Maier Brewing Co. v. Fleischmann Distilling Corp. - 390 F.2d 117 (9th Cir. 1968)

Rule:

The purposes of the Lanham Act can be accomplished by making acts of deliberate trademark infringement unprofitable. In the case where there is direct competition between the parties, this can be accomplished by an accounting of profits based on the rationale of a returning of diverted profits. In those cases where there is infringement, but no direct competition, this can be accomplished by the use of an accounting of profits based on unjust enrichment rationale. Such an approach to the granting of accountings of profits would, by removing the motive for infringements, have the effect of deterring future infringements.

Facts:

Defendant Maier Brewing Company was adjudged to have infringed Plaintiff Fleischmann Distilling Corp.’s trademark. It was found that Defendant sold beer under the name Black & White, the trade name registered to Plaintiffs. The District Court awarded an accounting by Defendants of their profits accrued from the sale of Black & White beer. In this present appeal, Defendant argued that the District Court was without jurisdiction to award monetary recovery in the form of an accounting of profits. According to Defendant, Black & White Beer was not “in commerce” as required by the Lanham Act, 60 Stat. 427, 15 U.S.C. §§ 1051-1127 (1946). Moreover, the Defendant argued that even if the District Court had jurisdiction to enter an order for an accounting of profits, the making of such an order was not merited by the facts.

Issue:

1. Did the District Court have jurisdiction to award monetary recovery in the form of an accounting of profits?
2. Was the order awarding plaintiffs monetary recovery in the form of an accounting of defendant’s profits supported by the facts?

Answer:

1) Yes. 2) Yes.

Conclusion:

The Court noted that under Title 28 U.S.C. § 1338(a), the district court was granted original jurisdiction of any civil action arising under any Act of Congress relating to trademarks. It was further noted that the jurisdiction of a district court to grant either injunctive or monetary relief under the Lanham Act was dependent upon the “use in commerce” of the infringing goods. Commerce was defined in Title 15 U.S.C. § 1127 as meaning "all commerce which may lawfully be regulated by Congress.” The Court noted that the trademark of the scotch was registered in the United States Patent Office in 1908 and the registration was renewed under the Lanham Act in 1948. Black & White Scotch was sold in interstate commerce and is concededly a scotch of excellent reputation. According to the Court, the infringement of Black & White Scotch mark by another alcoholic beverage would jeopardize the good name of Black & White Scotch, or at least so diminish the appellees' ability to control and therefore sustain the excellent reputation of their scotch that it must have substantial effect on that trademark and its relation to interstate commerce.  The sale of Black & White Beer could thus affect the interstate sale and reputation of Black & White Scotch, and was, for that reason, commerce which Congress could regulate. Therefore, the District Court had jurisdiction in this case.

Anent the second issue, the Court held that the District Court reached the proper conclusion since the defendant knowingly, willfully, and deliberately infringed the trademark Black & White. According to the Court, the defendant has the burden of proof as to any deductions from his gross sales. According to the Court, an infringer can limit the profits which he must deliver to plaintiff if it can be shown that the infringement had no relation to profits made by defendant, that some purchasers bought goods bearing the infringing mark because of defendant's recommendation or his reputation or for any reason other than a response to the diffused appeal of plaintiff's symbol, the burden of showing this is upon the poacher. In this case, however, the defendant had not sustained such burden of proof. Moreover, the Court averred that the dollar amount of the recovery in an accounting for profits under the unjust enrichment rationale has no relation to the damages, if any, sustained by plaintiff.