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Archived updates for Monday, November 28, 2005

Intent to Appropriate Goodwill Required for Willfulness

In WESTERN DIVERSIFIED SERVICES, INC v.HYUNDAI MOTOR AMERICA, INC. (10th Cir.; November 1, 2005) , the court held that the willfulness required to support an award of profits or attorney fees under the Trademark Act typically requires an intent to appropriate the goodwill of another's mark:

"However, the standard we adopt today does not categorically preclude all
other possibilities. Because an award of profits under the Lanham Act is
grounded in equity, there may be other situations that constitute willful
infringement even though the defendant does not intend to derive any benefit
from the plaintiff's goodwill or reputation. For example, if the defendant
deceives the plaintiff into thinking he has ceased infringing the trademark when
in fact the illegal action continues, a finding of willfulness might be
appropriate. Similarly, misrepresentation to the courts might constitute willful
infringement. Finally, if the wrongdoer uses its own economic muscle to weaken a
plaintiff who has threatened an infringement action, a finding of willfulness
might be justified. At the end of the day, courts must be guided by familiar
principles of equity, but we believe that situations such as those described
above may be exceptions rather than the rule. However, those situations are not
before us, so we do not need to explore the parameters of such possibilities. In
the typical case, the willfulness required to support an award of profits in the
absence of actual damages is the intent to benefit from the goodwill or
reputation of another."

". . . In our trademark cases dealing with the likelihood of confusion, we have held that the "deliberate adoption of a similar mark may lead to an inference of an intent to pass off goods as those of another . . . ." Beer Nuts, Inc. v. Clover Club Foods Co., 805 F.2d 920, 927 (10th Cir. 1986); see also Universal Money Ctrs., 22 F.3d at 1532. As the non-moving party, Western is entitled to the benefit of this presumption. Matsushita Elec. Indus. Co., 475 U.S. at 587. Even though we established this presumption in a likelihood-of-confusion case, we conclude that it is appropriate to apply the presumption here, particularly because our intent inquiry is the same in both situations."

. . . Here, the evidence indicates that Hyundai appropriated not one, but two of Western's marks, "THE ADVANTAGE" and "THE ADVANTAGE PLUS." Furthermore, Hyundai's marks were not only similar to Western's, they were identical and referred to substantially similar products aimed at the same group of consumers, i.e. automobile purchasers.

Considering the larger factual context of the case in conjunction with the factual dispute over Hyundai's knowledge, we are compelled to presume that Hyundai's deliberate adoption of two similar marks could lead to an inference that it intended to benefit from Western's goodwill.

But we do not hold as a matter of law that Hyundai actually possessed such an intent. Like almost every presumption in the law, the one we apply today may be rebutted by competent evidence in front of a jury. Hyundai argues that its initial selection of the "Bumper-to-Bumper" name for its extended warranty and the prominence of its corporate logo on the warranty brochures shows that it did not have the requisite intent for willful infringement. These arguments are not without merit, and it may well be that they will win the day when considered by the jury. But at this point in the proceedings, all that can be said is that the parties have established a genuine factual dispute over the intent required for willful infringement. Under Fed. R. Civ. P. 56, nothing else need be shown for the plaintiff to avoid summary judgment.

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