Opinion
CIVIL ACTION NO. SA-OO-CA-0137 OG
September 7, 2001
MEMORANDUM AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
I. Introduction
In this lawsuit, plaintiffs, the United Services Automobile Association and its Alliance Services (hereinafter collectively referred to as "USAA" or "plaintiff'), allege that defendant, National Car Rental System, Inc. ("National") committed trademark infringement by engaging in the unauthorized use of its trade name and service marks when providing car rental services to USAA members. USAA asserts the following causes of action against National: common law unfair competition, false designation of origin under Section 43(a) of the Lanham Act, state and federal trademark dilution, and breach of contract and/or unjust enrichment. In response to one of National's summary judgment motions, USAA withdrew its breach of contract claim so that cause of action is no longer at issue in this case. Through this action, USAA seeks injunctive relief to permanently enjoin National: (1) from implying or making representations that a contract and/or agreement exists between National and USAA for any purpose, including car rental services; (2) from engaging in unfair competition with USAA by implying any affiliation with USAA; (3) from engaging in conduct which is likely to cause confusion or mistake or deceive customers with respect to the source of origin of goods or services offered by the Defendant; and (3) from diluting USAA's name or marks. Besides its request for permanent injunctive relief, USAA seeks an accounting from National of all the revenue it received from car rentals to USAA members in the past four years and asks that National be ordered to pay USAA all profits received by National and all monetary damages suffered by USAA as a result of National's unlawful conduct, pursuant to 15 U.S.C. § 1117 (a). USAA further requests an award of punitive damages on the ground that National's infringement was "knowing and willful."
USAA is an insurance company and the parent company of a family of insurance and diversified financial services companies that does business worldwide. Docket Entry 1, at 2-3. Over 99% of USAA's members are current or retired military personnel, their families and/or dependents. Docket Entries 68 70, at 2, citing to Joseph Bruja's Deposition, at 32:4-5, attached as Exhibit 4. USAA Alliance Services, L.P., is a related company that manages the alliance programs. Id . citing to Linda Giessel King's Deposition, at 16-17, attached as Exhibit 5. Alliance programs are third-party vendors that provide services directly to USAA members. Id . citing to Linda Giessel King's Deposition, at 17:18-24, attached as Exhibit 6. USAA earns income through a variety of means. It is undisputed, however, that USAA is not in the business of providing rental car services. Id . at 2, citing to Jeanne Dowda's Deposition, at 116:5-9, attached as Exhibit 7 and Patricia Godkin's Deposition, at 171:9-10, attached as Exhibit 8.
National is one of the largest car rental companies in the United States, with annual revenues of $1.5 billion. Docket Entries 68 70, at 2; and Docket Entry 65, at (unnumbered) 5 fn. 14, citing to deposition testimony of James R. Wood, National's Vice-President.
Docket Entry 1, at 7-10.
Docket Entry 84, at 2.
Docket Entry 1, at 11.
Id .
" Id . at 12.
This Memorandum and Recommendation addresses the following pending motions: USAA's motion for partial summary judgment on the measure of damages pursuant to 15 U.S.C. § 1117 (a) (Docket Entry 65); National's motion to strike the same (Docket Entry 78); National's motion for summary judgment on USAA's claim for an accounting of profits (Docket Entry 68); and National's motion for partial summary judgment on its defenses to USAA's breach of contract and unjust enrichment claims (Docket Entry 70). A separate Memorandum and Recommendation will address National's summary judgment motions on its affirmative defenses of laches, estoppel, limitations (Docket Entry 69), acquiescence and unclean hands (Docket Entry 71).
National, in addition, has also moved for an oral hearing on its pending summary judgment motions. Docket Entry 91. It is not the practice of this court to conduct hearings on summary judgment arguments. Here, the issues have been fully briefed and extensive summary judgment evidence has been presented. Because the court does not believe that a hearing on these motions is necessary, National's motion for an oral hearing is hereby DENIED .
I have jurisdiction to enter this Memorandum and Recommendation under 28 U.S.C. § 636(b) and the District Court's Order referring all pretrial matters in this proceeding to me for disposition by order, or to aid in their disposition by recommendation where my authority as a Magistrate Judge is statutorily constrained.
Docket Entry 30.
II. Jurisdiction
Jurisdiction is based on the Lanham Act, 15 U.S.C. 1121, 28 U.S.C. § 1331 (federal question), 28 U.S.C. § 1332 (diversity jurisdiction), 28 U.S.C. § 1338 (jurisdiction to adjudicate cases involving trademark infringement and accompanying claims of unfair competition), and 28 U.S.C. § 1367 (a) (supplemental jurisdiction).III. Relevant Factual Background
Plaintiff states in its federal court complaint that it has been doing business under its acronym, "USAA," since 1927. The acronym is used as both a service mark and a trade name for United Services Automobile Association. USAA advertises its services throughout the United States under the trade name and service mark of "USAA." In addition, USAA is the owner of numerous trademark/service mark registrations containing the acronym "USAA." According to USAA, a representative sample of its registrations with the United States Patent and Trademark Office, involving motor vehicle and travel-related services, as well as insurance, is as follows:
Docket Entry 1, at 2.
