WILLIAM D. QUARLES, JR., District Judge.
The Coryn Group II, LLC ("Coryn II") appealed the Trademark Trial and Appeal Board's ("TTAB") cancellation of its registration for the mark "SECRETS" for "resort hotel services" and its denial of other relief. O.C. Seacrets ("O.C.") counterclaimed against Coryn II, and sued the Coryn Group, Inc., and AMR Resorts, LLC, (collectively "Coryn") under the Lanham Act and Maryland common law. For the following reasons, Coryn's motion for leave to file a surreply will be granted. Coryn's motion for judgment as a matter of law or for a new trial will be granted in part and denied in part. O.C.'s motion to amend the judgment or for a partial new trial will be denied, and its motion for a permanent injunction will be granted as modified.
O.C., a Maryland corporation, owns and operates "Seacrets," a Jamaican-themed "entertainment complex" in Ocean City, Maryland. Tr. 41:15, 49:20-21.
When Leighton Moore, O.C.'s owner, began to develop Seacrets in 1987, he planned to build bars, add restaurants, a nightclub, and eventually a hotel. After he completed the hotel, he wanted to franchise the complex "either in the United States or possibly down in the islands." Tr. 47:11-22.
O.C. first used the mark SEACRETS for two bars and a Restaurant in 1988. Tr. 50:3. The complex included a beachfront, with palm trees and a deck. Tr. 51:11-18. From 1988 to 1997, O.C. bought surrounding property and added more bars, kitchens, dining areas, and a stage to the complex. Tr. 59:1-25, 60:1-17.
SEACRETS began to turn a profit in 1990. Tr. 53:8-13. Between January 1999 and December 2008, O.C. reported over $155 million in revenues. Tr. 264:24-25, 265:1-8.
O.C.'s federally registered trademark "SEACRETS" was issued on October 7, 1997 for "restaurant and bar services." Tr. 298:12. O.C. has applied to register SEACRETS for motel services; the application has been suspended pending the outcome of this case. Tr. 88:23-25.
In 1998, O.C. bought a ten-unit motel near the complex. Tr. 60:18. In spring 1999, O.C. placed a sign reading "Seacrets Motel" on the hotel. Tr. 64:16-21. In 1999, O.C. provided maid, maintenance, laundry, and reception services at the motel. Tr. 65:24-25, 66:1-9. From 1999 to 2004, O.C. allowed band members retained to play at the complex to stay at the motel in exchange for a reduced performance fee. Tr. 63:14-25, 64:1-5. Moore estimated that he saved almost $1 million through the performance discounts. Tr. 64:6-9. O.C. reported no financial revenue from the hotels before 2005. Tr. 108:24-25, 109:1-8. During that period, O.C. purchased several nearby condominium complexes and used them as motel rooms for performers. Tr. 69:4-25, 111:7-19, 112:3-8.
In 2001, O.C. opened a nightclub on the property, Morley Hall. Tr. 61:6. In 2003, O.C. broadened its entrance "so people could come in easier and quicker," and added metal detectors "to make sure we never did have a problem." Tr. 62:1-9.
In late 2003, two customers asked Moore if O.C. "was affiliated with or knew of a Secrets that was being built or was in Mexico." Tr. 80:21-25, 81:1. Customers ask Moore if O.C. is connected with Secrets "at least two or three times a year." Tr. 81:11-16. Moore was not aware of any customers who came to O.C. "thinking that they were in Coryn's Secrets in Mexico or in Jamaica." Tr. 82:1-4.
By 2004, O.C. had a pier for private boats to moor at the complex. Tr. 62:10-13. In 2004, O.C. opened the hotel to the public. Tr. 64:8, 108:10-13. About 18 of the 34 hotel rooms are available to the public for rent. Tr. 109:17-22. Hotel revenue accounts for no more than 2% of O.C.'s revenue. Tr. 100:23-25.
On September 15, 2011, O.C. proposed rebuilding the hotel, expanding it and attaching it to the nightclub. Tr. 72:14-23, 73:1-17. By November, 2011, O.C. had published a franchise disclosure document and had contacted "several prospective franchisees." Tr. 74:14-17. The franchise offering states that O.C. owns the mark SEACRETS for food, beverage, and hotel services, and that hotel services are part of the offering. Tr. 74:24-25, 75:1-6. The franchise offering requests royalty payments of 10% on hotel revenue and 6% on food and beverage revenue, for the SEACRETS mark, operation and design guidance, training, marketing, and ongoing support. Tr. 75:16-17, 133:12-25, 134:1-15.
O.C. has never lost a sale of services to Coryn. Tr. 125:19-21. Moore was unable to "quantify any specific financial harms that (O.C.) suffered as a result of the [alleged] infringement." Tr. 137:10-13.
AMResorts, LLC is one of several related entities owned by members of the Mullen family ("the AMR-Related Companies"). Tr. 363:2-25, 364:10-22. AMResorts, LLC manages the sales, marketing and administration of several all-inclusive, five-star resort hotels in Mexico and the Caribbean. Tr. 292:4-6, 16-24. The resorts operate under different brands, including "Secrets," "Dreams," "Zoetry," and "Sunscape," and target travelers from the United States, Canada, and Europe. Tr. 292:9-18, 402:11-17. Their target consumers have an annual household income of over $100,000. Tr. 401:13-18.
