Appendix — Ajac Transmission Parts Corp. v. Transgo, Inc.
Supreme Court brief1986
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65 = 8 17 ») Supreme Court, US.
- FILED
NOV 12 1986
No. JOSEPH F. SPANIOL, JR.
= SLERK
In The
Supreme Court of the Anited States
OCTOBER TERM, 1985
AJAC TRANSMISSION PARTS CORP.,
FAIRBANKS RACING AUTOMATICS and
JERRY JACOBY,
Petitioners,
TRANSGO, INC.,
Respondent.
APPENDICES TO PETITION FOR WRIT OF
CERTIORARI TO THE UNITED STATES COURT
OF APPEALS FOR THE NINTH CIRCUIT
Gene 5. Winter
St. Onge Steward Johnston &
Reens
986 Bedford Street
Stamford, Connecticut 06905
(203) 324-6155
Attorney for Fairbanks
Racing Automatics
November 13, 1985
Douglas E. Olson
Lyon & Lyon
611 West Sixth Street
Los Angeles, California 90017
(213) 489-1600
Of Counsel:
William L. Respess
Hybritech Incorporated
11085 Torreyana Road
San Diego, California 92121
(619) 455-6700
Attorneys for Ajac Tran: -
mission Parts Corp. and
Jerry Jacoby
A YN
INDEX TO APPENDICES
Page
APPENDIX A
Opinion of the United States Court of Appeals for the Ninth
Circuit filed January 15, 1985 .................... PRCT Al
APPENDIX B
Order of the United States Court of Appeals for the Ninth
Cir. _‘t amending the January 15, 1985 opinion and denying
petition for rehearing and the suggestion for rehearing en banc
filed August 15, 1985 and amended order dated September 4,
PN Aa sce caakcnna tides cddscaicecsasabelatebeudbcdaaew .cisesse- A42
APPENDIX C
Findings of Fact and Conclusions of Law, and order of the
United States District Court for the Central District of Cali-
fornia awarding attorneys fees filed Febmary 18, 1981 ...... A49
APPENDIX D
1S U.S.C. § 1117 and 15 U.S.C. § 1125S(a) reproduced ....... A63
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APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Filed Jan. 15, 1985
TRANSGO, INC.,
Plaintiff-Appellee/ Cross-Appellant,
VS.
AJAC TRANSMISSION PARTS CORP., FAIRBANKS
RACING AUTOMATICS, and JERRY JACOBY ,
Defendants-Cross-Appellants/ Appellees,
and
FAIRBANKS AMERICA, INC., and JOSEPH P. LUPO,
Defendants-Appellees.
Nos. 80-5659, 80-5660, 80-5661 , 80-5707, 81-5102, 81-5230,
81-5231, 81-5232, 81-5691, 82-5161, 82-5162.
D.C.No. CV 77-0728-LEW
OPINION
Appeal from the United States District Court for the Central
District of California
Laughlin E. Waters, District Judge, Presiding
Argued and submitted March 9, 1984
Before: WALLACE and, ALARCON, Circuit Judges, and
HARDY *, District Judge.
* Honorable Charles L. Hardy, United States District Judge for the
District of Arizona, sitting by designation.
ALARCON, Circuit Judge:
Ajac Transmission Parts Corp., (Ajac), Jerry Jacoby (Jacoby),
and Fairbanks Racing Automatics (Fairbanks) appeal from (1) the
judgment entered against them after trial by jury for copyright and
trademark infringement, unfair competition, false designation of
origin and conspiracy, (2) the award of attorney's fees, (3) the den-
ial of their post-trial motions and (4) separate orders of the district
court finding them in contempt. Transgo, Inc., (Transgo) has cross-
appealed from (1) the judgment entered in favor of appellants on
the claim that Fairbanks violated Transgo’s trade dress rights by
copying its color codes for springs and its instruction sheets and by
engaging in false advertising and (2) from the order of the district
court imposing sanctions against Fairbanks and its president. We
affirm.
I
A. FACTUAL BACKGROUND
In order that the parties’ legal contentions can be more readily
understood, we set forth the facts in some detail. In doing so, we
have resolved conflicts in the evidence in favor of the party who
prevailed on a particular claim.
/. Evolution of Transgo’ s ‘‘Shift Kit’’
Gilbert Younger (Younger) began working with automatic
transmissions in 1951 as a mechanic for a Ford dealership. in 1956,
he acquired his own automatic transmission rebuilding shop.
Around 1961, Younger invented two different valve body kits
for the Ford 2-speed automatic transmission and began manufac-
turing them the next year. He called his products Valve Body Repair
Kits, Valve Body Rebuilding Kits, or Valve Body Calibration Kits.
He did not obtain a patent for his inventions.
Transmission rebuilders regard the valve body as the *‘brain’’ of
an automatic transmission. Countervailing pressures are created in
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the valve body when springs on the one hand, and hydraulic fluid
coming through a separator plate on the other, exert their forces on
pistons. These pressures determine the transmission’s shifting
characteristics. Automatic transmission manufacturers strive for a
smooth shift, so that passengers will not feel the gears’ move-
ments. A firmer shift, however, can improve car performance. The
shift can be altered by replacing the springs and separator plate
installed by the manufacturer with one of Younger’s valve body
kits.
Younger developed a reputation as an expert in the transmission
trade. Among transmission rebuilders, he was known as *‘Mr
Shift." He was invited to lecture to other rebuilders at seminars
sponsored in different parts of the country by the Automatic Trans-
mission Rebuilders Association, the Automobile Parts Rebuilders
Association, and the Automotive Service Counsel. He used the
lectures to attempt to create a demand and a market for his valve
body kits.
He would also gather information at these meetings concerning
rebuilders’ problems with different types of automatic transmis-
sions. When he was not lecturing, Younger gathered information
concerning transmission problems by telephone. Transgo’s
instruction sheets contained the telephone number of its research
division. Rebuilders were invited to telephone for assistance with
any transmission problem. Younger and his staff developed a line
of valve body kits to solve problems with different types of auto-
matic transmissions. By 1976, the line had grown from two to
twenty-four. A Transgo valve body kit generally consists of a sep-
arator plate, discretely colored springs, check valves, gaskets, and
an instruction sheet.
The valve body kit for each type of transmission was arbitrarily
assigned a set of identifying numbers or letters. For example, the
kit for a ‘“Torque-Flight’’ transmission was identified as *‘TF."”
Kits would be marketed under a product designation consisting of
‘““SK”’ for “‘Shift Kit’’ and the identifying letters. Thus, a valve
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body kit to improve Torque-Flight transmissions was given the
product model designation “‘SK-TF.""
Along with developing valve body kits, Younger’s group devel-
oped instruction sheets to guide rebuilders in the installation of
replacement parts. The development of some instruction sheets took
as much time as did the development of the parts themselves. The
first instruction sheets used photographs from factory manuals or
factory charts of the particular transmission the kit was designed to
improve. Later, Younger did his own camera work. Younger’s
picture appeared on the instruction sheets.
About 1966, Younger decided to capitalize on his reputation by
associating his nickname, Mr. Shift, with his valve body kits, and
he began referring to them as ‘‘shift kits’’ in conversations with
customers. In 1969, he began placing the name *‘Shift Kit’ on the
packages for his products.
In the transmission trade, distributors buy valve body kits in bulk
and repack them in packagings that simulate the packagings used
by the original equipment manufacturers. This is done so that
transmission rebuilders can organize their shelves by putting all the
products for a certain transmission model together. Distributors
generally do not display the product manufacturer's name on the
package in order to prevent rebuilders from ordering directly from
the manufacturer. In accordance with this trade practice, Younger
permitted distributors to repackage his valve body kits without dis-
playing his name on their package. He recognized that a distributor
had the implied right to use the name shift kit when he purchased
the product from Younger.
In 1969, Younger developed a line of valve body replacement
components called ‘*‘Reprogramming Kits.’* These kits were
designed for use in high performance engines, hot rodders, drag
racers and by car enthusiasts. Reprogramming kits go on the shelves
of *‘speed shops,’’ where a car enthusiast can purchase them for
self-installation. A separate division of Transgo manufactures these
high performance products. Other manufacturers of comparable kits
AS
such as J. C. Whitney and Company and Hurst Performance, were
referring to their products as shift kits when Younger’s reprogram-
ming kits were introduced to the high performance market.
By 1976, Transgo was the sole manufacturer of valve body kits
for automatic transmissions of ordinary passenger cars. They were
distributed throughout the United States and Canada. Transgo also
sold directly to a customer in Australia and several world-wide
exporters.
Ninety percent of Transgo’s sales came from valve body kits. In
1975, the sales of shift kits totalled about $750,000.
2. Evolution of the Fairbanks *‘Shift Kit”
Ajac was formed in 1966 by Jerry Jacoby, who was its president
and sole stockholder. Ajac purchases transmission parts from var-
ious manufacturers, repackages them, and sells them under its own
name to transmission rebuilders and to other distributors. It has
approximately 3,000 accounts world-wide, the majority of which
are transmission rebuilders. Most of Ajac’s sales result from tele-
phone orders.
For ten years after Ajac started doing business in 1966, it sold
Transgo valve body replacement kits for passenger cars. During that
period, Ajac purchased $200,000 worth of valve body kits from
Transgo.
Fairbanks, Inc., the parent company of Fairbanks Racing Auto-
matics, had been in the business of producing high performance
automatic transmission and replacement components since the mid-
1950s. However, it did not manufacture replacement parts for pas-
senger car transmissions. In 1974, several distributors of auto-
matic transmission parts, including Ajac, suggested to Joseph Lupo,
the president of Fairbanks, that his company expand into the auto-
matic transmission parts field. To help Lupo make a decision
whether his company should get into that field, Jerry Jacoby gave
him Transgo’s price list, which he had previously treated as confi-
|
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dential, a list of customers for shift kits and information regarding
which of Transgo’s kits sold best. On several occasions between
1974 and April 1976, Fairbanks purchased sets of Trango’s shift
kit line from Ajac. Fairbanks also called the Transgo ‘‘hot line”’
several times to see how Transgo solved problems. Ajac’s vice-
president asked Lupo to set up a ‘hot line’’ which would be avail-
able to rebuilders who had questions about Fairbanks’ kits or about
rebuilding transmissions in general.
About October, 1976, Fairbanks began to manufacture and sell
a line of valve body kits for passenger cars. The kits displayed the
name **Shift Kit’ in lettering larger than the lettering used for other
words on the boxes. Fairbanks attempted to copy the mechanical
components of twenty of Transgo’s twenty-four shift kits. The
components were packaged in a plastic bag, just as they were in
Transgo’s kits. Each spring in the Fairbanks’ kits had the same color
as comparable springs in the Transgo kits. Every one of Fairbanks’
product model designations was the same as Transgo’s. In one
instance, Transgo inadvertently failed to place the numerical por-
tion of the product model designation on the package for the **SK
425" kit. The corresponding Fairbanks’ kit also appeared without
any model number on the package. The instruction sheets for Fair-
banks’ ‘‘shift kits’’ were nearly indentical in size, shape and page
number to the corresponding Transgo instruction sheets. Every
photograph and line drawing was taken directly from the Transgo
sheets. Younger’s picture, however, was omitted. Insignificant
changes were made in the introduction and conclusion. As
requested by Ajac, Fairbanks installed a ‘‘hot line’’ to receive
trouble calls from rebuilders. Fairbanks’ employees answered the
line *“Transactions’’ and the **Transactions’’ phone number was
printed on Fairbanks’ instruction sheets. There was no reference to
Fairbanks. The same words used by Transgo to describe the effect
of using the kit appeared on Fairbanks’ package. The only differ-
ence in the package was a tiger stripe motif on the Fairbanks’ box.
Since Transgo’s shift kits were more expensive than Fairbanks’
kits, Jacoby planned to replace the Transgo kits with Fairbanks’
kits. Ajac sales personnel were not informed of this replacement.
|
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The Ajac catalog listed the Fairbanks valve body components under
the same numbers that identified Transgo’s shift kits. Jacoby rec-
ognized that when rebuilders ordered a ‘‘shift kit” they assumed
they would be getting a Transgo product. Nevertheless, when orders
for shift kits came in, Ajac sent Fairbanks kits without any notifi-
cation to the rebuilder that he was not getting a Transgo product.
Ajac charged the same price for Fairbanks’ products as for
Transgo’s.
Shortly after Ajac begun filling shift kit orders with Fairbanks
products, rebuilders began to complain that the product was defec-
tive. After receiving numerous complaints, one Ajac salesman
telephoned Ajac and inquired whether Transgo had changed its
boxes and revised its program. He was informed that this was the
case, and he was not told that Ajac was distributing a rival product.
Several rebuilders who thought they were buying Transgo kits
believed that the boxes bore tiger stripes because Transgo had
changed its packaging. When one rebuilder learned that the defec-
tive *‘shift kits’’ he had purchased were Fairbanks products, Jacoby
told him to ‘‘just keep my mouth shut, that he would take care of
the bill.’* Jacoby led other rebuilders to believe that they were the
only complainants concerning Fairbanks’ kits.
Fairbanks’ new line met with considerable success. In the first
three and one-half years following its introduction of the new line
of shift kits, it sold an estimated 76,400, and it reaped an estimated
$222,000 in profits.
