VIRGINIA M. HERNANDEZ COVINGTON, District Judge.
This cause comes before the Court pursuant to eleven ripe Motions for Judgment as a Matter of Law regarding Health & Sun Research, Inc.'s PURPLE RAIN trademark, filed by both Health & Sun and Australian Gold, LLC. (Doc. ## 89, 91, 96, 97, 99, 101, 103, 107, 118, 119, 135). After due consideration, the Court denies the Motions.
On January 17, 2014, after a four-day trial, the jury entered its verdict in favor of Health & Sun with respect to Health & Sun's PURPLE RAIN trademark. (Doc. # 109).
At this juncture, Australian Gold seeks a Judgment as a Matter of Law: (1) that Health & Sun's trademark rights in the PURPLE RAIN product should be limited to Ohio, and (2) that Health & Sun abandoned the PURPLE RAIN mark. (Doc. ## 96, 97, 118, 119). Health & Sun, on the other hand, seeks Judgment as a Matter of Law on the issue of its damages, asserting that, instead of $147,615, the jury should have awarded Australian Gold's profits in the amount of $367,663. (Doc. ## 107, 135). The Court will address each issue in turn.
Rule 50(b) governs the Court's resolution of the pending Motions and states:
Fed. R. Civ. P. 50(b). Under Rule 50, a "district court should grant judgment as a matter of law when the plaintiff presents no legally sufficient evidentiary basis for a reasonable jury to find for [plaintiff] on a material element of [plaintiff's] cause of action."
The Court "must review all of the evidence in the record and must draw all reasonable inferences in favor of the nonmoving party[,]" but should nevertheless be mindful not to intrude into the province of the jury.
Although a jury's findings are not inherently shielded from review, a jury's findings are nevertheless to be afforded due deference.
As noted, the jury determined that Health & Sun enjoys nationwide rights in its PURPLE RAIN mark. (Doc. # 109 at 1). However, Australian Gold requests Judgment as a Matter of Law arguing that "there is no basis to find nationwide trademark protection for Health & Sun's PURPLE RAIN." (Doc. # 118 at 16). In the alternative, Australian Gold seeks an order limiting Health & Sun's trademark rights in PURPLE RAIN to Westlake, Ohio, and reducing the jury's award from $147,615 to $9,585. Health & Sun counters that sufficient evidence supports the jury's finding that Health & Sun enjoys nationwide rights to the relevant mark and that the jury's determination should not be disturbed.
Trademark rights do not exist without bona fide use in commerce. 15 U.S.C. § 1127. The Lanham Act defines "use in commerce" as "the bona fide use of a mark in the ordinary course of business."
Common law trademark rights are established through actual prior use in commerce.
Lewis Henry, the individual in charge of Health & Sun's day to day operations, testified that Health & Sun made sales of its PURPLE RAIN product to distributors and to salons in the following states: Alabama, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, Washington, and Wisconsin. (Doc. # 121 at 194-196). Mr. Henry further testified that he physically saw PURPLE RAIN in salons in the following states, even though Health & Sun did not make direct sales of the PURPLE RAIN product to any customer in such state: Kansas, Maine, Massachusetts, Mississippi, Montana, New York, Oregon, and Rhode Island. (
That leaves several states where Mr. Henry testified that he neither sold PURPLE RAIN directly nor had seen PURPLE RAIN for sale in a salon. During the trial, counsel for Health & Sun asked Mr. Henry: "on the map, I see several states that don't have an X or a star [indicating direct sales or having been observed in a state]. Is it your understanding that the products aren't in those states, PURPLE RAIN products specifically are not in those states?" (Doc. # 122 at 8). Mr. Henry responded: "No, that's not my understanding at all. Our understanding is our distribution is selling to almost every state. Even if I personally haven't seen it in the state, you have to assume that they are selling it to all states, because even the states that I don't have distribution in, I've seen product there." (
(Doc. # 122 at 6-7).
As argued by Health & Sun in its Response to Australian Gold's Motion for Judgment as a Matter of Law, the jury could reach the "reasonable conclusion" that Health & Sun's "distributors were doing their job." (Doc. # 131 at 7). While Australian Gold contends that Health & Sun failed to show nationwide distribution of its PURPLE RAIN product, it appears that Australian Gold's own corporate comptroller, Martin Sperry, confirmed that both Ultraviolet Resources International and Four Seasons are nationwide distributors, and both Australian Gold and Health & Sun utilize these distributors. (Doc. # 122 at 221).
(Doc. # 122 at 221-222).
Considering Health & Sun's direct sales and sales to distributors, and taking into consideration the aforementioned testimony from Mr. Henry and Mr. Sperry, the Court determines that the jury's finding of nationwide trademark protection was supported by the evidence. The Court declines to limit Health & Sun's trademark protection to Westlake, Ohio, as suggested by Australian Gold.