The Coryn Groups own the licenses for the brands. Tr. 365:3-4. The resorts are in Mexico, the Caribbean, the Dominican Republic, and Jamaica. Tr. 292:15-16. AMResorts manages about 10,000 rooms in the hotels. Tr. 292:17-18.
AMResorts's hotels advertise that they provide "unlimited luxury," which is "the luxury version of the traditional all-inclusive resorts." Tr. 292:22-24. Accordingly, patrons' restaurant and bar expenses are included in the resort price. Tr. 293:8-13.
On June 22, 2000, Coryn filed
Tr. 322:21-25, 372:7-12. The letter discussed some of the similar marks, but not O.C.'s SEACRETS mark. Tr. 372:19-25. Renz also gave Coryn the search results, but Coryn did not read them, relying instead on Renz's advice; in the search of "resort hotels" with marks similar to "SECRETS," O.C.'s SEACRETS mark was fourth on the list. Tr. 327:5-25.
Also on June 29, 2000, Coryn secured the web domain name "secretsresorts.com." ECF No. 94, Ex. 22. On March 21, 2001, the PTO issued a Notice of Publication of the SECRETS mark, and the mark was published for opposition on April 3, 2001. ECF No. 81, Ex. 18.
In late 2001 Coryn began to use the SECRETS mark in advertising; it opened the first SECRETS Resort in January 2002. Tr. 300:5-7. On October 7, 2003, the USPTO registered the SECRETS mark and assigned it U.S. Registration No. 2772061. ECF No. 296 Attach. 2 at A54 [hereinafter "Cancellation Pet."]. The application was not opposed, and the PTO issued the registration to Coryn on October 7, 2003. Id., Ex. 20.
SECRETS Resorts include bars and restaurants, which are not called Secrets. Tr. 307:5-12. As with food services at the other AMResorts hotels, the cost of food and drinks at those bars and restaurants is included in the resort price. Tr. 293:8-13. SECRETS Resorts are members of the "Preferred Hotels" network, a certification that SECRETS — like other "Preferred Hotels" — meets "Standards of Excellence, an extensive quality assurance program." Tr. 385:16-25, 386:1-11. Some of the SECRETS Resorts were named to the top ten all-inclusive hotels in the world and Conde Nast's Golden List, and have been recognized in Travel + Leisure and Trip Advisor; all SECRETS Resorts have been awarded four-diamond status from AAA. Tr. 387:5-19.
Coryn reaches most of its consumers through travel agents. It also uses direct mailing to consumers of high-end products and airport advertisements, as well as advertising on its website. Tr. 401:2-12.
Coryn advertises Secrets Resort in magazines sold in Ocean City. Tr. 90:12-20. In September 2011, a travel agent entered O.C. and attempted to distribute brochures advertising Apple Vacations and Secrets Resorts on the property. Tr. 91:5-20, 92:4-7.
On January 23, 2004, after the SEACRETS customers asked Moore about his connection to SECRETS, O.C. petitioned for cancellation of the SECRETS mark. Cancellation Pet. at A54.
On August 20, 2008, the TTAB ordered the cancellation of Coryn's registration because O.C. had a priority of usage in its SEACRETS mark and there was a likelihood of confusion between the marks. ECF No. 1 Attach. 2 at 27 [hereinafter "Cancellation Op."]. The TTAB also denied Coryn's petition for partial cancellation or restriction because it found that the proposed restrictions would not avoid confusion. Id.
By August 2008, Coryn was operating one SECRETS Resort and had begun construction on two others.
Several hotels in the United States use the marks SEACREST, SECRET, or SECRETS; O.C. has not challenged their uses. Tr. 129:11-25, 130:1-25. They advertise online but other forms of advertisement have not reached Ocean City; they use SECRET or SECRETS with other words, such as SECRET HARBOUR or SECRETS INN. Id.
On October 20, 2008, Coryn appealed the TTAB's decision to this Court. ECF No. 1. On December 10, 2008, O.C. counterclaimed for trademark infringement and unfair competition under the Lanham Act and Maryland common law. ECF No. 29.
A jury trial was held from October 31 through November 8, 2011. Alex Zozaya, AMResorts's president, conceded that: (1) SEACRETS and SECRETS are used for "vacation destinations," (2) for "a fun ... island experience" (3) that includes "restaurant and bar services," and involves (4) sand, sun, ocean, palm trees, "music and dancing and events." Tr. 314:21-25, 315:1-25, 316:1-6. Moore acknowledged that SECRETS offers more luxurious options than SEACRETS. Tr. 98:8-25, 107:6-25, 108:1-13, 113:25, 114:1-25.
There was also evidence that some restaurants, such as Planet Hollywood, expand into the hotel industry. Tr. 303:2-15.