3. Facts Pertinent to the Filing of this Action
Shortly after Ajac began distributing Fairbanks kits, Transgo
began receiving numerous complaints on its hot line from rebuild-
ers about complete failures and transmission *‘burn-ups."’ These
rebuilders assumed that the shift kits they had purchased from Ajac
had been manufactured by Transgo. The copying had been so com-
plete that it took Younger about two months to realize that Ajac was
selling kits that were not Transgo products. An Ajac salesman
ieee
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admitted to him that Fairbanks was the manufacturer. After exten-
sive testing of Fairbanks’ kits, Transgo sent a notice to the trade in
early 1977 entitled ‘‘Beware of defective imitation TransCo Shift
Kit™ products.’’ Younger also asked the Automotive Transmis-
sion Rebuilders Association to give notice to the trade since they
“had done such things in the past on other defective material’’ but
the association’s executive director declined to do so.
Transgo applied for trademark registration with both California
and the United States early in January 1977, some ten days before
filing this action. The California application was granted within a
day or two. A United States trademark examiner, however, twice
rejected Transgo’s application. On August 3, 1978, the examiner
indicated that ‘‘the mark is highly descriptive, if not generic, and
is therefore incapable of acquiring secondary meaning.’’ Transgo
appealed the United States Trademark Office’s final refusal on
February 2, 1979. The outcome of that appeal has been stayed
pending the outcome of the instant suit. Transgo also obtained nine
United States copyright registrations on its instruction sheets just
prior to or after instigation of this action.
On January 24, 1977, Transgo commenced this action by filing
a complaint which alleged the following misconduct on the part of
the appellants:
1. Deliberate and willful copying of its trademark ‘‘Shift Kit’’
in violation of 15 U.S.C. § 1125(a).
2. Deliberate and willful infringement of its copyright on its trade
pieces and instruction sheets in violation of 15 U.S.C. § 116.
3. Wrongful appropriation and copying of photographs, picto-
rial illustrations and trade designations of its goods for competitive
use in violation of 15 U.S.C. § 1125(a).
4. Wrongful appropriation and copying of plaintiff's package
design and product model designations and use of plaintiff's color
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coding system for purposes of falsely designating the origin of their
goods in violation of 15 U.S.C. § 1125(a).
After a lengthy and complicated trial, the jury found for Transgo
on the following claims for relief:
a. trademark infringement relating to the term ‘‘Shift Kit,”’
b. trademark infringement relating to the letters ““SK,”’
c. copyright infringement,
d. unfair competition,
e. false designation of origin,
f. conspiracy to pass off Fairbanks’ kits as Transgo products.
The jury found against appellants on their counterclaims for unfair
competition, disparagement and malicious use and abuse of pro-
cess. No issue has been raised concerning the sufficiency of the
evidence in support of these findings. The jury found against
Transgo on its claims for trade dress protection of its uncopy-
righted instruction sheets and color coding of its springs. The jury
also declined to find that appellants had engaged in false advertis-
ing. The jury made specific findings of fact by answering written
interrogatories. The court granted Transgo’s motion for attorney's
fees for the period from December 1976 through the end of
litigation.
Judgment on the jury’s verdict was entered in the district court
on May 9, 1980. After a timely post-trial motions seeking to set
aside the jury’s verdict were denied, the court entered final judg-
ment on July 31, 1980, granting a permanent injunction against the
appellants, which ordered them to refrain from ‘‘using any name,
designation, or material . . . likely to cause confusion, mistake or
deception as to source relative to plaintiff's trademark ‘Shift Kit"
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and denying all other post-trial motions brought by Ajac, Jacoby
and Fairbanks.
Notwithstanding this injunction, Fairbanks marketed valve body
replacement components under the label ‘‘Shift Timing Kit.’’ The
____court entered a civil contempt order on January 19, 1981, which
admonished Fairbanks against using any name containing the words
“‘shift’’ and ‘‘kit,’’ or using the names ‘‘Shift Timing Kit,’’ *‘Posi
Shift Kit,’’ ‘‘Posi Shift,’ ‘°2-Stage Kit,’’ and ‘‘Posi Shift Single
Stage Kit.’’ Fairbanks nevertheless proceeded to market a product
which it referred to in a telephone solicitation campaign as ‘‘Shift
Kit.’’ The district court in two separate proceedings found that
Fairbanks had violated the court’s final judgment and injunction of
July 31, 1980, and itic civil contempt order and injunction entered
January 19, 1981. The court awarded attorney’s fees for the con-
tempt proceedings to Transgo.
B. JURISDICTION
The district court had jurisdiction over the claim of copyright
infringement under the United States Copyright Laws, 17 U.S.C.
§ 101 et seq., 28 U.S.C. § 1338(a) and 28 U.S.C. § 1400(a). Juris-
diction over the trademark infringement claim arose under 28
U.S.C. § 1332 and the Lanham Act, 15 U.S.C. § 1125(a), infring-
ment of an unregistered trademark being a form of false designa-
tion of origin, and 28 U.S.C. § 1338(a). The district court had
jurisdiction over the unfair competition claim under 28 U.S.C. §
1332 and 28 U.S.C. § 1338(b), and over the claim of false desig-
nation of origin under 15 U.S.C. § 1125(a) and 28 U.S.C. §
1338(a).
As discussed above, the defendants appeal from the jury ver-
dict, the grant of the injunction, the denial of their post-trial
motions, and the award of attorneys’ fees. We have jurisdiction over
these appeals under 28 U.S.C. § 1291 as they are final decisions of
a federal district court. These appeals were timely filed. See Fed.
R. App. P. 4(a)(1).
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C. STANDARD OF REVIEW
The standard for reviewing a jury verdict is whether it is sup-
ported by substantial evidence. Fabrica, Inc. v. El Dorado Corp.,
697 F.2d 890 (9th cir. 1983). Substantial evidence means “‘such
relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.’’ Consolidated Edison Co. v. NLRB, 305
U.S. 197, 229 (1938). A jury verdict may be reversed if it is clearly
erroneous. Marquis v. Chrysler Corp., 577 F.2d 624, 630 (9th Cir.
1978). But when there is ‘‘sufficient evidence before the jury ona
particular issue, and if the instructions of law on the issue were cor-
rect, then the jury’s verdict must stand.’* Runge v. Lee, 411 F.2d
579 (9th Cir. 1971).
Judgment notwithstanding the verdict (JNOV) is proper when the
jury verdict is not supported by substantial evidence. William Inglis
& Sons Baking Co. v. ITT Continental Baking Co., Inc., 668 F.2d
1014, 1026 (9th Cir. 1981). Denial of JNOV is inappropriate, and
therefore must be reversed, when it is clear that the evidence and
its inferences cannot reasonably support judgment in favor of the
opposing party. Maheu v. Hughes Tool Co., 569 F.2d 459, 464 (9th
Cir. 1977). Similarly, the grant or denial of either a motion for a
new trial or a motion to amend the judgment must be reviewed on
the basis of a determination of whether the district court abused its
discretion. Inglis & Sons Baking, supra at 1027.
It is well settled that an award of attorney's fees under 15 U.S.C.
§ 1117 is within the discretion of the court. Although attorney's fees
are to awarded ‘‘only in exceptional circumstances and on evi-
dence of fraud or bad faith,’’ such awards are reviewable only to
determine if the trial court abused its discretion in granting or
denying them. See Dogherra v. Safeway Stores, Inc., 679 F.2d
1293, 1298 (9th Cir. 1982); Runge, supra; Schmidt v. Zazzara, 544
F. 2d 412 (9th Cir. 1976).
II
DISCUSSION
Many issues and sub-issues have been raised by the parties in
their appeal of this complex matter. We consider each argument and
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additional facts pertinent thereto under separate headings. © ‘e begin
our analysis by addressing the contentions set forth in the briefs filed
by Fairbanks, Ajac, and Jacoby.
A. TRADEMARK INFRINGMENT
1. ‘‘Shift Kit’’ as a Trademark
In response to special interrogatories, the jury found that ‘*Shift
Kit’’ was not a generic name, but was a descriptive term whose pri-
mary significance was to identify Transgo as ‘‘the exclusive man-
ufacturing source of the goods to which the name is applied.’’ The
jury also determined that the name Shift Kit ‘“‘when first used by
| Transgo] was arbitrary and identified [Transgo] as an exclusive
manufacturing source.’’ Finally, the jury concluded that ‘‘Shift
Kit’* was Transgo’s trademark.
Appellants argue that ‘‘Shift Kit’? was a common descriptive
term which was used generically prior to Transgo’s first use.
The threshold issue in any action for trademark infringement is
whether the words used by a manufacturer in connection with his
product are entitled to protection. A potential trademark may be
classified as (1) generic, (2) descriptive, (3) suggestive, or (4) arbi-
trary. Park 'N Fly, Inc. v. Dollar Park & Fly, Inc., 718 F.2d 327,
329 (9th Cir. 1983), cert. granted, ___. U.S. ____, 104 S.. Ct.
1438 (1984).
We analyze genericness by asking whether a term ‘“‘has come to
be understood as referring to the genus of which the particular
product is a species.’” Anti-Monopoly, Inc. v. General Mills Fun
Group, 611 F.2d 296, 302 (9th Cir. 1979) Generic terms can never
attain trademark protection. Park ’N Fly, at 329. See also 15 U.S.C.
§ 1052(f). A descriptive term identifies a characteristic or ingredi-
ent of an article or service. /d. Descriptive terms ordinarily are not
protectable as trademarks. See 15 U.S.C. § 1052(e)(1). They may
become valid marks, however, by acquiring a secondary meaning
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in the minds of the consuming public. Park 'N Fly, at 329; 15
U.S.C. § 1052(f).
a. Association
To establish that a descriptive term has secondary meaning, the
plaintiff ‘‘must show that the primary significance of the term in
the minds of the consuming public is not the product but the pro-
ducer.’’ Kellogg Co. v. National Biscuit Co., 305 U.S. Lil, 118
(1938).
Secondary meaning is achieved by an association between a
name and a source. When this mental recognition occurs among
purchasers, the name becomes legally protectable as an identifica-
tion symbol. American Scientific Chemical, Inc. v. American Hos-
pital Supply Corp., 690 F.2d 791, 792 (9th Cir. 1982). *‘Secondary
meaning has been defined as association, nothing more.’ Carter-
Wallace, Inc. v. Proctor & Gamble Co., 434 F.2d 794, 802 (9th
Cir. 1970). ‘The test of secondary meaning is the effectiveness of
the effort to create it, and the chief inquiry is directed towards the
consumer’s attitude about the mark in question: does it denote to
him ‘a single thing coming from a single source?’’’ /d. (citations
omitted).
Whether a symbol or device has acquired a secondary meaning
is a question of fact. American Scientific Chemical, Inc. supra.
Since all factual questions on this issue were resolved by the jury,
we must determine whether there is sufficient evidence in the record
to support the jury’s verdict. We cannot disturb a jury’s verdict
unless no reasonable person would accept the evidence presented
to establish a fact essential to prove liability. Glovatorium, Inc., v.
NCR Corp., 684 F.2d 658, 660 (9th Cir. 1982). Factors consid-
ered in determining whether a secondary meaning has been
achieved include: (1) whether actual purchases of the product bear-
ing the claimed trademark associate the trademark with the pro-
ducer, (2) the degree and manner of advertising under the claimed
trademark, (3) the length and manner of use of the claimed trade-
mark and, (4) whether use of the claimed trademark has been
————
exclusive. See | Gilson, Trademark Protection & Practice, §
2.09[ 1).
The record is replete with evidence supporting the jury’s finding
that the relevant market, the rebuilders who used valve body kits,
associate the name ‘‘Shift Kit’’ with Transgo. While there was evi-
dence that other manufacturers used the name shift kit to describe
valve body components that were manufactured for high perfor-
mance vehicles used by hot rodders, drag racers and ‘‘car enthusi-
asts,"’ itis clear that these products were sold in a separate market.
Furthermore, the parties agreed before the trial that the relevant
market consisted of transmission rebuilders. Indeed, on the first day
of trial, Fairbanks was successful in preventing the introduction of
evidence that Fairbanks had used Transgo’s trademark ‘‘Repro-
gramming Kit.”’
Our review of the record satisfies us that a reasonable juror could
conclude that there was substantial evidence that the primary sig-
nificance of ‘‘Shift Kit’’ to rebuilders at all relevant times was to
identify Transgo and not the product.
b. Likelihood of Confusion
Secondary meaning can also be established by evidence of like-
lihood of confusion. See Norm Thompson Outfitters, Inc. v. Gen-
eral Motors Corp., 448 F.2d 1293, 1297 (9th Cir. 1971)
(supporting use of ‘‘confusion’’ by Oregon Supreme Court as indi-
cium of secondary meaning). ‘‘Secondafy meaning and likelihood
of buyer confusion are separate but related determinations, the
relationship rising from the same evideatiary findings.’’ Levi
Strauss, supra. Facts which play a role in the determination of
likelihood of confusion in a trademark infringement case include:
visual, verbal and intellective similarity; the class of goods in
question; evidence of actual confusion; the intent of the defendant;
and the strength or weakness of the mark. Carter-Wallace, Inc. 434
F.2d at 800.
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The products in question here are identical, and the class of goods
in question is the same. Furthermore, even if the mark is ‘“weak"’
(a meaningful word in common usage), that is only one factor to be
considered along with the others to determine likelihood of confu-
sion. New West Corp. v. NYM Co. of California, Inc., 595 F.2d
1194, 1201-02 (9th Cir. 1979). We thus direct our inquiry to the
questions of actual confusion and intent of the defendant.
(1) Actual Confusion
In making its determination that ‘‘Shift Kit’’ had acquired a sec-
ondary meaning, the jury could have relied on the confusing simi-
larity of the kits, which caused customers to believe that Fairbanks’
faulty kits were those of Transgo.
Instances of actual confusion in the mind of the relevant market
concerning the Fairbanks product were ‘‘stacked high in the
record.’’ See North American Aircoach Systems, Inc. v. North
American Aviation, Inc., 231 F.2d 205, 213 (9th Cir. 1955), cert.
denied, 351 U.S. 920 (1956).