Id .
Id . at 3.
Id .
Mark Filing Date Registration Date Registration No.
Word Mark — 3/01/1965 3/29/1966 806,520 USAA (Insurance)
Id . at Exhibit A.
Service Mark — 7/17/1989 4/17/1990 1,592,395 USAA, with logo (auto leasing)
Id . at Exhibit J.
Word Mark — 7/17/1989 5/1/1990 1,594,579 USAA, with logo (travel agency)
Id . at Exhibit I.
Service Mark — 12/26/1990 6/30/1992 1,698,530 USAA Road and Travel Plan (auto services)
Id . at Exhibit H.
Service Mark — 11/1/1991 9/1/1992 1,712,134 USAA (discount buying; auto leasing; travel)
Id . at Exhibit G.
Word Mark — 5/8/1992 1/12/1993 1,745,781 USAA Travel Log, A World of Travel at Your Command travel newsletters)
Id . at Exhibit E.
USAA, with logo 12/16/1994 12/26/1995 1,943,955 (membership mark)
Id . at Exhibit B.
Service Mark — Join 2/10/1997 8/11/1998 2,180,105 Forces with USAA (discount buying; auto leasing; travel)
Id . at Exhibit F.
Service Mark — 3/10/1998 10/5/1999 2,282,821 USAA Roadside Assistance (towing insurance)
Id . at Exhibit C.
Trademark — USAA 5/4/1998 5/18/1999 2,246,185 Travel Log (travel newsletters)
Id . at Exhibit D.
USAA and National entered into a marketing agreement, effective April 1, 1992, in which National agreed to provide car rental services to USAA members at a special discount, in exchange for USAA agreeing to market National's services to its members. The primary elements of the Agreement included: 1) recognizing National as a recommended supplier of rental car services to USAA members and staff; 2) USAA agreeing to market National as a primary supplier to its membership by placing the National name and its trademark toll-free number ("1-800-CAR RENT")' on USAA membership cards, credit card bill inserts, Members Guide to Services, and various other advertising mediums periodically sent by USAA to its members; 3) National agreeing to offer contract rates, discounts from published and promotional rates and other benefits, such as waiving the right to collect for loss and damage to the vehicle (LDW) from the renter; 4) National agreeing to pay USAA a quarterly marketing allowance between 2% and 5% based upon net time and mileage revenue received by National from rentals by USAA members; and 5) National agreeing to guarantee contract rates for USAA members as long as USAA provided National with a minimum of $2,000,000 rental revenue annually. The revenue was to be tracked and measured by National through their Recap system utilizing a specific contract identification number (5142060) assigned to USAA. The Agreement further provided that either party could terminate it, for convenience and without cause, by notifying the other party in writing, and the termination was to become effective ninety days after receipt of the notice.
Docket Entry 82, at 3 Exhibit 14; and docket entries, 68 70, at ¶ 3. This Agreement apparently replaced an earlier contractual arrangement between the parties that had been in effect since 1990. Docket Entry 82, at ¶ 3.
Id .
Id . This contract identification number also appeared on the back of the USAA membership card.
Id . at Exhibit 14, Section 12 of the Agreement, entitled "Termination."
USAA gave National notice of its intent to terminate the Agreement in two separate letters dated December 11 and 14, 1992. Although termination could occur without cause, USAA noted lack of customer support and failure to waive the LDW, as its primary reasons for non-renewal. The effective termination date of the agreement was March 31, 1993. In its non-renewal notices, USAA requested that National representatives inform USAA members who attempted to use the USAA recap number 5142060, that the account has been terminated. What transpired next is the subject of this lawsuit.
at ¶ 4, Exhibit 14; and docket entries 68 70, at ¶ 5, citing to correspondence dated December 11 and 14, 1992, from Richard Goertz, from USAA's Buying Services, to John R. Swanson at National, attached as Exhibit 12.
Id .
Docket no. 82, at ¶ 4; and docket entries 68 70, at ¶ 5.
Id . at Exhibit 14.
