United States Court of Appeals
For the First Circuit
Nos. 01-1382, 01-2273
TAMKO ROOFING PRODUCTS, INC.,
Plaintiff, Appellee,
v.
IDEAL ROOFING COMPANY, LTD.,
Defendant, Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Joseph A. DiClerico, Jr., U.S. District Judge]
Before
Selya, Circuit Judge,
Campbell, Senior Circuit Judge,
and Lynch, Circuit Judge.
H. Joseph Hameline with whom Rosemary M. Allen, Geri L.
Haight, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., and
Michael B. Clapp were on brief for appellant.
Christopher R. Benson with whom Marcy Hogan Greer, Susan J.
Hightower, and Fulbright & Jaworski L.L.P. were on brief for appellee.
March 7, 2002
LYNCH, Circuit Judge. Tamko Roofing Products, Inc. won its
trademark infringement case against Ideal Roofing Company, Ltd. after
a six-day jury trial. The district court awarded Ideal's profits to
Tamko, ordered Ideal to pay Tamko's attorneys' fees, which amounted to
a sum larger than the profits, and issued a permanent injunction.
Ideal now appeals each of these district court actions.
We affirm. We reject Ideal's argument that bad faith or
fraud is a necessary condition to an award of attorneys' fees under
section 35 of the Lanham Act; willful conduct may be sufficient when
the trial court takes into account all the facts and equities of the
case. We reject Ideal's proposed limitation on the availability of an
accounting of defendant's profits as a remedy for trademark
infringement. The injunction, which covers a broader range of marks
than those Tamko has registered with the United State Patent and
Trademark Office (USPTO), is warranted by the "safe distance rule."
I.
The facts are described "as a jury might have found them,
consistent with the record but in the light most favorable to the
verdict." Grajales-Romero v. Am. Airlines, Inc., 194 F.3d 288, 292
(1st Cir. 1999).
Tamko and Ideal each manufacture and sell roofing products.
Tamko manufactures and sells asphalt roofing products, including
shingles, in the United States and Canada. Ideal is based in Ottawa,
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Canada, and manufactures metal roofing and siding products, which it
sells in Canada and the United States.
Since 1975, Tamko has been using the trademark "Heritage" in
its roofing products business. By 1997, when Ideal began to use the
Heritage mark, Tamko had registered ten marks in the Heritage family
with the USPTO, including "The American Heritage Series" mark, and two
Heritage family trademarks in Canada. Tamko has vigorously defended
the Heritage marks, and has successfully enforced its trademark rights.1
In April 1997, Ideal selected the trademark "Heritage Series"
for hidden fastener metal roofing panels, a new product it introduced
to the market later that year. Ideal's "Heritage Series" mark used
very similar cursive script to Tamko's "The American Heritage Series"
mark. Ideal made the selection through a four-member executive
committee: Marcel Laplante (President), René Laplante (Vice President),
Pierre Tessier (Sales Manager), and Mark Lebreque (Quebec City Office
Manager).
Before Ideal adopted the Heritage Series mark, Tessier
attended several roofing trade shows where Tamko prominently displayed
its Heritage mark. Ideal hired an advertising agency, Innovacom, to
1 For example, Tamko has been involved in disputes over
the Heritage mark with MBCI, a metal roofing manufacturer, and
Supradur, Inc., a slate roofing manufacturer. In both cases,
the companies acknowledged that the rights to the Heritage mark
used for roofing products belonged to Tamko.
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help in the selection and marketing of the new mark. Although the
agency usually recommends a trademark search to its clients before they
adopt a new mark, René Laplante of Ideal decided against conducting
such a search through the agency, an attorney, or Ideal itself. Two
other trademarks considered by Ideal were "Carriage" and "Royal
Albert," both of which are similar to marks owned by other
manufacturers in the roofing industry: Certain-Teed uses the mark
"Carriage House," and IKO uses "Royal Victorian."
Although Tamko and Ideal produce and sell different types of
roofing products, their products -- asphalt and metal roofing
respectively -- are both appropriate for steep-slope roofs. They
compete directly in the roofing industry market, particularly in the
northeastern United States. For example, Ideal belongs to the Metal
Roofing Alliance, which, among other things, attempts to persuade
homeowners to install metal roofing instead of asphalt shingles. Ideal
also tried to persuade consumers to use metal roofing rather than
asphalt shingles in its brochure called "The Smartest Looking House."
When Tamko discovered that Ideal was using the Heritage mark
for its new product line, its president, David Humphreys, wrote to
Marcel Laplante on March 9, 1999. In the letter, Humphreys discussed
the importance of the mark to Tamko, expressed his concern that Ideal's
use of the mark would cause "confusion in the marketplace," and asked
Ideal to "cease and desist all use of HERITAGE in connection with its
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building products." When Humphreys did not receive a response, he sent
another letter to Ideal on March 26, 1999, demanding a response and
warning Ideal that if Tamko did not receive a response, it would have
"no choice but to seek legal help to resolve this matter." Ideal
responded to the second letter, but the companies could not negotiate
a mutually agreeable phase out period in which Ideal would stop using
the Heritage mark. Ideal wanted a two-year period, while Tamko claimed
that a few months would be sufficient.
Tamko gave Ideal notice that it was going to file a suit
against it, and that the USPTO had previously rejected another metal
roofing manufacturer's application for the Heritage mark. In
response, Ideal suggested a one-year phase out as a compromise.
In August 1999, Tamko filed suit against Ideal for trademark
infringement in violation of section 32(1)(a) of the Lanham Act, 15
U.S.C. § 1114(1)(a) (2000).2 On November 3, 1999, Tamko filed a motion
for a preliminary injunction to enjoin Ideal from using the Heritage
mark until the trial resolved the infringement issue. The district
court granted the preliminary injunction on February 29, 2000, adopting
the report and recommendation from the magistrate judge, who was
briefed and held an evidentiary hearing on the issue.
2 Originally, Tamko had two other claims against Ideal:
unfair competition under 15 U.S.C. § 1125(a) (2000), and
trademark dilution under 15 U.S.C. § 1125(c) (2000). Tamko
dropped these claims before the start of the trial.