(2) Intent of Defendants
Proof of exact copying, without any opposing proof, can be suf-
ficient to establish a secondary meaning. Audio Fidelity, Inc., v.
High Fidelity Recordings, Inc., 283 F.2d 551, 557 (9th Cir. 1960).
‘*There is no logical reason for the precise copying save an attempt
to realize upon a secondary meaning that is in existence.’ /d. at
558. In another case, we noted that:
It is well settled that plaintiffs were not obliged in order
to make a case against the defendants to prove a wrong-
ful intent . . . . But when the evidence does show or
require the inference that another’s name was adopted
deliberately with a view to obtain some advantage from
the good will, good name, and good trade which another
has built up, then the inference of likelihood of confu-
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sion is readily drawn, for the very act of the adopter has
indicated th. . he expects confusion and resultant profit.
Fleischmann Distilling Corp. v. Maier Brewing Co., 314 F.2d 149,
157-58 (9th Cir. 1963) (citations omitted).
There is no question but that Fairbanks copied the name ‘‘Shift
Kit."” In fact, the record indicates that Fairbanks copied virtually
everything with regard to that product. It is clear that Fairbanks
attempted to capitalize on the secondary meaning of *‘Shift Kit’’ in
order to obtain an advantage from the good will built up by Transgo.
The other factors indicating secondary meaning considered by
the jury were Transgo sales, its duration of exclusive use, and the
promotional efforts of Mr. Younger. Transgo sales of products
under the *‘Shift Kit’’ label were significant; they exceeded $5 mil-
lion through 1978, see | McCarthy, Trademarks and Unfair Com-
petition § 15:10 (1973) (evidence may include number of sales).
Prior to Fairbanks’ entry into the market in 1976, Transgo exclu-
sively had used the name ‘‘Shift Kit’’ for #s products directed to
the normal passenger car market for come thirteen years. See
American Scientific Chemical, Inc. v. Asnerican Hospital Supply
Corp., 690 F.2d 791, 793 (9ta Cir. 1982) (American Scientific’s
use of its name for over thirteen years was relevant to discussion of
secondary meaning). Younger’s lectures, shop visits, educational
seminars, and the assitance given directly to rebuilders caused them
to associate the name ‘‘Shift Kit’’ with Younger and Transgo. As
we noted in American Scientific, reliance upon such personal con-
tact, especially in a ‘‘market that is specialized, limited and close-
knit,’” is an important element in establishing secondary meaning
for a descriptive term. /d.; see also 3 R. Callmann, The Law of
Unfair Competition, Trademarks and Monopolies, § 19.27 (4th ed.
1983).
There is substantial evidence to support the jury’s finding of sec-
ondary meaning in this case.
Al?
2. Infringement of Transgo’s ‘‘SK’’ Mark
There is also substantial evidence to support the jury's finding
that Transgo’s SK mark and product numbering system are source
indicators and that the defendants infringed them.
Almost any symbol can serve as a trademark. American Scien-
tific, 690 F.2d at 792. In /deal Industries, Inc. v. Gardner Bender,
Inc., 612 F.2d 1018 (7th Cir. 1979), cert. denied, 447 U.S..924
(1980), the Seventh Circuit found that the numerical designation
‘*71B”’ given to the company’s screw-on electrical connectors was
protectable. Similarly, the Eighth Circuit in Stewart Paint Mfg. Co.
v. United Hardware Distributing Co., 253 F.2d 568, 569-70 (8th
Cir. 1958), held that the defendant's use of code numbers desig-
nating color shades of paint which had been arbitrarily developed
by the plaintiff constituted infringement. Aiso, the Second Circuit
held that the designation ‘*V-8,"’ used to identify a juice cocktail
drink, was protectable against use by a vitamin manufacturer.
Standard Brands, Inc. v. Smidler, 151 F.2d 34, 37 (2nd Cir. 1945).
Fairbanks admitted copying each of Transgo’s part numbers. The
SK numbers were used by rebuilders in ordering transmission valve
body components from Ajac. A number of rebuilders stated that
they always associated the SK numbers with Transgo and Gil
Younger.
Prior to the use by Fairbanks, only Transgo used SK in its num-
bering system. During cross-examination, Fairbanks’ president
agreed that Transgo’s numbers were arbitrary and random. He was
asked: ‘‘If Transgo had called the first designation here PG-X YZ
and had been using that for ten years, or six years, would you have
copied PG-X YZ?"’ Lupo responded: *‘Most likely.*”
3. Abandonment of Trademark
Ajac contends that even if Transgo at one time had trademark
rights in ‘Shift Kit,’’ those rights have been abandoned due to
Transgo’s failure to exercise control over the use of the name. Spe-
cifically, Ajac points to Transgo’s decision to grant an oral license
to Winters Performance Products to use ‘‘Shift Kit’’ for products
Al8
over which Transgo did not exercise quality control. The jury
expressly found that Transgo ‘‘exercised supervision and control
adequate to ensure the quality of those products’’ in permitting
Winters Performance to use the name ‘‘Shift Kit’’ on products.
A trade name licensor must maintain control over the quality of
the finished product or service to guarantee to the public that the
goods or services are of the same, pre-license quality. Siegel v.
Chicken Delight, Inc., 448 F.2d 43, 51 (9th Cir. 1971), cert.
denied, 405 U.S. 955 (1972). **Because a finding of insufficient
control essentially works a forfeiture, a person who assests insuf-
ficient control must meet a high burden of proof.’’ Edwin K. Wil-
liams & Co., Inc. v. Edwin K. Williams & Co.-East, 542 F.2d
1053, 1059 (9th Cir. 1976), cert. denied, 433 U.S. 908 (1977).
Transgo entered into an oral agreement whereby Winters was
permitted to use Transgo’s trade name, ‘‘Shift Kit,’’ for products
sold by Winters under its own label. In approving Winters’ use of
“Shift Kit,’’ Younger instructed Winters to put ‘“TM’” after the
term and explained to him that he felt it was a trademark name.
At least 90% of the components sold by Winters Performance
Products were manufactured by Transgo. On these products,
Transgo utilized its own quality control procedures at its plant.
Younger cautioned Winters that, if Winters chose to use his own
parts, ‘““he (Younger) wanted to know about it.’’ Winters made
minor part adjustments on certain Transgo kits after conferring with
Younger. Winters designed one product which he called *‘the 350
Shift Kit.”’ The 350 *‘Shift Kit’ was made from a prototype fur-
nished by Younger. Winters worked with Younger throughout its
development. While Younger never directly inspected or tested the
final product, he did upon occasion test individual parts of the kit.
Due to his association with Winters for over ten years and his respect
for his ability and expertise, Younger felt he could rely on Winters
to maintain high standards by performing his own quality control.
Younger believed that Winters was second only to Younger him-
self in overall knowledge and ability in product development for
this market.
Al9
Younger’s confidence in Winters’ ability and integrity was
backed by the fact that Transgo never received any complaints from
the field about parts produced by Winters Performance Products.
See Syntex Laboratories, Inc. v. Norwich Pharmacal Co. , 315 F.
Supp. 45, 56 (S.D.N.Y. 1970) (inspection by a licensor during
period of negotiations leading up to agreement constitutes ade-
quate control, particularly where parties are previously familiar with
each other's expertise), aff d, 437 F.2d 566 (2d Cir. 1971).!
‘*The purpose of the Lanham Act. . . is toensure the integrity of
registered trademarks, not to create a federal law of agency.”
Oberlin v. Marlin American Corp. , 596 P.2d 1322, 1327 (7th Cir.
1979). The scope of a licensor’s duty of supervision of a licensee
who has been granted use of a trademark must be commensurate
with this limited goal. /d.
It is readily apparent from these facts that Transgo did not fail to
provide adequate supervision of its licensee. There is substantial
evidence to support the jury's determination that the appellants did
not meet their burden of proving abandonment.
B. COPYRIGHT
1. Infringement
The jury found ‘‘that the early instruction sheets used by | Fair-
banks] were substantially similar to copyrighted material in
[Transgo’s] nine instruction sheets.”’
‘*The test of infringement is whether the work is recognized by
an ordinary observer as having been taken from the copyrighted
source.”’ Bradbury v. Columbia Broadcasting System, Inc., 287
F.2d 478, 485 (9th Cir.), cert. dismissed, 368 U.S. 801 (1961).
‘*(T]here must be substantiaf similarity between the infringing work
and the work copyrighted; and that similarity must have been caused
by the defendant's having copied the copyright holder's creation. "”
A20
Roth Greeting Cards v. United Card Co. , 429 F.2d 1106, 1110 (9th
Cir. 1970). Copying may be established by proof of access and
substantial similarity. /d.
Once a plaintiff has demonstrated that a defendant had access to
the copyrighted work and that the defendant's work is substantially
similar to the copyrighted work, the burden shifts to the defendant
to prove that the defendant's work was not a copy, but was inde-
pendently created. Kamar International, Inc. v. Russ Berrie & Co.,
657 F.2d 1059, 1062 (9th Cir. 1981).
There was substantial evidence to support the jury's finding of
copyright infringement. First, Ajac and Fairbanks had access to
Transgo’s copyrighted instruction sheets. Ajac admitted having
received Transgo’s instruction sheets each year s.nce the mid-
1960's. Ajac supplied Fairbanks with Transgo kits, including the
instruction sheets. Second, substantial similarity was established
by evidence that Fairbanks lifted from Transgo’s instruction sheets
all pictures, line drawings and the bulk of the text. Lupo admitted
that Transgo’s instruction sheets were ‘‘just plain copied.”’ Finally,
Fairbanks was unable to prove that its instruction sheets were inde-
pendently created.
2. Copyrightability
Ajac further contends that Transgo failed to show that the
instruction sheets, which are admittedly derivative works, con-
tained particular ‘“‘new matter’’ that was entitled to protection.
Work which results from the independent efforts of its author is
copyrightable, even though identical work may already be in the
public domain. United States v. Hamilton, 583 F.2d 448, 451 0.4
(9th Cir. 1978).
The jury found that each of Transgo’s instruction sheets con-
tained substantial original and creative material. This determina-
tion is supported by the evidence. Transgo produced all artwork,
photographs, and ‘‘original pen scratchings"’ used in developing -
its instruction sheets. Some of its older instruction sheets included
ee ee ree
All
photographs taken from the public domain. These early instruction
sheets, however, were approved for copyright by the copyright
office. Under both the Copyright Act of 1909 and the Copyright Act
of 1976, registration by the Copyright Office is prima facie evi-
dence of copyrightability. 1909 Act, § 55, 35 Stat. 1075, 1086
(1909) (repealed 1976); 1976 Act, § 410(c), 90 Stat. 2541, 2583
(1976) (codified at 17 U.S.C. § 410 (c)). This presumption shifts
the burden of proof to the challenging party to demonstrate why the
item in question is not copyrightable. H.R. Rep. No. 1476, 94th
Cong., 2d Sess. 157 (1976), reprinted in 1976 U.S. Code Cong.
& Ad. News 5659, 5773. The defendants failed to meet their
burden.
3. Forfeiture of Copyright
The jury found the use by Winters Performance Products of
Transgo instruction sheets that did not contain copyright notices for
six years caused Transgo to forfeit its copyright protection. Ajac
claims that Transgo’s alleged acquiescence in Winters’ action con-
stitutes a dedication of the entire work to the public.
A copyright can be forfeited through some overt act which indi-
cates the copyright proprietor’s desire to surrender its rights. Lopez
v. Electrical Rebuilders, Inc., 416 F. Supp. 1133, 1135 (C.D. Cal.
1976). Acquiescence, with full knowledge in the publication of a
vast number of copies without copyright notice, may work a for-
feiture. Synercom Technology, Inc. v. University Computing Co. ,
462 F. Supp. 1003, 101! (N.D. Tex. 1978); see also 2M. Nim-
mer, Nimmer on Copyright, § 7.03 (1983). :
Federal copyright law contains an exception to the doctrine of
abandonment through publication without notice:
The omission of the copyright notice prescribed by sec-
tions 401 through 403 from copies or phonorecords pub-
licly distributed by authority of the copyright owner does
not invalidate the copyright in a work if -
A22
(1) the notice has been omitted from no more than a
relatively small number of copies or phonorecords dis-
tributed to the public.
17 U.S.C. § 405(a)(1).
Here, we have neither ‘‘knowledge’’ by Transgo nor a ‘‘vast
number’’ of copies. The elimination of Transgo’s copyright notices
occurred without the approval or knowledge of Winters Perfor-
mance Products or Transgo. Also, out of all the companies that
received or used Transgo’s instruction sheets, Winters was appar-
ently the only company which neglected to include the notice.
Fairbanks acknowledged that ‘‘most’’ of Transgo’s instruction
sheets did include the notice. The jury’s determination that Transgo
has not abandoned its copyright is supported by substantial
evidence.
. 4. Admission of Revised Fairbanks Sheets Into Evidence
Over objection, the trial court admitted Fairbanks’ revised
instruction sheets into evidence. A side-by-side comparison of the
old and the new Fairbanks sheets was made in the jury’s presence.
Fairbanks contends that the evidence should have been excluded
under Federal Rule of Evidence 407.
Rule 407 states:
When, after an event, measures are taken which, if
taken previously, would have made the event less likely
to occur, evidence of the subsequent measures is not
admissible to prove negligence or culpable conduct in
connection with the event. This rule does not require the
exclusion of evidence of subsequent measures when
offered for another purpose, such as proving ownership,
control, or feasibility of precautionary measures, if con-
troverted, or impeachment.