USAA maintains that National continued to represent to USAA members that it had an affiliation with USAA after the termination date of the contract or after March 31, 1993. Based on the summary judgment evidence of record, it appears that in fact USAA members did rent vehicles from National and that National did continue to offer USAA members a discount through the expired contract identification number 5142060. It is also undisputed that USAA first became aware of National's unauthorized practices on June 30, 1993. Subsequently, on September 1, 1993, USAA sent its first cease and desist letter to National, requesting that National: refrain from using USAA's name and taking reservations under the expired contract identification number; inform USAA members that the contract had been cancelled; and pay the marketing assessment owed to USAA for the last quarter of the contract year, January 1 to March 31, 1993. Based on telephone conversations between USAA and National's representatives following the September 1, 1993 correspondence, USAA understood that National had agreed to stop taking reservations under the expired contract identification number and that National customer representatives would no longer represent to USAA members that an agreement existed between the companies. USAA maintains, however, that National, through its customer representatives, continued to represent to inquiring USAA members that an agreement existed between the parties, and then using the expired contract identification number for car rental reservations. The record reflects that USAA sent cease and desist letters to National on January 12, 1994, February 17, 1994, December 30, 1996 and January 3,2000. USAA filed the instant lawsuit after receiving no response from National to its January 3,2000 letter. In that regard, USAA states that since 1993 until the present:
Id . at Exhibits 18, 22, and 26.
Docket Entry 67, ¶ 11; and docket entry 82, ¶ 5. USAA alleges that it discovered National's continuation of discount rentals to USAA members when a USAA member complained to USAA regarding his treatment by National; specifically, that he had not received the benefits discussed in the marketing materials by USAA regarding National rentals.
Id . at Exhibit 20.
Id . at Exhibits 23, 25, 28 34.
National has been using USAA's name together with the contract identification number on rental agreements provided to USAA members. In addition, the USAA name and contract identification number was used on rental receipts provided to USAA members. National even began to use USAA as an example in National's training of reservations and listed USAA and the USAA contract number in its top twenty-nine affinity accounts. . . . With the exception of eliminating USAA's name from the list of clubs and associations in the Apollo and Sabre airline reservation systems, National has never made any changes or complied with any of the requests to cease and desists contained in the letters from Linda King, Robert Newman, Glenn Alford, or Debbie Coulton. National's continued use of the USAA name has worked to their gain. A recent survey was conducted using the exact facts as exist in this case and a 45% confusion rate was found among the USAA members surveyed. The USAA members mistakenly believed that there was an affiliation, connection or association between USAA and National. This resulted in sales to USAA members in excess of $15,000.000 since the termination of the contract.
at ¶¶ 12 13 (and referenced footnotes).
National, on the other hand, maintains that although it continued to offer courtesy discounts to USAA members after the termination date of the Agreement, the discounts offered were, for the most past, the same as those given to members of the United States military. These discounts were substantially less than the discount provided in the expired Agreement. National further contends there is no evidence that it ever took any direct action to solicit USAA members, through its own marketing efforts or otherwise, following termination of the Agreement. National in addition maintains that since USAA cannot show that it lost profits as a result of National's alleged infringement, USAA is not entitled to collect any monetary damages in this suit.
Docket Entries 68 70, at ¶¶ 6-8.
Docket Entry 68, at ¶ 28.
Moreover, National argues that at least since February 25, 1994, it consistently advised USAA that it would continue to offer courtesy discounts to USAA members, or to whomever it wished, irrespective of the existence of any written agreement between the parties. In other words, National argues that it has always been National's position that USAA has no legal basis for preventing it from offering a discount to any car renter, including USAA members. According to National, USAA's unreasonable delay in filing the instant suit by waiting six plus years after it first knew of National's alleged unauthorized use, has greatly prejudiced National in properly defending itself in this suit. In that regard, National has invoked the affirmative defenses of laches, estoppel, limitations, acquiescence and unclean hands, to bar USAA's suit. In addition, National contends that based on USAA's actions in soliciting bids from National in 1997 to again join in an affiliation with USAA, National believed that USAA was no longer pursing its claims against National, and that it had indeed consented to, National's conduct in providing car rental services to USAA members.
Docket Entry 82, at Exhibit 26.
Docket Entry 68, at ¶¶ 24-27.
Docket Entries 69 71.
Docket Entry 71.
IV. Issues Presented
1. Whether USAA is entitled to partial summary judgment on the measure of monetary damages it is entitled to receive from National, prior to establishing National's liability under section 43(a) of the Lanham Act?
2. Whether National is entitled to summary judgment on USAA's claim for an accounting of profits under 15 U.S.C. § 1117(a)?
3. Whether National is entitled to summary judgment on USAA's claim for unjust enrichment?
V. Analysis A. Summary Judgment Standard
The applicable standard in deciding a motion for summary judgment is set forth in FED. R. CIV.P.56, which provides in pertinent part as follows:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
FED.R.CIV.P. 56(c); Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986).
Mere allegations of a factual dispute between the parties will not defeat an otherwise proper motion for summary judgment. Rule 56 requires that there be no genuine issue of material fact. A fact is material if it might affect the outcome of the lawsuit under the governing law. A dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Therefore, summary judgment is proper if, under governing laws, there is only one reasonable conclusion as to the verdict; if reasonable finders of fact could resolve a factual issue in favor of either party, summary judgment should not be granted.