O.C. presented testimony from Robert Reitter, a market researcher. Tr. 449:22. Reitter had conducted a survey to test potential consumers' reactions to SECRETS and SEACRETS. Tr. 453:15-16. Reitter included 225 people in the test group and the same number in his control group. Reitter concluded that, after seeing photos of a luxury beach resort called SECRETS,
Coryn introduced testimony from its expert, Kenneth Hollander, another market researcher. Tr. 706:7-12. Hollander conducted a confusion survey that found little to no consumer association of SECRETS and SEACRETS. Tr. Vol. IV at 77:14-20. He also critiqued Reitter's survey, and criticized Reitter's choice of participants, stimuli, questions asked, and the control group. Tr. Vol. IV at 84:14-24.
On November 3, 2011, the fourth day of trial, Coryn moved for judgment as a matter of law. ECF No. 263. On November 7, 2011, O.C. moved for judgment as a matter of law on its federal trademark infringement and unfair competition claims, and separately on its Maryland law claims. ECF Nos. 272, 273. The motions were denied.
On November 8, 2011, the jury returned a verdict for O.C. It concluded that Coryn had infringed O.C.'s rights in the SEACRETS mark, O.C. was entitled to $1 in compensatory damages, none of which represented Coryn's profits, and it found that Coryn's infringement was willful, and O.C. was entitled to $265,035 in punitive damages. ECF No. 279. Shortly after, the Court affirmed the TTAB's cancellation of the SECRETS mark. ECF No. 295.
On November 14, 2011, O.C. moved for a permanent injunction. ECF No. 284. On November 22, 2011, O.C. moved for attorney's fees. ECF No. 288. On December 23, 2011, O.C. moved to amend the judgment or for a partial new trial. ECF No. 296. On December 27, 2011, Coryn renewed its motion for judgment as a matter of law and alternatively sought a new trial. ECF No. 298. On January 17, 2012, Coryn moved for leave to file a surreply opposing O.C.'s motion for permanent injunction. ECF No. 311. All motions were opposed. ECF Nos. 293, 305, 306, 312.
Coryn contends that it is entitled to judgment as a matter of law or a new trial because (1) it did not infringe O.C.'s SEACRETS mark, (2) even if it did, O.C. is net entitled to punitive damages, and (3) even if O.C. is entitled to punitive damages, the jury award violated Coryn's right to due process of law. ECF No. 298 Attach. 1.
Under Fed.R.Civ.P. 50, after trial a district court should grant judgment as a matter of law against a party when that "party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue." Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 149, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).
Edmondson v. Am. Motorcycle Ass'n, Inc., 7 Fed.Appx. 136, 146 (4th Cir.2001) (quoting Reeves, 530 U.S. at 151, 120 S.Ct. 2097).
Under Rule 59(a), a district court may grant a new trial if: "(1) the verdict is against the clear weight of the evidence, or (2) is based upon evidence which is false, or (3) will result in a miscarriage of justice, even though there may be substantial evidence which would prevent the direction of a verdict." Atlas Food Sys. & Servs., Inc. v. Crane Nat'l Vendors, Inc., 99 F.3d 587, 594 (4th Cir.1996). In determining whether to grant a new trial, the court may weigh the evidence and consider witness credibility. Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 301 (4th Cir.1998).
To prove infringement, O.C. had to prove, by a preponderance of the evidence, that it owned a protectable mark, and Coryn's use of SECRETS creates a likelihood of confusion. 15 U.S.C. § 1114(1)(a); George & Co, LLC v. Imagination Entm't Ltd., 575 F.3d 383, 393 (4th Cir.2009). Coryn contends that no reasonable jury could conclude that there was a likelihood of confusion of the marks. ECF No. 298 Attach. 1 at 5, 24. "As a `cross-section of consumers,' the jury is particularly `well-suited to evaluating whether an ordinary consumer would likely be confused.'" Super Duper, Inc. v. Mattel, Inc., 382 Fed.Appx. 308, 313 (4th Cir.2010) (quoting Anheuser-Busch, Inc. v. L. & L. Wings, Inc., 962 F.2d 316, 318 (4th Cir. 1992)), cert. denied, ___ U.S. ___, 131 S.Ct. 1003, 178 L.Ed.2d 827 (2011).
To determine likelihood of confusion, factfinders and courts in the Fourth Circuit consider nine factors:
George & Co., 575 F.3d at 393 (citations omitted). Evidence of actual confusion is "often paramount in the likelihood of confusion analysis." Id. (internal quotation marks and citations omitted).
Coryn contends that a reasonable jury would have to conclude O.C.'s mark is weak because the evidence showed "a variety of third-party uses of the SECRETS mark." ECF No. 298 Attach. 1 at 12-13. O.C. counters that though SEACRETS has "a suggestive quality," the evidence showed that the mark is strong because it
In assessing overall strength, two considerations apply: (1) a mark's conceptual strength, meaning the relationship between the mark and the goods or services it is used for, and (2) its commercial strength, meaning the degree to which the mark is known by the consuming public. George & Co., 575 F.3d at 393-95.
Suggestive, arbitrary, and fanciful marks are conceptually strong marks.
Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 465 (4th Cir.1996). Evidence that third-parties use the mark undermines the conceptual strength of a mark.
Federal registration is prima facie evidence that a mark is, at least, suggestive, or that it is descriptive and has acquired secondary meaning. Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1528-29 (4th Cir.1984).
The jury heard evidence that: (1) the SEACRETS mark is federally registered, Tr. 298:12, and (2) SEACRETS is a coined term, combining the English words "sea" and "secrets," and does not exist in the English language, Tr. 54:2-17. The combination of "sea" and "secrets" was sufficient for the jury to conclude that the mark is suggestive, and thus conceptually strong. See George & Co., 575 F.3d at 394; Sara Lee, 81 F.3d at 465. Also, the jury could have inferred from the federal registration that the mark is suggestive or has acquired secondary meaning. See Pizzeria Uno, 747 F.2d at 1528-29.
The commercial strength inquiry is "similar to the `secondary meaning' inquiry," and considers the plaintiff's investment in and extent of advertising, commercial success, and length and exclusivity of use of the mark; consumer studies identifying the mark with the source,
The jury heard evidence that (1) O.C. used the SEACRETS mark continuously from 1988 to 2011, (2) O.C. pays for advertisements with the SEACRETS mark in local and national media including television shows, and (3) O.C. has enjoyed enough success to expand each year since 1990, reporting $155 million in revenue for ten recent years. Tr. 50:3-7, 165:16-25, 166:1-25, 171:1-25, 264:24-25, 265:1-8. From this, the jury could conclude that SEACRETS had at least some commercial strength.
Accordingly, the jury heard sufficient evidence on the first factor to support a likelihood of confusion finding.
To determine whether the marks are confusingly similar, the factfinder considers whether the marks are similar in sight, sound, and meaning. George & Co., 575 F.3d at 396. The factfinder must consider the similarity in the context of "the manner in which the marks are used," id., because "a comparison of the texts of the two marks alone is insufficient," CareFirst, 434 F.3d at 271.
The jury heard and saw evidence that SECRETS and SEACRETS sound the same and differ by only one letter. Tr. 312:7-11, 313:15-19. Though, as Coryn argues, each mark is sometimes displayed with other components, such as "Bar & Grill" for SEACRETS and "Resorts & Spas" or "Maroma Beach" for SECRETS, the jury could have concluded that SECRETS and SEACRETS predominate the commercial impression for O.C. and Coryn and that, because of their auditory and apparent similarity, they were confusingly similar. See Palm Bay Imports, 396 F.3d at 1372.
The services "need not be identical or in direct competition with each other" to be similar. George & Co., 575 F.3d at 397 (citing CAE, Inc. v. Clean Air Eng'g, Inc., 267 F.3d 660, 679 (7th Cir. 2001)).
The jury heard evidence that there is some overlap between "restaurant and bar" services and "hotel service" industries. Tr. 303:19-25, 304:1-10. It could accept Moore's testimony that he had planned, from the beginning, to build a large hotel on the SEACRETS complex. Tr. 47:7-20. It also heard and could accept that: (1) SEACRETS and SECRETS are used for "vacation destinations," (2) for "a fun ... island experience" (3) that includes "restaurant and bar services," and involves (4) sand, sun, ocean, palm trees, "music and dancing and events." Tr. 314:21-25, 315:1-25, 316:1-6. From that evidence, the jury could conclude that the services are sufficiently similar.
The jury heard evidence that SEACRETS and SECRETS have a hotel, dining and drinking venues, sand, sun, ocean, palm trees, "music and dancing and events." Tr. 314:21-25, 315:1-25, 316:1-6. From that evidence, it could conclude that the facilities were sufficiently similar, despite the differences in quality Coryn highlighted. Cf. CareFirst, 434 F.3d at 273 (no similarity when there are "basic differences between [parties'] modes of distributing their products" because CareFirst did not operate clinics and First Care only operated clinics).
In comparing advertising, the factfinder considers the media, geographic scope, appearance, and content of the parties' advertisements. CareFirst, 434 F.3d at 273. The jury heard evidence that Coryn markets SECRETS Resorts primarily to travel agents around the country — including in Ocean City — and through national magazine advertisements, but also through direct mailing to potential consumers. Coryn also markets nationally and internationally through the SECRETS website. Tr. 91:1-16, 401:2-12. The jury heard that O.C. markets SEACRETS through promotional features on national television shows, local magazines, print publications, and billboards, and local and internet radio. Tr. 170:1-25, 171:1-17, 174:8-19, 175:13-24.
Though O.C. and Coryn's advertisements do not completely overlap in scope or media, the jury could conclude that both parties advertised nationally and in Ocean City, with similar media.
In a reverse confusion
The jury heard evidence that, after filing its intent-to-use application but before opening its first SECRETS Resort, Coryn received an opinion letter from its attorney that mentioned similar registrations
Evidence of actual confusion "is often paramount in the likelihood of confusion analysis,"
Evidence that a handful of people over several years believed the parties' services came from the same source is de minimus when the field of potential consumers is large. George & Co., 575 F.3d at 399 (evidence of four confused customers was insufficient when the plaintiff sold 500,000 of the product per year).
