
defendant liable for damages based on the use of the plaintiff’s trademarks as “meta tags” embedded in
defendant McGills’ web site, as well as for the payment of plaintiff’s attorney’s fees.
Plaintiff Venture Tape manufactures and sells specialty adhesive tapes and foils for use in the stained
glass industry. In connection with its business, Venture has used and obtained trademark registrations
for the marks VENTURE TAPE and VENTURE FOIL, and over the years has expended many hundreds
of thousands of dollars advertising and promoting its products and marks both in print and on the
internet. As a result, the district court found and the appeals court agreed, that Venture has “gained
considerable popularity, prestige, and good will in the world-wide stained glass market.”
Defendant McGills Glass Warehouse, through its internet web site, sells adhesive tapes and foils for
use in the stained glass industry in direct competition with Venture. Beginning sometime in 2000,
McGills began using the VENTURE TAPE and VENTURE FOILS trademarks in two unauthorized ways:
McGills placed the VENTURE trademarks directly on certain of its website pages, but did so in a color
that was the same as the background of the screen so the terms were not viewable by consumers (or
by plaintiff Venture); McGills also inserted the VENTURE trademarks into the embedded computer
language of its website. Terms comprising this embedded computer language are commonly referred
to as “meta tags”, and although they are not typically viewed by visitors to the website that embeds
them, they are recognized by internet search engines. In the instant case, the use by McGills of the
VENTURE trademarks as meta tags and as part of the invisible background of its website, caused
internet searchers to be directed to the McGills website. McGills did not have the permission or
authorization of Venture to use the VENTURE trademarks in this manner. Indeed, McGills did not even
sell Venture’s products on its web site.
Upon discovering the use by McGills, Venture brought an action for trademark infringement seeking
injunction as well as damages and the recovery of its attorney’s fees. In ruling on a motion for
summary judgment filed by Venture, the district court concluded that McGills had essentially admitted
all of the factors that the court was required to examine in connection with its determination on liability.
Specifically, the court concluded, based on the testimony of McGills’ owner, that the parties’ marks were
the same; that the parties were direct competitors; and that both parties used websites to promote and




market their products. Indeed, based on an admission by McGills’ owner, the district court found that
McGills had acted intentionally in using the VENTURE trademarks “for the express purpose of
attracting customers to McGills’ website.” Id. at 61.
On appeal, McGills argued that because it had no way of actually knowing whether any of its efforts had
successfully lured customers to its site, it was impossible for Venture (and the court) to conclude that
actual confusion had occurred, and thus that disposition of the case on summary judgment was
improper. Defendant also argued that the district court has erred in concluding that Venture was
entitled to approximately $426,000 in damages, attorney’s fees and costs.
Addressing the liability issue, the appeals court concluded that McGills was essentially arguing that
because Venture had not proven actual confusion, summary judgment in Venture’s favor was
inappropriate. The court pointed out however, that actual confusion is not required for a finding of
trademark infringement liability. The court agreed with the district court that the likelihood of confusion
factors, including the admission by McGills’ owner that his purpose for using the VENTURE trademarks
was to lure customers, overwhelmingly supported the conclusion that confusion was likely to occur and
thus that summary judgment was appropriate.
With respect to the monetary award, defendant raised three issues on appeal. First, McGills argued
that the award did not correspond to the actual harm suffered by Venture – and, in fact, that Venture
had not even attempted to show actual harm. The appeals court explained that “when a plaintiff cannot
prove actual damages attributable to the infringer’s misconduct (e.g., specific instances of lost sales),
its recovery of an equitable share of the infringer’s profits serves, inter alia, as a ‘rough measure’ of the
likely harm that the mark owner incurred because of the infringement . . ..” In this case, the district
court’s assessment was without fault in this regard.
