listing similar factors as well as the public interest in making the misconduct unprofitable
How later courts described this case
- listing similar factors as well as the public interest in making the misconduct unprofitable
- “A plaintiff’s entitlement to disgorged profits is assessed based on the equities of the case and does not automatically follow from liability.”
Written by the judges who cited it.
The opinion
Case: 17-40960 Document: 00514888678 Page: 1 Date Filed: 03/26/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 26, 2019
No. 17-40960
Lyle W. Cayce
Clerk
RETRACTABLE TECHNOLOGIES, INCORPORATED; THOMAS J. SHAW,
Plaintiffs - Appellants
v.
BECTON DICKINSON & COMPANY,
Defendant - Appellee
Appeals from the United States District Court
for the Eastern District of Texas
Before HIGGINBOTHAM, SMITH, and GRAVES, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
A jury found that Becton Dickinson & Co. falsely advertised its products
for years. The district court determined that neither disgorgement of profits
nor further injunctive relief would be equitable under the circumstances. It did
not abuse its discretion. We affirm.
I
This case involves a narrow subset of medical syringes: retractable
syringes, a type of “safety syringe” designed to reduce risk of accidental
needlesticks. Retractable syringes compete both with other varieties of safety
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No. 17-40960
syringes and with “conventional” syringes. 1 Although retractable syringes
provide significant protection against accidents, their fixed needles prevent use
for some hospital and clinical purposes. 2
Retractable Technologies, Inc. and Becton Dickinson & Co. compete in
the U.S. safety syringe market alongside two other major safety syringe
manufacturers. 3 RTI primarily manufactures retractable syringes and
dominates the retractable syringe sub-market; while BD produces retractable
syringes, it also produces several conventional and non-retractable safety
products that account for the bulk of its revenue. 4 This appeal is the latest
stage of ongoing litigation between the two.
A
BD made two false claims in its marketing materials. First, it advertised
itself as having the “world’s sharpest needle,” reflecting that needle sharpness
is seen as a proxy for patient comfort, and persisted in doing so after its
internal tests indicated otherwise. 5 Second, it promoted its retractable
syringes as having seven times less “waste space” than RTI’s product, meaning
that the syringes would waste less medicine per use. 6 While BD’s testing
supported this claim at first, internal tests from 2003 onward demonstrated
that RTI’s syringes were less wasteful than claimed. 7
RTI and its founder, Thomas J. Shaw, sued BD for antitrust violations
and false advertising under the Lanham Act, pointing to these false claims and
1 Retractable Techs., Inc. v. Becton Dickinson & Co. (RTI I), 842 F.3d 883, 889 (5th
Cir. 2016).
2 Id.
3 Id. As of 2010, BD had a 49% share of the safety syringe market, Covidien Ltd. had
a 30% share, Smiths Medical had a 10% share, and RTI had a 6% share. Id.
4 Id.
5 Id. at 893.
6 Id. at 893–94.
7 Id.
2
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other allegedly unfair and anticompetitive business practices. 8 A jury sided
with RTI on one of its antitrust claims and all of its Lanham Act false
advertising claims. It found that RTI was due more than $113.5 million in
antitrust damages. 9 RTI elected to not seek an award of damages for the
Lanham Act claim from the jury. 10
The district court statutorily trebled the antitrust damages and granted
attorney’s fees, resulting in a total award of approximately $352 million. RTI
additionally requested disgorgement of BD’s profits and injunctive relief. The
district court concluded that equity favored disgorgement, but that any
relevant profits were subsumed by the trebled antitrust damages award. It also
crafted a six-part injunction requiring BD to cease certain advertising claims
for several years, post a notice on its website, notify various entities of the false
claims, and implement a training program for employees and distributors. 11
On BD’s motion to stay the injunction pending appeal, the district court stayed
only the portion of the injunction that would require BD to notify its “end
users”—that is, the “hospitals, clinics, and other healthcare providers that do
not resell the syringes in the ordinary course of business.” 12
8 RTI initially filed state tort claims in addition to its Lanham Act and antitrust
claims, but dismissed them after the close of evidence at trial. Id. at 890. RTI also sued BD
for patent infringement, which was tried separately. On appeal, the Federal Circuit upheld
one of the patent claims on which RTI had prevailed at trial. See Retractable Techs., Inc. v.
Becton, Dickinson & Co., 653 F.3d 1296 (Fed. Cir. 2011).
9 RTI I, 842 F.3d at 890.
10 Id.
11 The injunction extended up to five years for certain portions and up to three years
for other portions.
12 The district court’s rationale for staying this portion of the injunction was that
intermediary distributors were the most likely to perpetuate BD’s false statements and
further harm RTI, whereas forcing BD to admit wrongdoing to end users posed a greater risk
of irreparable harm to BD.
3
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B
While BD began to comply with the portions of the injunction that were
not stayed, it appealed the jury’s finding of antitrust liability and the district
court’s remedies determination. 13 We concluded that RTI’s antitrust claim was
legally insufficient and reversed that portion of the judgment—so at a
minimum, RTI was no longer entitled to trebled antitrust damages and
attorney’s fees. 14 Having determined that the injunction was predicated at
least in part on BD’s antitrust liability, we also vacated the injunction and
remanded to the district court to determine whether the Lanham Act violations
standing alone justified continued equitable relief. 15
As for disgorgement of BD’s profits, we specifically approved of some of
the district court’s findings: “at least some portion of BD’s profits were
attributable to the false advertising,” BD intended to confuse or deceive
consumers, and RTI did not unreasonably delay in seeking relief. 16 Beyond
that, recognizing that the district court had subsumed the disgorgement into
the trebled antitrust damages, we remanded “for a thorough reweighing of the
remaining factors and the entirety of the record to determine whether and how
much profit BD should disgorge to compensate for the Lanham Act
violations.” 17 “In particular,” we observed, “when assessing [whether BD
diverted sales from RTI], the district court should bear in mind that
speculative and attenuated evidence of diversion of sales will not suffice.” 18
13 RTI I, 842 F.3d at 893, 901. BD also appealed its Lanham Act liability, asserting
res judicata and laches. Id. at 898–900. It did not contest the underlying finding of false
advertising liability.