The jury heard evidence that each year, at least two to three customers have
The eighth factor "applies in situations involving the production of cheap copies or knockoffs of a competitor's trademark-protected goods." George & Co., 575 F.3d at 399. O.C. does not suggest that Coryn infringed its SEACRETS mark with "cheap copies or knockoffs." See id.; Tr. 98:8-25, 107:6-25, 108:1-13, 113:25, 114:1-25 (acknowledging that SECRETS offers more luxurious services than SEARETS). This factor bears little to no weight here. George & Co., 575 F.3d at 399.
The ninth factor, like the eighth, does not apply to all infringement suits. Sara Lee, 81 F.3d at 467. "Barring an unusual case, buyer sophistication will only be a key factor when the relevant market is not the public at-large." Id.; see also George & Co., 575 F.3d at 400. It applies, instead, when a typical consumer "is sophisticated in the use of — or possesses an expertise regarding — a particular product [or service]."
Although the jury heard evidence that Coryn's clientele might be more limited than the public-at-large because of the expense of a resort stay,
Further, even if the jury concluded that the average consumer of hotel, restaurant, and bar services is sophisticated, they could have concluded that, despite that sophistication, confusion remained likely, because sophistication is only one of the factors and can be outweighed by the others. See Seidelmann Yachts, Inc. v. Pace Yacht Corp., 898 F.2d 147 (table), 1990 WL 27236, *4 (4th Cir. 1990).
As there was legally sufficient evidence for the jury to conclude that most, if not all, of the likelihood of confusion factors favored O.C, judgment as a matter of law on the infringement finding is not warranted. See Reeves, 530 U.S. at 149, 120 S.Ct. 2097.
A new trial is also not warranted. Having considered and weighed the evidence, the Court concludes that the infringement verdict is not against the clear weight of the evidence or based on false evidence, and will not result in a miscarriage of justice. See Atlas Food Sys. & Servs., 99 F.3d at 594.
Coryn next contends that it is entitled to judgment as a matter of law on the damages award because no reasonable jury could conclude that the evidence supported awarding damages. ECF No. 298 Attach. 1 at 25.
Under the Lanham Act, a successful plaintiff may, "subject to the principles of equity ... recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action." 15 U.S.C. 1117(a). "The court shall assess such profits and damages or cause the same to be assessed under its direction" and ensure that any relief awarded "shall constitute compensation and not a penalty." Id. Awarding damages makes "violations of the Lanham Act unprofitable to the infringing party."
The Fourth Circuit has identified six nonexclusive factors that should be considered when awarding damages or a defendant's profits:
Synergistic Int'l, LLC v. Korman, 470 F.3d 162, 175 (4th Cir.2006).
In determining damages on a reverse confusion claim, the focus is on whether junior user has selected the infringing mark recklessly or despite knowledge of the senior user's mark — not whether the junior user intended to trade on the senior user's goodwill and reputation. See 4 McCarthy, § 23:10 (collecting cases). Continued use after notice of the senior user's mark may be relevant, Buzz Off, 606 F.Supp.2d at 588, or it may permit the inference that Coryn thought O.C.'s mark was too weak or otherwise did not conflict with Coryn's use, see Renaissance Greeting Cards, 227 Fed.Appx. at 245.
The second Synergistic factor considers the junior user's effect on the senior user's market. See Buzz Off, 606 F.Supp.2d at 588. There was no evidence of diverted sales in this case. See Tr. 278:1-3, 278:9-14 (Moore testimony that he could not identify "any single sale that [he had] lost as a result of something [Coryn] did"). However, the jury could have concluded that O.C. lost some "market presence" because of Coryn's "expansive use" of the SECRETS mark. See Buzz Off, 606 F.Supp.2d at 588. This would weigh slightly toward awarding some damages.
The third factor considers whether a remedy other than compensatory damages, including an injunction, "might more appropriately correct any injury the [senior user] suffered from the [junior user's] infringement." Synergistic, 470 F.3d at 176. If an injunction would be adequate, the third factor weighs against awarding damages. Id.
There was no evidence whether other remedies would adequately protect O.C. See ECF No. 305 at 34 (identifying no evidence about alternative remedies in discussion of third factor); ECF No. 298 Attach. 1 at 25 (same). Further, as discussed below, an injunction will adequately protect O.C.'s interest in controlling its goodwill and reputation. See Part II.C.4, infra. Accordingly, this factor weighs against a damages award.
The jury could have accepted Moore's testimony that O.C. learned about the SECRETS mark in late 2003 and asserted its rights in the SEACRETS mark in January 2004. Cancellation Pet. At A54; Tr. 80:19-21. Accordingly, the jury could have concluded that this factor does not weigh against damages because O.C. did not unreasonably delay asserting its rights. See Mazelmints, Inc. v. It's A Wrap, LLC, No. 10-1117, 2011 WL 2960873, *5 (E.D.Va. Jul. 20, 2011) (finding fourth factor favored damages award because the plaintiff "sought relief immediately after becoming aware" of infringing behavior).