Anderson v. Liberty Lobby. Inc . 477 U.S. 242, 247 (1986).
Anderson 477 U.S. at 248; Thomas v. LTV Corp ., 39 F.3d 611, 616 (5th Cir. 1994).
Id . See also Wise v. E.I. DuPont De Nemours Co ., 58 F.3d 193, 195 (5th Cir. 1995).
Anderson , 477 U.S. at 249.
The movant on a summary judgment motion bears the initial burden of informing the court of the basis for its motion and identifying those portions of the record which it alleges demonstrate the absence of a genuine issue of material fact. To satisfy this burden, the movant must either submit evidentiary documents that negate the existence of some material element of the nonmoving party's claim or defense, or if the crucial issue is one for which the nonmoving party will bear the burden of proof at trial, merely point out that the evidentiary documents in the record contain insufficient proof concerning an essential element of the nonmoving party's claim or defense. Regardless of whether the movant accompanies its summary judgment motion with affidavits or other evidentiary materials, the motion must be granted if the evidence before the court demonstrates that the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied. Once the movant has carried that burden, the burden then shifts to the party opposing the motion to present affirmative evidence in order to defeat a properly supported motion for summary judgment.
Celotex Corp ., 477 U.S. at 323.
Edwards v. Aguillard , 482 U.S. 578, 595 n. 16 (1987); and Celotex Corp ., 477 U.S. at 325.
Id .
Anderson , 477 U.S. at 257.
The nonmoving party cannot discharge this burden by referring to the mere allegations or denials of the nonmoving party's pleadings. Rather, the nonmovant must, either by submitting opposing evidentiary documents or by referring to evidentiary documents already in the record, set out specific facts showing the existence of a genuine issue for trial. The court will look at the record in the light most favorable to the nonmovant drawing all inferences most favorable to that party. Nevertheless, "conclusory allegations, speculation, and unsubstantiated assertions are inadequate to satisfy the nonmovant's burden." Summary judgment is mandated if the nonmovant fails to make a showing sufficient to establish the existence of an element essential to his case on which he bears the burden of proof at trial.
FED R.CIV.P. 56(e); Anderson , 477 U.S. at 250; State of Texas v. Thompson , 70 F.3d 390, 393 (5th Cir. 1995).
Celotex Corp . 477 U.S. at 324; Fields v. City of South Houston, Texas , 922 F, 2d 1183, 1187 (5th Cir. 1991); Neff v. American Dairy Oueen Corp ., 58 F.3d 1063, 1065 (5th Cir. 1995), cert. denied , 516 U.S. 1045 (1996).
Hibernia Nat'l Bank v. Carner , 997 F.2d 94, 97 (5th Cir. 1993). See also Little v. Liquid Air Corp ., 37 F.3d 1069, 1075 (5th Cir. 1994) (holding that a nonmovant cannot discharge her burden with doubt as to the material facts, by conclusory allegations, unsubstantiated assertions, or by only a scintilla of evidence).
See Douglass v. United Services Auto. Ass'n , 79 F.3d 1415, 1429 (5th Cir. 1996) (citing Forsyth v. Barr , 19 F.3d 1527, 1533 (5th Cir.), cert denied , 513 U.S. 871 (1994)).
Celotex Corp ., 477 U.S. at 322 ("In such situation, there can be "no genuine issue as to any material fact, since a complete failure of the proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial."). Id . at 323.
Accordingly, summary judgment motions permit the court to resolve lawsuits without the necessity of trials if there is no genuine dispute as to any material facts and the moving party is entitled to judgment as a matter of law.
See Fields, 922 F.2d at 1187.
USAA argues that, "contingent upon USAA first proving a likelihood of confusion under 15 U.S.C. § 1125 (a)," it is entitled to monetary damages under 15 U.S.C. § 1117 (a) in the form of National's profits. USAA in that regard maintains that it has satisfied its burden of proving National's sales. Since National has not met its burden of establishing any costs and deductions, even after USAA filed numerous motions to compel said information, USAA maintains it should be awarded National's entire gross profits from 1993 to 2000, amounting to approximately $15,615,699.00. Alternatively, USAA claims it is entitled to incremental profits which consist of gross sales minus a proportionate share of National's variable expenses due to the infringement. USAA further posits that "[w]hile no proportionate share of their variable expenses has been suggested by National, USAA's expert has estimated that such variable expenses due to the infringement would constitute approximately fifteen percent of the total sales." By subtracting an estimated fifteen percent variable costs from National's gross sales, the incremental profits approach would allow a recovery by USAA of approximately $13,333,647.00.
Docket Entry 65, at 2 (unnumbered).
