TOP Tobacco v. Star Importers and Wholesalers was a case that considered the relationship between statutory damages and actual damages. Defendants appealed to the Eleventh Circuit to review the amount of statutory damages that the jury awarded in the Northern District of Georgia.
TOP Tobacco (“TOP”) is the manufacturer of TOP and JOB popular brands for cigarette rolling papers. Star Importers & Wholesalers (“Star”) was, as the name suggests, a wholesaler who sold rolling papers to smaller businesses like gas stations and convenience stores. TOP received a tip telling them that Star was selling counterfeit versions of their products; they hired investigators; and this lawsuit was the result.
Once liability is established for trademark counterfeiting, statutory damages under the Lanham Act range from $2,000 up to $200,000 per infringement. In this case, with liability already determined by the judge’s granting summary judgment, the jury saw fit to attach an award of $123,000 to each of the nine counts of infringement, which led to a total award of $1,107,000.
Star and its owner were found not to have acted willfully, and that, the defendants said, should have lowered the amount of statutory damages. In bringing its appeal, the defendants claimed that the jury verdict was inconsistent with a finding of non-willful infringement, so that the appellate court should reverse the award. However, the guidelines used to arrive at the award were included in the jury instructions, and the defendants never objected to them. In its instructions, the jury was told it could consider:
– the value of the trademark;
– the willfulness of the infringement(s);
– the deterrent effect on others besides the defendant;
– the potential for discouraging the defendant at issue; and
– whether the counterfeit goods posed a risk to public safety.
The appellate court noted that a laboratory test revealed an unknown ingredient in the counterfeit product, which the jury may have perceived as a risk to public safety. This could have impacted the final sum which the jury reached.
In its appeal, defendants tried to link actual damages to statutory damages, claiming that an award substantially greater than actual damages violated the Seventh Amendment (which protects the right to a jury trial). The court noted that statutory damages were established to fill in the gaps when it was impossible or impractical to determine actual damages. So, the verdict was not improper just because it was larger than the actual damages the plaintiff could prove. The court also reminded defendants that a jury’s verdict cannot be reduced by a judge; rather, that would require a new trial, and defendants waived their right to a re-trial by failing to timely request one. So, the Eleventh Circuit affirmed the jury’s award granted in the district court.
Starting with a finding of liability was, shall we say, inauspicious for the defendants. It may not have helped that several witnesses, including the president of Star, testified about how prevalent counterfeiting was in the wholesale industry for rolling papers. And citing to the U.S. Constitution is often a desperate stretch of the imagination…
What struck me about this case was the attempted link between actual and statutory damages. Although copyright cases require a reasonable relationship between actual and statutory damages, for trademark cases the statute provides a range of damages to be awarded. The jury had the latitude to award within that range. Nothing suggests that statutory damages must be limited to actual damages. In this case, the jury award was right in the middle of the available range (though unfortunately for defendant, multiplied by 9 separate, infringed trademarks). It’s not clear why the defendants didn’t request a re-trial promptly after getting a sour verdict — though one can imagine that they didn’t want to pour more “good money after bad” into another expensive trial.