The fifth factor, the public interest in making the infringing misconduct unprofitable, weighs a plaintiff's right to be compensated for infringing activities against the defendant's right not to be assessed a penalty,
The jury could have concluded that the public interest would be served by awarding nominal damages for Coryn's failure to check for similar marks and choose a mark not already in use for similar services. See Part II.A.2.vi.
It was undisputed that this was not a case of palming off. See Part II.A.2.viii.
Coryn contends that the punitive damages award was inappropriate as a matter of law, and, if punitive damages were allowed, the amount violated Coryn's due process rights. ECF No. 298 Attach. 1 at 29, 31.
The Court may resolve an excessive verdict by conditioning the granting of a new trial on the plaintiff's rejection of a reduced verdict. G.M. Garrett Realty, Inc. v. Century 21 Real Estate Corp., 17 Fed.Appx. 169, 172 (4th Cir.2001).
In Maryland, punitive damages are appropriate when the plaintiff shows, by clear and convincing evidence that the defendant acted "maliciously, wantonly or fraudulently." Seidelmann Yachts v. Pace Yacht Corp., 14 U.S.P.Q.2d 1497, 1511, 1989 WL 214497 (D.Md.1989) (standard); Owens-Illinois, Inc. v. Zenobia, 325 Md. 420, 469, 601 A.2d 633, 657 (1992) (clear and convincing requirement).
O.C. does not contend that Coryn's behavior was malicious or fraudulent, arguing instead that the evidence supported a finding of wantonness. ECF No. 305 at 40. Wanton behavior is characterized by "extreme recklessness and utter disregard for" others' rights. Dennis v. Bait. Transit Co., 189 Md. 610, 617, 56 A.2d 813, 817 (1948).
As noted above, the jury could have concluded that Coryn recklessly disregarded O.C.'s rights in the SEACRETS mark by failing to check the TTAB before filing its application. This could justify an award of some punitive damages.
To satisfy the Fourteenth Amendment Due Process guarantee, punitive damages imposed under state law must be reasonable. BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 568, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) (overturning $2 million punitive award in light, in part, of $4,000 compensatory award). To determine whether a punitive damages award is reasonable, the Court considers: (1) the degree of reprehensibility of the defendant's conduct; (2) the difference between the actual or potential harm suffered (compensatory damages) and the punitive award; and (3) the difference between the punitive award and civil penalties in comparable cases. Id. at 575, 116 S.Ct. 1589; State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003).
The degree of reprehensibility of the defendant's conduct is the "most important indicium of the reasonableness of a punitive damages award." State Farm, 538 U.S. at 419, 123 S.Ct. 1513 (quoting Gore, 517 U.S. at 575, 116 S.Ct. 1589). The Court considers whether: (1) the
There was no evidence that factors one, two, four, or five were present here: O.C. was not physically harmed; Coryn was not indifferent to and did not recklessly disregard the health or safety of others;
There was evidence that, by 2000 — Coryn's first use of the SECRETS mark — O.C. had been profitable for 10 years and had the resources to continually expand the business, and between 1999 and 2008 O.C. had a total revenue of over $155 million. Tr. 53:12-13, 59:1-25, 60:1-17, 265:1-8. There was no evidence that, between 2000 and the trial, Coryn was financially vulnerable. Accordingly, this factor also favors Coryn.
As none of the aggravating factors is present in this case, the first Gore prong weighs against a substantial punitive award.
This prong measures the disparity in the harm actually or potentially caused and the punitive award by comparing the compensatory and punitive awards. See, e.g., State Farm, 538 U.S. at 425, 123 S.Ct. 1513. Ordinarily, "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." Id. However, "when a jury only awards nominal damages or a small amount of compensatory damages, a punitive damages award may exceed the normal single digit ratio because a smaller amount would utterly fail to serve the traditional purposes underlying an award of punitive damages, which are to punish and deter." Saunders v. BB & T Co. of Va., 526 F.3d 142, 154 (4th Cir.2008).
Despite these exceptions to the general single-digit rule, a 265,035:1 ratio, without aggravating factors from the first Gore prong, weighs heavily against finding that the award satisfies due process. Although the jury awarded nominal damages, most of the awards the Fourth Circuit has approved or cited, in concluding that the single digit ratio guideline might not apply when nominal damages are awarded, considered ratios of 125,000:1 or less.
The parties agree that this factor "should be deemed neutral in this case." ECF No. 305 at 43; ECF No. 298 Attach. 1 at 34.
None of the factors supports the imposition of $265,035 in punitive damages: Coryn's conduct was not especially egregious, did not cause very much actual harm, and did not have the potential to cause great harm to others.
Accordingly, the Court will grant Coryn a new trial on punitive damages unless O.C. accepts a remittance to "a modest award of exemplary damages"
O.C. contends that it is entitled to disgorgement of Coryn's profits in addition to the nominal damages the jury awarded it. ECF No. 296 Attach. 1 at 2. Accordingly, it seeks amendment of the jury award or, alternatively, a partial new trial. Id.
