As defined in the Lanham Act and further clarified in case law, trademarks differ from other forms of intellectual property in that their primary purpose is to safeguard the welfare of the consumer. Secondarily, these laws enable commercial advantage.
Exactly what constitutes actual trademark infringement includes multiple factors, and consensus on these qualifications is murky. Federal circuit courts evaluate trademark infringement against their individual sets of criteria, yet all seem to be consistent in making the plaintiff’s burden of proof more strenuous where monetary damages are being sought. In contrast, showing a likelihood of confusion in the market may be enough to obtain an injunction that forces the defendant to stop using the confusing logo, name or packaging.
In seeking monetary damages, plaintiffs may be required to prove actual confusion in the market (not just likely confusion) and actual economic harm to their business. To establish actual confusion, evidence such as customer testimony and market surveys may be used. The court will also consider the resemblance between the allegedly infringing trademark and the defendant’s apparent intent to dupe consumers.
If successful in proving infringement, plaintiffs may be able to recover their lost profits or the defendant’s gained profits. Generally speaking, a plaintiff’s lost profits stem from lost sales, price erosion or some combination of these. Lost sales result from sales that were erroneously diverted to the defendant in the market because consumers thought they were buying manufacturer A’s product, but actually purchased manufacturer B’s product.
Price erosion stems from the competitive presence of the infringing product in the market. In cases where price erosion occurs, the existence of the infringing product, often at a lower price point, leads to greater competition and may force incumbents to lower their prices in an attempt to maintain market share.
Of course, other market forces may be behind lost sales or the need to reduce prices, and defendants should consider these other potential causes in responding to damage claims. Such factors may include overall industry declines, the rise of substitute products, regulatory changes, shifting consumer tastes, distribution problems or product-quality issues.
In calculating lost profits, the plaintiff normally bears the burden of calculating the defendant’s infringing. But the defendant must provide the costs associated with generating this revenue. The plaintiff’s lost sales may be substantiated by analyzing sales trends before and after the infringement or by comparing actual sales to projected sales. Of course, data should be reliable and methods of calculation should be theoretically sound if the courts are to consider the resulting findings reasonable and acceptable.
Although many cases seeking damages will be based on the lost profits of the plaintiff or illicitly gained profits of the defendant, plaintiffs may also seek reimbursement for costs associated with repairing any damage to their goodwill in the market. This form of damage may involve the cost of corrective advertising. Finally, plaintiffs may seek damages based on a reasonable royalty rate as applied to infringing sales.
The 1995 Federal Trademark Dilution Act provides additional injunctive protection for famous trademarks based on dilution or shrinking value without proving confusion between the trademarks. Further, if willful intent is established, the plaintiff may also be able to recover attorney fees, monetary damages and even treble damages. The 2005 Trademark Dilution Revision Act would take this one step farther by providing injunctive relief in cases where the use of a trademark is likely to cause dilution.
Because of the dynamic nature of legislative guidance and the specialized economic expertise required, trademark infringement cases can be challenging. But the value of your company’s trademark, and the brand and image it represents, is worth fighting for.
Glenn Perdue can be reached at (615) 360-5609 or email@example.com.