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Despite the preliminary injunction, Ideal continued to use
the Heritage mark in its brochures and on its web site. Ideal
distributed brochures containing the Heritage mark at two trade shows
which took place in March 2000 in the United States. Ideal also did
not modify its web site which contained several references to the
Heritage mark. As a result, on March 16, 2000, Tamko moved for
contempt. After a hearing, the magistrate judge issued another report
and recommendation that "Ideal should be held in contempt," finding
Ideal distributed brochures that contained the Heritage mark at a trade
show two weeks after the preliminary injunction issued, and
"intentionally kept the 'Heritage' mark on its web site" after the
injunction issued. The district court adopted the magistrate judge's
report and recommendation and held Ideal in contempt on May 26, 2000.
The contempt order provided that Ideal would be fined $200 for each day
of noncompliance, starting on May 29, 2000. Ideal was fined $3,000 for
its failure to comply with the contempt order until June 13, 2000.
In advance of trial, Ideal filed a motion in limine to
preclude Tamko "from making reference in the presence of the jury to
the Preliminary Injunction Order issued in this case." The issue was
resolved by an agreement to a stipulated instruction to the jury. The
instruction given to the jury at the start of the trial on May 16,
2000, was "after this case was filed in this court and pending the
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outcome of the case, the Court on February [2]9,3 the year 2000, ordered
Ideal to stop using the trademark in question in order to preserve the
status quo pending the outcome of the case."
On the fourth day of trial, during the cross-examination of
René Laplante, Ideal's attorney questioned Laplante about "the Court's
order" and whether it made "any mention of the Internet site?" In
response, during redirect, Tamko's attorney asked Laplante about the
"magistrate's report" which said that "[Ideal's] use of Heritage Series
in connection with the Internet is a violation of [the] order."
Ideal's attorney objected to this line of questioning.
On the fifth day of the trial, Ideal moved for a mistrial.
Ideal argued that the introduction of testimony about both the
preliminary injunction and the contempt order prejudiced the jury and
deprived Ideal of a fair trial. The district court denied the motion,
stating that Ideal had opened the door to the evidence about the
contempt order, and that a jury would not understand the significance
of a preliminary injunction in any case.
At the end of the trial, the district court ruled that
Tamko's Heritage trademarks were valid. The jury found: (i) "by a
preponderance of the evidence that Ideal infringed Tamko's trademarks";
(ii) "by clear and convincing evidence that Ideal acted willfully in
3 The court made an error in the date of the preliminary
injunction and corrected itself immediately.
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infringing Tamko's trademarks"; and (iii) "by a preponderance of the
evidence that the roofing product[s] of Ideal and Tamko directly
competed with each other."
After the close of the trial, the judge requested briefing
on the issues of an accounting of defendant's profits and attorneys'
fees. On August 21, 2000, the district court issued an order that
Tamko was entitled to both an accounting of Ideal's profits and
attorneys' fees. On October 19, 2000, the court issued an order
awarding $201,385.60 in profits. On August 30, 2000, the district
court permanently enjoined Ideal from "using the term Heritage,
Heritage Series, H Series, or any name or mark confusingly similar to
Heritage."
On appeal, Ideal is represented by new counsel. It does not
contest the jury's findings, but disputes the district court's rulings.
Ideal argues, first, that Tamko should not have been awarded attorneys'
fees because there was no evidence to support the court's findings that
"exceptional circumstances" existed. In the alternative, Ideal argues
that even if attorneys' fees were justified, the district court erred
in calculating the fees. Second, Ideal argues that the district court
should not have awarded Tamko an accounting of 100% of Ideal's profits
because the two companies did not compete in 100% of their markets, and
that the court erred in setting the amount of profits. Third, Ideal
contends that the district court erred in denying its motion for a
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mistrial based on the prejudicial admission of testimony about the
preliminary injunction and contempt order against Ideal. Fourth, Ideal
argues that the scope of the district court's permanent injunction was
too broad in that it enjoined it from using the term "H Series," which
is not one of Tamko's registered trademarks.
II.
A. Ideal’s Challenges to the Award of Attorneys' Fees to
Tamko
The district court awarded over $500,000 in attorneys'
fees and expenses to Tamko. Ideal protests that no fees at all
should have been awarded since this was not an "exceptional
case," a requirement under section 35 of the Lanham Act, 15
U.S.C. § 1117(a) (2000), for an attorneys' fees award. The
district court erred, Ideal says, by using an incorrect legal
standard to determine exceptional circumstances and by
concluding that the evidence supported such an award. The
court's error of law, Ideal argues, is that fees may only be
awarded in circumstances where the defendant acted deceitfully
or with a degree of culpability; it claims the court's error of
fact is that there was no such deceit or culpability here.
Finally, Ideal argues that even if some award of attorneys' fees
was justified, the sum awarded is too high.
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We review de novo the legal question of the meaning of
"exceptional cases" in the context of section 35 of the Lanham
Act. See Atl. Fish Spotters Ass'n v. Daley, 205 F.3d 488, 490
(1st Cir. 2000) ("A legal ruling . . . as to the meaning of the
statute is almost always an issue of law reviewed de novo.").
We review the district court's award of attorneys' fees under
section 35 of the Lanham Act for abuse of discretion.4 To the
4 Although this court has not articulated before the
standard of review for the award of attorneys' fees in the
Lanham Act context, we use the abuse of discretion standard in
reviewing an award of attorneys' fees in several other contexts.
See, e.g., Gay Officers Action League v. Puerto Rico, 247 F.3d
288, 292 (1st Cir. 2001) (Civil Rights Act, 42 U.S.C. § 1988);
O'Rourke v. City of Providence, 235 F.3d 713, 737 (1st Cir.