14 Id. at 898.
15 Id. at 902.
16 Id. at 901 (emphasis added).
17 Id.
18 Id. (citing Seatrax, Inc. v. Sonbeck Int’l, Inc., 200 F.3d 358, 372 & n.8 (5th Cir.
2000)).
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On remand, the district court conducted a one-day bench trial and
evaluated an otherwise closed record. It ultimately declined to disgorge BD’s
profits or reinstate any portion of the vacated injunction. RTI appeals.
II
We review a district court’s decision to grant or withhold disgorgement
or injunctive relief under the Lanham Act for abuse of discretion. 19 Exercise of
its discretion must not have been based on an “erroneous view of the law” or a
“clearly erroneous assessment of the evidence.” 20 The district court otherwise
has “[g]reat latitude” 21 to “determine the nature of the infringing conduct and
its adverse effects, if any, on the plaintiff,” and to fashion relief accordingly. 22
III
We will begin with the district court’s denial of further injunctive relief.
A district court’s discretion to grant injunctive relief is both broad and
constrained by well-settled principles. When we remanded the issue to the
district court, while recognizing that a further need for injunctive relief was
“theoretically possible,” we emphasized that “[a] plaintiff seeking injunctive
relief must show a real and immediate threat of future or continuing injury
apart from any past injury,” and that any injunction should be “no broader
than reasonably necessary to prevent the deception.” 23
19 See, e.g., Quick Techs., Inc. v. Sage Grp., PLC, 313 F.3d 338, 347 (5th Cir. 2002).
20 Aransas Project v. Shaw, 775 F.3d 641, 648 (5th Cir. 2014) (per curiam). RTI argues
that because the district judge on remand did not preside over the original trial, the court’s
factual conclusions on remand should be subject to higher scrutiny. Here, where the remand
court conducted a one-day bench trial and could review extensive documentary evidence
presented in the initial trial, we will review its factual determinations for clear error. Cf.
Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985) (confirming that clear error
review accounts for the trial court’s expertise in determining facts, so even factual findings
that do not rest on in-person testimony must be reviewed for clear error).
21 Martin’s Herend Imports, Inc. v. Diamond & Gem Trading USA Co., 112 F.3d 1296,
1304 (5th Cir. 1997).
22 Seatrax, 200 F.3d at 369.
23 RTI I, 842 F.3d at 902 (quoting Aransas Project, 775 F.3d at 663, and Better Bus.
Bureau of Metro. Hous., Inc. v. Med. Dirs., Inc., 681 F.2d 397, 405 (5th Cir. 1982)).
5
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The district court hewed to these reminders on remand. It observed that
although it had stayed the requirement that BD notify its end users of the false
advertising, BD took multiple steps to comply with the remainder of the
injunction for the two-year period 24 before we reversed BD’s false advertising
liability on appeal. BD notified “over 750 distributors, over 10,000 employees,
and all the major Group Purchasing Organizations, stating that its needle
sharpness and waste space claims were inaccurate.” Further, “BD removed the
false advertising from its marketing materials . . . and posted a notice on its
website.” It also implemented a training program for employees and
distributors. The district court concluded that these steps had been sufficient
to remedy any injury or threat of injury RTI had suffered from the false
advertising.
RTI argues that this analysis was flawed because it failed to account for
notification to end users, the portion of the original injunction that never went
into effect because the district court stayed it pending appeal; that because end
users play a significant role in medical decisions to purchase syringes, BD’s
false advertising cannot be fully remedied without requiring end user
notification. While aware that this portion of the original injunction never took
effect, the district court concluded that RTI had not demonstrated a real and
immediate threat of future or continuing injury that would warrant further
injunctive relief. RTI has presented no reason to conclude that the district
court clearly erred in this determination or that it abused its discretion by
denying further injunctive relief.
24 The district court required BD to begin complying with the injunction on February
14, 2015, and our opinion issued on December 2, 2016.
6
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IV
The heart of the parties’ dispute is whether the district court erred in
denying disgorgement of BD’s profits. Section 35 of the Lanham Act allows
monetary recovery for certain Lanham Act violations in the form of actual
damages, disgorgement, and costs. 25 A plaintiff’s entitlement to disgorged
profits is assessed based on the equities of the case and does not automatically
follow from liability. 26
Our caselaw establishes two distinct considerations in assessing whether
disgorgement is appropriate. The first is whether disgorgement is equitable
under the six factors set forth in Pebble Beach Co. v. Tour 18 I Ltd.:
(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. 27
The Pebble Beach factors are non-mandatory and non-exclusive: the district
court is free to consider other facts in assessing whether disgorgement of
profits would be equitable, just as it may exercise discretion in weighing the
individual factors. 28
25 15 U.S.C. § 1117(a) (2018). The statute further clarifies that “[i]n assessing profits
the plaintiff shall be required to prove defendant’s sales only; defendant must prove all
elements of cost or deduction claimed.” Id.
26 See, e.g., Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 338 (5th Cir.
2008); Seatrax, 200 F.3d at 369.
