IP Law Daily Jury award over fitness equipment mark reduced for lack of actual consumer confusion
Wednesday, May 6, 2020

Jury award over fitness equipment mark reduced for lack of actual consumer confusion

By Brian Craig, J.D.

The court vacated a jury award of $1 million in compensatory damages but doubled the disgorged profits to $500,000 and awarded attorney fees.

The federal district court in Columbus, Ohio has reduced a jury verdict award from $1.25 million to $500,00 stemming from a former licensee’s failure to remove references to a fitness equipment company’s trademark MAX RACK on the former licensee’s website. The court vacated the jury award of $1 million in compensatory damages finding that no evidence of actual consumer confusion in the trademark infringement case. The court, however, exercised its discretion and increased the jury award of $250,000 in disgorged profits to $500,000. In addition, the court awarded over $384,000 in attorney fees and also issued a permanent injunction (Max Rack, Inc. v. Core Health & Fitness, LLC, May 5, 2020, Marbley, A.).

Max Rack, Inc. markets and sells weightlifting equipment throughout the United States, including a machine sold under the brand name MAX RACK. It holds a trademark registration for MAX RACK. In 2006, Max Rack entered into a licensing agreement with Star Trac Strength, Inc., in which Star Trac obtained the exclusive right to manufacture, sell, and distribute the MAX RACK until 2015. After expiration of the licensing agreement, Core Health and Fitness, LLC, a successor to Star Trac, continue selling a product identical to the MAX RACK but under the name FREEDOM RACK. Core Fitness failed to remove all references to MAX RACK from its website and continued to sell MAX RACK units after the contract expired. Max Rack sued for trademark infringement. At trial, the jury awarded Max Rack $1 million in compensatory damages and $250,000 in disgorged profits. The jury concluded that the former licensee intentionally infringed upon the protected trademark. Both parties filed a variety of post-trial motions.

New trial. The court first denied the former licensee’s renewed motion for judgment as a matter of law or, in the alternative, a motion for a new trial. In denying the renewed motion for judgment as a matter of law, the court recognized that the jury heard all of the evidence, deliberated for several hours, and rendered a verdict. The court’s role post-trial is not to question how the jury assessed this evidence, so long as there was evidence which, if believed, could support their verdict. Because such evidence existed in this case, the court denied the renewed motion for judgment as a matter of law and the motion for a new trial.

Compensatory damages. The court concluded that the jury award of $1 million in compensatory damages cannot stand as compensatory damages requires evidence of actual consumer confusion. While evidence of a likelihood of confusion may be sufficient to obtain injunctive relief under the Lanham Act, it is not sufficient to sustain an award for compensatory damages. An award of compensatory requires marketplace injury as a result of the infringing conduct. The court found no evidence in the record demonstrating marketplace injury. Therefore, the court vacated the jury verdict award of $1 million in compensatory damages.

Enhanced damages. The court exercised its discretion and increased the lost profits award from $250,000 to $500,000. Max Rack requested enhanced damages of $3,750,000—three times what the jury awarded at trial. The court recognized that 15 U.S.C. § 1117(a) grants a district court a great deal of discretion in fashioning an appropriate remedy in cases of trademark infringement. The court determined that the award of $250,00 in lost profits seemed sufficient to deter future misconduct without constituting an impermissible penalty. The court found that the evasiveness of the defendants during the discovery phase could have undoubtedly hindered the plaintiff’s ability to calculate accurately the defendants’ infringing profits. Courts may rely on misconduct during discovery to exercise their discretion and enhance damages. Therefore, the court doubled the lost profits award to a total of $500,000.

Attorney fees. The court found exceptional circumstances justifying the award of attorney fees in the amount of $384,598 in favor of Max Rack. Courts have consistently held that where a defendant’s intentional infringement continues after a lawsuit is filed, this can amount to an exceptional case to support attorney fees. The jury determined that the trademark infringement was intentional. Moreover, the defendants concede that their trademark infringement persisted after this suit was filed. In fact, this infringement continued even through the date of trial. The defendants did not dispute the amount of the attorney fees requested. The court found that the rates requested, including a billing rate of $450 per hour for one attorney, and the hours expended, were reasonable.

Permanent injunction. Finally, the court issued a permanent injunction requiring a notice on the former licensee’s website and enjoining the former licensee from producing MAX RACK equipment labels. The court declined to order the defendants to cooperate in the completion of a preliminary inspection of potentially mismarked goods. The court found that this would be highly invasive to consumers, potentially burdensome for the court to regulate, and costly for the defendants to fund. Rather, the court required the defendants to continue to post a notice on their website wherever the term MAX RACK appeared indicating that MAX RACK was a registered trademark of Max Rack, Inc., so long as warranties continue to run. Furthermore, the court enjoined the defendants from producing MAX RACK equipment labels.

This case is No. 2:16-cv-01015-ALM-CMV.

Attorneys: Joseph P. Okuley (Okuley Smith LLC) for Max Rack Inc. Andrew Evan Samuels (Baker & Hostetler LLP) for Core Health & Fitness, LLC.

Companies: Max Rack, Inc.; Core Health & Fitness, LLC

MainStory: TopStory Trademark GCNNews OhioNews

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