2001) (Title VII); Colortronic Reinhard & Co. v. Plastic
Controls, Inc., 668 F.2d 1, 7-8 (1st Cir. 1981) (similar
attorneys' fees provision of Patent Act, 35 U.S.C. § 285); see
also Dubois v. United States Dep't of Agric., 270 F.3d 77, 80
(1st Cir. 2001). Several other circuits also use the abuse of
discretion standard in reviewing the award of attorneys' fees
under the Lanham Act. See, e.g., Waco Int'l, Inc. v. KHK
Scaffolding Houston Inc., 278 F.3d 523, 529 (5th Cir. 2002);
People for the Ethical Treatment of Animals v. Doughney, 263
F.3d 359, 370 (4th Cir. 2001); Securacomm Consulting, Inc. v.
Securacom Inc., 224 F.3d 273, 279 (3d Cir. 2000). But see S
Indus., Inc. v. Centra 2000, Inc., 249 F.3d 625, 627 (7th Cir.
2001) ("We review a grant of attorney fees to a prevailing
defendant under the Lanham Act only for clear error."). The
widespread use of this standard for awards of attorneys' fees
"reflects the fact that only the district court has the
'intimate knowledge of the nuances of the underlying case,'"
Richardson v. Miller, No. 01-1309, 2002 WL 91406, at *2 (1st
Cir. Jan 29, 2002) (quoting Gay Officers Action League, 247 F.3d
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extent that the district court's award rests on factual
determinations, however, we review those for clear error. See
Pierce v. Underwood, 487 U.S. 552, 557-58 (1988); De Allende v.
Baker, 891 F.2d 7, 11 (1st Cir. 1989); see also People for the
Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 370 (4th
Cir. 2001). As noted in Atlantic Fish Spotters,
[m]any courts, including the Supreme Court, sum up the
standard in . . . attorney's fee cases by referring to
abuse of discretion. But since they then treat errors
of law as an example of such an abuse, it seems more
informative to recognize that the effective standard
of review depends upon the precise claim of error being
asserted and not the nature of the case.
205 F.3d at 491 n.2 (citations omitted).
1. The Standard for Exceptional Cases
The Lanham Act provides: "The court in exceptional
cases may award reasonable attorneys fees to the prevailing
party." 15 U.S.C. § 1117(a). Ideal asserts that the district
court erred by essentially converting the jury finding of
willful infringement, without more, into a court finding of
at 292), and in "determining whether sanctions are warranted
'the district court is better situated than the court of appeals
to marshal the pertinent facts and apply the fact-dependent
legal standard,'" Dubois, 270 F.3d at 80 (citing Cooter & Gell
v. Hartmarx Corp., 496 U.S. 384, 402 (1990)).
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exceptional circumstances justifying a fee award. In truth, the
district court referred to both the jury finding of willfulness
and to other record evidence before it, so there was no
automatic conversion of a jury willfulness finding into a
finding of exceptional circumstances.5 The district court said
nothing one way or the other as to whether there was bad faith
or fraud on Ideal's part.
Under the statute, the decision to award fees is
committed to the district court, not the jury. 5 J. T. McCarthy,
McCarthy on Trademarks and Unfair Competition § 30:99, at 30-184
(4th ed. 2001). Ideal says that the trial court failed to make
the necessary findings.6 Where the facts of record amply explain
5 To the extent Ideal argues that it would be error for
a district court to adopt a per se equivalence between
"exceptional case" and a jury finding of willfulness, we would
agree. Congress gave the attorneys' fees issue to the court,
not to the jury, and the court must consider whether an award is
equitable. However, here the court did decide the issue of
whether this was an "exceptional case."
6 Ideal relies on two cases in its claim that the lack
of more explicit findings by the district court was an abuse of
discretion which invalidates the fee award in this case.
However, in both Bandag, Inc. v. Al Bolser's Tire Stores, Inc.,
750 F.2d 903, 921 (Fed. Cir. 1984), and Ferrero U.S.A., Inc. v.
Ozak Trading, Inc., 952 F.2d 44, 48 (3d Cir. 1991), the courts
relied not only on the lack of any express findings by the
district court, but also on the lack of clear facts from the
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the decision, we will not find that the mere failure of the
trial judge to be more explicit amounts to an abuse of
discretion. See L.E.A. Dynatech, Inc. v. Allina, 49 F.3d 1527,
1531 (Fed. Cir. 1995) ("Although the district court did not
state the specific basis for its fee award, sufficient record
evidence supports the award.").
Because the Lanham Act does not further explain the
term "exceptional cases," this court and others have turned to
the legislative history for a working definition. See
Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 821
(1st Cir. 1987); see also Ferrero U.S.A., Inc. v. Ozak Trading,
Inc., 952 F.2d 44, 47 (3d Cir. 1991); VIP Foods, Inc. v. Vulcan
Pet, Inc., 675 F.2d 1106, 1107 (10th Cir. 1982). In exceptional
cases, attorneys' fees may be appropriate in circumstances where
the acts of infringement were "'malicious,' 'fraudulent,'
'deliberate,' or 'willful.'" S. Rep. 93-1400, at 5 (1974),
reprinted in 1974 U.S.C.C.A.N. 7132, 7133. The legislative
history also explains that attorneys' fees may be awarded "when
equitable considerations justify such awards," id. at 6,
record that showed exceptional circumstances. That is not the
case here.
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reprinted in 1974 U.S.C.C.A.N. at 7137, and so the list of four
(for example, "malicious") may not be exclusive.
Ideal urges this court to adopt the "bad faith"
standard utilized by some circuits. See Conopco, Inc. v.