Australian Gold also characterizes Health & Sun's sales of PURPLE RAIN as "de minimis" and asserts that nationwide protection is not warranted because Health & Sun's sales were "transitory, spasmodic, and inconsiderable." (Doc. # 118 at 9)(internal citation omitted).
As stated above, "[t]here is [] no rule of law that the owner of a trademark must reach a particular level of success, measured either by the size of the market or by its own level of sales."
Furthermore, "[t]he fact that a business is small and its trade immodest does not necessarily preclude the acquisition of trademark rights."
Australian Gold previously moved for summary judgment in its favor on the theory that Health & Sun abandoned its PURPLE RAIN trademark. The Court denied the summary judgment motion and submitted the issue to the jury. (Doc. # 56). The jury found that Health & Sun did not abandon its PURPLE RAIN mark. (Doc. # 109 at 6). Specifically, the jury answered "no" to whether "Health & Sun ceased using the PURPLE RAIN trademark with the intent not to resume its use in the reasonably foreseeable future in one or more geographic areas." (
Under the Lanham Act, a trademark is deemed abandoned "when its use has been discontinued with intent not to resume such use." 15 U.S.C. § 1127;
As stated in
Australian Gold seeks a finding that Health & Sun has abandoned its trademark and, therefore, must establish two elements: "(1) that [Health & Sun] ceased using the mark in dispute and (2) that [Health & Sun] has done so with an intent not to resume its use."
Ultimately, Australian Gold faces a strict burden on its abandonment theory. "Because a finding of abandonment works an involuntary forfeiture of rights, federal courts uniformly agree that defendants asserting abandonment face a stringent, heavy, or strict burden of proof."
In the persuasive case of
Australian Gold asserts that because Health & Sun's sales of PURPLE RAIN were limited, Health & Sun abandoned its mark. However, the evidence, including Health & Sun's Sales History Report, shows that Health & Sun sold thousands of bottles of its PURPLE RAIN product to distributors, as follows:
(Doc. # 121 at 197; Plf. Trial Ex. 133).
The Court agrees with Health & Sun that "[t]he existence of these sales alone is sufficient to demonstrate that [Health & Sun] had continued its use of the PURPLE RAIN mark." (Doc. # 132 at 5). In addition, because Health & Sun sold its PURPLE RAIN product to multiple distributors, the jury could reasonably infer that, even during months when Health & Sun did not make any direct sales of its product, the distributors made sales to salons.
The Court's determination that Australian Gold failed to show that Health & Sun ceased using the mark warrants the denial of Australian Gold's Motion for Judgment as a Matter of Law on the issue of abandonment. However, for the sake of completeness, the Court will also address the second element for trademark abandonment — the intent not to resume use of the mark.
Even assuming that Health & Sun ceased using its mark, "[i]t is difficult for a defendant to prove a plaintiff's subjective intent to abandon a mark."
Here, it is undisputed that there has never been a three-year period in which Health & Sun stopped selling PURPLE RAIN lotion. Therefore, Australian Gold does not enjoy a presumption of abandonment, and must meet its strict burden of demonstrating that Health & Sun ceased using the PURPLE RAIN mark with the intent not to resume use of the mark.
The evidence adduced at trial supports the jury's determination that Health & Sun did not cease using the PURPLE RAIN mark with the intent not to resume use. Mr. Carollo testified that he launched the PURPLE RAIN product in 2001. (Doc. # 121 at 101). At that time, Health & Sun advertised the product at a Nashville, Tennessee trade show, created brochures and magazine ads featuring the product, and even sponsored a NASCAR driver. (
Health & Sun's witnesses consistently testified that PURPLE RAIN has always been available for purchase since its creation in 2001, and Health & Sun never ceased using the PURPLE RAIN mark with intent not to resume use. Furthermore, Mr. Carollo testified that Health & Sun has consistently defended its PURPLE RAIN mark by contacting Australian Gold when Health & Sun discovered the infringing PURPLE REIGN product, sending a pre-suit cease and desist demand, and, ultimately, filing this lawsuit. (Doc. # 121 at 115-117);
Australian Gold has not pointed to any evidence concerning abandonment which invalidates the jury's verdict. "If the jury's verdict is supported by substantial evidence-that is, enough evidence that reasonable minds could differ concerning material facts-the motion [for judgment as a matter of law] should be denied."
