United States District Court, D. New Jersey
MEMORANDUM AND ORDER
G. SHERIDAN, U.S.D.J.
matter comes before the Court on Kars 4 Kids Inc.'s
(hereinafter "Kars 4 Kids") motion to present
disgorgement evidence outside the presence of the jury. Kars
4 Kids argues that America Can! Cars for Kids (hereinafter
"America Can!") is seeking disgorgement of Kars 4
Kids' profits, an equitable remedy for which no right to
a jury trial attaches, therefore, any disgorgement evidence
should be presented only before the Court, and not the jury.
(Kars 4 Kids Br., ECF No. 201, at 3). According to America
Can!, it seeks an award of Kars 4 Kids' profits as a
rough proxy of its own damages, and thus argues that it is
seeking disgorgement of Kars 4 Kids' profits as
compensatory damages. (Cars for Kids Br., ECF No. 202, at 6).
America Can! argues that a jury should determine compensatory
damages. (Id. at 7).
the Lanham Act, after showing a violation, a "plaintiff
shall be entitled, ... and 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 court shall assess such profits and damages or
cause the same to be assessed under its direction." 15
U.S.C. § 1117(a). "The remedy of damages seeks to
compensate the victim for its loss, whereas the remedy of an
accounting [seeks] disgorgement of ill-gotten profits."
Hard Candy, Ltd. Liab. Co. v. Anastasia Beverly Hills,
Inc., 2019 U.S. App. LEXIS 11877, at *9 (11th Cir. Apr.
23, 2019) (quoting SCA Hygiene Prods. Aktiebolag v. First
Quality Baby Prods., LLC, 137 S.Ct. 954 (2017)).
"[A]n accounting of the infringer's profits is
available if the defendant is unjustly enriched, if the
plaintiff sustained damages, or if an accounting is necessary
to deter infringement." Banjo Buddies, Inc. v.
Renosky, 399 F.3d 168, 178 (3d Cir. 2005). "[A]n
award of the trademark infringer's profits originated in
the law as a way of compensating the plaintiff for sales lost
to the infringer . . . when the parties are in competition
with each other." 3 J. Thomas McCarthy, McCarthy on
Trademarks and Unfair Competition § 30:59 (5th ed.
situations where parties compete, it is not appropriate to
award both plaintiffs damages and defendant's
profits because defendant's profits are an attempt to
measure a plaintiffs actual loss. 3 J. Thomas McCarthy,
McCarthy on Trademarks and Unfair Competition § 30:73
(5th ed. 2019). Moreover, "damages and profits cannot be
awarded simultaneously if it would result in
over-compensation . . . where the parties directly compete,
over-compensation may result if plaintiff seeks both damages
for lost profits on sales diverted to the infringer
and the profits made on those sales by the
America Can! frames its theory of damages as a claim for its
own lost profits as damages, and in order to calculate those
lost profit damages, proposes an award of Kars 4 Kids'
profits as a rough proxy measure of its own damages. America
Can! argues that "the parties are direct competitors,
and a donation to [Kars 4 Kids] precluded a donation to
[America Can!]," and this supports a claim for
compensatory damages, because were parties are "direct
competitors, an award of defendant's profits has served
as a rough proxy measure of plaintiffs damages."
((America Can! Br. at 6). However, this is more appropriately
considered a claim for disgorgement of Kars 4 Kids'
Because of the difficulties of proving an actual diversion of
sales, the courts often assumed or presumed that the
infringer's profits consisted entirely of profits on
sales that would have been made by plaintiff but for the
infringing actions. In competitive relationships, the courts
continue to use this method of measuring plaintiffs losses .
. .[t]he assumption that every sale by the infringer is a
sale that would have been made by plaintiff but for the
illegal acts is only an approximation . . . The courts find
the accounting of profits remedy a rough, but reasonable
measure of plaintiff s loss in competitive relationships.