A23
Under Rule 407, evidence of subsequent change may be admit-
ted for the limited purpose of showing the practicability of making
a change. See Boeing Airplane Co. v. Brown, 291 F.2d 310, 315
(9th Cir. 1961). The district court’s decision regarding the rele-
vancy of evidence cannot be reversed absent abuse of discretion.
M/V American Queen v. San Diego Marine Construction Corp. ,
708 F.2d 1483, 1491 (9th Cir. 1983).
In the instant matter, Transgo explained to the district court that
the primary relevance of Fairbanks’ subsequent instruction sheet
was to demonstrate the lack of credibility of Fairbanks’ conten-
tions that it ‘‘had to copy all of Transgo’s sheets in order to com-
pete,’’ and that no matter what changes were made, ‘‘it would still
look like it was a Transgo instruction sheet.’’ Fairbanks’ presi-
dent, Lupo, admitted that the revised sheets ‘‘were adequate for
purposes of marketing.’’ Under the circumstances of this case, the
evidence was admissible to show feasibility, which was contro-
verted, or to impeach Lupo’s testimony. See, e.g., Kenny v.
Southeastern Pennsylvania Transportation Authority, 581 F.2d
351, 356 (3d Cir. 1978) (where defendant opens up issue by claim-
ing that all reasonable care was being exercised, plaintiff may attack
that contention by showing later repairs inconsistent with it), cert.
denied, 439 U.S. 1073 (1979). The trial court did not abuse its dis-
cretion in admitting the evidence.
C. CONSPIRACY TO PASS OFF
The jury found that appellants had passed off Fairbanks’ valve
body kits as Transgo ‘‘Shift Kits.’’ Appellants contend that this
finding was not supported by substantial evidence. A cause of action
for ‘‘passing off’’ arises when one’s own creation is sold under the
name or mark of another. Smith v. Montoro, 648 F.2d 602, 604 (9th
Cir. 1981). ‘‘Express passing off occurs when an enterprise labels
goods with a mark identical to that of another enterprise, or other-
wise expressly misrepresents that the goods originated with another
enterprise.’’ /d. There was substantial evidence of passing off.
A24
Appellants also challenge the sufficiency of the evidence to sup-
port the jury’s finding that they engaged in a civil conspiracy in order
to pass off Fairbanks’ copy. A civil conspiracy occurs when the
parties have reached ‘‘a unity of purpose or a common design and
understanding, or a meeting of the minds in an unlawful arrange-
ment.’’ American Tobacco Co. v. United States, 328 U.S. 781,
809-10 (1946): «ee also William Inglis & Sons Baking Co. v. ITT
‘aaa Continental Baking Co. , 668 F.2d 1014, 1055 (9th Cir. 1981), cert.
denied, U.S. , 103 S. Ct. 57 (1982). A conspiracy must
be looked at as a whole, and acts which are in themselves legal lose
that character when they become constituent elements of an unlaw-
ful scheme. See Continental Ore Co. v. Union Carbide & Carbon
Corp., 370 U.S. 690, 699 (1962).
The jury heard evidence that Ajac provided Fairbanks with con-
fidential information concerning Transgo’s pricing structure,
Transgo’s best-selling ‘‘Shift Kits,’’ and Transgo’s primary cus-
tomers. Fairbanks purchased complete sets of Transgo’s ‘‘Shift
Kit’’ line from Ajac in order to copy them. Jacoby told Lupo to leave
the name ‘‘Fairbanks’’ off the package and the instruction sheets.
Fairbanks’ employees answered the hot line with the word ‘‘Trans-
actions.’’ The similarity between ‘‘Transactions’’ and *‘Transgo’’
could suggest to a reasonable mind that the word ‘*Transactions”’
was not randomly selected, but resulted from an attempt to confuse
rebuilders about the origin of the kits. The jury’s findings that
appellants passed off Fairbanks’ kits and conspired to accomplish
this end is supported by substantial evidence.
Jacoby contends that it was error to hold him personally liable
for Ajac’s acts of unfair competition because the jury’s finding, that
he conspired with Fairbanks to pass off Fairbanks’ imitation prod-
uct, is not supported by substantial evidence. We disagree.
A corporate ‘‘officer or director is, in general, personally liable
for all torts which he authorizes or directs or in which he partici-
pates, notwithstanding that he acted as an agent of the corporation
and not on his own behalf.’’ Murphy Tugboat Co. v. Shipowners
& Merchants Towboat Co., 467 F. Supp. 841, 852 (N.D. Cal.
A25
1979), aff d sub nom. Murphy Tugboat Co. v. Crowley. 658 F.2d
1256 (9th Cir. 1981), cert. denied, 455 U.S. 1018 (1982), quoting
Ballantine, Corporations § 112 (rev. ed. 1946). The evidence dis-
cussed above amply demonstrates the instrumental role Jacoby
played in Fairbanks’ success at copying Transgo’s ‘‘Shift Kit’ and
at marketing the imitatuuns as if they were Transgo products.
D. FALSE DESIGNATION OF ORIGIN
The jury found that appellants had falsely designated the origin
of the Fairbanks’ valve body components. Section 43(a) of the
Lanham Act, 15 U.S.C. § 1125(a), makes actionable any false
designation of a product’s origin.
We have determined above that substantial evidence supports the
jury’s determination that appellants passed off Fairbanks’ valve
vody kits as Transgo ‘‘Shift Kits.’’ The federal cause of action for
false designation created by section 43(a) encompasses the com-
mon law action for passing off. Smith v. Montoro, 648 F.2d 602,
604 (9th Cir. 1981).
E. VALIDITY OF THE INJUNCTION
Fairbanks asserts that the injunction prohibiting appellants from
using the name ‘‘Shift Kit’’ in connection with selling valve body
parts is overly broad.
The district court permanently enjoined Fairbanks from ‘‘using
any name, designation or material . . . likely to cause confusion,
mistake or deception as to source relative to plaintiff's trade-
mark.’’ In the January 1981 contempt proceedings, the court clar-
ified the injunction after appellants had continued their use of the
terms ‘‘Shift Kit’’ in several combinations. The new order prohib-
ited the use of the name ‘‘Shift Kit’ or any other name including the
words ‘‘Shift’’ and ‘‘Kit.’’ The court specifically enjoined use of
the terms ‘‘Shift Timing Kit,’’ ‘‘Posi Shift Kit,’’ ‘‘2 Stage Shift
Kit,’ ‘‘Posi Shift 2 Stage Kit,’’ or ‘‘Posi Shift Single Stage Kit"
A26
on the basis that such use was likely to cause confusion with Trans-
go’s trademark.
The grant or denial of injunctive relief rests with the sound dis-
cretion of the trial court and requires a clear abuse of discretion for
a modification or reversal. To succeed in its attack on the injunc-
tion, Fairbanks must show that there was no reasonable basis for
the district court’s decision. SEC v. Arthur Young & Co. , 590 F.2d
785, 787 (9th Cir. 1979).
The scope of the injunction was based on the district court’s con-
clusion that the use of the words ‘‘shift’’ or ‘‘kit’’ in any combi-
nation would be likely to confuse the public. Unless we find the
underlying facts to be clearly erroneous, we must affirm the find-
ing of the district court and conclude that the court acted within its
discretion in enjoining the use of names likely to confuse the pub-
lic. J.B. Williams Co. v. Le Conte Cosmetics, 523 F.2d 187, 191
(9th Cir. 1975), cert. denied, 424 U.S. 913 (1976).
Under Rule 65(d) of the Rules of Civil Procedure, an order
granting an injunction shall ‘‘set forth the reasons for its issuance;
shall be specific in terms; shall describe in reasonable detail, and
not by reference to the complaint or other documents, the act or acts
sought to be restrained; . . .”’ The basic principle of the federal rule
is that those against whom an injunction is issued should receive
fair and well-defined notice of what the injunction prohibits. Granny
Goose Foods, Inc. v. Brotherhood of Teamsters, Local No. 70, 415
U.S. 423, 444 (1974).
The injunction in the instant case precisely sets out the forbidden
conduct. Fairbanks was on notice that it was prohibited from using
any name or designation which was likely to cause confusion. The
jury had found that Fairbanks and the other defendants had delib-
erately copied Transgo’s trademark. The court concluded that
Fairbanks had deliberately chosen names similar to Transgo’s
trademark in an attempt to ‘‘walk as close to the line as they can’”’
and had deliberately and willfully ignored the previous injunction.
In light of the overwhelming evidence of appellants’ deliberate
A27
violations of Transgo’s interest, the injunction was not overbroad.
Rather, it put Fairbanks on notice that future imitations of Trans-
go’s trademark would not be tolerated. ‘‘[A]n injunction may be
framed to bar future violations that are likely to occur.”’ United
States v. An Article of Drug, 661 F.2d 742, 747 (9th Cir. 1981).
Under these circumstances, we do not find an abuse of discretion.
Fairbanks also maintains that the injunction violates its first
amendment rights. This argument lacks merit. Commercial speech
may be regulated when its content is otherwise false or misleading.
Virginia State Board of Pharmacy v. Virginia Citizens Consumer
Council, Inc. , 425 U.S. 748, 771-73 (1976). Substantial evidence
was presented at trial to show that Fairbanks’ use of the words
**shift’’ and ‘‘kit’’ was misleading.
F. CONTEMPT
The trial court in two separate proceedings found Fairbanks had
violated the court’s final judgment and injunction issued July 31,
1980, and the civil contempt order and injunction entered January
29, 1981. Fairbanks contends that the district court abused its dis-
cretion in holding Fairbanks in contempt and in assessing costs.
The decision to hold a party in contempt of a court order rests
with the sound discretion of the trial court. Vertex Distributing, Inc.
v. Falcon Foam Plastics, Inc. , 689 F.2d 885, 889 (9th Cir. 1982).
This court will not reverse unless the district court has abused its
discretion. /d.
In the first contempt hearing, the district court found that the
injunction issued in July of 1980 specifically set out what conduct
was forbidden. The injunctive order did not limit the prohibited
conduct to the use of the name ‘‘Shift Kit.’’ Rather, it set forth a
prohibition against ‘‘using‘any name, description or material . . .
likely to cause confusion, mistake or deception as to source relative
to plaintiff's trademark ‘Shift Kit.’’’ (Emphasis added). From July
1980 to January 1982, Fairbanks marketed a product it referred to
as a ‘‘Shift Timing Kit’ and ‘‘STK.’’ The district court properly
A28
concluded that the injunction put Fairbanks on notice that the use
of *‘Shift Kit’’ in combination with any words which would lead to
confusion was prohibited. The district court did not abuse its dis-
cretion in finding Fairbanks in contempt of the July 1980 injunction.
In January 1981, the court specifically ordered Fairbanks not to
use any name containing the words “‘shift’’ and ‘‘kit,’’ including
the names, ‘‘Shift Timing Kit,’’ ‘‘Posi Shift Kit,’’ ‘‘2-Stage Shift
Kit,’* ‘*Posi Shift 2-Stage Kit,’’ and ‘‘Posi Shift Single Stage Kit.”’
In spite of this warning, Fairbanks proceeded to market a product
called **Shift in a Box”’ which was referred to as a ‘‘Shift Kit’’ in
a telephone solicitation campaign. The court did not abuse its dis-
cretion in finding Fairbanks in contempt for this conduct.
The court imposed investigation costs of $5,286.01 on Fair-
banks, including the cost of deposition transcripts and witness travel
expenses. The imposition of costs will not be overturned absent
abuse of discretion. Chavez v. Tempe Union High School District
#213, 565 F.2d 1087, 1095 (9th Cir. 1977). Our task in reviewing
the propriety of a sanction imposed by a district court is limited to
determining whether we have a ‘definite and firm conviction’’ that
it was clearly outside the court’s discretion. Chism v. Nationel
Heritage Life Insurance Co., 637 F.2d 1328, 1331 (9th Cir. 1981).
This determination must be based upon the facts of the particular
case. /d.
Costs were assessed here only after appellant failed to comply
with the court’s injunction and was therefore held in contempt. The
district court did not abuse its discretion by imposing reasonable
investigative costs.
G. DAMAGES
The jury assessed special and general compensatory damages of
$40,021 against the defendants as follows: $15,007 against Fair-
banks (Copyright Infringement - $15,000 special, $1 general;
Trademark Infringement $1 special, $1 general; Unfair Competi-
tion - $1 special, $1 general; False Designation of Origin - $1 spe-
A29
cial, $1 general); $25,006 against Ajac (Copyright Infringement -
$1 special, $1 general; Trademark Infringement - $1 special, $1
general; Unfair Competition - $15,000 special, $1 general; False
Designation of Origin - $10,000 special, $1 general); and $8 against
Jacoby ($1 in each of the eight categories). The jury awarded puni-
tive damages for unfair competition against the defendants as fol-
lows: $50,000 against Ajac; $50,000 against Jacoby; and $1 against
Fairbanks.
Although the Jury verdict shows a breakdown of compensatory
damages among the defendants, this was done at the defendants’
request for purposes of contribution and apportionment. The jury
found that the defendants conspired to injure Transgo’s trade iden-
tity rights and property rights. As co-conspirators, the defendants
were found to be joint tortfeasors, jointly and severally liable for
all compensatory damages awarded to Transgo. Joint tortfeasors are
jointly and severally liable for compensatory damages. Clark v.
Bunker, 453 F.2d 1006, 1011 (9th Cir. 1972).
Fairbanks, Ajac and Jacoby contend on appeal that the damage
award is inappropriate, because there is no substantial evidence to
support the underlying verdict. As we have discussed above, the
evidence was Sufficient to support the jury’s findings of liability.
An award of damages was therefore appropriate.
1. Compensatory Damages
Ajac and Fairbanks further contend that the evidence concern-
ing actual damages is inadequate to support the awards of $15,000
against Fairbanks for Copyright Infringement, $15,000 against Ajac
for Unfair Competition and $10,000 against Ajac for False Desig-
nation of Origin.