After determining that Australian Gold's PURPLE REIGN product infringed Health & Sun's PURPLE RAIN product, the jury awarded "Australian Gold's profits" in the amount of $147,615. (Doc. # 109 at 2). In its Motion for Judgment as a Matter of Law, Health & Sun asks the Court to adjust this figure to $367,663. Health & Sun indicates that Australian Gold's relevant sales of PURPLE REIGN amounted to $686,223, and Australian Gold's profit margin was 55.6%. (Doc. # 135 at 2). The jury presumably deducted other expenses to arrive at the "profits" award of $147,615. Health & Sun contends that the jury should not have deducted certain expenses (such as "selling costs" and "new product development costs"), which reduced the award. (
Under the Lanham Act, "[i]n assessing profits the plaintiff shall be required to prove defendant's sales only; defendant must prove all elements of cost or deduction claimed." 15 U.S.C. § 1117(a);
While Health & Sun now claims that the jury deducted too many costs, leaving Health & Sun with inadequate damages, during its closing argument, Health & Sun invited the jury to do exactly what it did:
(Doc. # 124 at 51-53). Health & Sun also noted during its closing argument that "it's up to your discretion to make any additional deductions based on the invoices and other expenses proven by Australian Gold." (
Health & Sun's current argument that the jury made improper deductions rings hollow in light of Health & Sun's closing argument statements inviting the jury to make any deductions proven by Australian Gold. It seems to this Court that any deductions made by the jury in arriving at the damages award were invited by Health & Sun.
Furthermore, while Health & Sun's Motion is premised on the argument that the jury utilized a "simple mathematical formula" to reach its verdict on damages (Doc. # 135 at 2), the reality is that the jurors were not required to provide any formula to the Court or enumerate the costs deducted to arrive at the profits determination. As asserted by Australian Gold, Health & Sun's arguments regarding what costs the jury considered and deducted are pure "speculation." (Doc. # 141 at 10).
Here, Australian Gold presented substantial evidence through witness testimony and trial exhibits, which provides ample support for the jury's profits determination. Mr. Sperry testified about the costs of creating the PURPLE REIGN product, including the bottles and packets containing the product. (Doc. # 122 at 222). Mr. Sperry also testified about costs that are necessarily incurred in order to sell PURPLE REIGN, including sales and marketing employee costs, sales and marketing expenses, packaging, shipping, inventory, returns, and payroll. (
Australian Gold employees Angela Provo and Emily Golay testified about the marketing and promotional efforts related to selling PURPLE REIGN, which included, inter alia, advertisements in national trade magazines, promotional videos, and social media. (Doc. # 123 at 44-45, 110, 112, 118-129, 141). Furthermore, Michael Mard, Australian Gold's accounting expert corroborated that Australian Gold's method of allocating costs actually related to its product sales is in accordance with generally accepted modern accounting practices. (Doc. # 123 at 195-202). Australian Gold's detailed evidence concerning its costs in creating, marketing, and selling its PURPLE REIGN product support the jury's profit determination.
In addition, assuming that the jury deducted any portion of Australian Gold's overhead or administrative costs, the Court also rejects Health & Sun's assertion that such costs should not have been deducted because Australian Gold's PURPLE REIGN product's sales constituted a "small percentage" of Australian Gold's total sales.
(Doc. # 113 at 25). Health & Sun has not convinced the Court that a different jury charge should have been included, nor has Health & Sun convinced the Court that the jury's verdict should be augmented. Health & Sun's Motion for Judgment as a Matter of Law is denied.
Accordingly, it is
(1) Australian Gold's Oral Motion for Judgment as a Matter of Law (No. 1) (Doc. # 89) is
(2) Australian Gold's Oral Motion for Judgment as a Matter of Law (No. 2) (Doc. # 91) is
(3) Australian Gold's Motion for Judgment as a Matter of Law (No. 1) on Geographic Scope (Doc. # 96) is
(4) Australian Gold's Motion for Judgment as a Matter of Law (No. 2) on Abandonment (Doc. # 97) is
(5) Health & Sun's Oral Motion for Judgment as a Matter of Law (Doc. # 99) is
(6) Australian Gold's Renewed Oral Motion for Judgment as a Matter of Law (No. 1) (Doc. # 101) is
(7) Australian Gold's Renewed Oral Motion for Judgment as a Matter of Law (No. 2) (Doc. # 103) is
(8) Health & Sun's Motion for Judgment as a Matter of Law (Doc. # 107) is
(9) Australian Gold's Renewed Motion for Judgment as a Matter of Law (No. 1) on geographic Scope (Doc. # 118) is
(10) Australian Gold's Renewed Motion for Judgment as a Matter of Law (No. 2) on Abandonment (Doc. # 119) is
(11) Health & Sun's Renewed Motion for Judgment as a Matter of Law (Doc. # 135) is
(12) The Clerk is directed to enter the Court's Judgment in accordance with the jury's verdict (Doc. # 109).
(13) The Clerk is directed to