27 Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 554 (5th Cir. 1998), abrogated on
other grounds by TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23 (2001). While these
factors were formulated in the trademark infringement context, they also apply to false
advertising. See, e.g., RTI I, 842 F.3d at 900–01.
28 See, e.g., Quick Techs., 313 F.3d at 348–49.
7
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The second consideration is whether the defendant’s profits are
attributable to the Lanham Act violation. 29 In short, “where a plaintiff who has
brought a Lanham Act claim for false advertising has failed to present evidence
that the defendant benefited from the alleged false advertising, the plaintiff
will not be permitted to recover any of the defendant’s profits,” even where the
Pebble Beach test favors disgorgement. 30
On remand, the district court correctly recognized that we had affirmed
certain portions of its disgorgement analysis, making that analysis the law of
the case. We agreed with the district court’s conclusion that “at least some
portion of BD’s profits were attributable to the false advertising.” 31 As for the
Pebble Beach factors, we specifically affirmed its findings that the “intent to
confuse or deceive” and “unreasonable delay” Pebble Beach factors favored
disgorgement. 32 Following our instructions to engage in “a thorough re-
weighing of the remaining factors and the entirety of the record to determine
whether and how much profit BD should disgorge to compensate for the
Lanham Act violations,” 33 the district court reevaluated the remaining Pebble
Beach factors. It found that although BD had intended to confuse or deceive,
RTI had not unreasonably delayed in asserting its rights, and the public
interest favored disgorgement, the equities weighed against disgorgement
because RTI had not shown diversion of sales or palming off and injunctive
relief was an adequate remedy. RTI challenges the district court’s assessment
of several of the individual Pebble Beach factors, as well as its ultimate
balancing of the factors.
29See, e.g., id. at 350; Tex. Pig Stands, Inc. v. Hard Rock Cafe Int’l, Inc. (Texas Pig
Stands II), 966 F.2d 956, 957 (1992), on denial of reh’g.
30 Logan v. Burgers Ozark Country Cured Hams Inc., 263 F.3d 447, 464 (5th Cir. 2001).
31 See RTI I, 842 F.3d at 901.
32 See id.
33 Id.
8
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A
RTI contests the district court’s conclusion on remand that the “diversion
of sales” factor did not favor disgorgement. The district court initially found
that this factor favored disgorgement, but only slightly. As we have explained,
the district court found that at least some of BD’s profits were attributable to
its false advertising. But although it recognized that “BD profited from its false
advertisements,” the court observed that “it is less certain that the resulting
sales came at RTI’s expense,” because RTI and BD were not the only
participants in the safety syringe market. Despite this hesitation, the court
ultimately found that RTI had produced enough evidence, in the form of
internal BD emails touting commercial successes attributable to its needle-
sharpness and waste-space advertisements, to confirm the “rational conclusion
that some portion of BD’s ill-gotten sales came at RTI’s expense.” It therefore
weighed the diversion factor slightly in favor of disgorgement.
On remand, guided by our reminder that “speculative and attenuated”
evidence of diversion is insufficient to support disgorgement, the district court
reevaluated the “diversion of sales” factor. It ultimately concluded that the
factor weighed against disgorgement because RTI had not adequately
demonstrated diversion. RTI challenges this on two grounds: first, that the
district court was bound by the case’s prior history to find diversion of sales,
and second, that the district court abused its discretion in finding no diversion.
We disagree.
1
RTI first argues that the remand court should not have reassessed the
diversion factor because the fact of diversion of sales was already conclusively
established, both by the jury’s liability finding and by our opinion. Not so.
The jury’s finding of Lanham Act liability did not conclusively establish
diversion of sales. To prevail on a false advertising claim, a plaintiff must
9
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demonstrate injury or likely injury due to the defendant’s false advertising. 34
We have cautioned against “conflat[ing] the injury requirement for [a] false
advertisement claim with the requirement that [the plaintiff] prove his actual
damages in order to obtain relief.” 35 We have further explained that “[i]n
fashioning the appropriate remedy, a legal determination of liability is not
dispositive,” and in determining whether disgorgement is appropriate a court
must further consider the “adverse effects, if any, on the plaintiff.” 36 In sum, a
plaintiff could prove that a defendant is liable for false advertising, but not
satisfactorily demonstrate tangible harm—such as diverted sales—as a result
of that false advertising. 37
Nor did our prior decision establish diversion of sales as the law of the
case. RTI argues that when we found “no clear error in the district court’s
conclusion that at least some portion of BD’s profits were attributable to the
false advertising,” 38 we established that the diversion factor weighed in favor
of disgorgement. Taken in context, this argument conflates the “attribution of
profits” requirement with the “diversion of sales” factor.
When first determining whether disgorgement was appropriate, in
keeping with our caselaw, the district court addressed the attribution
34 Logan, 263 F.3d at 462.
35 Id. at 462. Typically, injunctive relief is available even where a false advertising
plaintiff cannot prove concrete enough damage to qualify for monetary relief. For example,
while we generally will require a plaintiff seeking monetary relief to demonstrate actual
consumer confusion or deception, we relax that requirement for a plaintiff seeking purely
injunctive relief—the latter need only prove that the advertisement tends to deceive
consumers. See Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 497–98 (5th Cir. 2000).
36 Seatrax, 200 F.3d at 369.
37 See Logan, 263 F.3d at 462–63 (holding that the plaintiff had not proven damages
with sufficient particularity to support an award of actual damages, even though the injury
element of the false advertising claim was met); see also Porous Media Corp. v. Pall Corp.,
110 F.3d 1329, 1336 (8th Cir. 1997) (“Once it had established its [false advertising] claim,
[the plaintiff] still bore the burden of proving an evidentiary basis to justify any monetary
recovery.”).
