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Sabinsa Corporation v. Creative Compounds

July 25, 2011

SABINSA CORPORATION, PLAINTIFF,
v.
CREATIVE COMPOUNDS, LLC, DEFENDANT.



The opinion of the court was delivered by: Dennis M. Cavanaugh, U.S.D.J.:

OPINION

Hon. Dennis M. Cavanaugh

This matter is again before this court following a reversal and remand by the Court of Appeals for the Third Circuit, decided before Circuit Judges Roth and Ambro and District Judge Fischer, sitting by designation. In reversing and remanding, the Third Circuit instructed this Court to enter judgment in favor of Sabinsa Corporation on its trademark infringement and unfair competition claims and for other proceedings not inconsistent with the opinion. Plaintiff Sabinsa presently seeks damages for Creative Compounds' trademark infringement and unfair competition under a theory of disgorgement of profits as well as attorneys' fees pursuant to the Lanham Act and/or New Jersey state law.

The underlying undisputed facts are more fully explained in Sabinsa Corp. v. Creative Compounds, LLC, 609 F.3d 175, 180-82 (3d Cir. 2010). This Court will provide additional facts pertinent to the present claims where necessary.

DISCUSSION

A. Lanham Act - Accounting of Profits

The Lanham Act provides that subject to the principles of equity, a plaintiff shall be entitled to recover (1) defendant's profits; (2) any damages sustained by the plaintiff, and (3) the costs of the action. 15 U.S.C. §1117(a). "An accounting of profits is a form of equitable relief, and it does not follow as a matter of course upon the mere showing of an infringement." A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 166 F.3d 197 (3d Cir. 1999) (quoting Williamson-Dickie Mfg. v. Davis Mfg., 251 F.2d 924 (3d Cir. 1958)); Gucci America, Inc. v. Daffy's Inc., 354 F.3d 228, 243 (3d Cir. 2003). To determine whether the equities of the case warrant an award of money damages by disgorgement of profits, the Third Circuit considers various factors in its analysis which 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 his rights,

(5) the public interest in making the misconduct unprofitable, and

(6) whether it is a case of palming off.

Banjo Buddies, Inc. v. Renosky, 399 F.3d 168, 175 (3d Cir. 2005). This Court will consider each of these factors in determining whether Plaintiff is entitled to recover for damages.

(1) Whether Creative Compounds had the Intent to Confuse or Deceive In its Sabinsa decision, the Third Circuit stated that there were disputed factual issues on the question of Creative Compounds' intent in adopting the Forsthin mark. Namely, there were issues pertaining to Creative Compounds' efforts in conducting a trademark search prior to its adoption of the Forsthin mark, as well as whether Creative Compounds' conducted research to expand on Sabinsa's patent. There were also issues pertaining to whether Creative Compounds' advertising was intentionally misleading in order to trade on Sabinsa's goodwill, and whether the Forsthin mark was aimed at purchasers of Sabinsa's ForsLean product.

The Third Circuit found this Court's finding on the question of intent in its analysis of the Lapp factors to be improperly conclusory.*fn1 The Circuit court was unable to hold that it favors either party as a matter of law. See Sabinsa, 609 F.3d at 187-88. The task, then, is for this Court to determine if Creative Compounds had the intent to confuse or deceive.

Sabinsa argues that if Creative Compounds knew of its ForsLean mark prior to adopting the Forsthin mark, and failed to conduct an adequate trademark search, that would show Creative Compounds had a clear intent to confuse or deceive. Creative Compounds does not dispute that it was aware of Sabinsa's ForsLean mark prior to adopting the Forsthin mark. While the testimony describing the thoroughness of the trademark search conducted by Creative Compounds prior to its adoption of the Forsthin mark is somewhat inconsistent,*fn2 any such search would have confirmed what Creative Compounds already knew - that Sabinsa had trademarked the ForsLean mark for its forskohlin product. Although the knowledge and care Creative Compounds used to investigate and evaluate its proposed marks and the knowledge of similar marks are "highly relevant" to a finding of an intent to confuse or deceive,*fn3 it does not automatically lead to a conclusion that Defendant had the intent to confuse or deceive. See, e.g., R. J. Ants, Inc. v. Marinelli Enters., LLC, - F. Supp. 2d -, 2011 WL 611809, at *16-17 (E.D. Pa.. Feb. 18, 2011). Mere knowledge of the ForsLean mark is insufficient to prove bad faith on the part of Creative Compounds. See M.D. On-line, Inc. v. WEBMD Corp., 2005 WL 2469668, at *8 (D.N.J. Oct. 6, 2005).

Sabinsa also argues that Creative Compounds' advertising of the Forsthin product was intended to trade on its goodwill and confuse customers as to the source of its product. The Court does not agree. Creative Compounds' name and contact information appear on its advertisements. Further, there are other products marketed by Creative Compounds in the advertisements presented that consumers may know of as belonging to Creative Compounds, or at the very least not sold by Sabinsa. Any customer who may still be unaware of the differences after observing the advertisements would still have to use Creative Compounds' information as found in the advertisement to contact them and order the product, where they would be told of the difference between the products and uses between Forsthin and Sabinsa's product. See Tr. 232:5-233:2 [Haynes].

Sabinsa also argues that Creative Compounds' Forsthin name was aimed at Sabinsa's ForsLean mark. Creative Compounds states that it lacked any intent to confuse or deceive and that it had a subjective "bona fide belief" that it acted in good faith by following its pre-existing naming strategy for its line of weight loss products in creating the Forsthin name.*fn4

Sabinsa states that Creative Compounds did not follow its pre-existing naming strategy for its "thin" line of weight loss products when creating the Forsthin mark, as Creative Compounds repeats the "thin" suffix consistently with an abbreviation of the first word of the active ingredient or plant ingredient.*fn5 Sabinsa argues that the "Forsthin" mark skips the first name of the Coleus forskohlii plant it derives from, and instead abbreviates the second word. Sabinsa's argument is incorrect. In all of the products noted, the abbreviated word combined with "thin" is not the plant name itself, but that of the chemical extract. As the Third Circuit noted, the parties to this case use "fors" as an abbreviation for forskohlin. Sabinsa, 609 F.3d at 186. Thus "fors" is the abbreviation for the chemical extract, and not of the plant Coleus forskohlii.*fn6 Creative Compounds' submissions support this conclusion. It is part of the name of the chemical, not the plant, that is combined with the "thin" ...

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