A copyright owner is entitled to recover actual damages as well
as those profits of the infringer that are attributable to the infringe-
ment and that are not already included in the computation of actual
damages. 17 U.S.C. § 504(b). For the state law claims, California
A30
‘law also allows a recovery of lost profits. See, e.g., Glovatorium,
684 F.2d at 664.
Transgo presented evidence showing its damages were over $2
million in total. Stephen Younger, vice-president of Transgo, esti-
mated that Transgo’s lost profits were approximately $222,000.
This calculation, based on Fairbanks’ gross sales for three years is
a conservative figure since it does not include sales in the first year
of infringement. Fairbanks and Ajac argue that Younger’s method
of estimating net profits based on these figures was speculative.
They agree that Transgo did use the dollar amount of gross sales of
Fairbanks’ kits for three years. Transgo’s burden was only to show
the gross revenue from the sales of the Fairbanks imitation kits. It
was Fairbanks’ and Ajac’s burden to prove their deductible
expenses and elements of profit attributable to factors other than
infringement of Transgo’s product. See 17 U.S.C. § 504(b) (copy-
right owner is required to present proof of infringer’s gross reve-
nue; infringer must prove deductible elements). As Transgo
introduced evidence that sales of the imitation kits exceeded
$200,000, an award of a total of $40,000 is not excessive.
It is the function of the jury, not of this court, to weigh conflict-
ing evidence and judge the credibility of witnesses. Glovatorium,
684 F.2d at 660 (9th Cir. 1982). The jury’s award of special com-
pensatory damages against the defendants is supported by substan-
tial evidence and will not be disturbed.
2. Punitive Damages
The jury awarded punitive damages of $50,000 against Ajac and
Jacoby each and $1 against Fairbanks. Ajac and Jacoby attack the
awards on the grounds that they are unsupported by the evidence
and are excessive in amount. Ajac contends there was not suffi-
cient proof of actual damages to support such an award while Jacoby
individually argues that the ratio of punitive to compensatory dam-
ages is excessive and unreasonable.
As discussed earlier, California law allows the recovery for lost
profits as well as actual damages for successful copyright infringe-
A3l
ment and unfair competition claimants. In addition, where actual
damages are shown, the jury may also award punitive damages
when it determines that the wrongdoers acted maliciously, wan-
tonly or oppressively. Cal. Civ. Code § 3294. Malicious, wanton
or oppressive conduct may be found by wrongful conduct done
willfully, intentionally and in reckless disregard of its possible
injurious consequences. /d. Transgo presented substantial evi-
dence of the defendants’ deliberate and willful disregard of Trans-
go's property rights. The trial judge concluded that all appellants
acted in reckless disregard of Transgo’s rights. A punitive damage
award under these circumstances is appropriate. /d.
Ajac contends that the evidence is insufficient to support an award
of punitive damages because of the lack of proof of actual dam-
ages. We disagree. As detailed above, Transgo presented suffi-
cient evidence to establish actual damages; consequently, the
punitive damage award has proper support. The determination to
award punitive damages here was ‘‘within the exclusive province
of the jury,’’ Runge v. Lee, 441 F.2d 579, 584 (9th Cir.), cert.
denied, 404 U.S. 887 (1971). We will not overturn such an award
unless it appears that the jury was influenced by passion or preju-
dice. Harmsen v. Smith, 693 F.2d 932, 947 (9th Cir. 1982), cert.
denied, US. , 104 S. Ct. 89 (1983). Appellants have
not demonstrated from the record that the jury was influenced by
passion or prejudice.
Jacoby individually contends that, as a matter of law, where
compensatory damages are $2 and punitive damages are $50,000,
the resulting ratio is excessive and should not be upheld. This argu-
ment ignores the fact that the jury found that all three defendants
were co-conspirators. Accordingly, they are jointly and severally
liable for all the compensatory damages awarded by the jury. When
this fact is properly considered, the ratio or punitive damages for
unfair competition to the amount awarded for compensatory dam-
ages drops from 25,000:1 to 50,000: 15,005 or about 3 1/3:1. While
California law requires that punitive damages bear a reasonable
relationship to compensatory damages, there is no fixed ratio or
formula for determining the proper proportion between the two.
A32
Liodas v. Sahadi, 19 Cal. 3d 278, 284, 137 Cal. Rptr. 635 (1977);
Oakes v. McCarthy Co. , 267 Cal. App. 2d 231, 263, 73 Cal. Rptr.
127 (1968). The ratio of Jacoby’s punitive damages for unfair
competition to the compensatory damages for unfair competition
for which he is liable as a joint tortfeasor is reasonable.
An award of punitive damages is not considered excessive as long
as it punishes the wrongdoer without causing financial ruin. E/
Ranco, Inc. v. First National Bank of Nevada, 406 F.2d 1205, 1219
(9th Cir. 1968), cert. denied, 396 U.S. 875 (1969). Jacoby testi-
fied at trial that his personal net worth was $1 million and his most
recent annual income was $200,000. He further testified that Ajac’s
estimated worth was $2 million and that its most recent annual sales
were over $10 million. The awards of $50,000 in punitive dam-
ages against both Jacoby and Ajac constitute relatively small per-
centages of their respective net worths -- 5% for Jacoby and 2.5%
for Ajac. These punitive damage awards are not excessive; they will
not cause either of the defendants to suffer financial ruin.
A33
H. ATTORNEY’S FEES
In May 1980, Transgo filed a request for attorney's fees for the
period from December 1976 through the end of the litigation.
Transgo claimed that its attorney was required to work 2,522 hours
on this case and sought payment at $60 to $75 per hour. Appellants
opposed the request on numerous grounds.
The court awarded Transgo $250,254 in fees. Appellants argue
that the award of fees is contrary to law and an abuse of discretion.
The American rule is that attorney's fees are not ordinarily
recoverable as costs. However, the Supreme Court and Congress
have developed exceptions to this rule for situations in which over-
riding considerations indicate the need for such recovery. Attor-
ney’s fees will be aliowed where there is statutory authorization for
such a remedy as well as where there is a valid contract providing
for payment of such fees. Further, a court in exercise of its equita-
ble powers may award attorney's fees when the interest of justice
so requires. It has long been recognized that attorney's fees mzy be
awarded to a successful party when his opponent has acted in bad
faith, vexatiously, wantonly, or for oppressive reasons. F.D. Rich
Co. v. Industrial Lumber Co. , 417 U.S. 116, 129 (1974); Hall v.
Cole, 412 U.S. 1,5 (1973).
In this case, the district court based the award of fees on both
equitable and statutory grounds. The court observed that
‘*{a}ttorney fees may be awarded when the Court finds that the los-
ing party has engaged in bad faith or inequitable conduct . . . .”’
The evidence supports the district court’s finding that the appel-
lants’ violation of Transgo’s trademark rights and copyrights and
their conspiracy to pass off an imitation product, constituted
extraordinary, malicious, wanton and oppressive conduct. The
award of fees can be sustained on this ground alone.
The district court also concluded that the ‘‘attorney’s fees may
be awarded under the laws relating to copyright, 17 U.S.C. § 116;
an award of fees under the copyright laws is appropriate where a
A34
defendant has willfully or deliberately infringed a copyright.”’
Indeed, section 505 of the 1976 Copyright Act, 17 U.S.C. § 50S,
permits the trial court in its discretion to award a reasonable attor-
ney’s fee to the prevailing party in a copyright infringement action.
We will not reverse such an award absent abuse of discretion. Rus-
sell v. Price, 612 F.2d 1123, 1132 (9th Cir. 1979), cert. denied,
446 U.S. 952 (1980).
The Supreme Court, in Hensley v. Eckerhart, U.S.
, 103 S. Ct. 1933, 1939 n.7 (1983), noted that a prevailing
party is one who succeeds on any significant issue in the litigation
by achieving some of the relief sought. Clearly, in the case before
us, Transgo was the prevailing party in the copyright infringement
claim.
Appellants argue that section 116 is not applicable where the
defendants have presented a ‘good faith’ defense. Some courts, we
have observed, recognize that a showing of good faith may justify
a denial of fees. Original Appalachian Artworks, Inc. v. Toy Loft,
Inc., 684 F.2d 821, 832 (1 1th Cir. 1982); Boz Scaggs Music v. KND
Corp., 491 F. Supp. 908, 915 (D. Conn. 1980). Here, however,
the district court awarded attorney's fees because it found that
appellants acted in bad faith. The district court and the jury rejected
appellants’ defense that they innocently infringed in the mistaken
belief that Transgo had abandoned its copyright. Our review of the
record convinces us that the court and jury did not err. The district
court did not abuse its discretion in determining that attorney's fees
could be awarded pursuant to 15 U.S.C. § 116.
in Hensley, the Supreme Court also discussed the factors to be
considered in awarding a ‘reasonable’ attorney's fee pursuant to a
statutory command. The Court pointed out that the *‘most useful
starting point for determining the amount . . . is the number of hours
reasonably expended on the litigation multiplied by a reasonable
hourly rate.”’ 103 S. Ct. at 1939. Excluded from this fee calcula-
tion are hours that are not reasonably expended, i.e. , hours that are
‘‘excessive, redundant, or otherwise unnecessary.’ /d. at 1940.
The Court went on to state that the ‘‘extent of a plaintiff's success
A35
is a crucial factor in determining the proper amount. * /d. at 1943.
Where a plaintiff has achieved only limited success, the district
court should award only those fees which are reasonable in relation
to the result obtained. /d. The Court stated:
Where the plaintiff has failed to prevail on a claim that is
distinct in all respects from his successful claims, the
hours spent on the unsuccessful claim should be excluded
.... [But w)here a lawsuit consists of related claims, a
plaintiff who has won substantial relief should not have
his attorney's fees reduced simply because the district
court did not adopt each contention raised.
Id.
The district court made specific findings as to Transgo’s sub-
stantial success on the majority of the claims and concluded that
the number of hours worked were reasonably calculated to achieve
the results obtained. Most importantly, the district court expressly
excluded from its calculations hours worked on a matter which the
court considered to be frivolous. This exclusion provides a clear
indication that the court properly exercised its discretion and
understood its obligations to exclude those hours worked on sepa-
rate and distinct contentions unrelated to the successful claims.
Finally, the hourly rate claimed by Transgo’s attorney appears rea-
sonable to us in light of the complex issues litigated in this matter.
The district court also determined thai attorney's fees were proper
under 15 U.S.C. § 1117. We disagree. This section provides in
pertinent part: *‘When a violation of any right of the registrant of a
mark registered in the Patent and Trademark Office shall have been
established . . . the plaintiff shall be entitled . . . to recover. . . .
The court in exceptional cases may award attorney fees to the pre-
vailing party.’’ Transgo’s application for registration of its trade-
mark was rejected. Therefore, the provisions of 15 U.S.C. § 1117
are inapplicable to this case. See Maier Brewing Co. v. Fleisch-
mann Distilling Corp. , 359 F.2d 156, 159 (9th Cir. 1966) (courts
|
A36
should not establish a right to attorney’s fees that Congress has not
conferred).
The district court also found that Transgo’s motion for attor-
ney’s fees was not barred by Fed. R. Civ. P. 59(e). Rule 59(e) pro-
vides that ‘‘[a] motion to alter or amend the judgment shall be served
not later than 10 days after entry of the judgment.’’ Appellants argue
that the motion for fees was filed beyond the ten day time limit.
Transgo filed its motion for attorney’s fees May 23, 1980. Final
judgment in this matter was not entered until July 31, 1980. There-
fore, the motion for attorney’s fees was not time barred under Rule
59(e).
The record discloses, moreover, that the parties stipulated on
May 15, 1980, that Transgo would be allowed to file all post judg-
ment motions by May 23, 1980. Thus, the filing of the motion for
attorney’s fees was not untimely under the stipulation.
Appellants also challenge the validity of the award of attorney’s
fees for work performed in connection with the contempt hearings.
Subsequent to the issuance of the final judgment, Transgo filed
motions on three separate occasions seeking contempt orders
against Fairbanks for violating the injunction.
\
In the first contempt proceeding, the court granted Transgo’s
motion after finding that Fairbanks had violated the injunction by
marketing its product under the name ‘‘Shift Timing Kit’’ and under
the designation ‘STK.’ Fairbanks was ordered to pay Transgo
$8,902 in attorney’s fees incurred in connection with this
proceeding.
A second motion was heard on June 15, 1981, wherein Transgo
alleged that Fairbanks used the words ‘‘Shift Kit’’ in a telephone
sales campaign. The court declined to rule ‘‘one way or the other’’
on ‘‘the question of the representations made in the sales pitch.’’
Thus, the court did not reach the merits of this alleged violation of
the court’s order.
(ieeeienene
A37
On October 19, 1981, the court found Fairbanks in contempt for
using the words ‘‘Shift Kit’’ in various sales campaigns, and
awarded attorney’s fees to Transgo in the amount of $34,251.50.
Appellants contend the amount of fees was excessive and that the
court improperly included fees based on the unsuccessful June
motion. The trial court awarded Transgo attorney’s fees for ser-
vices performed since March 1981 in connection with the claim that
Fairbanks used ‘‘Shift Kit’’ in telephone solicitations. Fairbanks
asserts that the trial court abused its discretion by awarding attor-
ney’s fees for work performed on the motion for a contempt order
which was denied by the court.
The June and October motions filed by Transgo alleged the same
conduct as violative of the court’s order. Transgo was not unsuc-
cessful on the merits of the June motion. As noted above, the court
declined to rule on the effect of the telephone ‘‘sales pitch’’ in June.