38 RTI I, 842 F.3d at 901.
10
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requirement and the Pebble Beach factors separately. It found that RTI had
sufficiently demonstrated that at least some of BD’s profits were attributable
to its wrongful conduct—internal BD documents suggested that the false
advertising allowed BD to command premium pricing and claim increased
market share. Despite finding that some profits were attributable to the false
advertising, the district court expressed well-founded skepticism that RTI had
proven diversion of sales—observing that “[a]lthough BD profited from its false
advertisements, it is less certain that the resulting sales came at RTI’s
expense,” since it was not clear that every dollar BD earned came out of RTI’s
pocket. Nonetheless, as we have explained, it ultimately found that “some
portion of BD’s ill-gotten sales came at RTI’s expense.”
When we affirmed the district court’s conclusion that “at least some
portion of BD’s profits were attributable to the false advertising,” we referred
to the district court’s initial finding that some of BD’s profits were attributable
to the false advertising, not its considerably more tentative finding that the
false advertising diverted sales specifically from RTI to BD. Indeed, after
directing the district court to re-weigh the Pebble Beach factors that we had
not specifically addressed, we instructed it not to consider “speculative and
attenuated” evidence of diversion when assessing the “diversion of sales”
factor—reflecting our understanding that while the district court may have
properly found some profits attributable to the false advertising, this did not
necessarily mean that the diversion factor supported disgorgement. 39
At base, the attribution and diversion inquiries serve different functions
in assessing the propriety of disgorgement. The “diversion” factor plays an
39 Id. Of course, we left open the possibility that the district court could find on remand
that RTI had lost sales to BD. See, e.g., id. at 895 (in discussing BD’s potential antitrust
liability, observing that “RTI may have lost some sales or market share because of BD’s false
advertising”).
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important role in establishing the plaintiff’s entitlement to profits. In many
cases, disgorgement will not be equitable where few or no sales were ever
diverted from the plaintiff to the defendant, because disgorgement in such
contexts would grant the plaintiff an unjustified “windfall.” 40 The “attribution”
requirement ensures that once the district court has determined disgorgement
is equitable, a defendant will only be forced to disgorge profits attributable to
the Lanham Act violation. 41 It signifies that, while these inquiries will often
overlap, they are not coextensive. For example, as the district court recognized
from the beginning, RTI had presented evidence that BD benefited from its
false advertising by commanding premium pricing—generating increased
profits for BD without necessarily diverting sales from RTI.
In sum, there was no inconsistency between the district court’s
reweighing of the diversion factor on remand and either the jury verdict or our
previous opinion on appeal. Although we affirmed the district court’s
recognition that BD benefited from the false advertising to some extent—
satisfying the attribution requirement—we left open the possibility that RTI
would be unable to present anything beyond “speculative and attenuated”
evidence proving that this benefit came in the form of sales diverted from RTI
to BD.
2
RTI also argues that once the district court reassessed the “diversion of
sales” factor, it clearly erred in finding that RTI offered insufficient proof of
diversion. Here too, we disagree. The district court found that the diversion
factor did not favor disgorgement because the only evidence RTI had presented
40Cf. Tex. Pig Stands, Inc. v. Hard Rock Cafe Int’l, Inc. (Texas Pig Stands I), 951 F.2d
684, 696 (5th Cir. 1992) (“The granted permanent injunction adequately remedies the
complained-of infringement, and awarding [the plaintiff] any of [the defendant’s] profits
would be far from equitable—it would be a windfall.”); accord Quick Techs., 313 F.3d at 348.
41 See, e.g., Quick Techs., 313 F.3d at 349–50.
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of diverted sales was “speculative and attenuated”; the best evidence of
diversion RTI produced was internal BD correspondence boasting about the
commercial impact of its “needle sharpness” and “waste space” claims, and the
trial court was persuaded that this correspondence did not actually prove that
RTI’s customers or potential customers chose to purchase from BD instead of
RTI as a result of the false advertising. Notably, RTI had not produced “a single
witness or reliable study or data to prove a single example of a diverted sale,”
nor did it produce evidence that any potential customer “ever saw the waste
space comparison or relied on it in making purchasing decisions.” 42 At least
some customers expanded their purchases from RTI after the dates they were
allegedly presented with the deceptive waste space comparisons. In contrast,
BD had difficulty selling its retractable syringes during the same period.
These findings closely tracked our reasons for concluding that BD’s false
advertising, standing alone, could not ground antitrust liability. We observed
the sophisticated nature of the parties’ customers, not one of which testified to
a purchase motivated by either of BD’s false claims about needle sharpness or
waste space, but several of which testified that they were not impacted by
advertisements. 43 We further observed that “RTI produced no evidence of
customers being misled or confused and purchasing BD’s syringes instead of
RTI’s because of the advertisements”—noting RTI’s 67% share of the
retractable syringe sub-market, RTI’s own experts’ recognition that they could
not substantiate a causal connection between the false advertising and BD’s
42 RTI argues that the district court ignored evidence that a presentation including
the false claims had been used with potential customers. Even if there was some evidence
that BD presented the false advertising to clients, however, the district court did not clearly
err in concluding that the false advertising did not affect client decisions or divert sales from
RTI to BD. Further, RTI’s counsel conceded that in at least one case, an internal document
prepared for a customer presentation was “not actually given” to that customer.