Usually, a motion to alter or amend a judgment is analyzed under Rule 59(e). MLC Auto., LLC v. Town of Southern Pines, 532 F.3d 269, 280 (4th Cir.2008); In re Burnley, 988 F.2d 1, 2-3 (4th Cir. 1992).
Under the Lanham Act, which governs this review of the award against Coryn, if "the court shall find that the amount of recovery based on profits is either inadequate or excessive, the court may in its discretion enter judgment for such sum as the court shall find to be just," but the award must "constitute compensation and not a penalty." 15 U.S.C. § 1117(a).
O.C. recognizes that increasing the award amount is a matter of the Court's equitable discretion. ECF No. 296 Attach. 1 at 2; 15 U.S.C. § 1117(a). The Court considers the Synergistic factors to determine whether the award is excessive or inadequate. See Super Duper, 382 Fed. Appx. at 317 n. 8; Buzz Off, 606 F.Supp.2d at 588. As O.C. is the moving party here, the Court considers the evidence in the light most favorable to Coryn.
Though willful infringement can be sufficient to justify awarding some compensatory damages in a reverse confusion case, lack of fraud, bad faith, or intent to deceive or trade on the senior user's goodwill undermines the appropriateness of increasing the jury's compensatory damages award. Buzz Off, 606 F.Supp.2d at 588 (denying defendant's motion to strike jury's compensatory award and plaintiff's motion to adjust it). Continued use of the mark after learning of the senior user is also insufficient. Id.
As in Buzz Off, accepting the jury's finding of willful infringement does not mandate enhancing the compensatory award. Id. Here, there was no evidence that Coryn intended to trade on O.C.'s goodwill, or that it acted in bad faith or fraudulently. See supra. Accordingly, the first factor supports an award of some damages, but does not strongly support increasing the jury's damage calculus.
As discussed above, in a reverse confusion context, the Court considers diversion
An injunction will adequately protect O.C.'s interest in retaining control over its market presence. This factor weighs against more than nominal damages.
The evidence showed that O.C. learned about the SECRETS mark in late 2003 and asserted its rights in January 2004. Cancellation Pet. At A54; Tr. 80:19-21. Accordingly, O.C. did not unreasonably delay asserting its rights. See Mazelmints, Inc., 2011 WL 2960873, *5 (finding fourth factor favored damages award because the plaintiff "sought relief immediately after becoming aware" of infringing behavior).
The fifth factor, the public interest in making the infringing misconduct unprofitable, weighs a plaintiff's right to be compensated for infringing activities against the defendant's right not to be assessed a penalty, and the public's interest in encouraging innovation and good faith investment in promoting marks that become more successful than the senior user's mark. Buzz Off, 606 F.Supp.2d at 589.
Though the public interest would be served by awarding some damages for Coryn's failure to check for similar marks and choose a mark not already in use for similar services, increasing the damages award might hinder innovation. See id. This factor does not support awarding more damages.
This was not a case of palming off. See Part II.A.2.viii.
Considering the evidence in the light most favorable to Coryn, the non-moving party, only the intent factor favors a damages award, and only slightly. Accordingly, a nominal compensatory award is adequate. No amendment of the judgment or new trial is appropriate.
Coryn has moved for leave to file a surreply to O.C.'s brief in support of permanent injunction. ECF No. 311. It argues that O.C. raised new legal arguments and "mischaracterizations of the evidence" in its reply brief. Id. at 2. O.C. counters that its reply brief "responded only to arguments first introduced in Coryn's ... opposition brief." ECF No. 312 at 2.
Unless otherwise ordered by the court, a party generally may not file a surreply. Local Rule 105.2(a) (D.Md. 2011). Leave to file a surreply may be granted when the movant otherwise would be unable to contest matters presented for the first time in the opposing party's reply. Khoury v. Meserve, 268 F.Supp.2d 600, 605 (D.Md.2003), aff'd, 85 Fed.Appx. 960 (4th Cir.2004). Because O.C. raised new arguments, such as that an injunction is warranted because Coryn "continues to develop its business under [the SECRETS]
O.C. seeks a permanent injunction "consistent with the jury's ... finding of infringement." ECF No. 284 Attach. 1 at 2. Under the Lanham Act, the Court may "grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of [15 U.S.C. § 1125(a), (c), or (d)]." 15 U.S.C. § 1116.
To justify granting a permanent injunction, the movant must show that: (1) it has suffered an irreparable injury; (2) monetary damages are inadequate to compensate the injury; (3) the "balance of hardships between the plaintiff and defendant" warrants an equitable remedy; and (4) the public interest would not be disserved by an injunction. eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006). If the movant makes a sufficient showing, "whether to grant the injunction still remains in the equitable discretion of the court." Christopher Phelps & Assocs., LLC v. Galloway, 492 F.3d 532, 543 (4th Cir.2007).
Injury is measured by damage to the senior user's reputation or goodwill. See PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111, 127 (4th Cir.2011).
Here, O.C. presented some evidence that, by overwhelming the market with the SECRETS brand, Coryn may have usurped some control over O.C.'s goodwill. Accordingly, the lack of control weighs slightly toward granting an injunction. See Buzz Off, 606 F.Supp.2d at 599 (finding first factor favored injunction in similar circumstances).
