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LLC v. Dickey's Barbecue Restaurants, Inc.

United States District Court, D. Idaho

April 23, 2019

BBQ 4 LIFE, LLC, an Idaho Limited Liability Company, and BRAD TAYLOR, an Individual, Plaintiffs,
v.
DICKEY'S BARBECUE RESTAURANTS, INC., a Texas Corporation, Defendant.

          MEMORANDUM DECISION AND ORDER

          B. LYNN WINMILL U.S. DISTRICT COURT JUDGE.

         INTRODUCTION

         The Court has before it cross-motions for partial summary judgment on the remedies issue. The Court heard oral argument on April 16, 2019, and took the motions under advisement. For the reasons explained below, the Court will grant plaintiff's motion and deny defendant's motion.

         BACKGROUND

         Plaintiffs claim that defendant Dickey's Barbecue Restaurants, Inc. has infringed plaintiffs' trademark by using it to promote the hundreds of restaurants Dickey's operates nation-wide, including five in the Boise Idaho area. Plaintiffs operate restaurants largely in the Boise area and have a disputed presence in some other selected locations.[1]Plaintiffs' trademark involves an image of closed fists bearing the tattooed word “BBQ 4 LIFE” just below the knuckles in connection with a drawing of a bearded face resembling plaintiff Brad Taylor.

         After plaintiffs filed this action, the parties attempted to reach a settlement. Their negotiations were stalled, however, when they could not agree on the legal standard for remedies. While both agree that a potential remedy for infringement is disgorgement of profits, they disagree over the scope of profits to be considered - plaintiffs argue that the profits to be considered are all profits attributable to infringement while Dickey's responds that the profits should be limited to the areas where the parties compete.

         To resolve this legal issue before undergoing expensive discovery, the parties filed cross-motions for partial summary judgment to identify the scope of the profits to be considered in determining the disgorgement remedy. The parties agree that to resolve these motions the Court may assume (1) the trademark was infringed, (2) the infringement was willful, and (3) Dickey's used the infringed mark on a nation-wide basis, not just in the areas where it competed with plaintiffs.

         ANALYSIS

         The damages available for trademark infringement under the Lanham Act are set forth in 15 U.S.C. § 1117(a): “[T]he plaintiff shall be 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 statute goes on to give courts substantial discretion in awarding profits: “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.” Id.

         While the statute does not specify the scope of the profits to be considered in a disgorgement remedy, it does provide some guidance by stating that the disgorgement will be “subject to principles of equity.” The particular principle of equity that should guide the Court was identified by the Ninth Circuit as “the principle of unjust enrichment traditionally applicable where property is used for profit without the owner's permission.Maier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 123 (9th Cir. 1968).

         In Maier, Fleischmann, a distiller of Scotch whisky, sued Maier, a beer brewer, claiming that Maier used Fleischmann's trademarked name “Black & White” on its beer products. The trial court eventually found infringement and awarded Fleischmann a sum representing Maier's profits. On appeal, Maier argued that the profit award was improper because Fleischmann never proved any lost or diverted sales as a result of Maier's use of the trademark, and cited caselaw from other Circuits holding that disgorgement of profits is only applicable in situations where the parties are in competition - where there is proof of lost or diverted sales. Id. at 121. The Ninth Circuit rejected the analysis in those cases:

These courts are protecting the trademark owner from only the most obvious form of damages - the diversion of sales, and are not in fact providing protection to the value of the good will built up in the trade-mark itself. No. recognition is given to the possibility that customers who believe that they are buying a product manufactured by the plaintiff - whether such product is competitive or non-competitive - may be so unhappy with that product that they will never again want to buy that product or any other product produced by the same manufacturer, who they believe to be the plaintiff. Nor do these opinions recognize that, even if the infringing product is of higher quality than that bearing the registered trade-mark, the trade-mark registrant has been deprived of his right to the exclusive use and control of the reputation of his product.

Id. at 122. A better approach, the Circuit concluded, would be to base disgorgement on the principle of unjust enrichment:

It would seem fairly evident that the purposes of the Lanham Act can be accomplished by making acts of deliberate trade-mark infringement unprofitable. . . . In those cases where there is infringement, but no direct competition, this can be accomplished by the use of an accounting of profits based on unjust enrichment rationale. Such an approach to the granting of accountings of profits would, by removing the motive for infringements, have the effect of deterring future infringements. The courts would therefore be able to protect the intangible value ...

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