The second issue raised on appeal with respect to the monetary award was that the amount awarded
by the district court did not correspond to the amount of money defendant made on sales of tapes and
foils, the only products sold by plaintiff Venture. Again, the court concluded that the district court had
been correct and that McGills’ complaint about the basis for the award was misplaced. Under the
Lanham Act, the burden with respect to proving a profit award first rests with the plaintiff: the plaintiff
must show that there is direct competition. Upon such a showing, the burden shifts to the defendant
infringer “to show the limits of the direct competition.” In this case, Venture met its burden by proving
McGills’ sales; McGill failed to meet its burden of establishing that some of those sales were “unrelated
to and unaided by McGills’ illicit use of Venture’s marks.”
Finally, defendant McGills also attempted, unsuccessfully, to argue that the attorney’s fee award was
inappropriate. The appeals court confirmed that in view of the fact that McGills’ infringement was
“willful”, it was within the discretion of the trial court to find the case “exceptional” and thus to award
attorney’s fees to the prevailing plaintiff.







Trademark Damages: District Court's Assessment of "Reasonableness" Not
Relevant In Award Of Defendant's Profits; Burden On Accused Infringer To
Establish Costs And Deductions
In WMS Gaming, Inc. v. WPC Gaming Prods., Ltd., 542 F.3d 601 (7th Cir. 2008), the Seventh Circuit
Court of Appeals reversed a trademark damages ruling issued by the Northern District of Illinois,
holding that the lower court had incorrectly assessed actual damages only, despite plaintiff’s request
for, and entitlement to, an accounting of profits under Lanham Act Section 35(a), 15 U.S.C. § 1117(a).
Plaintiff WMS Gaming, Inc. (“WMS”) has manufactured gaming devices under the registered mark
JACKPOT PARTY since 1998, and under the registered mark SUPERJACKPOT PARTY since 2004.
Defendant WPC Gaming Products, Ltd. (“WPC”), based in Gibraltar, was an on-line gaming servicethat,
from 2004-2006, used approximate and even exact reproductions of WMS’s JACKPOT marks in
connection with its on-line gaming services both in the U.S. and abroad. In 2005, WPC attempted to
register the mark PARTYJACKPOT, and WMS opposed. WPC ultimately abandoned its application in
the wake of the U.S. Congress’ passage of the Unlawful Internet Gambling Enforcement Act in 2006,
which prohibited on-line gambling. At that time, WPC ceased its U.S. operations, but continued to use
WMS’s marks abroad. Concerned about WPC’s unauthorized use of its trademarks and unable to
amicably resolve the matter, WMS initiated this trademark infringement suit in federal district court
seeking injunctive relief, damages, and an equitable accounting of WPC’s profits attributable to WPC’s
use of WMS’s marks in the U.S. during the 2004, 2005 and 2006 time period.
WPC chose to ignore the suit in its entirety and the district court thereafter entered a default judgment
in favor of WMS, granting injunctive relief and awarding $2,673,442.10 in damages. WMS actually had
sought a recovery of close to $300 million, based on the profit figures contained in WPC’s publicly
available annual reports and financial statements. The district court, however, concluded that while
WMS’s estimate for 2004 revenues was “reasonable,” its estimates for 2005 and 2006 could not “be
ascertained with reasonable certainty” and were “clearly excessive.” Accordingly, the court based its
award for these latter two years on the amount deemed reasonable for 2004, even though actual U.S.
revenues in 2005 alone exceeded $800 million.
Unsatisfied with the district court’s award, WMS moved under Rule 59(e) of the Federal Rules of Civil
Procedure to alter or amend the judgment, arguing that the district court had erred in applying the
standard for “actual damages” as opposed to the standard for an equitable accounting of profits. The
district court denied the Rule 59(e) motion, and maintained that WMS’s request was for “damages that
are clearly excessive” and “cannot be ascertained with reasonable certainty.”