Transgo was successful, however, in presenting the same conten-
tion in October. Under Hensley, a court may award attorney’s fees
where success has been achieved on related claims. Hensley, 103
S. Ct. at 1943. Here the claims were identical. Under the circum-
stances of this case, the amount awarded was neither excessive nor
an abuse of discretion.
lil
ISSUES RAISED BY TRANSGO ON ITS CROSS-APPEAL
Transgo raises three issues in its cross-appeal.
A. SUFFICIENCY OF THE EVIDENCE TO SHOW
FUNCTIONALITY OF THE COLOR CODE
After hearing all of the evidence, the jury expressly found that
Transgo’s color coded springs serve primarily to help rebuilders
install ‘‘Shift Kits,’’ rather than to designate Transgo as the Kits’
manufacturer. Transgo requests that this matter be remanded ‘‘with
respect just to its own appeals with instructions to prescribe appro-
A38
priate injunctive relief.’’ Transgo contends that no substantial evi-
dence was presented to support the jury’s determination that the
spring color coding system was primarily functional. We disagree.
Functional features, unlike trade dress, are not protected by the
laws of unfair competition. This court discussed the concepts of
functionality and trade dress in Fabrica, Inc. v. El Dorado Corp.,
697 F.2d 890 (9th Cir. 1983).
‘Functional’ . . . might be said to connote other than a
trade-mark purpose. If the particular feature is an impor-
tant ingredient in the commercial success of the product,
the interest in free competition permits its imitation in the
absence of a patent or copyright. On the other hand,
where the feature or, more aptly, design, is a mere arbi-
trary embellishment, a form of dress for the goods pri-
marily adopted for purposes of identification and
individuality and, hence, unrelated to basic consumer
demands in connection with the product, imitation may
be forbidden where the requisite showing of secondary
meaning is made.
Id. at 894-95, quoting Pagliero v. Wallace China Co., 198 F.2d
339, 343 (9th Cir. 1952) (emphasis added).
The evidence on the question of the primary function of the color
coding was conflicting. The jury heard evidence from a number of
rebuilders that the colored springs identify where in the valve body
the springs belong. One transmission shop owner testified that
Spanish-speaking employees learn to install the valve body com-
ponents on the basis of the springs’ colors. The jury was told that if
the colors were changed, his rebuilders would not know where to
install the springs. ‘‘It is the function of the jury, not of this court,
to weigh conflicting evidence and judge the credibility of wit-
nesses.’’ Glovatorium, 684 F.2d at 660. The jury apparently
believed that the springs’ colors were primarily of assistance in
installing the kits. Substantial evidence supports this finding.
A39
B. INSTRUCTION SHEETS AS TRADE DRESS
The jury found that the primary significance of the instruction
sheets to rebuilders was as an aid to installation. The evidence was
conflicting. The testimony of certain rebuilders established that the
instruction sheets were initially used by inexperienced rebuilders
as a guide to installation. Once the rebuilder gained experience,
however, the instructions were thrown away without being read.
They relied, instead, on the colors of the springs. The jury was per-
suaded that the primary purpose of the instruction sheets was func-
tional. In reviewing the sufficiency of the evidence, conflicting
evidence is viewed favorably to the prevailing party. On the instant
issue, there is sufficient evidence to support the jury’s finding.
C. FAIRBANKS’ ADVERTISING CLAIMS
Transgo sought to convince the jury that Fairbanks was guilty of
false advertising. Fairbanks published advertisements which stated
that Fairbanks was ‘‘the FIRST name in Shift Kits.’’ Fairbanks’ ads
also claimed, ‘‘For No Returns, No Complaints . . . Insist On the
Fairbanks Kit . . .’’ Further, Fairbanks told consumers that Fair-
banks’ and Transgo’s kits were equal in quality.
There was testimony that Fairbanks’ advertisements were nei-
ther misleading nor false. For example, one of Transgo’s wit-
nesses testified on cross-examination that after reading Fairbanks’
**FIRST name’”’ advertisement in toto, he realized it referred to
Fairbanks rather than Transgo. Although Transgo presented evi-
dence concerning the superior quality of Transgo’s kits, two wit-
nesses testified that they had, on occasion, received defective
products from Transgo. One rebuilder testified concerning Fair-
banks’ ‘‘No Returns’’ claim as follows: ‘‘When I see those types
of claims én advertising, they just kind of go in one ear and out the
other. I still evaluate the product on other bases.’’ This testimony
provided substantial evidence to support the jury’s finding that these
advertising claims were ‘‘merely puffing.”’
A40
D. PROPRIETY OF A REMAND FOR AN ACCOUNTING
ON THE ASSESSMENT OF FURTHER SANCTIONS
Transgo seeks a remand of this matter for a modification of the
injunction and to ‘determine monetary relief due since trial for
contempt... .’’ Transgo maintains that the district court abused
its discretion in not awarding punitive damages or fines and in fail-
ing to order an accounting.
We decline the invitation to remand the case to the district court
with directions to order such proceedings. If there have been addi-
tional post-trial infringements, Transgo may apply directly to that
court for an appropriate remedy.
When dealing with its equitable powers, a court possesses the —
intrinsic power to adapt the injunction to meet the needs of a ‘*new
day.”’ Atlas Scraper & Engineering Co. v. Pursche, 357 F.2d 296,
298 (9th Cir. 1966). The district court has continuing jurisdiction
over such matters as the modification of injunctive relief. Hoffman
v. Beer Drivers & Salesmen’s Locai 888 , 536 F.2d 1268, 1276 (9th
Cir. 1976). Under its continuing jurisdiction, the district court must
supervise the injunctive relief granted, and may order an account-
ing or award punitive damages and fines where the injunctive relief
has proven insufficient to protect trademark rights. See Maier
Brewing Co. v. Fleischmann Distilling Corp. , 390 F.2d 117, 123
(9th Cir. 1968), cert. denied, 391 U.S. 966 (1968) (both the trade-
mark owner and the buying public are slighted if the court provides
no greater remedy than an injunction).
The judgment is AFFIRMED.
FOOTNOTE
'The defendants also present a general challenge to the ade-
quacy of Transgo’s overall policing efforts in protecting the name
‘*Shift Kit’? from unauthorized use. They include evidence of
magazine advertisements wherein other companies have used
‘Shift Kit’’ in denoting or describing their product.
ee
A4l
Evidence of Transgo’s policing efforts to stop misuse and unau-
thorized display of ‘‘Shift Kit’’ in the marketplace is reflected
throughout the record. The largest publisher carrying ads market-
ing ‘‘Shift Kit’’ honored Transgo’s demand to remove the term from
its directory and product listings. 4819-20. Other publishers also
cancelled the use of ‘‘Shift Kit’’ in their directories because of
pressure from Transgo, switching instead to the generic term ‘“‘valve
body kit.”’ 3858-60, 3665-66. One producer agreed to quit using
the name when Younger warned that he was ‘‘going to sue.’* 198-
202. Others also agreed to stop using Transgo’s name upon demand
by Transgo. Aamco 3868, Hurst 443, 3627. Thus, the two excep-
tions, the companies who had displayed ‘‘Shift Kit’’ in magazine
ads and on their boxes either no longer exist or have stopped their
use under demands from Transgo. The two remaining users, B &
M and Turbo Action, have each received notice from Transgo to
stop infringing on ‘*Shift Kit.’” PX 249, RT 3668-89. ‘‘[A]n owner
is not required to act immediately against every possible infringing
use to avoid a holding of abandonment. Such a requirement would
unnecessarily clutter the courts.’’ Wallpaper Manufacturers, Ltd.
v. Crown Wallcovering Corp. , 680 F.2d 755, 766 (C.C.P.A. 1982);
United States Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 139
(3d Cir. 1981).
A42
APPENDIX B
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Filed August 15, 1985
TRANSGO, INC.,
Plaintiff-Appellee/ Cross-Appellant,
VS.
AJAC TRANSMISSION PARTS CORP., FAIRBANKS RAC-
ING AUTOMATICS, and JERRY JACOBY,
Defendants-Cross-Appellants/ Appellees,
and
FAIRBANKS AMERICA, INC., and JOSEPH P. LUPO,
Defendants-Appellees.
Nos. 80-5659, 80-5660, 80-5661, 80-5707, 81-5102, 81-5230, 81-
5231, 81-5232, 81-5691, 82-5161, 82-5162
D.C. No. CV 77-0728-LEW
ORDER
Appeal from the United States District Court for the Central
District of California
Laughlin E. Waters, District Judge, Presiding
Argued and submitted March 9, 1984
Before: WALLACE ax,. ALARCON, Circuit Judges, and
HARDY *, District Judge.
* Honorable Charles L. Hardy, United States District Judge for the
District of Arizona, sitting by designation.
A43
The Opinion filed in the above matter on January 15, 1985, is
amended as follows:
The following language is inserted replacing the language in
headnotes 80-84 on page 258 of the slip opinion:
The American rule is that attorneys’ fees are not ordinarily
recoverable as costs for the prevailing party. Although courts have
a general power in equity to award fees as part of the costs, partic-
ularly when the opposing party has acted in bad faith, vexatiously,
wantonly or oppressively, see e.g., F.D. Rich Co. v. Industrial
Lumber Co. , 417 U.S. 116, 129 (1974); Hall v. Cole, 412 U.S. 1,
5 (1973), the Supreme Court held that this power did not apply in
Lanham Act cases because Congress acted to circumscribe the
general powers of the courts by prescribing detailed remedies under
section 35. See Fleischmann Distilling Corp. v. Maier Brewing
Co., 386 U.S. 714, 718-20 (1967). See also Pachmayr Gun Works,
Inc. v. Olin Mathieson Chemical Corp. , 502 F.2d 802, 812 (9th
Cir. 1974) (concluding that neither Lanham Act nor unfair com-
petition cases present the kind of ‘‘exceptional circumstance’’ that
permitted recovery of fees as a matter of equity).
In 1975, however, Congress amended section 35 to permit the
recovery of fees for the prevailing party in ‘‘exceptional cases.”
Act of Jan. 2, 1975, Pub. L. No. 93-600, § 3, 88 Stat. 1955. In the
case before us, the district court awarded attorneys’ fees under sec-
tion 35, 15 U.S.C. § 1117. By its terms, the remedies available
under section 35 apply only to cases involving registered trade-
marks. We have not yet determined, however, to what extent the
provisions of section 35 also apply to section 43(a), the provision
for unregistered trademarks, which is the provision applicable to
this case. In Rickard v. Auto Publisher, Inc. , 735 F.2d 459 (1 Ith
Cir. 1984), the court reviewed the language, interpretations, and
legislative history of sections 35 and 43(a), and concluded that the
congressional purposes of uniformity and simplicity in the trade-
mark laws could be furthered only if attorneys’ fees were recover-
able under section 43(a). See id. at 453-58. All of the other circuits
faced with this issue have reached the same result. See Metrics &
A44
Multistandard Components Corp. v. Metric’ s, Inc. , 635 F.2d 710,
715-16 (8th Cir. 1980) (concluding that section 35 remedies were
the exclusive remedies for section 43(a)); see also Burndy Corp. v.
Teledyne Industries, Inc., 748 F.2d 767, 771-72 & n.3 (2d Cir.
1984) (assuming without deciding that section 35 remedies applied
to section 43(a)); Donsco, Inc. v. Casper Corp. , 587 F.2d 602, 608
(3d Cir. 1978) (same).
This analysis is persuasive, and we conclude that at least with
respect to attorneys’ fees, the remedial provisions of section 35
apply to actions under section 43(a). The core of the Fleishmann
opinion was that Congress’ failure to provide for attorneys’ fees as
part of a meticulous remedial scheme precluded the courts from
doing so on their own; to do so would have been to evade congres-
sional intent. See 386 U.S. at 719-20. Now, however, Congress has
spoken and clearly intends the recovery of attorneys’ fees in regis-
tered trademark cases. Further, like the other circuits, we can see
no reason to distinguish between registered and unregistered trade-
marks for purposes of attorneys’ fees. The type of conduct that these
damages should deter is unrelated to the type of intellectual prop-
erty protected. It would be anomalous to provide for attorneys’ fees
in copyright actions, 17 U.S.C. § 106, registered trademark actions,
15 U.S.C. § 1117, and patent actions, 35 U.S.C. § 285, but not in
unregistered trademark actions. We do not believe this is what
Congress intended. Moreover, our result is consistent with
Fleischmann, which ‘‘conclude[d] that Congress intended § 35 of
the Lanham Act to mark the boundaries of the power to award
monetary relief in cases arising under the Act.’’ 386 U.S. at 721.
Since the ‘‘boundaries’’ of relief now include attorneys’ fees, we
conclude that the district court could exercise its discretion to award
this element of damages to Transgo. !
Our holding in this regard, however, is limited to attorneys’ fees,
and we do not hold that section 35 provides the exclusive remedies
for section 43(a) actions because the facts of this case do not pres-
ent the opportunity to examine the issue fully. See, e.g., Rickard,
735 F.2d at 458 n. 34 (declining to decide the exclusivity issue).
A45
In this case, the district court awarded attorneys’ fees
on both equitable and statutory grounds. We need not
reach the issue of whether the subsequent amendment or
other authority permit a district court to award attorneys’
fees under section 43(a) as a matter of equity, because we
conclude that there was statutozy authority for the award.
Our review of the record reveals that substantial evi-
dence supported the district court's finding that the
appellants’ violation of Transgo’s trademark rights and
copyrights and their conspiracy to pass off an imitation
product constituted extraordinary, malicious, wanton,
and oppressive conduct. Thus, we conclude that the dis-
trict court appropriately awarded fees in an ‘‘exceptional
7°
case.