Id . at 3-6 (unnumbered).
Id . at ¶ (unnumbered).
Id . at 7 (unnumbered).
Id .
In response, National filed a motion to strike USAA's motion on the grounds that: (1) USAA's summary judgment motion is procedurally defective because it seeks an advisory opinion on an issue that is highly contested by the parties, in violation of FED. R. Civ. P. 11 56(c); (2) National's liability, if any, should first be established before USAA can seek an adjudication on the monetary damages it is entitled to receive, if any, pursuant to 15 U.S.C. § 1117 (a); and (3) USAA's motion for partial summary judgment on the measure of damages fails on the merits primarily because USAA cannot establish that it lost any profits as a result of National's infringement. The applicable law and the present posture of the case support National's position. Before addressing USAA's shortcomings, an overview on the law applicable to an accounting or profits is warranted.
2. Applicable Law to USAA's Claim for an Accounting of Profits
The Lanham Act requires that liability be established before awarding profits and attorneys' fees. In that regard, the Act provides, in pertinent part:
(1) Any person, who shall, without consent of the registrant—
(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with such use is likely to cause confusion, or to cause mistake, or to deceive . . . shall be liable in a civil action by the registrant for the remedies hereinafter provided . . . .
§ 1114(1)(a) (Emphasis added).
Accordingly, in this case, the liability question (as National so aptly framed it) is, "first, whether National used USAA's registered mark(s) in commerce in connection with offering its rental car services and, second if it did, whether National's use caused confusion, mistake or was likely to deceive." "The touchstone of trademark infringement is whether the use creates a likelihood of confusion as to the source, affiliation, or sponsorship of the defendant's product." In determining whether a likelihood of confusion exists, as USAA alleges, the Fifth Circuit has articulated the following non-exhaustive list of factors: (1) the type of mark allegedly infringed; (2) the similarity between the two marks; (3) the similarity of the products or services; (4) the identity of the retail outlets and purchasers; (5) the identity of the advertising media used; (6) the defendant's intent, and (7) any evidence of actual confusion." "No single factor is dispositive, and a finding of a likelihood of confusion does not require a positive finding on a majority of these "digits of confusion"' Likelihood of confusion is a jury question.
Docket Entry 68, at ¶ 16.
Pebble Beach Co. v. Tour 18 I Limited , 155 F.3d 526, 543 (5th Cir. 1998) (citing 15 U.S.C. § 1114 (1) 1125(a)(A)).
Id . at 543 (citing Conan Properties. Inc. v. Conans Pizza. Inc ., 752 F.2d 145, 149 (5th Cir. 1985)).
Id . (citing Conan Properties. Inc ., 752 F.2d at 150).
Id .
Remedies for §§ 1114(1)(a) 1125(a)(1) violations are found in 15 U.S.C. § 1116 (injunctive relief), § 1117 (profits, damages, costs, attorneys' fees) and § 1118 (destruction of infringing articles). "Under appropriate circumstances, an injunction alone, may fully satisfy the equities in a given case."
Under 15 U.S.C. § 1116, federal courts may "grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent or Trademark office . . . ." Seatrax. Inc. v. Sonbeck International, Inc , 200 F.3d 358, 369 (5th Cir. 2000).
Id . (citing Bandag, Inc. v. Al Bolser's Tire Stores. Inc ., 750 F.2d 903, 919 (Fed. Cir. 1984)).
Id .
Once infringement has been established, Section 1117(a) provides, in pertinent part that a successful plaintiff is entitled,
subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. The court shall assess such profits and damages or cause the same to be assessed under its direction. If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case. Such sum in either of the above circumstances shall constitute compensation and not a penalty. The court in exceptional circumstances may award attorney fees to the prevailing party.
§ 1117(a) (Emphasis added). See also A Touch of Class Jewelry Co. v. J.C. Penney Co., Inc. et al ., No. CIV. A. 98-2949, 2000 WL 1224804 (E.D. La. Aug. 28, 2000), where the court interpreted the language of§ 1117(a), that "[t]he Court shall assess profits and damages or cause same to be assessed under its direction . . .," as authorizing the court, in the exercise of its discretion, to have the same jury which determines whether there is "willful infringement," to also make an assessment of the amount of such profits under the Court's direction. Id . at *7 See also Ironclad. L.P. v. Poly-America, Inc ., NO. Civ.A. 3:98-CV-2600, 2000 WL 1400762, at *1 fn. 1 (N.D. Tex. July 28, 2000) (where the issue of profits under § 1117(a) was also presented to the jury to decide). Notably, punitive damages are not available through § 1117(a).