43 RTI I, 842 F.3d at 895.
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sales, evidence that certain customers increased their purchases of RTI
syringes after potentially being exposed to BD’s false statements, and evidence
that factors other than BD’s advertising predominantly impacted its sales. 44 In
sum, we concluded that “RTI’s evidence consisted mostly of boastful e-mail
exchanges between BD sales representatives recounting what they believed
were successful sales pitches, but notably there was no testimony from the
customers themselves.” 45 While we discussed these facts in the context of RTI’s
antitrust claim, the district court appropriately accounted for them in its
analysis of diversion of sales. We cannot conclude that the district court clearly
erred in finding that RTI had only presented speculative and attenuated
evidence of diversion of sales, and that the diversion factor therefore did not
favor disgorgement.
Relatedly, RTI suggests that the district court on remand should have
presumed diversion of sales because BD engaged in intentionally deceptive
comparative advertising. 46 While some of our fellow circuits have applied this
presumption to claims for disgorgement in false advertising cases, they have
largely done so in cases of intentionally false comparative advertising “where
[it is] reasonable to presume that every dollar defendant makes has come
directly out of [the] plaintiff’s pocket.” 47 We need not decide the wisdom of this
44 Id. at 896–97.
45 Id. at 897.
46 RTI also argues that the district court should have presumed diversion from the
fact that BD’s statements were literally false. While we have held that a plaintiff can
presumptively satisfy the deception and materiality elements of a false advertising claim by
showing literal falsity, this speaks to liability, not entitlement to disgorgement. See Pizza
Hut, 227 F.3d at 497 (“With respect to materiality, when the statements of fact at issue are
shown to be literally false, the plaintiff need not introduce evidence on the issue of the impact
the statements had on consumers.” (emphasis added)).
47 TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 831 (9th Cir. 2011); see also
Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247, 262 (2d Cir. 2014) (“In a false advertising
case such as this one, where the parties are direct competitors in a two-player market, and
where literal falsity and willful, deliberate deception have been proved, the presumptions of
injury and consumer confusion may be used for the purposes of awarding both injunctive
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presumption in such cases, because it does not apply here. From the beginning,
the district court recognized that RTI and BD were not the only players in the
safety syringe market and that it could not presume that any benefit BD
gained from its false advertising came directly at the expense of RTI. 48 The
district court therefore did not err in looking for more concrete evidence of
diversion.
B
RTI also challenges the district court’s decision on remand that the
“adequacy of other remedies” factor disfavored disgorgement. Before we
reversed BD’s antitrust liability, the district court found that the trebled
antitrust damages award and six-part injunction were likely adequate to
remedy any harm caused by the false advertising. Even after we remanded,
the district court concluded that the steps BD had already taken to comply
with the injunction were sufficient—so the factor still weighed against
disgorgement. This conclusion went hand-in-hand with the district court’s
determination that RTI had not sufficiently demonstrated that it suffered
concrete harm—in the form of diverted sales or otherwise—as a result of the
false advertising.
We have already explained why the district court did not clearly err in
finding that further injunctive relief was unnecessary. For similar reasons, we
cannot conclude that the district court clearly erred here. RTI has not
demonstrated that the district court misunderstood or overestimated the scope
relief and monetary damages to a successful plaintiff.”); Balance Dynamics Corp. v. Schmidt
Indus., Inc., 204 F.3d 683, 694–95 (6th Cir. 2000) (“[L]iteral falsity, without more, is
insufficient to support an award of money damages to compensate for marketplace injury
such as harm to goodwill . . . . While literal falsehood or the likelihood of deception may be
sufficient to entitle [the plaintiff] to injunctive relief or reimbursement for responsive
advertising, it should not permit [the plaintiff] to recover for injuries to goodwill in the
absence of some more substantial indication that these injuries actually occurred.”).
48 See RTI I, 842 F.3d at 888, 896.
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of the actions BD had already taken to comply with the injunction before it was
vacated. Nor has RTI shown that the district court clearly erred in finding that
the steps BD already took—including notifying over 750 distributors and
Group Purchase Organizations—were adequate to remedy any harm RTI had
experienced as a result of BD’s actions, especially since RTI ultimately offered
only “speculative and attenuated” evidence of harm to its business as a result
of the false advertising. We have previously held that when a Lanham Act
plaintiff has already received or will benefit from substantial injunctive relief,
disgorgement may amount to a “windfall.” 49
The district court’s treatment of this factor hinged on a straightforward
application of the principle that where the relief that a plaintiff has already
received is otherwise adequate to remedy any harm posed to the plaintiff, an
award of profits may not be equitable. 50 It did not abuse its discretion in
weighing this factor against disgorgement.
C
Finally, RTI argues that the district court abused its discretion when it
weighed the Pebble Beach factors to find that the equities did not favor
disgorgement. RTI avers that the district court erred by assigning significant
weight to the “palming off” factor. It also argues that the district court should
have awarded disgorgement based solely on the need to deter future false
advertising.
49 See, e.g., Quick Techs., 313 F.3d at 350 (citing Texas Pig Stands I, 951 F.2d at 696).
50 There is also no tension between the district court’s conclusions here and our
reminder that “equitable relief is normally appropriate only in the absence of an adequate
remedy at law (i.e., money damages).” RTI I, 842 F.3d at 902. Here, a large portion of the
injunctive relief had already been secured, and the district court was asked to determine
whether the fact that BD had already taken several steps to comply with the injunction
helped to mitigate the need for monetary relief. We do not necessarily approve of a general
rule that, ex ante, injunctive relief is preferable to disgorgement.
