I have written numerous posts about the legalities of bidding on a competitor’s trademarked term to trigger a pay-per-click advertisement. Today, we discuss the remedies you may be able to obtain if you are successful.
After all, why spend a lot of money filing suit if you are going to lose a lot of money doing it? Professor Goldman of the Technology and Marketing Law Blog feels strongly about this writing, “Most keyword ad lawsuits are not economically justified, so trademark owners are almost invariably making a bad business decision bringing them.”
So, what exactly can a prevailing party obtain in such a suit?
Obviously, a trademark owner can get an injunction that prevents the wrongdoer from continuing. More often than not, the offending party stops the practice with the first cease and desist letter. If not, the injunction may be important enough to justify the cost. But if they stop, should you still sue?
People often start off on a case saying it’s a matter of principle and don’t care about the cost. Then, they get the first bill, have to site through a deposition and get involved in the morass of litigation. At that point, principles start to change.
The damages under the Lanham Act may include the defendant’s profits, damages sustained by the plaintiff. To determine whether to award profits, the court considers: (1) whether the defendant had the intent to confuse; (2) whether sales were actually diverted; (3) the adequacy of other remedies; (4) any unreasonable delay by the plaintiff in asserting its rights; and (5) whether this is a palming off case. If the court determines profits are appropriate, the burden shifts to the defendant to show it made no profits from the infringement.
If you are proving your own damages, you don’t have to prove the exact amount to the penny, but you do have to show a reasonable correlation and reasonable certainty as to the amount.
The Lanham Act gives the trial judge discretion to award any amount in excess of the actual damages, but not to exceed three times the amount of actual damages. Enhanced damages will be upheld in cases involving deliberate and fraudulent infringement. Often it requires knowing and intentional conduct that defendants knew their actions were illegal. Cases of innocent infringement and cases in which the defendant made efforts to prevent, and not take advantage of, confusion probably do not merit enhanced damages. If a defendant immediately takes down the offending ad or claims ignorance, it can be difficult to obtain enhanced damages.
The Lanham Act claim allows for recovery of fees in “exceptional cases.” Generally, this means there is a high degree of culpability, bad faith or fraud, or when the defendant’s infringement can be characterized as “malicious”, “fraudulent”, “deliberate” or “willful.” Such a finding must be by clear and convincing evidence. Attorney’s fees are not appropriate in cases in which the law is unclear or in which a party presents what it in good faith believes may be a legitimate defense or in which only mixed results are achieved.
Risks to the Plaintiff
When sued, Defendants often seek to have the plaintiffs’ trademark cancelled (American Blinds, anyone?). The USPTO may order cancellation including a registration that was: (1) obtained fraudulently; (2) has become or is generic; (3) has not acquired secondary meaning; (4) has been abandoned; or (5) has become functional.
A Case Study
In Internetshopsinc.com v. Six C Consulting, Inc., 2011 WL 1113445 (N.D. Ga. March 24, 2011), both parties made golf mats. Plaintiff made one using the trademark “Dura Pro.” The defendant bid on “Dura pro” to bring up paid ads. Plaintiff notified defendant to stop. Within 48 hours, defendant instructed the marketing firm to stop. Unfortunately, the marketing firm did not do so. Plaintiff filed suit. Defendant stopped the practice soon thereafter. Plaintiff sought an injunction, damages, costs and attorneys’ fees, as well as an accounting of defendant’s damages. The defendant conceded it violated the act so the only issue was the remedy.
Plaintiff claimed it lost $123,784 damages by showing a reduction in sales during the time defendant engaged in the practice. The court responded: “The . . . affidavit does not provide a rational basis for awarding, or a reasonable methodology for calculating, actual damages.” Some months during the infringement period had higher sales than some months outside of the pertinent period. The average monthly sales prior to the infringement had a few outlier good months which skewed the average.
The court wrote:
Even assuming that the spreadsheet shows some unquantifiable decline in plaintiff’s sales during the infringement period, there is no evidence to suggest that the decline occurred as a result of defendant’s infringement. The . . . affidavit is not very helpful on his point, because [the affidavit] offers no reasonable basis for determining whether any decline in sales was caused by defendant’s infringement, as opposed to some other or multiple other factors. Nor could she, as she is admittedly not an expert in the market factors that could cause such a decline. Rather, [she] simply assumes a decline in sales was caused by defendant’s activities because it coincided with them. In the absence of any other evidence on damages, [her] assumption is insufficient to withstand summary judgment.
As a result, the court granted the defendant’s summary judgment as to plaintiff’s lost profit damages.
Regarding the defendant’s profits from the infringing conduct, the court wrote:
One of the features of a PPC campaign is that it allows a seller to track how many times its website appeared as a result of a search for a keyword (called “impressions”), how many times a potential customer clicked on the seller’s website following a search (called “clicks”), and whether the customer purchased anything from the website following the search (called “conversions”). In the internet advertising industry, it is standard practice to rely on this type of search data, which is generated by search engines such as Google.
The search data from, defendant’s PPC campaign shows that during the infringement period there were 1,319 impressions resulting from searches for the term “Dura Pro.” Only 35 of those impressions resulted in a click, after which a potential customer was directed to defendant’s website, however, not one of those clicks resulted in a conversion, or a sale, of anything.
Based on this evidence, the court determined there was no evidence of defendant’s profit from the infringing conduct.
The court also denied the request for attorneys’ fees writing:
There is no evidence in the record to suggest that defendant acted In a ‘malicious, fraudulent, deliberate, or willful manner,’ While defendant admits to direct infringement of plaintiff’s mark, it credibly argues and presents substantial evidence that the infringement was unintentional. Defendant was not aware of plaintiff’s rights to the “Dura Pro” mark until it was contacted by plaintiff in January, 2009. Within 48 hours of plaintiff’s contact, defendant acted, albeit not entirely effectively, to eliminate the term “Dura Pro” from the PPC campaign.
As a resut, the plaintiff got its injunction, but nothing else. It is not clear how much the plaintiff spent in attorney’s fees. According to the case, the defendant shortly stopped using the ad after the suit was filed. Was it worth it for the plaintiff?