The goal behind §§ 1116 1117 remedies is to achieve equity between or among the parties. In fashioning the appropriate remedy, a legal determination of liability is not dispositive. Because each case presents a different set of facts and circumstances, a case-by-case evaluation is warranted to determine the nature of the infringing conduct and its adverse effects, if any, on the plaintiff. Importantly, "an award of the defendant's profits is not automatic . . ., and is committed to the discretion of the district court, whose decision [the Fifth Circuit] review[s] for an abuse of discretion."
See Pebble Beach Co ., 155 F.3d at 554 (upholding district court's decision to grant injunctive relief, but not an accounting of profits).
Id . (Emphasis added) (citing Champion Spark Plug Co. v. Sanders , 331 U.S. 125, 131 (1947), and Bandag, Inc ., 750 F.2d at 919).
While the Fifth Circuit has not required a particular factor to be present, factors relevant to the court's determination of whether an award of profits is appropriate include, but are not limited to: (1) whether the defendant had the intent to confuse or deceive; (2) whether sales have been diverted; (3) the adequacy of other remedies; (4) any unreasonable delay by the plaintiff in asserting its rights; (5) the public interest in making the misconduct unprofitable; and (6) whether it is a case of"palming-off." Once an award is found to be appropriate, the plaintiff is entitled to recover only those profits attributable to the unlawful use of its trademark With these legal principles in mind, I proceed to address USAA's motion for partial summary judgment on the measure of damages.
See Rolex Watch USA v. Meece , 158 F.3d 816, 823 (5th Cir. 1998), cert. denied , 526 U.S. 1133 (1999). See also Seatrax, Inc ., 200 F.3d at 369; Pebble Beach Co ., 155 F.3d at 554; and Texas Pig Stands, Inc. v. Hard Rock Cafe Int'l. Inc ., 951 F.2d 684, 695 (5th Cir. 1992).
Pebble Beach Co ., 155 F.3d at 554; Texas Pig Stands. Inc ., 951 F.2d at 696; and Seatrax, Inc ., 200 F.3d at 369.
3. National's motion to strike USAA's motion for partial summary judgment on the measure of damages should be granted
Considering the applicable law and the arguments of the parties, it is my recommendation that USAA' s motion should not be entertained for the following reasons. First, USAA has presented no case authority allowing for a determination of § 1117(a) damages in a partial summary judgment proceeding filed before a finding of liability is established. The only case cited by USAA in furtherance of its position is Zirin Laboratories International. Inc. v. Mead-Johnson Company . Contrary to USAA's representation, a review of that case indicates that the court did not grant partial summary judgment on the issue of damages prior to establishing liability. Instead, the Zirin court granted summary judgment to the alleged infringing defendant on its motion for summary judgment based upon a complete lack of factual basis for plaintiff's claim that it suffered damages in the amount of four million dollars.
Docket Entry 65.
208 F. Supp. 633 (E.D. Michigan 1962).
Id . at 635-36.
Second, the express language of 15 U.S.C. § 1117 (a), as quoted above, supports National's position that an award of profits may be rendered once liability has been established and equity principles have been considered; not before. Third, in reviewing the case authorities cited by the parties, there have been instances when after liability had been found by a jury, the district court would nevertheless refrain from awarding profits to the plaintiff, opting instead, for instance, to only award permanent injunctive relief. As in these cases, when all the evidence pertinent to National's liability has been heard and the equitable factors have been considered, USAA may only be entitled to permanent injunctive relief. Finally, there is no doubt, based on the briefs from both parties, that genuine issues of material fact exist concerning the equitable factors to be considered in determining whether an award of profits is appropriate in this case. The most critical of these issues concerns USAA's evidence showing what portion of National's profits resulted from its alleged "willful or deliberate" infringement of USAA's marks. Contrary to USAA's assertion, the amount of monetary damages to which USAA is entitled, if any, is very much in dispute by the parties; and as such, it cannot be deemed established for purposes of trial under FED. R.CIV. P. 56(d). For these reasons, to ask this court to issue a ruling on the appropriate measure of damages USAA is entitled to receive under 15 U.S.C. § 1117 (a) without first having determined whether National is liable to USAA, as USAA contends, or whether any other relief is appropriate, is indeed premature and not subject to determination by way of summary judgment.
See Texas Pig Stands , 951 F.2d at 695-96 (awarding permanent injunctive relief but refusing to award an accounting of profits because there was insufficient evidence of unjust enrichment): Rolex Watch USA. Inc ., 158 F.3d at 828 (finding that trial court did not clearly err in refusing to award profits and attorneys' fees under § 1117(a) because defendant did not engage in deliberate infringement), cert. denied , 526 U.S. 1133 (1999); Seatrax Inc ., 200 F.3d at 368-69 ("an injunction alone, under proper circumstances, fully satisfies the equities of a given case brought under the Lanham Act."); and Pebble Beach Co , 155 F.3d at 554-55 (awarding injunctive relief but not an accounting of profits).
