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Archived updates for Monday, October 09, 2006

No Double Counting of Patent and Trademark Infringement Damages

In AERO Products International, Inc., et al. v. INTEX Recreation Corp., et al. (October 2, 2006) the Federal Circuit concluded that an award of both patent infringement and trademark infringement damages in favor of Aero was an impermissible double recovery, and vacated the award of $1 million in trademark infringement damages.

At trial, Aero sought patent infringement damages in the amount of $3.4 million. This was based upon the testimony of Aero’s damages expert, Mark Alan Peterson, that Aero was entitled to a 15.7% reasonable royalty on $21.8 million in sales of the accused Intex mattress, which would amount to $3.425 million. At the same time, Aero sought trademark infringement damages in the amount of $2.2 million. This was based upon Aero’s contention that defendants had made $2.2 million in profits based on sales of the accused Intex mattresses. Defendants’ damages expert, Roy Weinstein, testified at trial that Intex had sold $22 million worth of accused Intex mattresses, and Intex’s profits were 10.4%, so Intex had made approximately $2.2 million in profits. In short, Aero used defendants’ patent infringement damages calculations in support of its proposed amount of trademark damages.

According to Circuit Judge Schall,

The jury awarded Aero $2.95 million dollars for the patent
infringement—presumably a reasonable royalty as Aero requested—and $1 million in Intex’s and Quality Trading’s profits for the trademark infringement. This was less than the damages that Aero requested—reasonable royalty damages of $3.4 million for the patent infringement and disgorgement
of Intex’s profits of $2.2 million for the trademark infringement.

. . . the record demonstrates that Aero based both its patent and trademark damages solely on sales of the accused Intex mattresses. Aero did not rely on any other evidence in support of its trademark damages. In other words, there was no evidence introduced at trial of Intex’s use of the mark "ONE TOUCH" other than in connection with the sales of mattresses that formed the basis for Aero’s patent infringement claim. In short, all of the damages awarded to Aero flowed from the same operative facts: sales of the infringing Intex mattresses. Aero was fully compensated for defendants’ patent infringement when it was awarded a reasonable royalty for patent infringement based on sales of the infringing Intex mattresses. It could not also be awarded defendants’ profits for trademark infringement based on the same sales of the same accused devices. This is the result compelled by Bowers, Catalina Lighting, Junker, Celeritas, and CPG Products. We thus hold that the district court abused its discretion by allowing to stand the jury’s award to Aero of $1 million in trademark damages.

Finally, we do not think that Nintendo helps Aero. Nintendo stated that, "[p]ut together, selling the cartridges may have been one act, but it was two wrongs [trademark and copyright infringement]." 40 F.3d at 1011. The Nintendo court reasoned that "Congress created two separate statutory schemes to govern copyrights and trademarks; in order to effectuate the purposes of both statutes, damages may be awarded under both." Id. Further, the court reasoned that Nintendo "did not recover the same type of damages under both acts" because it recovered actual damages under the Lanham Act and it elected and recovered statutory damages, instead of actual damages, under the Copyright Act. Id. From our standpoint, the problem with Aero’s reliance on Nintendo is that an award of both patent and trademark infringement damages in this case would be contrary to our decisions in Bowers, Catalina Lighting, Junker, Celeritas, and CPG Products. Under these cases, even though damages are claimed based upon separate statutes or causes of action, when the claims arise out of the same set of operative facts, as is the case here, there may be only one recovery.

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