IP Law Daily Variety Stores awarded $4M in attorney fees in BACKYARD GRILL case against Walmart
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Friday, May 10, 2019

Variety Stores awarded $4M in attorney fees in BACKYARD GRILL case against Walmart

By Robert Margolis, J.D.

Court denies Walmart's post-trial motions and Vartiey's treble damages request, but upholds jury's award of compensatory damages and disgorgement of Walmart's profits

In ruling on several post-trial motions after a jury found that Walmart's use of the mark BACKYARD GRILL plus design infringed several common law marks owned by Variety Stores, the federal district court in Raleigh, North Carolina has: (1) awarded Variety $4,136,168.75 in attorney fees and costs as the prevailing party; (2) denied Variety's motions to amend the judgment to treble damages and enforce a prior agreement between the parties; and (3) denied Walmart's motions for a new trial and judgment as a matter of law (JMOL) (Variety Stores, Inc. v. Wal-Mart Stores, Inc., May 6, 2019, Boyle, T.).

Variety Stores operates retail locations in 16 states and the District of Columbia and sells various outdoor products, including grills and grilling products. In 1997, Variety purchased another retailer and acquired its registered trademark THE BACKYARD for “retail store services in the field of lawn and garden equipment and supplies.” At some point, Variety began using variations of THE BACKYARD—BACKYARD and BACKYARD BBQ—for selling not just lawn and garden equipment but also grills and grilling supplies. In late 2010, Wal-Mart Stores, Inc. (“Walmart”) adopted the name BACKYARD GRILL as the private label mark for its grills and grilling supplies.

In 2014, Variety sued Walmart, alleging that Walmart's sale of products bearing the BACKYARD GRILL+ Design mark infringed Variety's marks. After the district court had granted partial summary judgment in Variety's favor, finding Walmart liable for infringement, and a subsequent bench trial on remedies where, inter alia, the district court ordered Walmart to disgorge $32.5 million in profits, both sides appealed. The U.S. Court of Appeals in Richmond, Virginia, in April 2018 reversed the district court's liability judgment, vacated the damages award, and remanded the case for trial.

In October 2018, in a jury trial on liability, the jury returned a verdict for Variety, finding that Walmart's use of the BACKYARD GRILL+ Design mark was likely to cause confusion in connection with Variety's marks and that Walmart had willfully infringed Variety's marks. The court signed off on the jury's award of $50 million in disgorgement damages, while setting a separate jury trial on damages and profits. The same jury was empaneled in February 2019 for a trial on damages and found Walmart liable for more than $95.5 million in damages—a reasonable royalty of $45,536,846.71 plus the aforementioned $50 million of Walmart profits to be disgorged, with post-judgment interest of 2.56% per annum.

The parties subsequently made several post-trial motions: (1) Variety's motion for attorney fees and non-taxable expenses; (2) Variety's motion to amend the judgment to enforce a prior agreement; (3) Variety's motion for treble damages and prejudgment interest; (4) Walmart's motion for a judgment as a matter of law; and (5) Walmart's motion for a new trial.

Attorney fees. The court found that the case was “exceptional,” such that Variety was entitled to recover its reasonable attorney fees and costs. In a prior ruling before the appeal, the court had found the case to be exceptional, and as it noted, the case “has not become less exceptional” since that time. The court highlighted discrepancies in several of Walmart's litigation positions, how Walmart “exhaustively litigated and relitigated even minor issues,” and how Walmart was now seeking a JMOL for the third time. As the court summarized, a larger company with deeper pockets knowingly chose a product name similar to that of a smaller company and used it to sell the same and similar items.

Having found the case to be exceptional, the court examined Variety's fee petition and awarded Variety the entirety of the amount sought—$3,819,075.00 in attorney fees and $317,093.75 in non-taxable expenses, totaling $4,136,168.75. The court found Variety's evidence of its law firm's costs and fees, including excerpts from AIPLA Report of the Economic Survey for 2015 and 2017, to establish the reasonableness of the hourly rates charged. The court held that redacted legal bills sufficiently disclosed the hours billed and found the 12,813.32 hours claimed to be reasonable.

Amend judgment. The court denied Variety's motion to amend the judgment under Federal Rule 59(e) to include additional damages specified in a confidential agreement between the parties made in 2016. The court held the motion to be premature because (1) the case had not yet reached its ultimate termination (given Walmart's likely appeal), and (2) there was no allegation that Walmart had breached the agreement such that the court should be called on to order enforcement.

Treble damages. Variety also moved under Rule 59(e) to amend the judgment to treble the damages award from $45,536,486.71 to $136,610,540.13 and to obtain prejudgment interest of $3,009,800.27. But as the court noted, it had previously declined to treble the damages award and none of the factors set forth in Rule 59(e) for amending the judgment were present—either an intervening change in the law or new evidence not previously available.

No new trial. The court examined several reasons Walmart cited for seeking a new trial and rejected every one of them. First, Walmart contended that it was prejudiced when the court re-empaneled the same jury for the damages phase of the trial as had been empaneled for the liability phase in October 2018. But the court pointed out that it had indicated during the liability phase that it was likely the same jury would be used and Walmart did not object until the day before the damages phase in February 2019. In addition, the jury was not “re-empaneled,” but remained empaneled throughout the proceedings, consistent with the preferred practice in federal courts.

The court also rejected Walmart's challenge to the court's jury instruction on willful infringement, citing the Fourth Circuit's prior decision in the case that Variety presented sufficient evidence for a reasonable jury to find that Walmart had acted in bad faith.

Next, Walmart contended that in determining that Walmart should disgorge $50 million in profits, the court improperly considered evidence of Walmart's national revenue, even though Variety does not sell its products nationally. As the court pointed out, the Lanham Act confers nationwide rights, and using the reasonable royalty method of determining profits from a hypothetical license, any such license Walmart would have obtained from Variety would have been national in scope. Similarly, the court upheld its instruction to the jury on damages, finding that it met the standard that a reasonable royalty be “rationally related” to the scope of the infringement. The court had instructed that the jury should award compensatory damages “consist[ing] of Variety's direct economic losses resulting from the effect of Walmart's conduct,” or “the amount of money that will reasonably and fairly compensate Variety for any injury you find was caused by Walmart's infringement or unfair competition.”

No JMOL. Finally, the court denied Walmart's motion for judgment as a matter of law, finding that Variety introduced sufficient evidence to support its claim on every issue that Walmart challenged. Those included the basis for a finding of willful infringement, the determination of reasonable royalty, and Variety's entitlement to disgorgement.

The court rejected Walmart's argument that brand names play a minimal role in customers' purchasing decisions, and therefore Variety could not prove that the infringement caused it damages. As the court reasoned, once the jury found that willful infringement occurred and had caused financial harm to Variety resulting in unwarranted profits, Variety had met its burden. Any argument that the profits were caused by something other than the infringement was not a causation argument but instead an argument for deduction from damages for which Walmart bore the burden of proof.

Finally, awarding both damages and profits was not an improper “penalty,” the court found, since the jury was instructed to consider those two elements independent of each other and the court could not say no reasonable jury would have awarded both.

This case is No. 5:14-CV-217-BO.

Attorneys: Christina Davidson Trimmer (Shumaker, Loop & Kendrick, LLP) for Variety Stores, Inc. Elizabeth E. Brenckman (Fish & Richardson, PC) for Wal-Mart Stores, Inc.

Companies: Variety Stores, Inc.; Wal-Mart Stores, Inc.

MainStory: TopStory Trademark NorthCarolinaNews

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