Docket Entry 78, at 5-13; Docket Entry 79, at 7-10 and Docket Entry 89, at 5-9.
See Maltina , 613 F.2d at 585 ("district court properly ordered [defendant] to account to the plaintiffs for the profits it earned from its willful infringement."). See also Georce Basch Co., Inc. v. Blue Coral , 968 F.2d 1532, 1540 (2d Cir.) (to recover profits under § 1117(a), the "plaintiff must prove that an infringer acted with willful deception"), cert denied , 506 U.S. 991 (1992); International Star Class Yatch Racing Ass'n v. Tommy Hilfiger., U.S.A., Inc ., 80 F.3d 749, 753 (2d Cir. 1996) ("in order to recover an accounting of an infringer's profits, a plaintiff must prove that the infringer acted in bad faith."); Lindy Pen Co., Inc. v. Bic Pen Corp ., 982 F.2d 1400, 1405 (9th Cir.) ("Willful infringement carries a connotation of deliberate intent to deceive."), cert. denied , 510 U.S. 815 (1993); ALPO Petfoods. Inc. v. Ralston Purina Co ., 913 F.2d 958, 968 (D.C. Cir. 1990) (" an award based on a defendant's profits requires proof that the defendant acted willfully or in bad faith.") and Frisch's Restaurants, Inc., v. Elby's Big Boy , 849 F.2d 1012, 1015 (6th Cir. 1988) ("For a court to order an accounting . . . bad faith must be shown.").
See WRIGHT MILLER, 10B FED. PRAC. PROC. Civ.3d § 2737 (1998), which provides:
According to Rule 56(d), if a court finds that summary judgment cannot be granted because there are genuine issues of material fact to be tried, it is empowered, when it would be practicable to save time and expense and to simplify the trial, to issue an order that specifies the facts that appear without substantial controversy. The court also may indicate the extent to which the amount of damages or other relief is not in controversy. a (Emphasis added).
Since the amount of damages or other relief is clearly in controversy in this case, FED. R. Civ. 56(d) does not further USAA's position. Docket Entry 79, at 3.
As USAA has correctly stated, according to the Maltina court and the express language of 15 U.S.C. § 1117 (a), the plaintiff is only required to prove the amount of the defendant's sales. Then, the defendant has the burden of proving all elements of costs and other deductions it actually spent on the infringed marks. In other words, defendant has the burden of establishing deductions from the gross profits identified by the plaintiff. If the defendant fails to sustain its burden of proof with respect to any claimed expenses, the court could award defendant's entire gross profits. 613 F.2d at 585-86. Although an award of profits is not automatic, in the event that the district court finds it appropriate in this case, USAA may be awarded the entirety of National's gross profits, that is if National fails to meet its burden of establishing costs and deductions related to the alleged infringed marks. At this stage of the case, I am not able to assess the repercussions, if any, of National's unwillingness to provide this information to USAA.
For these reasons, it is my recommendation that National's motion to strike be GRANTED and that USAA's motion for partial summary judgment on the measure of damages be DENIED on the grounds that it is prematurely brought.
C. National's motion for summary judgment on USAA "s claim/or an accounting of profits pursuant to 15 U.S.C. § 1117 (a) should be denied
National has moved for summary judgment on USAA's claim for an accounting of profits under 15 U.S.C. § 1117 (a) by essentially arguing that no such remedy is available to USAA because "[t]here is no evidence that any profits earned by National from car rentals to USAA members were attributable to or resulted from any unlawful use by National of USAA's marks." As already discussed in this Memorandum, I relied on this very same material issue of disputed fact in recommending that USAA's partial summary judgment motion on the measure of damages be denied. Accordingly, it follows, that the same genuine issue of fact which precluded summary judgment in favor of USAA should also preclude summary judgment in favor of National. For the reasons articulated in section B of this Memorandum, it is my recommendation that the National's summary judgment motion on USAA's claim for an accounting of profits pursuant to 15 U.S.C. § 1117 (a) be DENIED . Any determination of whether recovery of National's profits is contrary to "principles of equity" involves issues of material fact which are yet to be resolved.
Docket Entry 68, at ¶ 28. National also argues that USAA's unreasonable delay in bringing this lawsuit precludes an award of accounting of profits. This, however, is one of the many equitable factors to be considered in determining whether an award of profits is appropriate in the case. Further, I will address the extent to which USAA's delay in bringing this lawsuit has prejudiced National, if any, in my analysis of National's summary judgment motions on its affirmative defenses of laches, estoppel, limitations, acquiescence and unclean hands, in a separate Recommendation.
Although National's position on this motion is curiously inconsistent with its motion to strike USAA's partial summary judgment motion on damages and substantive response to USAA's motion (Docket Entry 78), it is nevertheless my opinion that USAA's request for attorneys' fees and costs for responding to USAA's summary judgment motion should bedenied Docket Entry 82, at 11.