Campbell Soup Co., 95 F.3d 187, 194 (2d Cir. 1996) (reciting
Second Circuit rule requiring a showing of fraud or bad faith on
the part of the infringer); Texas Pig Stands, Inc. v. Hard Rock
Cafe Int'l, Inc., 951 F.2d 684, 697 (5th Cir. 1992)
("requir[ing] a showing of a high degree of culpability on the
part of the infringer, for example, bad faith or fraud"); Scotch
Whisky Ass'n v. Majestic Distilling Co., 958 F.2d 594, 599 (4th
Cir. 1991) ("It is clear . . . that for a prevailing plaintiff
to succeed in a request for attorney fees, she must show that
the defendant acted in bad faith."). Other circuits hold that
willfulness alone is an adequate basis for the award of
attorneys' fees. Bishop v. Equinox Int’l Corp., 154 F.3d 1220,
1224 (10th Cir. 1998) ("deliberate or willful" conduct on part
of defendant in "fail[ing] to cease and desist from use of [the
trademark] despite its written commitment to do so" was enough
to warrant award of attorneys' fees); Hartman v. Hallmark Cards,
Inc., 833 F.2d 117, 123 (8th Cir. 1987) ("Bad faith is not a
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prerequisite to a Lanham Act fee award."). While conceding that
an award may be made if the acts of infringement are willful,
Ideal argues that "willful" must mean more than just voluntary
and intentional. Ideal grafts on another requirement that the
infringing act must be fraudulent or malicious; for example, the
act must be done with an intent to deceive or confuse the
public, by palming off inferior goods as though they were
trademark holder's goods, or through "deliberate pirating."
Ideal’s argument confuses sufficient conditions for an
attorneys' fees award with necessary conditions for such an
award. Fraud or bad faith may justify an attorneys' fees award
in some cases,7 but a finding of bad faith or fraud is not a
necessary precondition. Willfulness short of bad faith or fraud
will suffice when equitable considerations justify an award and
the district court supportably finds the case exceptional.
There are two reasons we reject a bad faith or fraud requirement
as a precondition to an award of attorneys' fees. First, the
legislative history of section 35 links such exceptional cases
7 Nonetheless, it is also possible that a finding of bad
faith by one party might not justify an award if equity required
otherwise: for example, in a case where there is equivalent bad
faith by the other party.
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to situations where the acts are malicious or fraudulent or
deliberate or willful, and where equity justifies the award.
Congress's list does not stop with "malicious" or "fraudulent,"
and we are loath to strip "deliberate" and "willful" of meaning.
Second, the purpose of the attorneys' fees amendment to the
Lanham Act was to provide for an award in exceptional cases in
which equity called for an award in the sound discretion of the
district judge. We would be hard pressed to say that such a
case can never arise unless there is fraud or bad faith. As an
example, one circuit has approved an award of fees in a case
where there was no bad faith in the infringement but the
subsequent litigation was oppressive and meant to delay. See
Securacomm Consulting, Inc. v. Securacom Inc., 224 F.3d 273,
279-83 (3d Cir. 2000).8
8 Although this court has never held that bad faith is
a requirement for an award of attorneys' fees under the Lanham
Act and now rejects the notion, language in some of our cases
about award of fees under the Patent Act, 35 U.S.C. § 285,
refers to the need for "strong evidence of unfairness and bad
faith," Colotronic Reinhard & Co. v. Plastic Controls, Inc.,
668 F.2d 1, 8 (1st Cir. 1981), in the context of determining
whether the losing party has engaged in "inequitable conduct,"
Codex Corp. v. Milgo Elec. Corp., 717 F.2d 622, 630 (1st Cir.
1983). The language of the two acts is identical; what is
different is that here we have the benefit of the Lanham Act's
legislative history.
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Still, awards may be made only in exceptional cases.
In Volkswagenwerk, this court reversed an award where the
plaintiff did not plead attorneys' fees in its complaint,
defendant had no statutory constructive notice of plaintiff's
claim of ownership of the marks because neither the trade name
nor design mark were registered, and it would have been
inequitable to visit an award on the defendant's small local
automobile shop. 814 F.2d at 821. Other circuits have
identified as counseling against an award the following factors:
the area of law is unclear and defendants might reasonably think
they did not infringe, Ferrero U.S.A., 952 F.2d at 49; there is
a close legal question as to whether there is any trademark
violation, Martin's Herend Imps., Inc. v. Diamond & Gem Trading
USA, Co., 112 F.3d 1296, 1305 (5th Cir. 1997); Ferrero U.S.A.,
952 F.2d at 49; defendant had no intent to deceive or confuse
the public, VIP Foods, 675 F.2d at 1107; the defendant made a
concerted effort to create a non-infringing mark, Roulo v. Russ
Berrie & Co., 886 F.2d 931, 942 (7th Cir. 1989); the plaintiff
suffered no actual damage, Bishop, 154 F.3d at 1224; VIP Foods,
675 F.2d at 1107. We agree that these are factors to be
considered as part of a case-specific multi-factored analysis.
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Here, there was adequate evidence of exceptional,
willful behavior, both in the infringing acts and in Ideal’s
conduct after Tamko brought the infringement to Ideal's
attention. We outline just some of the pertinent conduct.
1. Within several days of a 1997 trade show attended by Ideal,
where Tamko’s Heritage Mark was prominently displayed, Ideal
adopted the Heritage name and told its advertising agency not to
do a trademark search, which is usually done. Neither Ideal nor
its patent attorney did a trademark search.
2. The other two names considered by Ideal for its new product
were substantially similar to marks owned by other companies.
3. Ideal used an elaborate cursive script for its "Heritage
Series" mark, very similar to the one used in Tamko’s mark "The
American Heritage Series" (which was displayed in a 1996 Tamko
brochure).
4. Ideal’s metal roofing competes directly with Tamko's asphalt
roofing for steep-slope roofs and Ideal tried to increase its
market in the residential marketplace, which is asphalt’s
primary market.
5. Ideal did not respond to the March 9, 1999 letter from
Tamko, which notified Ideal of its infringement. Tamko sent
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another letter on March 26, 1999. Ideal responded and suggested
a lengthy two-year phase out. When Tamko informed Ideal that
the USPTO rejected a trademark application for Heritage for
another company's metal roofing panels, Ideal still refused to
stop its use of the mark.
6. Before filing suit, Tamko gave Ideal notice on August 17,
1999; Ideal asked for a one-year phase out.
7. In August 1999, Ideal nonetheless reprinted one of its
brochures that continued the use of the Heritage Series name.
8. On February 29, 2000, the district court issued a
preliminary injunction against Ideal, enjoining it from further
use of the mark.
9. Nonetheless, Ideal used the brochures containing the mark
in a trade show in mid-March 2000, after the preliminary
injunction had issued against it.