In conjunction with the above change, delete the material accom-
panying headnote 90, since we conclude that section 1117 does
apply to section 1125(a).
The panel as constituted above has voted to deny the petition for
rehearing. Judges Wallace and Alarcon vote to reject the sugges-
tion for rehearing en banc and Judge Hardy recommends such
rejection.
The full court has been advised of the suggestion for rehearing
en banc and has reviewed the amendments set forth above. No judge
of the court has requested a vote on the suggestion for rehearing en
banc. Fed. R. App. P. 35(b).
The petition for rehearing is denied and the suggestion for
rehearing en banc is rejected.
FOOTNOTE
|New West Corp. v. NYM Co., 595 F.2d 1194 (9th Cir. 1979),
does not force the opposite conclusion. In New West, a section 43(a)
case, we stated without discussion or reference to the amendment
of section 35, ‘that attorney fees are not recoverable in trade-mark
A46
infringement cases under the Lanham Act."’ /d. at 1202 (citing
Fleischmann). We then concluded that California law would not
have permitted the recovery of attorneys’ fees under the facts of that
case. /d. at 1202-03. New West is distinguishable on two grounds.
First, the issue presented in this case, whether section 35 remedies
applied to section 43(a), was not squarely presented to the court.
Second, even if it had been presented, we would not have had to
reach the issue to decide that case, because it is distinguishable on
its facts. The records in New West did not contain evidence of bad
faith or other opprobrious conduct, unlike the record in this case.
See id. at 1196-98, 1203.
A47
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Filed Sept. 4, 1985
TRANSGO, LNC.,
Plaintiff-Appellee/ Cross-Appellant,
VS.
AJAC TRANSMISSION PARTS CORP., FAIRBANKS RAC-
ING AUTOMATICS, and JERRY JACOBY,
Defendants-Cross-Appellants/ Appellees,
and
FAIRBANKS AMERICA, INC., and JOSEPH P. LUPO,
Defendants-Appellees.
Nos. 80-5659, 80-5660, 80-5661, 80-5707, 81-5102, 81-5230, 81-
5231, 81-5232, 81-5691, 82-5161, 82-5162
D.C. No. CV 77-0728-LEW
AMENDED ORDER
Appeal from the United States District Court for the Central
District of California
Laughlin E. Waters, District Judge, Presiding
Argued and submitted March 9, 1984
Before: WALLACE and ALARCON, Circuit Judges, and
HARDY *, District Judge.
* Honorable Charles L. Hardy, United States District Judge for the
District of Arizona, sitting by designation.
A48
The Order filed August 15, 1985 in this matter is amended to reflect
that the Petitions for Rehearing and Suggestions for Rehearing En
Banc filed by Fairbanks, Ajac Transmission Parts Corporation and
Jerry Jacoby are denied.
Ady
APPENDIX C
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
TRANSGO, INC.,
Plaintiff, v.
AJAC TRANSMISSION PARTS CORP., et !.,
Defendants.
CV 77-278 LEW
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This action was tried by a jury in March and April 1980 and spe-
cifically on the following days: March 18, 19, 20, 21, 25, 26, 27,
28 and 31 and April 1, 2, 3, 4,9, 10, 11, 14, 15, 16, 17, 18, 22, 23
and 24.
The case was submitted to the jury on April 24, 1980, and the
jury rendered its Verdict and Answers to Interrogatories on April
28, 1980. Judgment on the Verdict was entered on May 9, 1980,
and a notice of entry was sent to all counsel.
These Findings of Fact and Conclusions of Law are made in
connection with the Court's order awarding attorney fees to Plain-
tiff and in connection with the injunctive relief granted to Plaintiff.
These Findings of Fact and Conclusions of Law are based on the
Answers of the jury to interrogatories, the Verdict, facts admitted
by the parties, testimony and exhibits produced during the six-week
trial and various post-trial motions resuived by the Court,
FINDINGS OF FACT
|. Plaintiff Transgo Inc. (hereafter usually referred to as Transgo)
is a corporation of California having its principal business office in
ASO
El Monte, California within this Judicial District. Transgo is
engaged in the business of manufacturing transmission kits usable
in normal passenger cars that are marketed in interstate commerce.
2. The defendant Ajac Transmission Parts Corp. (hereafter usu-
ally referred to as Ajac) is a corporation of the State of New York
with its principal place of business in Elmont, New York. Ajac is
a ‘‘repackager’’ engaged in the business of repackaging automatic
transmission parts that are distributed in the United States and for-
eign countries to customers and the transmission industry.
3. The Defendant Jerry Jacoby (hereafter usually referred to as
Jacoby) wholly owns and is the President of Ajac, is a resident of
the State of New York and has his principal place of business in
Elmont, New York.
4. The Defendant Fairbanks Racing Automatics is a division of
Fairbanks America Inc. (hereafter collectively referred to as Fair-
banks) which is a New York corporation having its principal place
of business in Stamford, Conn. Fairbanks has been in the business
of producing automotive competition racing automatic transmis-
sions and automatic transmission component part kits for approxi-
mately 25 years, and manufactures transmission kits usable in
normal passenger cars that are marketed in interstate commerce.
5. The Court has jurisdiction over all of the parties and subject
matter and venue is proper.
6. Specific jurisdiction over Plaintiff's claims is established as
follows: first claim under the U.S. copyright laws /7 USC / et seq.
28 USC 1338(a), 28 USC 1400(a); second claim diversity of citi-
zenship, 28 USC 1332(a); the Lanham Act, 15 USC 105] et seq.,
15 USC 1125(a), 28 USC 1338, and 28 USC 1391; the third claim
diversity of citizenship, 28 USC 1332(a), Lanham Act, 15 USC
1051 et seq., 15 USC 1125(a), 28 USC 1338 and 28 USC 1391.
6. Specific jurisdiction over Defendant’s counterclaims is based
upon 28 USC 220] and 2202, the Federal Rules of Civil Procedure
ASI
Rule 13, 28 USC 1332 and 1338. Venue is proper under 28 USC
1391.
7. Around the year 1967, Transgo started to display the name
**SHIFT KIT”’ on the boxes and packaging inserts used with the
transmission kits directed to normal passenger car use designed to
improve and modify the shifting characteristics of vehicle
transmissions.
8. In September/October 1976 Fairbanks commenced market-
ing transmission kits for normal passenger car use under the name
**SHIFT KIT”’ presented in relatively large lettering on product
boxes.
9. Soon after Jacoby organized and incorporated Ajac around
1966 Ajac started purchasing transmission kits directed to normal
passenger car use directly from Transgo and continued to do so until
about the time of this controversy. During their ten years of direct
dealings the sales of transmission kits by Transgo to Ajac and
Jacoby exceeded Two Hundred Thousand Dollars ($200,000.00).
10. Both Transgo and Fairbanks use part numbering systems
including the prefix SK for 18 of their directiy competing transmis-
sion kits as follows: SK-400; SK-425; SK-250; SK-350; SK-6; SK-
4; SK-4L; SK-4S; SK-4SL; SK-4-71; SK4-73; SK-C3; SK-3V; SK-
3VL; SK3-67; SK3-73; SK-TF and SK-TG. Transgo and Fair-
banks also use the prefix PG for designating two of their competing
transmission kits i.e., PG-1 and PG-7. Each and every one of these
part numbers was first used by Trangso.
11. Instruction sheets are inserted in the boxes used for packag-
ing the transmission kits marketed by Transgo and Fairbanks.
12. After this lawsuit was commenced, Transgo obtained nine
U.S. copyright registrations for instruction sheets.
13. Ajac sold to Fairbanks transmission kits with all Transgo’s
instruction sheets included in transmission kits prior to any devel-
A52
opment of Fairbanks’ corresponding instruction sheets. On several
occasions between 1974 and April 1976 Fairbanks purchased full
sets of Transgo’s transmission kits directed to normal passenger car
use and sold under the name SHIFT KIT, directly from Ajac for
purposes of checking, evaluation and testing.
14. Fairbanks obtained sales information and the pricing struc-
ture regarding Transgo’s transmission kit line directed to normal
passenger car use, from Ajac. Some of this information was con-
sidered as ‘‘confidential’’ by Ajac and Jacoby.
15. Ajac planned to discontinue stocking Trango’s transmission
kits directed to normal passenger car use and sold under the name
SHIFT KIT as soon as Fairbanks transmission kits directed to nor-
mal passenger car use and sold under the name SHIFT KIT were
available for shipment.
16. Prior to shipping Fairbanks’ transmission kits none of Ajac’s
officers, including Jacoby had any formal practice of informing their
personal accounts that Fairbanks transmission kits would be shipped
or that Transgo transmission kits would not be shipped.
17. No bulletin, letter or other written notification was sent by
Ajac or Jacoby to their salesmen regarding the availability of Fair-
banks transmission kits prior to the earliest shipments of Fairbanks
transmission kits to Ajac’s accounts.
18. For approximately ten years prior to shipment of the Fair-
banks transmission kits, Ajac had only and exclusively carried and
sold transmission kits for normal passenger car use, manufactured
by Transgo since Transgo was the only manufacturer of transmis-
sion kits for normal passenger Car use.
19. The name SHIFT KIT used in connection with transmission
kit products is not a common name or generic (Jury Interrogatory
No. 1) but is a descriptive term (Jury Interrogatory No. 2).
20. The primary significance of the name SHIFT KIT is to iden-
tify Plaintiff as the exclusive manufacturing source of the goods to
which the name is applied (Jury Interrogatory No. 4).
A5S3
21. When the name SHIFT KIT was first used by Plaintiff it was
arbitrary and identified Plaintiff as the exclusive manufacturing
source (Jury Interrogatory No. 5).
22. The name SHIFT KIT is Plaintiff's trademark (Jury Interro-
gatory No. 6).
23. The product designations including the prefixes SK and PG
as used by the parties for transmission kit products are not descrip-
tive terms (Jury Interrogatory No. 8).
24. The product designations including the prefix letters SK and
PG were arbitrary when first used by Plaintiff and identified Plain-
tiff as the exclusive manufacturing source (Jury Interrogatory No.
11).
25. The product designations including the prefix letters SK. and
PG are Plaintiff's exclusive designations of origin (Jury Interro-
gatory No. 12).
26. The product designations including the prefix letters SK and
PG constitute Plaintiff's proprietary numbering system and are
Plaintiff's exclusive trademarks (Jury Interrogatory No. 13).
27. The nine instruction sheets for which Plaintiff claims and
asserts copyright protection contain substantial original and crea-
tive material (Jury Interrogatory No. 20).
28. The early instruction sheets used by Defendants were sub-
stantially similar to copyrighted material in Plaintiff's nine instruc-
tion sheets for which it claims copyright protection (Jury
Interrogatory No. 21).
29. Plaintiff's nine U.S. copyright registrations being asserted
against the Defendants are valid (Jury Interrogatory No. 22).
30. Fairbanks directly or contributorily passed off its goods as
Piaintiff’s goods (Jury Interrogatory No. 24).
A54
31. Ajac directly or contributorily passed off Fairbanks goods as
Transgo’s goods (Jury Interrogatory No. 25).
32. All of the Defendants, Fairbanks, Ajac and Jacoby con-
spired and acted in concert to injure Plaintiff in an unlawful man-
ner (Jury Interrogatory Nos. 26 and 27).
33. All of the Defendants deliberately and willfully copied
Transgo’s brand name and trademark SHIFT KIT for their directly
competing line of transmission kits with the aim of passing off
Fairbanks transmission kits as Transgo’s established transmission
kits.
34. Ail of the Defendants deliberately and willfully copied
Transgo’s part numbering system using the prefix letters SK and
PG for their directly competing line of transmission kits with the
aim of passing off Fairbanks transmission kits as Transgo’s estab-
lished transmission kits.
35. The Defendants worked together in deliberately and will-
fully copying Transgo’s instruction sheets.
36. All of the Defendants deliberately and wiilfully copied
Transgo’s name SHIFT KIT and part numbering system to induce
and enable others to pass off Fairbanks transmission kits as Trans-
go’s established transmission kits.
37. All of the Defendants conspired and combined in a con-
certed action to injure Plaintiff's property rights and trade identity
rights.
38. All of the Defendants conspired and combined in 2 con-
certed action to infringe Plaintiff's trademarks, designations of
origin and copyrights.
39. All of the Defendants conspired and combined in a con-
certed action to pass off Fairbanks transmission kits as Transgo’s
nal bola aee Ninn Le apni ta SB bod wih” 5B
AS5
established transmission kits and to induce others to likewise pass
off Fairbanks transmission kits as Transgo’s transmission kits.
40. Defendants’ conduct in imitating and injuring Transgo’s trade
identity rights and property rights, both individually and in com-
bination with one another, was extraordinary and done mali-
ciously, wantonly and oppressively.
41. The conduct of Defendants has caused many transmission
rebuilders and transmission shop owners to be actually confused and
deceived into believing that the Fairbanks transmission kits were
Transgo’s transmission kits.
42. Plaintiff did not file its motion requesting attorney fees until
May 23, 1980, fourteen days after the entry of judgment herein.
However, plaintiff has claimed fees throughout this action, and
plaintiff stated its intention to request attorney fees in Court on April
24, 1980, after the jury returned its verdict.
43. Defendants filed all their motions under Rule 59 of the Fed-
eral Rules of Civil Procedure on May 19, 1980, ten days after the
entry of judgment herein.
44. The hourly rates charged by plaintiff's counsel throughout
this litigation ($65 and $75 per hour) were reasonable.
45. The quality of the work of plaintiff's counsel was high.
46. The number of hours devoted to the case by plaintiff's coun-
sel was reasonable.