D. National's summary judgment on its defenses to USAA "s claim for unjust enrichment should be denied
National next moves for summary judgment on USAA's claim for unjust enrichment by arguing that USAA cannot establish that National's retention of its profits for car rentals to USAA members during the past seven years would be unjust and inequitable, nor can USAA prove that National misused the reputation and goodwill of USAA in providing car rental services to USAA members. Because USAA has established that genuine issues of material fact exist with respect to its claim for unjust enrichment, National's summary judgment motion should be denied and USAA should be allowed to proceed to trial on this theory.
Docket Entry 70, at 8-9.
In Texas Pig Stands. Inc. v. Hard Rock Cafe International. Inc ., atrademark infringement case relied upon by both parties on this issue, the court defined the claim for unjust enrichment to the jury as follows:
Unjust enrichment means the unjust retention of a benefit to the loss of another or unjust retention of money or property of another which is against the fundamental principles of justice or equity and good conscience. Unjust enrichment is present if you find that [defendant] has used the good will and reputation of [plaintiff] to sell its own goods and services.
951 F.2d at 694-95 fn.l5.
According to the Fifth Circuit, the district court's definition of unjust enrichment used Texas Pig Stands accurately framed the questions that must be answered in analyzing a claim for unjust enrichment: "(1) Would defendant's retention of its profits for sales [of the infringed product or mark] be unjust and inequitable? and (2) Did [defendant] use the reputation and good will of [plaintiff] to sell its own [product]." Further, the Fifth Circuit in Texas Pig Stands recognized that this claim must be assessed in accordance with the "totality of the circumstances" of each particular case, "as no single evidentiary fact carries the day." In Texas Pig Stands , the Fifth Circuit affirmed the district court's decision to permanently enjoin Hard Rock Cafe from using Texas Pig Stands' registered trademark "pig sandwich" after a jury's finding of infringement. The Fifth Circuit in addition upheld the district court's decision to overturn the jury's finding of unjust enrichment because no evidence was presented at trial that Hard Rock Cafe attempted to "palm off' its pig sandwiches as those of Texas Pig Stands' or that Hard Rock attempted to associate its operation with that of Texas Pig Stands; nor was there any evidence that Texas Pig Stands lost any sales as a result of the infringement. Based on the insufficiency of the evidence presented at trial, the Fifth Circuit concluded that Hard Rock Cafe's retention of its profits or sales from using Texas Pig Stands' registered trademark "pig sandwich" was not unjust and inequitable.
Id . at 694.
at 694.
Id . at 692-94.
Id . at 695-96.
Id .
After reviewing the evidence presented by the parties, it is my opinion that USAA has presented sufficient genuine issues of material fact precluding summary judgment for National. For example, USAA alleges that National has received over $15,000,000.00 in income due to its use of the USAA name by implying there is an affiliation, connection or sponsorship with USAA of National's car rental services. In that regard, USAA cites to the results of a survey it conducted where 45% of USAA's members who were surveyed believed there to be an affiliation, sponsorship or connection between USAA and National. It should be noted that while National has strongly objected to this survey as being result-oriented, biased and inaccurate, it has, at the same time, relied on it to argue that even if the survey were to be believed, it establishes that the overwhelming majority of USAA members surveyed chose their car rental provider based on price, not on sponsorship or affiliation. The parties' position on the interpretation of USAA's survey establishes a genuine issue of material fact that can only be resolved at trial. As further evidence of National's alleged misuse of USAA's reputation and good will to sell National's services, USAA cites to the employee training National provides to its reservationists where it is implied that USAA has an affiliation, and indeed that USAA has endorsed National's car rental services to its members.
Docket Entry 70, ¶ 20.
Docket Entry 84, at 4.
Considering the totality of the circumstances, I recommend that USAA has established that genuine issues of material fact preclude summary judgment on its claim for unjust enrichment. Whether National should disgorge the profits it gained at the expense of USAA, if any, is a jury question, not appropriate for summary judgment adjudication.
VI. Recommendation
For the reasons discussed above, I recommend that National's motion to strike (Docket Entry 78) USAA's motion for partial summary judgment on damages (Docket Entry 65) be GRANTED on the basis that USAA's motion is prematurely brought; and that National's motions for summary judgment (Docket Entries 68 70) be DENIED as USAA has shown that genuine issues of material fact exist on USAA's claims for an accounting of profits pursuant to 15 U.S.C. § 1117 (a), and for unjust enrichment.
In this regard, I note that an accounting of profits, as provided in 15 U.S.C. § 1117 (a), is a form of equitable relief that may be awarded under a theory of unjust enrichment. See Ironclad. L.P ., 2000 WI. 1400762, at *3 (and case authorities cited therein).