10. Despite the preliminary injunction, Ideal continued to use
the mark on its web site, which was accessed by users in the
United States.
11. On May 15, 2000, the magistrate judge issued a report and
recommendation, which found that Ideal was in contempt for
violation of the preliminary injunction. The district court
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adopted the report and recommendation and held Ideal in contempt
on May 26, 2000.
12. Ideal did not come into compliance with the preliminary
injunction until June 13, 2000; in the course of its
noncompliance it incurred fines of $3,000.
It is the totality of the circumstances, rather than
a particular item alone, that suffices for an award of
attorneys' fees. For example, mere failure to conduct a
trademark search before using a mark may evidence nothing more
than carelessness, and so may not warrant an award of fees.
Securacomm Consulting, 166 F.3d at 188-89. In combination, the
facts above warrant the district court’s conclusion that the
initial infringement and continuing infringement, even in the
face of court orders, was deliberate and willful and that equity
required an award of fees.
2. Amount of the Fees
The district court determined the amount of attorneys'
fees under the commonly used lodestar method, in which the
number of hours reasonably spent by the attorneys on the case is
multiplied by a reasonable hourly rate. Hensley v. Eckerhart,
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461 U.S. 424, 433 (1983); Lipsett v. Blanco, 975 F.2d 934, 937
(1st Cir 1992). Tamko submitted a supporting declaration by an
experienced trademark attorney. It also submitted detailed time
records from lead counsel, house counsel, and local counsel.
The court considered the time and labor required, the skill
required, the nature and length of the professional relationship
with the client, and time limitations imposed by the client. It
is clear from the court's October 6, 2000 order that it reviewed
the materials in some detail.
Because Ideal did not file any opposition to Tamko's
attorneys' fees request and materials, it may well have
forfeited this issue for appeal. Hebert v. Wicklund, 744 F.2d
218, 223-24 (1st Cir. 1984). Ideal argues that because the size
of the award is substantially larger than the award of profits
in this case, an injustice might result if this court does not
review the amount of fees. Neither the statute nor the
legislative history limits the award of fees to an amount less
than the award of profits or damages. To the contrary, the
legislative intent was partly to encourage the enforcement of
trademark rights in cases where "the measurable damages are
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nominal." S. Rep. 93-1400, reprinted in 1974 U.S.C.C.A.N. 7132,
7136. When a trademark is infringed, trademark owners have more
at stake than just the damages or loss of profits in that case.
Their failure to enforce their rights may result in the
weakening of these rights over time. 2 McCarthy on Trademarks,
supra, § 17:17, at 17-31. The cost of enforcing the rights may
well be larger than the lost profits in any particular case. In
all events, the district court appears carefully to have
scrutinized Tamko's filing,9 and it articulated a clear
understanding of the applicable lodestar principles. Given
these facts, and given Ideal's failure to furnish the district
court with any reasons why Tamko's fee application should have
been pared down, we do not think that this is an issue that
requires further review.
B. Award to Tamko of Ideal's Profits on the Heritage
Series Products
The district court awarded Tamko Ideal's profits of
$201,385.60, a sum calculated on the basis of conservative
9 For example, the court did not initially approve the
fees and expenses of Tamko's local counsel because their records
were not sufficiently specific about the dates on which services
were rendered, and "a number of invoices appear[ed] to reflect
that several lawyers performed the same work."
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estimates of Ideal's actual profits from the Heritage Series
products between November 1997 and February 2000. Ideal argues
that no profits should be awarded and the district court
committed errors of law; and if any award was justified, this
award was too high.
We review de novo the legal standard by which an award
of defendant's profits is calculated, and for clear error the
factual findings supporting the award.
1. Standard for an Award of Defendant's Profits
The jury found that Tamko and Ideal were in direct
competition. Ideal does not argue that the factual finding was
unsupported, but does argue that the district court was
nonetheless obligated to inquire further as to the percent of
direct market overlap in which such competition took place
before it could award an accounting of profits. At most, Ideal
says, the two companies competed in 20-30% of their business, so
it was error to award 100% of Ideal's profits. Ideal’s argument
is based on product differentiation. That is, Ideal sold only
metal roofing, while Tamko sold only asphalt roofing. Only
customers with residential steep-slope roofs would consider
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buying each of the two types of roofing. Ideal says that only
20% of its sales are in this residential market; its remaining
sales are in the commercial and agricultural buildings market,
where the products do not compete.
The thrust of the argument is essentially that most of
the products Ideal sold under the infringing mark should be
considered to be noncompeting products and so it is inequitable
to award 100% of the profits to Tamko. Under circuit precedent,
there may be infringement, as well as an accounting of
defendant’s profits, even when most of the products are not in
competition, if there is evidence, as there was here, of
likelihood of confusion. See Baker v. Simmons Co., 325 F.2d
580, 582 (1st Cir. 1963) (affirming an award of defendant’s
profits based on defendant's gross sales where some of goods
sold by defendant did not compete with those sold by plaintiff);
Baker v. Simmons Co., 307 F.2d 458, 462-63 (1st Cir. 1962)
(affirming infringement finding where plaintiff held the mark
Simmons for mattresses and sleep products and defendant used the
name Simmonds for reupholstering services).
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An accounting of defendant's profits may be awarded in
a trademark infringement action "subject to the principles of
equity." 15 U.S.C. § 1117(a). Here, Tamko did not seek its
actual damages, but did seek an accounting as well as injunctive
relief. If injunctive relief provides a complete and adequate
remedy, then the equities of the case may not require an
accounting of profits. Aktiebolaget Electrolux v. Armatron
Int'l, Inc., 999 F.2d 1, 5 (1st Cir. 1993) ("We have found 'a
clear distinction between the showing required to establish a
right to injunctive relief and that required to establish a
right to damages.'") (quoting Camel Hair and Cashmere Inst. of
Am., Inc. v. Associated Dry Goods Corp., 799 F.2d 6, 12 (1st
Cir. 1986)). For example, injunctive relief may be adequate if
there has been no fraud or palming off and there is little
likelihood of actual damage to the plaintiff or profit to the
defendant. Champion Spark Plug Co. v. Sanders, 331 U.S. 125,
131 (1947); Valmor Prods. Co. v. Standard Prods. Corp., 464 F.2d
200, 204 (1st Cir. 1972); see generally J. Koelemay Jr.,
Monetary Relief in Trademark Infringement Cases, in Litigating
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Copyright, Trademark and Unfair Competition Cases for the
Experienced Practitioner 287, 294 (1997).