On appeal, the Seventh Circuit pointed out that because this was a default judgment, “the usual rule
that a party should be given the relief to which it is entitled whether or not it has requested that relief”
did not apply. Rather, the appeals court pointed out that Rule 54(c) of the Federal Rules of Civil
Procedure provides that “[a] default judgment must not differ in kind from, or exceed in amount, what is
demanded in the pleadings.” But the court made it clear that WMS consistently had requested an
equitable accounting of profits, rather than, or at least in addition to, actual damages under Section
35(a) of the Lanham Act. The relevant statute, 15 U.S.C. § 1117(a), provides relief for a trademark
infringement, stating in pertinent part:
[T]he plaintiff shall be entitled . . . subject to the principles of equity, to recover (1) defendant’s
profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action . . . . In
assessing profits the plaintiff shall be required to prove defendant’s sales only; defendant must
prove all elements of cost or deduction claimed. In assessing damages the court may enter
judgment . . . for any sum above the amount found as actual damages, not exceeding three
times such amount.
The appeals court held that the district court clearly erred by failing to distinguish between WMS’s right
to the defendant’s profits and its rights to its damages. Indeed, while the district court acknowledged
the three “types of damages” available for trademark infringement, it failed to follow through with two
distinct computations, one for the accounting and one for damages.” Rather, it conflated the standards
for damages with those governing an equitable accounting of profits.
As a result, the Seventh Circuit found that the district court mistakenly incorporated into its accountingof-profits analysis the additional considerations of whether the “damages” could be “ascertained with
reasonable certainty”, and whether WMS had proven that its calculation properly separated out lawfully
gained revenues. Here, the court pointed out that the district court further erred by shifting the burden
to WMS to identify which portion of WPC’s revenues were attributable to casino games that infringed
the WMS marks, as opposed to revenues gained from other, non-infringing businesses. Such analysis
was based on the wrong standard, and was contrary to a long-standing Supreme Court precedent that
recognized that while it might be difficult to ascertain these proportions with any “reasonable certainty,”
it is more consonant with reason and justice that the owner of the trademark should have the
whole profit than that he should be deprived of any part of it by the fraudulent act of the
defendant. It is the same principle which is applicable to a confusion of goods. If one
wrongfully mixes his own goods with those of another, so that they cannot be distinguished and
separated, he shall lose the whole, for the reason that the fault is his; and it is but just that he
should suffer the loss rather than an innocent party, who in no degree contributed to the wrong.
Citing, Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251, 262 (1916).
Finally, the court held that the burden was on the defendant to segregate its legitimate revenues from
those derived through its infringing use of WMS’s marks. Indeed, the court pointed out that if the
infringer fails to prove his lawful revenues over those due to infringement, “[t]here may well be a




windfall to the trade-mark owner . . . [b]ut to hold otherwise would give the windfall to the wrongdoer”,
citing Mishawaka Rubber and Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 206-207 (1942). The
court reversed and remanded the case for a proper accounting.







COHIBA Cigar Trademark Case Heads Back To The Trademark Trial and Appeal
Board1
The latest decision in the ongoing battle over the ownership of the COHIBA trademark in the United
States was rendered by the Court of Appeals for the Second Circuit in September 2008, in Empresa
Cubana del Tabaco v. Culbro Corp., et al., 541 F.3d 476 (2nd Cir. 2008) (per curiam). In its decision, the
court of appeals affirmed the district court’s denial of a motion filed by the defendant and, essentially,
laid the groundwork for the case to proceed back to the Trademark Trial and Appeal Board (“TTAB”),
where the controversy between the parties began in 1997.