This is because as between the victim and the wrongdoer, the
burden should be and is placed on the wrongdoer to prove, if
it can, that some sales were not caused by the infringement,
or would not have gone to the plaintiff or that the infringer
is more efficient and has lower costs than the plaintiff.
3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair
Competition § 30:59 (5th ed. 2019).
America Can! is seeking Kars 4 Kids' profits, because it
argues that any donation to Kars 4 Kids was actually a
donation America Can! should have received. However, this is
exactly the type of situation described above: a party
(America Can!) is seeking a defendant's profits (Kars 4
Kids' profits) where the party (America Can!) argues it
would have received those profits but for the infringement of
that defendant (Kars 4 Kids). This is plainly a claim for
disgorgement of profits, and not a claim for America
Can!'s own damages. Thus, the Court determines that
America Can!'s claim for an award of Kars 4 Kids'
profits as a rough proxy measure of its own damages is
actually a claim for Kars 4 Kids' profits.
Court also determines that this claim is equitable in nature,
and for which no right to a jury exists. Under the Seventh
Amendment, "[i]n Suits at common law, where the value in
controversy shall exceed twenty dollars, the right of trial
by jury shall be preserved . ..." U.S. Const, amend.
VII. The Eleventh Circuit recently addressed whether the
recovery of a defendant's profits as "proxy"
for a plaintiffs damages suffered due to infringement was a
legal remedy that "carrie[d] with it a right to a jury
trial" or an equitable remedy, which does not entitled a
party to a jury trial. Hard Candy, Ltd. Liab. Co.,
2019 U.S. App. LEXIS 11877, at *2-3. There, the plaintiff did
not seek actual damages, but instead sought an accounting and
disgorgement of profits. The court focused on the nature of
the remedy sought, and explained that historically,
disgorgement of profits were matters for courts of equity.
Id.; see also 3 J. Thomas McCarthy, McCarthy on
Trademarks and Unfair Competition § 30:59 (5th ed. 2019)
(M[a]n accounting of profits has traditionally
been classified as an "equitable remedy," which
means that there is no right to trial by a jury.").
Accordingly, the court held that "[t]he remedy of an
accounting and disgorgement of profits for trademark
infringement is equitable in nature and has long been
considered that way, so .. .a plaintiff seeking the
defendant's profits in lieu of actual damages is not
entitled to a jury trial." Id.; accord Fifty-Six
Hope Rd. Music, Ltd. v. A.V.E.L.A., Inc., 778 F.3d 1059,
1075(9thCir. 2015) (determining there is no Seventh Amendment
right to have a jury calculate profits because "[a]
claim for disgorgement of profits under § 1117(a) is
equitable, not legal."); Ferrari S.P.A. Esercizio
Fabriche Automobili E Corse v. Roberts, 944 F.2d 1235,
1248 (6th Cir. 1991) (finding that a party was not entitled
to a jury trial where it requested only equitable relief,
"an injunction and disgorgement of profits.").
America Can! argues that this Court should empanel the jury
as an advisory jury on damages, the Court declines to do so,
and instead determines that trying disgorgement and liability
separately conserves judicial resources. Depending on how the
jury determines liability, the Court may not need to
determine disgorgement of Kars 4 Kids' profits, and any
time spent presenting that evidence could possibly serve no
purpose. The Court also determines that trying disgorgement
separately will enhance jury comprehension of the issues to
be presented in the case, as the jury will not be presented
with evidence that is not relevant to any issue it will need
to decide. For these reasons, Kars 4 Kids' motion to
present disgorgement evidence outside the presence of the
jury is granted.
matter having come before the Court on Kars 4 Kids Inc.'s
Motion to Present Disgorgement Evidence Outside the Presence
of the Jury (ECF No. 201), and the Court having carefully
reviewed and taken into consideration the submissions of the
parties, as well as the arguments and exhibits therein
presented, and for good cause shown, and for all of the
foregoing reasons, IT IS on this 9 day of May, 2019,
ORDERED that ...