Trying to fit itself into these shoes, Ideal suggests
that injunctive relief should suffice, as it engaged in neither
fraud nor palming off. Ideal’s argument is misplaced. The
presence of injunctive relief does not preclude an accounting
here. There was adequate evidence that Tamko did suffer actual
damages and that Ideal did benefit from its infringement. To
boot, Ideal's contumacious behavior also raises a question of
the adequacy of injunctive relief alone as a remedy.
Repeating its theme that it acted neither fraudulently
nor in bad faith, Ideal says that an accounting of profits is
unwarranted. Even if we were to accept this theme, it has been
this circuit's rule that an accounting of defendant's profits
where the products directly compete does not require fraud, bad
faith, or palming off. AB Electrolux, 999 F.2d at 5-6. Our
rule is thus different from the Restatement rule that an
accounting of profits is conditioned on a showing of bad faith.
Restatement (Third) of Unfair Competition § 37 cmt. e (1995).
Although AB Electrolux was silent on whether "willfulness" is a
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precondition for an accounting, the jury here found
willfulness,10 and so we need not reach the issue in this case.11
This circuit and others have articulated three
justifications for awarding to plaintiff an accounting of the
defendant's profits: (1) as a rough measure of the harm to
plaintiff; (2) to avoid unjust enrichment of the defendant; or
(3) if necessary to protect the plaintiff by deterring a willful
infringer from further infringement. Estate of Bishop, 256 F.3d
at 1054; Minn. Pet Breeders, Inc. v. Schell & Kampeter, Inc., 41
F.3d 1242, 1247 (8th Cir. 1994); AB Electrolux, 999 F.2d at 5-6;
George Brasch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d.
Cir. 1992); see generally 5 McCarthy on Trademarks, supra, §§
30:59, 30:64.
10 As to the meaning of willfulness, the jury was
instructed that "[a]n act is done willfully if done voluntarily
and intentionally."
11 Several circuits require a finding of willfulness to
support an award of the infringing defendant's profits. See,
e.g., Banff, Ltd. v. Colberts, Inc., 996 F.2d 33, 35 (2d Cir.
1993); Frisch's Rests., Inc. v. Elby's Big Boy, 849 F.2d 1012,
1016 (6th Cir. 1988); Reader's Digest Ass'n v. Conservative
Digest, Inc., 821 F.2d 800, 807-08 (D.C. Cir. 1987). We agree
that when the rationale for an award of defendant's profits is
to deter some egregious conduct, willfulness is required. See
Securacomm Consulting, 166 F.3d at 190.
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Ideal’s most cogent argument is that it did not
directly compete against Tamko in all the markets in which it
profited from use of the mark, and so all of its profits should
not go to Tamko. Ideal points to the articulated justification
for the AB Electrolux rule, which is that the defendant acts as
a "trustee" of profits that would otherwise belong to plaintiff.
999 F.2d at 5; see also Valmor Prods. Co., 464 F.2d at 204.
From this, Ideal argues that AB Electrolux established a "but
for" rule: a defendant may be deemed to have acted as "trustee"
for the plaintiff’s profits, which, but for the infringement,
would have been made by plaintiff. It follows then, Ideal
argues, that it cannot be deemed to have acted as "trustee" for
the plaintiff's profits as to the 70-80% of the market where, it
says, the two companies were not in direct competition; that is,
where asphalt roofing and metal roofing did not compete.
We reject any such limitation for an accounting of
profits award, once there has been a finding of direct
competition, for three reasons, each articulated in the Lanham
Act, 15 U.S.C. § 1117(a). First, the limitation misplaces the
burdens, in assuming plaintiffs must meet such a test as to
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remedy, once infringement and direct competition are
established. The burden of showing that not all profits should
be awarded is more akin to the burden of showing the amount of
costs to be deducted from profits, which the Act places on
defendant. Second, such a test ignores the three rationales for
the remedy of accounting of profits. Third, the test is
inconsistent with the inherent equitable power of the district
court and the Lanham Act's designation of an accounting of
defendant's profits as an equitable remedy.
First, we think once plaintiff has shown direct
competition and infringement, the statute places the burden on
the infringer to show the limits of the direct competition: "In
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). Even before
the Lanham Act, the Supreme Court had squarely placed the burden
on the infringer "to prove that his infringement had no cash
value in sales made by him. If he does not do so, the profits
made on sales of goods bearing the infringing mark properly
belong to the owner of the mark." Mishawaka Rubber & Woolen
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Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 206-07 (1942); see
also 5 McCarthy on Trademarks, supra, § 30:65, at 30-128 ("Under
the federal Lanham Act, as well as the common law, it is the
infringer's burden to prove any proportion of his total profits
which may not have been due to his use of the infringing
mark."); Koelemay, supra, at 322-23 ("The burden of
apportionment [of profits resulting directly from infringement
and those not], however, is on the infringer."). Here, the
plaintiff proved the amount of defendant’s sales; we consider
the defense of only partial direct competition to be very
similar to an element of cost or deduction claimed, which
defendant has the burden of showing. At trial, Ideal did not
ask for a jury finding on the percentage of market overlap. Nor
did it present the issue and evidence to the trial judge when he
requested briefing from both parties on the accounting of
profits. The trial judge was under no obligation to raise or
resolve the issue sua sponte. In fact, Tamko disputes Ideal’s
assertions made on appeal about the percentage of direct
competition in the market, and says there was 100% overlap. The
place for resolution of this issue was the trial court.