Monetary damages often do not accurately measure or compensate for damage to a senior user's reputation and goodwill. Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc., 43 F.3d 922, 939 (4th Cir.1995).
O.C.'s lost control over the reputation of its mark and market presence suggest that it has suffered an injury that is not easily quantifiable. See Lone Star, 43 F.3d at 939. It has also shown a likelihood of future infringement, as Coryn has continued to develop its mark and advertise within the United States after the partial judgment of infringement. ECF No. 301 Attach. 1. Accordingly, this factor favors an injunction.
The third and fourth factors consider the users' investment of time and resources into the marks, and the junior user's intent. Buzz Off, 606 F.Supp.2d at 599-600.
In a reverse confusion case, the Court considers whether the junior user invested "significant time and resources establishing its business, [without] engaging in fraud or other aggravated conduct." Id. at 599. Injunctive relief should not have "an anti-competitive effect by unnecessarily impairing [the junior user's] business." Id. at 600.
As in Buzz Off, the junior user here, Coryn, invested significant resources establishing SECRETS Resorts, without engaging in fraud.
Coryn notes that before the jury's verdict, it negotiated its rates with tour operators and travel agents, and paid for advertisements using the SECRETS mark, through the end of 2012. ECF No. 306 Attach. 1 ¶¶ 7-16. Cancellation of those ads and contracts would be costly, anti-competitive, and in some cases impossible because the ads appear with many other sellers, and some advertisers might be unwilling to recall or reprint the materials. Id. 118. Thus, prohibiting advertising with the mark before 2013 would create an unnecessarily large burden on Coryn. See Buzz Off, 606 F.Supp.2d at 600.
Weighing the circumstances of the case and the large burden that Coryn would suffer if it were enjoined from using the SECRETS mark in the United States before the end of 2012 against O.C.'s right to a permanent injunction and interest in avoiding future harm, the Court will enjoin Coryn and its agents from:
O.C. also seeks the recall and destruction of infringing material. ECF No. 301 at 17. The Court finds that recall and destruction of material with the SECRETS mark is unnecessary and wasteful in this case, as Coryn will not be barred from advertising outside the United States and may be able to use the materials internationally.
The Lanham Act mandates taxing costs for a prevailing senior user and permits awarding attorney's fees "in exceptional cases." 15 U.S.C. 1117(a). A case is exceptional
People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 370 (4th Cir.2001) (internal quotation marks and citations omitted).
A court may find that, despite acting willfully or in bad faith, attorney's fees are not appropriate. See id.; Buzz Off, 606 F.Supp.2d at 591 ("although the jury found that the infringement ... was willful, the Court has nevertheless concluded that [it] should not be characterized as malicious, fraudulent, or in bad faith").
The Court finds that this case is not "exceptional." Although the jury found that Coryn infringed the SEACRETS mark willfully, it
Buzz Off, 606 F.Supp.2d at 591. Coryn's continued use of the mark after O.C. filed its cancellation petition also does not support awarding attorney's fees. Id.
For the reasons stated above, Coryn's motion for leave to file a surreply will be granted. Coryn's motion for judgment as a matter of law or for a new trial will be granted in part and denied in part. O.C.'s motion to amend the judgment or for a partial new trial will be denied, and its motion for a permanent injunction will be granted as modified.
Despite Coryn's lack of awareness, its failure to perform a trademark search before filing its application permits an inference that Coryn had the requisite intent. George & Co., 575 F.3d at 398 (failure to "conduct a trademark search or contact counsel [before filing the application] shows carelessness"); Fisons Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 480 (3rd Cir.1994) (in reverse confusion case, junior user had requisite intent because "while it may have acted innocently, [it] was careless in not conducting a thorough name search" before adopting the mark).
On the other hand, that it conducted a trademark search and relied on its counsel's advice that the SECRETS mark would not conflict with other, similar marks weighs against a finding of the requisite intent. See Altira Grp. LLC v. Philip Morris Cos. Inc., 207 F.Supp.2d 1193, 1200-01 (D.Colo.2002).
Evidence that Coryn continued to use the SECRETS mark after O.C. objected to that mark is not probative of Coryn's intent. Renaissance Greeting Cards, Inc. v. Dollar Tree Stores, Inc., 405 F.Supp.2d 680, 697 (E.D.Va. 2005).
TXO, 509 U.S. at 459-60, 113 S.Ct. 2711 (internal quotation marks and citations omitted). Thus, this inquiry considers whether there were any narrow misses of great harm.
O.C.'s possible future lost profits are not "potential harm." The jury was instructed to consider the value and goodwill of the mark in its compensatory award. See Jury Instruction No. 28. Prospective lost profits are not like the narrow misses considered in the due process analysis; they are actual damages and thus part of the compensatory award. See id.
The extended transition period likely will not harm O.C. unnecessarily, as it has continued to grow for the past ten years, despite Coryn's use of the SECRETS mark; another nine months will likely not cause excessive harm.
