By Ashley Escoe
On Monday March 30, 2015, the Fourth Circuit released a published opinion regarding the civil case of Georgia-Pacific Consumer Products v. Von Drehle Corporation. In its opinion, the court agreed with von Drehle Corporation (“von Drehle”) and vacated the district court’s injunction and award of attorneys fees and also reversed the increase in damages and the award of prejudgment interest–all of which had been in favor of Georgia-Pacific Consumer Products (“Georgia-Pacific”).
Georgia-Pacific’s Claim of Trademark Infringement
Georgia-Pacific brought this trademark infringement case against von Drehle for designing and selling ten-inch paper-towels specifically for use in Georgia-Pacific’s “enMotion” motion sensor towel dispensers. Georgia-Pacific owns the trademark “enMotion” and alleged that von Drehle had violated the Lanham Act, 15 U.S.C. § 1114(1)(a), for contributory trademark infringement because the von Drehle towels were “likely to cause confusion and . . . deceive End-User Customers.”
Georgia-Pacific brought three separate actions against von Drehle for selling these ten-inch paper-towels: in the Western District of Arkansas, the Northern District of Ohio, and the Eastern District of North Carolina. The first to rule on this issue was Arkansas, which concluded that von Drehle towels made for use in an enMotion dispenser were not likely to cause confusion, and therefore not an instance of trademark infringement. The Eighth Circuit affirmed. The district court in Ohio then ruled against Georgia-Pacific as well, holding that Georgia-Pacific was precluded from litigating the same issue; the Sixth Circuit affirmed.
The Eastern District of North Carolina initially ruled against Georgia-Pacific based on von Drehle’s affirmative defense of claim and issue preclusion. However, on appeal the Fourth Circuit reversed this decision, concluding that von Derhle waived those defenses by failing to raise them in a timely manner. A jury awarded Georgia-Pacific the $791,431 in profits von Drehle made from the paper-towel sales. The district court trebled the jury verdict and awarded attorneys’ fees as well as prejudgment interest–totaling $4,887,283.51. The district court also granted Georgia-Pacific a permanent, nationwide injunction prohibiting von Drehle from selling its paper-towels.
On appeal, von Drehle challenged the geographical scope of the injunction and the monetary awards.
The Scope of the District Court’s Injunction Was Too Broad
The Fourth Circuit determined that the district court abused its discretion by granting a nationwide injunction. Generally, a district court has the authority to issue a nationwide injunction prohibiting trademark infringement. 15 U.S.C § 1116(a). In this instance, however, for the sake of inter-circuit comity, the court determined that the injunction should be limited to the states in the Fourth Circuit. The Sixth and Eighth Circuits have already ruled that von Drehle was not prohibited from selling its ten-inch paper towels, and the other Circuit courts that have not yet ruled on the issue should be free to resolve this matter for their jurisdictions. The Fourth Circuit vacated the district court’s injunction and remanded the issue.
Trebling the Damages Award Was Inappropriate
The Fourth Circuit concluded that the district court’s reliance on Larsen v. Terk Techs. Corp. was an erroneous conflation of 15 U.S.C. § 1117(a) and § 1117(b). In Larsen, the issue was the use of a counterfeit mark and thus was governed by § 1117(b), which mandates treble damages for willful and intentional infringement. The instant case does not concern counterfeit marks, but rather is a general trademark infringement case governed by § 1117(a). Section 1117(a) does allow a court to adjust a jury award, but only if the award was inadequate or excessive and never solely to punish the defendant. Georgia-Pacific only requested an award of von Drehle’s profits, and that is precisely what the jury awarded; therefore, there was no basis for the district court to find the award inadequate. The Fourth Circuit reversed the increase in the damages award and ordered the jury award be reinstated.
A New Standard for “Exceptional” in Regard to Attorneys Fees
The district court granted attorneys’ fees to Georgia-Pacific, finding the case to be “exceptional” because von Drehle purposefully and willfully sold its towels to be used in Georgia-Pacific’s dispensers. However the Fourth Circuit noted that the district court failed to distinguish between willfully performing an act one believes to be lawful and willfully breaking the law. Further, after the district court made its ruling, the Supreme Court issued its decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc. Though this decision did not define “exceptional” in the attorneys’ fees provision of § 1117(a), it defined an “exceptional case” in an identical provision of the Patent Act. The Supreme Court held that a district court may determine a case is exceptional by looking at the totality of the circumstances. The Fourth Circuit vacated the award of attorneys’ fees and remanded the issue for the district court to determine in light of the Octane Fitness standard.
Congress Did Not Intend for Prejudgment Interest in This Circumstance
Section 1117 is particular about what types of monetary relief are available for trademark infringement in specified circumstances. The Fourth Circuit concluded that if Congress did not include a certain type of monetary relief in a specified circumstance, then it was Congress’ intention that it not be available. Section 1117(a) does not provide for prejudgment interest in cases concerning recovery of a defendant’s profits. The court noted that it may be possible to recover prejudgment interest under § 1117(a) as an element of damages, but Georgia-Pacific only claimed von Drehle’s profits, not damages. Therefore the Fourth Circuit reversed the district court’s award of prejudgment interest.
The Fourth Circuit Vacated, Reversed in Part, and Remanded in Part the District Court’s Decision
The Fourth Circuit vacated the district court’s injunction and award of attorneys fees’ and remanded on these issues. It also reversed the increase in the damages award and the award of prejudgment interest.
Judge Shedd Disagrees with Limiting the Scope of the Injunction
Judge Shedd wrote separately, concurring in part and dissenting in part. Judge Shedd only disagreed with the decision to restrict the injunction to the Fourth Circuit. On appeal, injunctions are reviewed for abuse of discretion. Judge Shedd points out that the district court “applied the correct injunction standard, did not rely on a clearly erroneous finding of material fact, and did not misapprehend the law with respect to the underlying issues of this case.” The district court did not abuse its discretion, and the Fourth Circuit should affirm the injunction. Instead the majority of the panel relied on the doctrine of comity in determining that the nationwide scope of the injunction was too broad. The doctrine of comity is not a rule of law, but just a courtesy; and, according to Judge Shedd, relying on comity was not appropriate in this situation.
