IP Law Daily Marketer loses appeal of $600K infringement award to DirecTV
Tuesday, January 3, 2017

Marketer loses appeal of $600K infringement award to DirecTV

By Mark Engstrom, J.D.

A federal district court did not abuse its discretion by increasing a jury award to DirecTV—from $25,000 to more than $600,000—for a marketer’s infringing use of the company’s trademark, the U.S. Court of Appeals in Richmond, Virginia, has ruled. Because the Lanham Act allowed prevailing plaintiffs to recover a share of the defendants’ profits from trademark infringement, and because the district court had reasonably estimated the amount of profits that the marketer had unjustly received from its infringing activities (i.e., the unauthorized use of the DIRECTV mark in telephone directories), the larger award was affirmed (Exclaim Marketing, LLC v. DirecTV, LLC, December 29, 2016, per curiam).

The appellate court also concluded that DirecTV’s placement of 175 calls to the marketer over a six-year period—"at times using false names"—was not an unfair or deceptive trade practice, as a matter of law, under North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA). The district court’s grant of judgment as a matter of law to DirectTV—an action that nullified a $760,000 jury award to the marketer—was therefore affirmed. Finally, the district court did not err in denying attorney fees to DirecTV.

DirecTV discovered that Exclaim Marketing was using the DirecTV name, without prior authorization, in listings for telephone directories. DirecTV used an employee and an outside company to determine the owner those listings, and it did so by calling the phone numbers that were included in the listings. At times, the callers would give the telemarketer a false name as part of their conversation.

When DirecTV identified Exclaim as the owner of telephone numbers that were included in the allegedly infringing listings, the company contacted Exclaim and asked to have the listings removed or renamed. Some of the listings were indeed removed, but DirecTV continued to identify infringing listings that were owned by Exclaim.

In 2011, Exclaim sued DirecTV for UDTPA violations, and DirecTV filed a counterclaim for trademark infringement under the Lanham Act. A jury found that DirecTV had "telephoned Exclaim Marketing, LLC’s call center over 175 times over a six year period, at times using false names"—conduct that had proximately caused a UDTPA injury to Exclaim—and further found that Exclaim was entitled to damages in the amount of $760,000.

The district court granted judgment as a matter of law—to DirecTV—on Exclaim’s UDTPA claim, concluding that the allegedly unlawful phone calls were neither "in or affecting commerce" nor "unfair or deceptive" acts. In addition, the district court awarded DirecTV $610,560—for trademark infringement—based on a calculation of the profits that Exclaim had derived from each infringing phone number. Finally, the district court denied DirecTV’s motion for statutory attorney fees, concluding that fees were unwarranted because the case was not "exceptional."

Trademark infringement. The appellate court concluded that the district court had not abused its discretion in granting DirecTV’s motion for increased profits. Significantly, the plain language of the Lanham Act allowed prevailing plaintiffs to recover a share of the profits that the defendants had gained from their infringement activities.

In this case, the jury specifically found that Exclaim had intended to confuse or deceive consumers by using DirecTV’s mark. Moreover, an injunction would not provide any relief for Exclaim’s past wrongdoing, and it would not adequately deter future misconduct, given the scope and profitability of Exclaim’s past misconduct.

In addition, the district court had reasonably rejected Exclaim’s argument that DirecTV should not be entitled to increased profits because the company had unreasonably delayed the filing of its lawsuit. Finally, three trial exhibits supported the district court’s attribution of 159 infringing telephone numbers to Exclaim, and the district court had reasonably estimated the profits that Exclaim had unjustly received, according to the appellate court. Any minor variation in the precise number of telephone lines did not make the district court’s award an abuse of discretion, the appellate court explained. Greater precision in arriving at the exact amount of the award was simply not required.

UDTPA. The district court did not err in concluding that DirecTV’s placement of more than 175 telephone calls over a six-year period could not, as a matter of law, constitute an "unfair" or "deceptive" trade practice under the UDTPA, the appellate court ruled. The district court’s grant of judgment as a matter of law—to DirecTV, on Exclaim’s UDTPA claim—was therefore affirmed.

"Unfair" prong. The district court correctly held that the evidence did not show that DirecTV’s conduct was egregiously or aggravatingly "unfair." The conduct at issue was DirecTV’s placement of more than 175 phone calls to Exclaim’s call center, over a six-year period, an average of two to three calls a month. It was not unfair to Exclaim, the appellate court explained, that its own publicly available telephone listings had led DirecTV to call the marketer’s call centers. DirecTV had a legitimate business purpose for placing those calls, the court noted, because the associated phone numbers were part of the infringing listings.

For years—and even after the republication of certain telephone directories—DirecTV continued to discover infringing listings that were tied to Exclaim, the court observed. DirecTV thus acted "fairly" when it called the listed numbers to determine who their owner was. Moreover, the disparity in corporate size—between Exclaim and DirecTV—was, by itself, insufficient to indicate an unfair practice.

According to the appellate court, determining whether an inequitable assertion of power was "unfair" involved an examination of that size disparity in combination with what an actor did, and in this case, DirecTV had not exercised a superior degree of power or an advantageous market position by calling publicly available phone numbers to identify their owners.

"Deceptive" prong. Similarly, DirecTV’s telephone calls were not "deceptive" acts under the UDTPA. According to the appellate court, there was nothing inherently deceptive about the jury’s factual finding that DirecTV had placed those calls. Even if using a false name or pretending to be a potential customer was deemed "deceptive," neither of those acts was "egregiously" or "aggravatingly" deceptive, as required by the UDTPA.

According to a DirecTV employee who had used a false name to call numbers that were associated with the infringing telephone listings, she was often stonewalled in her efforts to identify the owner of those numbers. When she used her real name to place calls, telemarketers would be uncooperative or would hang up. DirecTV’s use of a false name was therefore intrinsically linked to—and was an effective means of investigating—the source of the infringing listings. For that reason, the employee’s actions did not constitute an egregiously or aggravatingly deceptive trade practice.

Attorney fees. DirecTV argued that the district court should have awarded attorney fees because Exclaim had willfully infringed its trademark. The appellate court disagreed. Even if the infringement was willful, a finding of willfulness was no longer sufficient to show that a case was exceptional. Instead, willfulness was merely "part of the totality of the circumstances" that informed the court’s analysis. Because DirecTV did not challenge the district court’s denial of attorney fees beyond its willfulness argument, the appellate court found that the denial of attorney fees was not an abuse of discretion.

The case is No. 15-2339.

Attorneys: Joseph H. Nanney Jr. (Meynardie & Nanney, PLLC) for Exclaim Marketing, LLC. Michael Ernest Williams (Quinn, Emanuel, Urquhart & Sullivan, LLP) and Robert C. Van Arnam (Williams Mullen) for DirecTV, LLC.

Companies: Exclaim Marketing, LLC; DirecTV, LLC

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