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Second, even ignoring momentarily Ideal’s waiver at the
district court level, the argument is inconsistent with the
first rationale for providing an accounting of profits --
recompense to plaintiff for the harms it has suffered. Congress
recognized that the defendant’s profits may be an inexact proxy
for the detriment suffered by plaintiffs. Toward this end, the
Act also provides:
If the court shall find that the amount of the
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, according to the circumstances of the case.
Such sum in . . . the above circumstances shall
constitute compensation and not a penalty.
15 U.S.C. § 1117(a). Here, Ideal provided little basis for the
district court to conclude that an award of all of defendant’s
profits was excessive. In addition to its own loss of profits,
a plaintiff may, for example, suffer harm to the goodwill
associated with its mark. But beyond that, the district court,
so long as the sum awarded was not a penalty, was entitled to
consider two other policy objectives once it found that
defendant's conduct was inequitable: awarding defendant's
profits based on unjust enrichment to the defendant, or based on
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a deterrence theory. AB Electrolux, 999 F.2d at 5 ("[W]here
defendant’s inequitable conduct warrants bypassing the usual
rule of actual harm, damages may be assessed on an unjust
enrichment or deterrence theory.").
Even assuming that Tamko and Ideal directly compete as
to only a portion of Ideal's sales, and even if we were to give
Ideal the benefit of plain error review, we could not say that
there was an abuse of discretion in awarding defendant's profits
in order to avoid unjust enrichment where the infringement was
willful. The award itself was conservative. Further, the
evidence is that the infringement was willful, intended to
divert customers from Tamko, and, importantly, to trade on the
goodwill Tamko had established, nurtured, and assiduously
guarded in its Heritage mark. There was also evidence of
customer confusion. Thus, even in the absence of palming off,
it is reasonable to conclude that Ideal was unjustly enriched by
trading on Tamko’s goodwill beyond the two companies' areas of
direct competition.
In cases of at least some direct competition and
willfulness, some role may exist for deterrence in an award of
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an accounting of profits. The role of deterrence must be
carefully weighed in light of the statutory prohibition on the
imposition of penalties. 15 U.S.C. § 1117(a) ("Such sum . . .
shall constitute compensation and not a penalty."); Koelemay,
supra, at 307; see also ALPO Petfoods, Inc. v. Ralston Purina
Co., 913 F.2d 958, 969 (D.C. Cir. 1990) (criticizing deterrence
rationale). In an analogous case, one circuit revised an award
of 20% of defendant’s profits and directed an award of 100% of
the profits because it believed that 20% was "clearly inadequate
to ensure that similar conduct will not reoccur in the future."
Truck Equip. Serv. Co. v. Fruehauf Corp., 536 F.2d 1210, 1223
(8th Cir. 1976). The rule that where there is willful
infringement, an accounting of profits is not necessarily
restricted to the particular area of direct competition is
reinforced by the intention of the Lanham Act to provide
nationwide protection of a mark, in contrast to the more limited
geographic protection afforded by the common law. See Minn. Pet
Breeders, 41 F.3d at 1246. Tamko had an unusually strong
interest in deterrence, given Ideal’s track record, and it would
not be an abuse of discretion to conclude that the accounting of
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profits should reflect some recognition of that interest.
Nonetheless, the deterrence rationale is primarily served by the
attorneys' fees award, and should not be the primary reason for
an accounting of profits. Koelemay, supra, at 308.
Our third reason for rejecting Ideal’s limitation on
profits awards is that it is inconsistent with the equitable
nature of the court’s remedial power. It may well be equitable
for a court to include in the damages calculation an award of
less than the defendant's complete profits in light of less than
complete direct competition. See, e.g., Truck Equip. Serv. Co.,
536 F.2d at 1221-22 (awarding defendant's profits only from
geographical areas where parties directly competed). On other
facts it may be inequitable to give defendants such a benefit.
Mechanical rules are of little aid in this analysis.
Equity must take account of the purposes served by the
Lanham Act:
One is to protect the public so it may be confident
that, in purchasing a product bearing a particular
trade-mark which it favorably knows, it will get the
product which it asks for and wants to get. Secondly,
where the owner of a trade-mark has spent energy,
time, and money in presenting to the public the
product, he is protected in his investment from its
misappropriation by pirates and cheats.
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S. Rep. No. 1333 (1946), reprinted in 1946 U.S.C.C.S. 1274,
1274. As another circuit cogently observed in a case raising the
issue of less than 100% competition, either through product
differentiation or geographical separation: "We think it
doubtful whether even the second of these purposes, protection
of the trademark owner, is adequately served by a rule which
would allow accountings only where the parties directly
compete." Monsanto Chem. Co. v. Perfect Fit Prods. Mfg. Co.,
349 F.2d 389, 395 (2d Cir. 1965); see also Maltina Corp. v. Cawy
Bottling Co., 613 F.2d 582, 585 (5th Cir. 1980) (holding that a
"diversion of sales," or direct competition, is not necessary
for an award of profits because of the need to protect a
trademark as a property right).
The award of Ideal’s entire profits was correct.
2. Amount of Award
This still leaves Ideal's attack on the amount of the
profits award. This attack is also without merit. The
calculation of the award is up to the trial court's discretion,
and we will not disturb it unless it rests on clearly erroneous
-35-
findings of fact, incorrect legal standards, or a meaningful
error in judgment.
The court awarded Tamko $201,385.60 as Ideal's profits
from the sales of its Heritage Series products. To calculate
this amount, the court accepted the $449,522 figure for Ideal's sales
of the Heritage Series product in the United States between January 1,
1998 and January 31, 2000, which was provided by René Laplante (Ideal's
Vice President) in response to an interrogatory. The court prorated
this amount "to account for sales made in November and December of 1997
and February 2000" to arrive at $503,464. The court then subtracted
60% from that amount because "LaPlante previously testified that
Ideal's profit margin on sales of its 'Heritage Series' product [was]
40%." Thus, the court arrived at its final figure.
Ideal argues that the court used the wrong numbers for
the amount of the costs. The defendant has the burden of
producing evidence as to its costs. 15 U.S.C. § 1117(a). Ideal
only provided the district court with a conclusory earnings
statement which included a number for costs. The court decided
that this statement was unreliable without supporting
documentation. Instead, it relied on a statement made by Ideal
at trial as to its profit margin on the Heritage Series
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products. This was not an abuse of discretion, and the amount
of the accounting award is affirmed.