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1
The “palming off” factor applies when a Lanham Act defendant attempts
to pass off its goods as the plaintiff’s. RTI has never argued that BD palmed off
its syringes as RTI’s. Instead, it submits that “palming off” is an irrelevant
factor in false advertising cases, and that the district court should have looked
instead to the general loss of goodwill RTI experienced due to BD’s false claims.
On remand, the district court observed that the “diversion of sales” and
“palming off” factors are “especially important factors” in the Pebble Beach
analysis under our caselaw. It concluded that disgorgement was inequitable
because three Pebble Beach factors, “including the two most important,”
weighed against disgorgement. RTI argues that this approach sets false
advertising plaintiffs at a disadvantage relative to trademark infringement
plaintiffs: while an appropriate measure of egregious conduct in trademark
cases, palming off will rarely be demonstrated in Lanham Act cases that do not
involve trademark claims.
If a false advertising plaintiff has otherwise shown concrete harm due to
the false advertising, such as diverted sales, a court should not heavily weigh
the absence of palming off against disgorgement. Here, however, the district
court appropriately considered the absence of palming off as another way in
which RTI could have demonstrated concrete harm as a result of BD’s false
advertising, but did not. The district court concluded that since RTI
demonstrated neither diversion of sales nor palming off, disgorgement of BD’s
profits would grant RTI an unjustifiable windfall.
The district court correctly read our caselaw, which establishes that a
plaintiff who cannot demonstrate diversion or palming off faces an uphill battle
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in obtaining disgorgement. 51 While a plaintiff seeking disgorgement need not
demonstrate damages with the same degree of particularity as one seeking
actual damages, 52 we are wary of disgorging profits to a party who can only
speculate as to harm caused by the Lanham Act violation.
RTI argues that in lieu of palming off, the district court should have
accounted for loss of goodwill that RTI experienced as a result of the false
advertising. Because the Pebble Beach factors are non-exclusive, district courts
are always free to consider other facts affecting the equity of disgorgement.
RTI argues that even where a Lanham Act plaintiff has not shown diversion of
sales or palming off, disgorgement of the defendant’s profits may still be
equitable where the plaintiff shows harm due to loss of consumer goodwill.
In principle, RTI is correct. Even without sufficient evidence of diverted
sales or palming off, proof of lost goodwill might weigh in favor of
disgorgement—especially, though perhaps not only, where the plaintiff can
show that the loss of goodwill tangibly affected the plaintiff’s business or would
have affected the plaintiff’s business had the plaintiff not taken steps to
resuscitate consumer perception. But here, RTI’s evidence of lost goodwill and
steps taken to combat that lost goodwill, like its evidence of diverted sales, was
51 See Streamline Prod. Sys., Inc. v. Streamline Mfg., Inc., 851 F.3d 440, 459 (5th Cir.
2017) (noting that monetary damages are especially unwarranted under the Lanham Act
either “in the absence of a showing of wrongful intent” or where there is “lack of sufficient
proof of actual damages”); Sw. Recreational Indus., Inc. v. FieldTurf, Inc., No. 01-50073, 2002
WL 32783971, at *9 (5th Cir. Aug. 13, 2002) (unpublished opinion) (noting the absence of
diversion and palming off in affirming a denial of disgorgement); Seatrax, 200 F.3d at 372
(noting that disgorgement was unjustified in light of a lack of willful infringement, lack of
palming off, sufficiency of injunctive relief as a deterrent, and lack of “sufficient proof of
actual damages”); Pebble Beach, 155 F.3d at 555 (emphasizing lack of proof of actual damages
or intent to confuse or deceive).
52 See Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 135–36
(2014) (explaining that disgorgement or injunctive relief may be appropriate in false
advertising cases even where actual damages cannot be quantified with “sufficient
certainty”).
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speculative. 53 As we have already explained, RTI pointed to no concrete
evidence of lost goodwill that affected the purchasing decisions of its
sophisticated customer base—in fact, as we recognized, RTI’s market share in
the retractable syringe sub-market increased and its sales nearly doubled over
the relevant period of false advertising. 54 The district court did not abuse its
discretion in failing to place significant weight on the bare possibility that RTI
lost goodwill with consumers due to BD’s advertising, without more, just as it
did not abuse its discretion in placing significant weight on the fact that RTI
had not otherwise demonstrated concrete harm.
2
In sum, the district court did not abuse its discretion in determining that
where RTI had not sufficiently demonstrated that its business suffered due to
BD’s false advertising and where BD had already taken significant steps to
correct the false statements, disgorgement was not equitable. That another
court could have evaluated the facts differently does not justify reversal,
especially as “an award of profits with no proof of harm is an uncommon
remedy in a false advertising suit.” 55
RTI argues that this outcome conflicts with our holding in Maltina Corp.
v. Cawy Bottling Co., which concluded that diversion of sales is not a
prerequisite to disgorgement because disgorgement may also remedy unjust
enrichment or deter future infringement, 56 thus helping to “take all the
53 RTI cites evidence that its employees who were worried about loss of goodwill “had
to expend effort and energy to go around and try to . . . tell people and convince them that it
wasn’t true” and “spent a lot of time going to customers and trying to correct the
misinformation, a lot of meetings, direct meetings, letter-writing, things like that.”
