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Ninth Circuit Rules on Lanham Act Enhanced Damages Awards
Practical Law Legal Update 2-518-4644 (Approx. 3 pages)
Ninth Circuit Rules on Lanham Act Enhanced Damages Awards
by PLC Intellectual Property & Technology
| Published on 19 Mar 2012 • USA (National/Federal) |
In Skydive Arizona, Inc. v. Quattrocchi, the US Court of Appeals for the Ninth Circuit reversed a district court's award of enhanced damages for false advertising and trademark infringement under the Lanham Act, finding that the award was improperly made to punish the trademark infringer.
Key Litigated Issues
The key issue before the US Court of Appeals for the Ninth Circuit in Skydive Arizona, Inc. v. Quattrocchi was whether the district court abused its discretion by enhancing a plaintiff's actual damages under the Lanham Act to punish a defendant's willful misconduct.
Background
Skydive Arizona, Inc., a skydiving center, sued Skyride, an advertising and booking service for skydiving centers for:
- False Advertising and trademark infringement under Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)).
- Cybersquatting under Section 43(d) of the Lanham Act (15 U.S.C. § 1125(d)).
The trial jury awarded Skydive Arizona actual damages for Skyride's willful false advertising and trademark infringement, lost profits and statutory cybersquatting damages. The district court then doubled the actual damages award. The final judgment totaled:
- $600,000 in statutory damages.
- $7 million in enhanced actual damages.
- $2,500,004 in disgorged profits.
The district court also granted a permanent injunction against Skyride in Arizona.
Skyride appealed the district court's grant of partial summary judgment in favor of Skydive Arizona for the false advertising claim, the jury's actual damages and profits awards, and the district court's damages enhancement. Skydive Arizona cross-appealed the district court's limitation of the permanent injunction, seeking a nationwide injunction.
Outcome
In its March 12, 2012, decision, the Ninth Circuit reversed the district court's award of enhanced damages, finding that the district court abused its discretion by improperly enhancing the actual damages award to punish the defendant.
The Lanham Act allows a district court to use its discretion to award up to triple the amount of actual damages to compensate a trademark holder but expressly forbids awarding damages to punish an infringer (15 U.S.C § 1117(a)). The Ninth Circuit found that the district court inappropriately used actual damages enhancement as a punitive damage by focusing on the need for the defendant to appreciate and accept the wrongfulness of its conduct.
The Ninth Circuit also affirmed:
- The district court's partial summary judgment in favor of Skydive Arizona on the false advertising claim.
- The actual damages award, finding it was supported by the jury's reasonable inferences and assessments based on substantial evidence in the record.
- The limitation of the permanent injunction to Arizona.
Practical Implications
The Lanham Act allows a judge or jury to award up to triple the amount of lost profits, actual damages and costs to compensate a trademark holder. However, parties to a trademark dispute should remember that the Lanham Act does not allow a judge or jury to award damages to punish an infringer, no matter how willful the defendant's conduct is.