FLORIDA TRADEMARK INFRINGEMENT LITIGATION: ACCOUNTING OF DEFENDANT’S PROFITS DEPENDS ON A SHOWING OF WILLFULL INFRINGEMENT

The Lanham Act provides that a successful plaintiff may recover: (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) costs of the action. 15 U.S.C. § 1117(a). In exceptional cases, a district court may award attorney fees to the prevailing party. The Lanham Act gives broad discretion to the district court to determine the proper relief due an injured party. See 15 U.S.C. § 1117(a); Burger King v. Weaver, 169 F.3d 1310 (11th Cir.1999). Peter Mavrick is a Miami business litigation lawyer who represents clients in trademark infringement lawsuits.

In Optimum Technologies, Inc. v. Home Depot U.S.A., Inc., 217 Fed.Appx. 899 (11th Cir. 2007), Optimum Technologies, Inc. (“Optimum”) sued Home Depot, Inc. (“Home Depot”) alleging that Home Depot committed trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114, and false advertising in violation of 15 U.S.C. § 1125(a). Optimum sold a variety of floor related products, including the Lok–Lift Gripper (“Lok–Lift”). Lok-Lift was applied in strips to the back of rugs and mats to prevent slippage on hard floors and carpets. Optimum owned the Lok–Lift mark. Optimum sold the Lok–Lift product to Home Depot through a joint venture partnership between Optimum and Henkel Consumer Adhesives, Inc. (“Henkle”). Henkle purchased the Lok–Lift product from Optimum then distributed it to Home Depot, among other retailers.

Henkle later developed its own similar product called Hold–It for Rugs (“Hold–It”); however, the Hold–It product was only intended for use on floors, not on carpets. Henkle notified Home Depot that it intended to substitute its Hold–It product in the place of the Lok–Lift product. Henkle sent Home Depot the Hold–It product with the same product number and tracking information as the Lok–Lift product. Home Depot’s computer system did not reflect that the products had changed, so the cash register receipts showed Hold-It purchases to be Lok-Lift purchases. Home Depot also did not update its shelf tags, which still displayed the name Lok–Lift. The Hold–It product that was sold at Home Depot, however, was packaged and marked with the Hold–It name with no reference to Lok–Lift.

Optimum filed a lawsuit against Home Depot alleging that Home Depot committed trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114, and false advertising in violation of 15 U.S.C. § 1125(a). Home Depot moved for partial summary judgment as to Optimum’s claim for monetary damages under both statutes. The district court granted Home Depot’s motion. The district court found that Optimum’s claim for monetary damages, which included Home Depot’s profits, attorney fees, and enhanced damages were not appropriate under the facts of this case. Optimum filed an appeal.

An accounting of a defendant’s profits is appropriate where: (1) the defendant’s conduct was willful and deliberate, (2) the defendant was unjustly enriched, or (3) it is necessary to deter future conduct. See Howard Johnson Co., Inc. v. Khimani, 892 F.2d 1512, 1521 (11th Cir.1990). The Eleventh Circuit held that there was insufficient record evidence that suggested Home Depot’s conduct was willful. Burger King v. Mason, 855 F.2d 779, 781 (11th Cir.1988) stated that a willful violation of a trademark occurred where the infringer was “knowingly and deliberately cashing in upon the good will of [the infringed].” Optimum argued that Home Depot’s actions were willful because after Home Depot was put on notice of the infringement, Home Depot initially took no steps to rectify the situation. Optimum further argued that when Home Depot did take steps to rectify the situation, those steps came about too slowly.

The Eleventh Circuit disagreed and held that the record showed that Home Depot began to change its outdated store tags and cash register receipts after receipt of Optimum’s second letter which directly accusing it of infringing upon the Lok–Lift mark. Home Depot began to rectify the situation before the lawsuit was filed and continued the process until all outdated store tags were changed and the cash register receipts reflected the proper item being sold. The Eleventh Circuit reasoned that Optimum’s desire for Home Depot to move a more rapid pace was not evidence that Home Depot’s alleged infringement was willful. The appellate court further stated that there was no evidence that the existence of outdated store tags and inaccurate store receipts was based on Home Depot’s attempt to deliberately cash in on Optimum’s good will. Optimum Technologies, Inc. v. Home Depot U.S.A., Inc. found that Home Depot’s actions of alleged infringement were not willful.

Pursuant to 15 U.S.C. § 1117(a), a trial court may, in its discretion, reduce or enhance the resulting award up to three times the amount of profits or damages, whichever is greater, as justice shall require. “Such an award is discretionary, but it may not be punitive, and must be based on a showing of actual harm.” Babbit Electronics. Inc. v. Dynascan Corp., 38 F.3d 1161 (11th Cir.1994) Optimum Technologies, Inc. v. Home Depot U.S.A., Inc. held that since Optimum is not entitled to Home Depot’s profits and has not shown any actual harm, it is not entitled to any enhanced damages.

In addition, a trial court has discretion, in “exceptional cases,” to “award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). An exceptional case is “where the infringing party acts in a malicious, fraudulent, deliberate, or willful manner.” Burger King v. Pilgrim’s Pride Corp., 15 F.3d 166, 168 (11th Cir.1994) (internal quotation marks omitted). The Eleventh Circuit agreed with the district court’s determination that there was no evidence to suggest that this was an exceptional case. The Eleventh Circuit, therefore, found that the district court did not abuse its discretion in finding that attorney fees was not an appropriate remedy. The Eleventh Circuit Court of Appeals (“Eleventh Circuit”), therefore, affirmed the district court’s decision.

Peter Mavrick practices business litigation in Miami, Florida. This article does not serve as a substitute for legal advice tailored to a particular situation.