54 RTI I, 842 F.3d at 897.
55 See TrafficSchool.com, 653 F.3d at 831.
56 See Maltina Corp. v. Cawy Bottling Co., Inc., 613 F.2d 582, 584–85 (5th Cir. 1980);
see also Texas Pig Stands II, 966 F.2d at 957 (“This Court recognizes Maltina to be the law
of the Fifth Circuit in its holding that (i) absence of competitors or (ii) failure of proof showing
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economic incentive” out of a Lanham Act violation. 57 It observes that Maltina
rejected the view that disgorgement is only a means of “compensating . . . for
loss or diverted sales,” and therefore held that diversion of sales is not
necessarily a prerequisite to disgorgement. 58
Maltina does not mandate disgorgement in every case where
disgorgement might conceivably remedy unjust enrichment or deter future
infringement, regardless of whether it would be equitable to disgorge profits to
a particular plaintiff. To do so would effectively make disgorgement automatic
any time the defendant has any profits attributable to a Lanham Act violation,
in sharp contrast to our repeated reminder that disgorgement is ultimately an
equitable remedy subject to the district court’s sound discretion. Here, where
the district court found that injunctive relief was sufficient and monetary relief
would grant RTI an unjustified windfall, it did not abuse its discretion in
refusing to award disgorgement—other potential purposes of disgorgement
notwithstanding. 59
diversion of the mark owner’s sales is no defense to the claim for Defendant’s profits under
15 U.S.C. § 1117.”).
57 Am. Rice, 518 F.3d at 340 (observing that “infringing conduct should be unprofitable
to infringers”).
The parties discuss the relevance of the Lanham Act’s provision that at least certain
monetary awards “shall constitute compensation and not a penalty.” 15 U.S.C. § 1117(a). The
statute is ambiguous as to whether this limitation applies to all monetary awards under the
section, or whether it only applies to enhancements or reductions for inadequate or excessive
awards. We have generally read this provision to broadly hold that any monetary damages
under the Lanham Act should constitute compensation and not a penalty. See, e.g.,
Streamline Prod. Sys., 851 F.3d at 459 (“The Lanham Act . . . . instructs that . . . monetary
damages [in the form of profits, damages, or costs] ‘shall constitute compensation and not a
penalty.’”); Logan, 263 F.3d at 464 n.15 (“Section 1117(a) states that the damages provided
thereunder are ‘subject to the principles of equity’ and ‘shall constitute compensation and not
a penalty.’”). Our decision here, though, does not hinge on this provision but rather on the
well-settled principles of equity repeatedly explained in our Lanham Act caselaw.
58 Maltina, 613 F.2d at 584.
59 The district court distinguished Maltina on the grounds that trademarks and trade
dress are unique “protected property right[s].” See Maltina, 613 F.2d at 585 (“This recognition
of a trademark as property is consistent with the view that an accounting is proper even if
the defendant and plaintiff are not in direct competition, and the defendants’ infringement
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This is not a case, moreover, where the defendant violated the Lanham
Act and emerged unscathed. BD complied with the district court’s original
injunction for nearly two years, including by notifying hundreds of
intermediary distributors and Group Purchasing Organizations and by
implementing a training program for employees and distributors. Further, our
caselaw ensures that where a false advertiser succeeds in diverting sales or
otherwise demonstrably harms another party’s consumer goodwill, the district
court will account for this in assessing the equities of disgorgement. While RTI
may have failed to demonstrate such harm here, future would-be false
advertisers would do well to heed that warning. RTI has demonstrated no
interest in deterrence or remedying unjust enrichment that overcomes the
district court’s well-founded emphasis on other equitable considerations.
* * *
The district court’s denial of disgorgement of profits from RTI’s
competitor was made against the larger backdrop of its prosecution of a
meritless antitrust claim against BD for conduct in the marketplace—during
a time in which RTI nearly doubled its own sales and increased its share of the
retractable syringe sub-market to two-thirds. RTI elected not to test its proof
of Lanham Act damages before the jury, but rather to later argue, as now, that
equity mandates disgorgement. Its effort to carry the flag of “public interest”
and guide the profits of its competitor to its own coffers here must fail. That
has not diverted sales from the plaintiff.”). RTI argues that the Lanham Act also protects
trade reputation and goodwill as property interests. We need not sift through whether a
business’s goodwill is a property right similar to its trademark interests; at a minimum,
without demonstrating that RTI’s goodwill was harmed in a way that affected potential
customers’ decisions, RTI has not shown harm to its goodwill that parallels the harm caused
a markholder whose mark is used without consent. Cf. Maltina, 613 F.2d at 585 (“Here, the
only valuable property [the plaintiff] had when he arrived in this country was his right to the
‘Cristal’ mark. [The defendant] used this property, and an accounting is necessary to partially
remedy its unjust enrichment.”).
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effort must be taken outside—to the marketplace. There the public interest is
best vindicated. The district court did not abuse its discretion.
V
We affirm the district court’s denial of disgorgement and further
injunctive relief.
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JAMES E. GRAVES, JR., Circuit Judge, dissenting:
Because I conclude that the district court erred in reweighing the
diversion factor and in finding insufficient evidence to support disgorgement,
I would vacate and remand. Therefore, I respectfully dissent.
As stated in the majority’s recitation of the procedural history, the jury
found for Retractable Technologies, Inc. (RTI) on one of its antitrust claims,
attempted monopolization of the market for safety syringes, and all the
Lanham Act false advertising claims. The jury awarded $113.5 million in
antitrust damages. The district court trebled the antitrust damages and added
attorneys’ fees, resulting in a total of approximately $352 million. The district
court concluded that RTI was entitled to disgorgement of Becton Dickinson &
Co.’s (BD) profits under 15 U.S.C. §1117(a), but, found that the trebled
antitrust damages and injunction were potentially adequate remedies.
Specifically, the district court found that, under the factors outlined in
Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 554 (5th Cir. 1998), four of
the six factors favored disgorgement: 1) that BD had the intent to confuse or
deceive; 2) that sales were at least slightly diverted; 3) that RTI did not
unreasonably delay; and 4) public interest in making misconduct profitable.