C. Denial of the Motion for Mistrial
Upon redirect examination of Ideal's vice president,
Tamko introduced some evidence concerning the existence of the
preliminary injunction and of the magistrate judge’s conclusion
that Ideal failed to comply with the preliminary injunction.
Ideal moved for a mistrial. The basis for the motion was that
the trial judge erred in admitting the evidence, causing
irreparable prejudice to Ideal. The court denied the motion.
Because the mistrial motion was premised on the
district court’s admission of evidence, Ideal bears an unusually
heavy appellate burden: a double burden of showing abuse of
discretion, both as to the admission of evidence and as to the
denial of the mistrial. United States v. Arias-Santana, 964
F.2d 1262, 1265 (1st Cir. 1992) ("We normally review the denial
of a request for the exclusion of evidence, or a motion for
mistrial, under the same 'abuse of discretion' standard.").
There was no abuse in the admission of the evidence,
and consequently could be no abuse in the denial of the
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mistrial. Initially, when Ideal moved in limine before the
trial to exclude any mention of the preliminary injunction and
the contempt order, the parties reached an agreement to a
stipulated jury instruction, described earlier. The parties
also agreed that they would not introduce evidence of the
contempt order. However, during the cross-examination of René
Laplante (Ideal's Vice President), Ideal's lawyer asked about
the preliminary injunction and whether it referred to the web
site. Then, on redirect, Tamko's lawyer asked about the court's
contempt order and some of its contents.
In response to Ideal's objection to the testimony about
the contempt order, the district judge stated that Ideal's
lawyer had opened the door to this testimony by asking about the
injunction and Ideal's compliance with it on cross-examination.
The next day, when Ideal moved for mistrial based on the
admission of the evidence of the contempt order, the judge
repeated his finding that Ideal had opened the door, and said
"it's unfortunate, but we will do everything reasonable to
minimize any problems from it." The judge then suggested a
curative instruction that would tell the jury "that they can use
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the evidence that they have received and focus as they should
solely on the issue of willfulness. It has no relevance to the
other issues in this case." During the jury instructions, the
court instructed the jury "to disregard all evidence relating to
the February 29, 2000, [preliminary injunction] order. Such
evidence is not to be considered by you in any way in deciding
any issue in this case."
In sum, the district court was admirably sensitive to
the problem of potential prejudice to Ideal and set up ground
rules to avoid the problem. Ideal transgressed those rules and
tried to give the impression that it had complied with the
injunction. In this it went too far and its own examination of
Laplante opened the door. Nevertheless, the district court
continued to be sympathetic to the potential problems with the
admission of the evidence and gave a strong curative instruction
to the jury. See United States v. Chamorro, 687 F.2d 1, 6 (1st
Cir. 1982) (cautionary jury instructions dispelled any
significant risk of unfair prejudice). Admission and exclusion
of evidence, as well as the necessity (if any) for a mistrial is
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committed to the sound discretion of the district court and we
see no error, much less an abuse of discretion.
D. The Permanent Injunction Against Ideal's Use of "H-
Series"
The district court issued a permanent injunction
against Ideal on August 30, 2000, barring Ideal "from using the
term Heritage, Heritage Series, H Series, or any name or mark
confusingly similar to Heritage in connection with the sale,
offer to sell, promotion, marketing, or advertising of any
roofing product or service in the United States."
Ideal argues that the injunction is overbroad in
barring use of "H-Series" by Ideal, because H-Series is not one
of Tamko’s registered trademarks. "[I]njunctive relief should
be no more burdensome to the defendant than necessary to provide
complete relief to plaintiffs," Califano v. Yamaski, 442 U.S.
682, 702 (1979), and courts must "closely tailor injunctions to
the harm that they address," ALPO Petfoods, 913 F.2d at 972.
While generally the issuance of injunctive relief is reviewed
for abuse of discretion, we review underlying factual
determinations for clear error. I.P. Lund Trading ApS v. Kohler
Co., 163 F.3d 27, 33 (1st Cir. 1998).
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On different facts, we might have more sympathy for a
claim that an injunction against the use of a mark not
registered to plaintiff is overbroad. Not here. This case is
a perfect example of the need for the "safe distance rule,"
which counsels that "an infringer, once caught, must expect some
fencing in. . . . Thus, a court can frame an injunction which
will keep a proven infringer safely away from the perimeter of
future infringement." 5 McCarthy on Trademarks, supra, § 30:4,
at 30-12. Indeed, it was after Ideal faced contempt charges
that it came up with "H-Series," effectively dropping the
"eritage" of "Heritage Series." The district court, during the
contempt proceedings, heard evidence that Ideal’s use of "H-
Series" would cause confusion: Tamko representatives and their
customers used "H" as an abbreviated reference for Tamko
Heritage products, and Tamko’s "Heritage 25" product is often
referred to as H25. Cf. Forum Corp. of N. Am. v. Forum, Ltd.,
903 F.2d 434, 441 (7th Cir. 1990); Syrelec v. Pass & Seymour,
Inc., 869 F.2d 838, 839 (5th Cir. 1989); Purolator, Inc. v. EFRA
Distribs., Inc., 687 F.2d 554, 560 (1st Cir. 1982). There are
circumstances in which abbreviations of trademarks may be
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protectable as independent marks. See 1 McCarthy on Trademarks,
supra, § 7:18, at 7-48. Whether or not that is the case here,
the evidence that Ideal's use of "H-Series" would cause
confusion is sufficient to justify the injunction requiring
Ideal to steer clear of this similar abbreviation of the mark.
III.
Although Ideal’s counsel on appeal have striven
mightily, the trial record dooms the appeal. The judgment is
affirmed. Costs are awarded to Tamko.
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Tamko Roofing v. Ideal Roofing
Court: Court of Appeals for the First Circuit
Date filed: 2002-03-07
Citations: 294 F.3d 227
Copy CitationsCombined Opinion