47. All of the actions taken by plaintiff's in this case and in the
District of Connecticut in a‘case filed by Fairbanks were reasona-
bly calculated to advance plaintiff's interests and protect plaintiff's
competitive rights. The award of fees will be based on the efforts
of plaintiff's counsel without an allocation of fees resulting from
the various issues raised by the parties.
AS6
48. No award of fees will be given to plaintiff for its efforts in
the Western District of Pennsylvania regarding defendants’ efforts
to enforce subpoenas. Plaintiff should not have been directly
involved in that action.
49. Plaintiff's counsel was precluded from taking other employ-
ment due to this case, because trial of this case spanned twenty-four
days and the preparation for such a lengthy trial was time
consuming.
50. Plaintiff obtained a substantial monetary judgment and
injunctive relief protective of its competitive rights.
51. The actual fee charged by plaintiff's counsel was reasona-
ble; thus, plaintiff will be awarded the actual fee charged. The award
will not contain an amount for plaintiff's efforts in the Western
District of Pennsylvania.
CONCLUSIONS OF LAW
|. The jury has determined and the Court concludes that the name
SHIFT KIT is Plaintiff's trademark and Defendants have commit-
ted trademark infringement.
2. The jury has determined and the Court concludes that the let-
ters SK and associated part numbers are Plaintiff's part numbers and
Defendants have committed trademark infringement.
3. The jury has determined and the Court concludes that the name
SHIFT KIT, the letters SK and associated part numbers are Plain-
tiff’s exclusive designations of origin and Defendants have wrong-
fully used them to falsely designate the origin of their goods.
4. The jury has determined and the Court concludes that nine of
Plaintiff's instruction sheets are protected by valid U.S. copyright
registrations and the Defendants have committed copyright
infringement.
:
j
:
:
AS7
5. The jury has determined and the Court concludes that the
Defendants have committed unfair competition in part by passing
off their goods as Plaintiff's goods, trademark infringement, copy-
right infringement and false designation of origin.
6. Palming off or ‘passing off"’ is a deliberate effort by a person
to induce a purchaser to believe that his product is actually the
product of another. It requires that the person have an actual inten-
tion to deceive the purchaser. The essence of ‘‘passing off”’ is an
attempt by one person to induce customers to believe that his prod-
ucts are actually those of another. The Defendants individually and
jointly passed off the transmission kits manufactured by Fairbanks
as the established transmission kits manufactured for many years
by Transgo. One trader may not sell his own goods under the pre-
tense that they are the goods of another and the law relating to unfair
competition forbids such deception as practiced by the Defendants.
Ross-Whitney Corp. ». Smith, Kline & French Labs 207 F2d.
190, 99 USPQ I (9th Cir 1953);
Mershon v. Pachmayr 220 F.2d. 879, 105 USPQ 4 (9th Cir
1955);
Quabaug Rubber Co. v. Fabiano Shoe Co. Inc. 567 F.2d. 154,
195 USPQ 689 (Ist Cir 1977);
Goodyear’ s India Rubber Glove Mfg. Co. v. Goodyear Rubber
Co. 128 US 598, 604 (1888).
7. Similarly one who induces another to commit a fraud or ille-
gal act and furnishes the means for doing so is equally responsible
and liable. As a general rule when one supplies others with the tools
for committing a fraud upon the public or the means by which oth-
ers are able to mislead a pufchaser, he is responsible for any pass-
ing off, infringement or unfair trade practice that may be caused by
these others in using the tools or means supplied to them. Defend-
ants are guilty of these practices. When one ‘‘sets the stage’’ so third
parties can benefit from expected confusion in dealing with their
AS8
customers, he cannot avoid sharing the blame and liability. There
was substantial actual confusion established at trial.
American Philatelic Society v. Claibourne 3 Cal. 2d. 689, 697
(Cal. Su Ct. 1935);
Reid Murdoch & Co. v. HP Coffee Co. 48 F2d. 817, 8 USPQ
420 (9th Cir 1931);
Cheseborough Mfg. Co. v. Old Gold Chemical Co. Inc. 70 F2d
383, 21 USPQ 304 (6th Cir 1934).
8. A civil conspiracy is a combination of two or more persons or
companies who, by concerted action, knowingly intend to accom-
plish some unlawful purpose or accomplish some lawful purpose
by unlawful means and thereby cause injury or damage to the rights
of others. The Defendants combined in a conspiracy to injure
Plaintiff's multiple trade identity rights and property rights. Each
tortfeasor and member of a conspiracy becomes the agent for every
other member and is liable even though one or more of the mem-
bers may not have made any actual monetary profits.
Clark v. Bunker 453 F2d 1006, 172 USPQ 420 (9th Cir 1972);
Tri-ton Intern v. Velto 525 F2d 433, 438 (9th Cir 1975);
Domsco Inc. v. Casper Corp. 587 F2d 602, 199 USPQ 705 (3d
Cir 1978).
9. The jury has determined and the Court concludes that Plain-
tiff is entitled to special and general compensatory damages against
the Defendants as follows: $15,007 assessed against Fairbanks;
$25,006 assessed against Ajac and $8 assessed against Jacoby.
10. “he Court concludes that the jury was reasonable and acting
within the scope of its discretion in awarding punitive and exem-
plary damages to Plaintiff and against all of the Defendants as iol-
lows: $50,000 punitive or exemplary damages against Ajac;
i
.
AS9
$50,000 punitive or exemplary damages against Jacoby and $1
punitive or exemplary damages against Fairbanks. Where actual or
compensatory damages can be shown as in this case, then punitive
or exemplary damages may be awarded where conduct injuring the
property or trade identity rights of another has been maliciously,
wantonly or oppressively done. All of the Defendants have acted
in reckless disregard of Plaintiff's many property and trade identity
rights and have shown their conduct to be malicious, wanton and
oppressive. Ar objective of awarding punitive and exemplary
damages is to punish particular wrongdoers, serve as an example
and warning to others similarly situated and deter the particular
wrongdoers and others similarly situated from doing such wrong-
ful acts in the future.
Calfornia Civil Code §3294
Schroeder v. Auto Drive Away Co. 11 Cal. 2d. 908, 114 Cal.
Rptr. 523 (1974);
Ward v. Taggart 5\ Ca. 2d 736, 320 P.2d 534 (1959).
11. There is no fixed ratio or formula for determining the amount
of punitive and exemplary damages relative to compensatory dam-
ages. An important factor to be taken into consideration is the rel-
ative wealth of the wrongdoers or their ability to respond to an award
of exemplary and punitive damages. An award of such extraordi-
nary damages is not excessive so long as it punishes the wrong-
doer, such as the Defendants in this case, without causing them
financial ruin or destruction.
Wetherbee v. United Ins. Co. of America 18 C.A. 266, 95 Cal.
Rptr. 678 (1971);
Oakes v. McCarthy Co. 267 C.A. 2d 231, 73 Cal Rptr. 127
(1968);
El Ranco Inc. v. First National Bank of Nevada 406 F.2d 1205
(9th Cir 1968);
A60
Clark v. Bunker 453 F.2d 1006, 172 USPQ 420 (9th Cir 1972).
12. Reasonable attorney fees may be awarded in actions brought
under the | anham Act in exceptional cases. 15 USC §1117. The
acts of infringement must be deliberate, fraudulent, malicious or
willful. RCA Records v. Kory 197 USPQ 908 (E.D. N.Y. 1978);
Amana Society v. Gemeinde Brau Inc. , 417 F. Supp. 310(N.D. Ta.
1976) aff'd 557 F.2d 638 (8th Cir.) cert. denied 434 U.S. 96
(1977).
13. Attorney fees may be awarded under the laws relating to
copyright. 17 U.S.C. §116. An award of fees under the copyright
laws is appropriate where a defendant has willfully or deliberately
infringed a copyright.
14. Attorney fees may be awarded when the Court finds that the
losing party has engaged in bad faith or inequitable conduct which
would make it grossly unjust for the prevailing party to be left with
the burden of its litigation expenses,
1S. Attorney fees may be awarded under California unfair com-
petition law only in cases of price discrimination, secret rebates and
loss selling. New West Corporation v. NYM Company of Califor-
nia Inc. , 595 F.2d 1194 (9th Cir. 1979); Pachmayr Gunworks Inc.
v. Olin Mathieson Chemical Corp. , 502 F.2d 809 (9th Cir, 1974).
16. Significant factors that usually determine whether a Court
should exercise its discretion are state of mind of the infringer and
the particular type of acts committed. In this controversy, all of the
Defendants were deliberate and willful in violating Plaintiff's many
trade identity and property rights and their conduct was determined
by the jury to be malicious, wanton and oppressive. In addition to
committing trademark infringement, copyright infringement and
unfair competition, Defendants joined in a civil conspiracy and
passed off Fairbanks kits as Transgo’s established kits.
17. The Court concludes that this is an extraordinary and excep-
tional case and the Plaintiff as prevailing party is entitled to an award
of reasonable attorney fees.
eee ee
a Ld la DD Ne vlna ANS
en ST i ie OP
A6l
18. A motion for attorney fees is a motion under Rule 5%e),
Federal Rules of Civil Procedure, which requires that a motion to
alter or amend judgment be served within ten days after the entry
of judgment. Stacey v. Williams, 50 F.R.D. 50 (N.D Miss. 1970)
aff d 446 F.2d 1363 (Sth Cir. 1971). However, the strict time lim-
its of Rule 59(e) are inapplicable to a party who has claimed attor-
ney fees throughout a litigation. Fase v. Seafarer's Welfare and
Pension Plan, 79 F.R.D. 363 (E.D. N.Y. 1978). Plaintiff's motion
for attorney fees is, therefore, timely made.
19. This Court has discretion whether to conduct an evidentiary
hearing on plaintiff's motion for attorney fees even if the motion
involves disputed facts. Federal Rule of Civil Procedure 43(e). An
evidentiary hearing on plaintiff's motion for attorney fees is
unnecessary because the Court is intimately familiar with coun-
sels’ work and reasonable fees generally.
20. Plaintiff is entitled to injunctive relief restraining defendants
from committing further trademark infringement, copyright
infringement, unfair competition and false designation of origin.
15 U.S.C. $1116; 17 U.S.C. §§ 101 and 1112; Cal. Bus. & Prof.
Code §14340; Drop Dead Co. Inc. v. §.C. Johnson & Son Inc.,
326 F.2d 87 (9th Cir. 1963); Runge v. Lee 441 F.2d 579 (9th Cir.
1971).
21. Plaintiff is entitled to its costs.
DATED: Feb. 12, 1981
Laughlin E. Waters
United States District Judge
A62
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
TRANSGO., INC.,
Plaintiff,
Vv.
AJAC TRANSMISSION PARTS CORP., et al.,
Deferdants. _
CV 77-278 LEW
ORDER
On June 9, 1980, the Court granted plaintiff's motion for attor-
ney fees. The amount of fees to be awarded was left for future
determination. The Court having considered argument by counsel
and all of the papers filed in connection with the motion for attor-
ney fees, including the post-hearing papers, and good cause
appearing therefor,
IT IS ORDERED that all defendants shall pay plaintiff the sum
of $240,899.00. In addition to the above amount, defendant Fair-
banks Racing Automatics shall pay plaintiff $9,375.00
DATED: Feb. 12°°T981
Laughlin E. Waters
United States District Judge
_~
A63
APPENDIX D
§ 1117. Recovery for violation of rights
(a) Profits; damages and costs; attorney fees
When a violation of any right of the registrant of a mark regis-
tered in the Patent and Trademark Office shall have been estab-
-tished in any civil action arising under this chapter, the plaintiff shall
be entitled, subject to the provisions of sections 111 and 1114 of
this title, 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 shail assess such profits and
damages or cause the same to be assessed under its direction. In
assessing profits the plaintiff shall be required to prove defendant's
sales only; defendant must prove all elements of cost or deduction
claimed. In assessing damages the court may enter judgment,
according to the circumstances of the case, for any sum above the
amount found as actual damages, not exceeding three times such
amount. If the court shall find that the amount of the recovery based
on profits is either inadequate or excessive the court may in its dis-
cyetion enter judgment for such sum as the court shall find to be just,
according to the circumstances of the case. Such sum in either of
the above circumstances shall constitute compensation and not a
penalty. The court in exceptional cases may award reasonable
attorney fees to the prevailing party.
(b) Treble damages for use of counterfeit mark
In assessing damages under subsection (a) of this section, the
court shall, unless the court finds extenuating circumstances, enter
judgment for three times such profits or damages, whichever is
greater, together with a reasonable attorney's fee, in the case of any
violation of section 1114(1)(A) of this title or section 380 of Title
36 that consists of intentionally using a mark or designation,
knowing such mark or des") "on is a counterfeit mark (as defined
in section 1116(d) of this ta» ,, in connection with the sale, offer-
ing for sale, or distribution of goods or services. In such cases, the
A64
court may in its discretion award prejudgment interest on such
amount at an annual interest rate established under section 6621 of
Title 26, commencing on the date of the service of the claimant's
pleadings setting forth the claim for such entry and ending on the
date such entry is made, or for such shorter time as the court deems
appropriate.
§ 1125. False designations of origin and false descriptions
forbidden
(a) Any person whe shall affix, apply, or annex, or use in con-
nection with any goods or services, or any container or containers
for goods, a false designation of origin, or any false description or
representation, including words or other symbols tending falsely
to describe or represent the same, and shall cause such goods or
services to enter into commerce, and any person who shall with
knowledge of the falsity of such designation of origin or descrip-
tion or representation cause or procure the same to be transported
or used in commerce or deliver the same to any carrier to be trans-
ported or used, shall be liable to a civil action by any person doing
business in the locality falsely indicated as that of origin or in the
region in which said locality is situated, or by any person who
believes that he is or is likely to be damaged by the use of any false
description or representation. »
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.