The court concluded that the two remaining factors, the adequacy of other
remedies and whether it was a case of palming off, disfavored disgorgement.
The district court also granted a six-part injunction prohibiting BD from
making certain advertising claims about needle sharpness for five years and
about medical savings for three years; to notify various entities about its false
statements; to post notice on its website for three years; and implement a
training program for employees and distributors.
On appeal, this court reversed BD’s antitrust liability, meaning RTI was
no longer entitled to the $352 million in trebled antitrust damages, and
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remanded for a new assessment of disgorgement remedies based on the
Lanham Act false advertising claims. See Retractable Techs., Inc. v. Becton
Dickinson & Co., 842 F.3d 883 (5th Cir. 2016). Regarding the Pebble Beach
factors, the panel affirmed three portions: 1) The district court’s conclusion
that at least some of BD’s profits were attributable to false advertising; 2) the
finding that BD intended to confuse or deceive; and 3) the finding that RTI did
not unreasonably delay. Retractable Techs., 842 F.3d at 901.
On remand, the district court evaluated the equities of disgorgement
under the Pebble Beach factors and found that disgorgement was not
warranted. Specifically, the district court found that public interest favored
disgorgement, but that RTI had not shown diversion of sales or palming off.
The remand court further weighted both diversion and palming off more
heavily than the other factors and found that prior temporary injunctive relief
was an adequate remedy. RTI then filed this appeal.
The majority now affirms, concluding that the district court did not err.
I disagree. The district court had previously determined that the diversion
factor at least slightly indicated that sales had been diverted. This court
affirmed that finding. It is helpful to look at the actual language used by this
court:
BD first argues that RTI failed to identify what portion of BD's
profits (if any) were attributable to false advertising. Additionally,
BD contends that the district court abused its discretion in
weighing three of the Pebble Beach factors, inasmuch as the court
(1) did not specify any amount of diverted sales; (2) failed to find
that BD willfully engaged in false advertising; and (3) erred in
holding that RTI did not unreasonably delay in filing suit.
We find no clear error in the district court's conclusion that at least
some portion of BD's profits were attributable to the false
advertising. Indeed, BD acknowledged in the district court, its
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expert witness's opinion that $7.2 million in profits—netting to
$560,000 after deductions for costs and expenses—could be
attributable to the waste space advertisements. In Logan or Texas
Pig Stands, by contrast, there was no evidence of attribution.
Similarly unassailable is the finding that BD had the intent to
confuse or deceive by continuing to use advertisements it knew
were false. That BD may not have willfully engaged in false
advertising does not change this analysis because a finding of
willfulness is not a prerequisite to remedial disgorgement. Quick
Techs., 313 F.3d at 349. Finally, we have approved the district
court's finding that RTI did not unreasonably delay.
Retractable Techs. 842 F.3d at 901 (emphasis added). After setting out the
factors, including diversion, that BD was taking issue with in the first
paragraph, the court then said, “We find no clear error in the district court’s
conclusion that at least some portion of BD’s profits were attributable to the
false advertising.” This was clearly addressing the diversion factor included in
the prior paragraph. The court then set out a specific amount that could be
attributable.
Moreover, this court’s additional language regarding diversion does not
contradict such a reading. This court said:
Nevertheless, the district court's equitably-founded decision not to
impose disgorgement rested in large part on the premise that RTI
was adequately compensated by a $340 million antitrust award.
Having overturned the antitrust judgment, we must remand to the
district court for a thorough re-weighing of the remaining factors
and the entirety of the record to determine whether and how much
profit BD should disgorge to compensate for the Lanham Act
violations. In particular, when assessing the “diversion” factor, the
district court should bear in mind that speculative and attenuated
evidence of diversion of sales will not suffice.
Retractable Techs. 842 F.3d at 901 (emphasis added). This court’s language
regarding diversion clearly indicates a reference to the assessment of the
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amount of profits to disgorge. This court did not say when reweighing the
diversion factor as it said regarding the “remaining factors”; it said when
assessing the diversion factor. Moreover, this court had already affirmed the
district court on the diversion factor. This language indicates this court was
referencing the “how much” profit to disgorge, as the district court had not
initially made that exact calculation other than to say it was properly included
as part of the trebled antitrust damages. But the district court had clearly
already found that “RTI produced evidence that on occasion BD relied on these
false advertisements to divert sales from RTI directly” and “[t]his evidence
confirms the rational conclusion that some portion of BD’s ill-gotten sales came
at RTI’s expense.” (emphasis original).
For these reasons, I conclude that it was error for the remand court to
reweigh the diversion factor. Further, RTI offered evidence of diversion. The
district court had already found it sufficient to establish some diversion and
this court had already affirmed. Because this court had already affirmed the
district court on three factors favoring disgorgement (diversion, BD’s intent to
confuse or deceive, and no unreasonable delay by RTI), there were only three
factors left for the remand court to reweigh.
Of those remaining three factors, the remand court found that the public
interest factor favored disgorgement. Thus, only the two remaining factors,
the adequacy of other remedies and palming off, could disfavor disgorgement.
Moreover, the remand court improperly weighted the absence of diversion and
palming off to the exclusion of other factors. Diversion was settled.
Regardless, there is no authority for weighting these factors more heavily.
Additionally, in light of these errors and the fact that the adequate remedies
the district court had previously found no longer exist, the district court
likewise erred in its reconsideration of the adequacy of other remedies.
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For these reasons, I would vacate and remand. Thus, I respectfully
dissent.
27