stating that “the district court ought to begin with the one measure of actual damages that, if ascertained with reasonable certainty, could be said to reflect the actual loss of [plaintiff] — the cost of a reasonable royalty.”
How later courts described this case
- stating that “the district court ought to begin with the one measure of actual damages that, if ascertained with reasonable certainty, could be said to reflect the actual loss of [plaintiff] — the cost of a reasonable royalty.”
- awarding additional attorney’s fees to plaintiffs based on percentage of brief pages attributed to issues that prevailed on appeal even though the initial damages award was remanded for recalculation
- noting that this model can under-compensate even the victims of infringement
- supplementing plaintiffs award for attorney’s fees but choosing to apportion it based upon the degree of success on appeal
Written by the judges who cited it.
The opinion
CUDAHY, Circuit Judge,
concurring in part and dissenting in part.
I have no real quarrel with the majority’s careful examination of the caselaw as it pertains to the somewhat esoteric relation between effecting deterrence and imposing a “penalty.” I agree that, if we are to make any sense out of the seemingly inconsistent language of § 35(a), permitting trebled damages but forbidding the imposition of a penalty, enhanced damages should be awarded only where there is reason to believe that the calculation of “actual damages” for some reason fails to fully compensate the plaintiff.
My viewpoint on damages is certainly somewhat colored by my role as author of the opinion on liability in this case. This is a thin case, as I think my opinion for the panel makes clear. In fact, a finding of bad faith was made here only with considerable reluctance. In re Gioioso, 979 F.2d 956, 961-63 (3rd Cir.1992) (describing the evidence of bad faith as “pretty slim” and “marginal at best”). The Thirst>-Aid mark was essentially a shelf item, attached to no good will of an ongoing business. It was a mark looking for a product and a business which might find it of some value. For a few months in 1980 it was licensed to Pet, Inc. in connection with an isotonic beverage. After a short test the product and the mark were dropped by Pet, and Thirst-Aid went back into storage in search of another ongoing business to which it might attach itself.
The district court has found that Quaker Oats would have paid a reasonable royalty of $10,000,000 for the use of the mark. This is a most generous calculation and, I think, beyond the wildest dreams of STW, which held the mark in its files and had never earned substantial sums from it before. It is an amount based on a rate considerably more liberal than the one negotiated for the brief Pet experiment. Certainly, it is a more than fair measure of damages. But it does have a rational basis and I am prepared to accept it. To double it, however, in the name of deterrence is, with great respect, wholly unjustified and an abuse of discretion.
It does not require the shadow of the bankruptcy court or even depressed quarterly earnings to “deter” a big corporation like Quaker Oats. $10,000,000 plus interest and attorneys’ fees is an embarrassment to management, probably costs some cents per share in earnings and will be duly noted by the securities analysts and by the trade press. 1 If $10,000,000 is fair compensation, it is an adequate deterrent. This is the as *1355 sumption underlying tort damages in general.
Damages equal to “L” from the Hand formula, see United States v. Carroll Towing Co., 159 F.2d 169, 173 (2d Cir.1947), are compensatory damages, and “optimal deterrence” is achieved when damages are so calculated. One might respond that such a measure of damages is inadequate in the “intentional tort” context. Quaker Oats should not be in a situation where it would just as soon be sued as be asked to negotiate a royalty. In other contexts, the common law of torts has endeavored to address this problem. “[W]e want to make sure that I am not allowed to be indifferent between stealing and buying my neighbor’s ear. We do this by making the damages award greater than the value of the car so that I do not consider conversion an acceptable substitute for purchase. Punitive damages are one way of doing this. Another way, also common in intentional tort cases, is to make the tortfea-sor pay the victim what the thing taken was worth to the tortfeasor. This is the restitu-tionary measure of damages.” Richard A. Posner, Economic Analysis of the Law 209 (4th ed. 1992).
The Lanham Act, however, admits of neither of these alternatives. But this possible shortcoming should not detain us in this case, since there is no basis here for the speculation that, if Quaker Oats could negotiate a $10,000,000 royalty, it would just as soon risk a lawsuit in the same amount. Even if there were such a basis, however, under the Lan-ham Act the two alternatives to compensatory damages, punitive damages and restitution (which in the securities context is called disgorgement) are not available. The prohibition of punitive damages is express. And restitution, a property based measure of damages, is inconsistent with the nature of a trademark holder’s rights. It must be kept in mind that the underlying purpose of the Lanham Act is consumer protection, and the damages measure is an effort to estimate the “cost” of the confusion that would be created if Sands Taylor attempted to market an isotonic beverage named “Thirst-Ad,” or (more likely) sold the mark to someone who would. We therefore look to a “reasonable royalty” to estimate the harm to the consumer, not to compensate the trademark holder for a “trespass” to its “property.” While our concern with “consumer confusion” “may result in the creation of ‘quasi-property rights’ in communicative symbols, the focus is on the protection of consumers” rather than on the trademark as the holder’s “property” per se. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 157 , 109 S.Ct. 971, 980 , 103 L.Ed.2d 118 (1989). The Lanham Act therefore requires damages, even when enhanced, to serve as “compensation,” not restitution or “a penalty.”
Doubling the $10,000,000 cannot be justified on a “compensatory” basis. Again with great respect for the able trial judge, doubling grossly miscalculates what deterrence requires and imposes an unjustifiable penalty in a situation where it takes a bit of imagination to find bad faith. I see no need to remand for yet another justification of an excessive award. I would let the $10,000,000 plus interest and attorneys’ fees stand as a generous calculation of compensation having a quite certain deterrent impact.
I therefore respectfully dissent from the need for further district court consideration.
. On April 19, 1993, the day the Supreme Court denied the petition for a writ of certiorari from our previous opinion in this case, Quaker Oats’ stock fell $.75 a share. See Nightly Business Report (April 19, 1993). But pinpointing the causal relationship between a particular event and a change in a stock's price is of course a complex, if not impossible, endeavor as the securities doctrine of loss causation attests.