By way of background, in 1997 plaintiff Empresa Cubana del Tabaco, which does business under the
name “Cubatabaco”, initiated a trademark cancellation action against defendants, collectively known as
“General Cigar”. In that proceeding, Cubatabaco sought cancellation of General Cigar’s United States
trademark registration for the mark COHIBA for cigars, on the grounds that, inter alia, Cubatabaco was
the rightful owner of the trademark. Thereafter, Cubatabaco filed the instant lawsuit against General
Cigar in federal district court in New York, and the TTAB proceeding was suspended pending the
outcome of the litigation.2 Over the intervening years, there have been several district court and
appeals court decisions the results of which have established, inter alia, that Cubatabaco has no rights
in the COHIBA trademark in the United States and that General Cigar’s use and registration of the
name in the U.S. were not improper. See generally, Empresa Cubana del Tabaco v. Culbro Corp., et
al., 399 F.3d 462 (2nd Cir. 2005). The present decision grows out of an attempt by General Cigar to use
the decisions of the district court and court of appeals as a basis for summarily disposing of the stillpending TTAB case.
Subsequent to the dismissal of Cubatobaco’s claims against General Cigar, General Cigar made a
motion under 15 U.S.C. § 1119 (Section 37 of the Trademark Act), seeking an order from the district
court directing the Commissioner of Patents and Trademarks to dismiss both the pending cancellation
proceeding and Cubatabaco’s pending trademark application. Section 1119 provides that in a court
action “involving a registered mark, the court may determine the right to registration, order the
cancellation of registrations, . . . and otherwise rectify the register with respect to the registrations of
any party to the action.” General Cigar argued that in view of the district court’s decision that
Cubatabaco was not entitled to the COHIBA name in the U.S., the court should simply order the
Commissioner to dismiss the pending petition to cancel and the Cubatabaco application.
1
A version of this article also appeared in the World Trademark Report.
Cubatabaco had also filed a trademark application for the mark COHIBA, which was also suspended pending the outcome
of the proceedings between the parties.
2




The district court viewed the General Cigar motion as a motion to amend or alter the judgment pursuant
to Rule 59(e) of the Federal Rules of Civil Procedure. In this regard, the court determined that because
General Cigar had not made a Section 1119 claim in its pleadings in the underlying case (by way of a
counterclaim for cancellation, for example), the motion to amend the judgment was untimely.
On appeal, the Second Circuit reviewed the district court decision from two perspectives. First, it
examined the motion made by General Cigar in the context of a motion to amend the judgment. On
that front, the court agreed with the district court that because General Cigar did not raise the Section
1119 claim in the pleading stage of the case, it was within the discretion of the district court to have
denied the motion. The appeals court premised its decision on the language of the statute, which is
clearly permissive in nature in that it states that the court “may” grant relief (and not that the court
“shall” grant relief). The court also pointed out that General Cigar was free to argue to the TTAB that
the decision in the court proceedings should act as an estoppel to Cubatabaco’s arguments in the
Trademark Office, but the court would not go so far as to order the Commissioner to take a particular
action given the facts of this case.
The appeals court then went on to examine the General Cigar motion in the context of the district
court’s ancillary jurisdiction. Essentially, General Cigar’s argument here was that the courts have the
inherent power to take the steps necessary to enforce their judgments, and thus that the district court
should give effect to the judgment by ordering the Commissioner to do what he would eventually (in its
view) have to do anyway, namely dismiss the cancellation proceeding. However, the court of appeals,
citing the Supreme Court’s caution against the exercise of such jurisdiction where the relief sought is of
a different kind or is based on a different principle than that of a prior decree, noted that the claim for
Section 1119 relief was not before the district court during the underlying action, or previously on
appeal. As such, the court concluded that that requested Section 1119 relief was a different kind of
relief than the relief that had been contemplated by the district court’s judgment. Moreover, since what
General Cigar was actually requesting was premised more on an estoppel theory (i.e., Cubatabaco is
now estopped from challenging the General Cigar registration) than on the theory of the underlying
case, General Cigar’s requested relief was based on a different legal principle than had been
contemplated below. Accordingly, the appeals court affirmed the district court decision refusing to issue
an order directing the Commissioner to dismiss the cancellation proceeding and refuse registration,
paving the way for the TTAB to finally bring some closure to this long-term dispute.