By Dabney Carr
After a bench trial, Judge Gibney of the Eastern District of Virginia found in favor of Lorillard Tobacco on its claims of trademark infringement, unfair competition and trademark dilution and awarded attorneys' fees to Lorillard based on an exceptional case finding under 15 U.S.C. § 1117(a). Lorillard Tobacco Co. v. California Imports, LLC, Case No. 3:10CV817-JAG (E.D.Va. Aug. 7, 2012), found here [enhanced version available to lexis.com subscribers]. While the trademark infringement case was clear-cut, Judge Gibney's imposition of liability on the individual defendants based on their personal involvement in the infringing activities, and his discussion of the factors necessary to an exceptional case finding make Lorillard an important case for both trademark holders and potential infringers.
Lorillard brought suit for infringement of the trademarks and trade dress associated with its NEWPORT® brand cigarettes. NEWPORT® is the second leading brand of cigarettes in the United States and accounted for 90% of Lorillard's revenue in 2010.
Lorillard claimed that the defendants infringed on their trademarks and trade dress through the sale of their NEWPROT "spice" smoking products. "Spice," according to the Court, is a mix of dried herbs, flowers, tobacco leaves and other substances sprayed with a synthetic chemical similar to THC, the active ingredient in marijuana. The Court found that the NEWPROT product was sold in pouches that mirrored the distinctive elements of Lorillard's trade dress
Trademark and Trade Dress Infringement
Judge Gibney found that Lorillard had easily proven all the elements of trademark and trade dress infringement. On the issue of likelihood of confusion, Judge Gibney found that other than evidence of actual confusion, Lorillard had established all seven factors for determining likelihood of confusion that are set forth by the Fourth Circuit in Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir. 1984). Specifically, Judge Gibney held that the NEWPORT® marks were "famous" under 15 U.S.C. § 1125. Defendants' NEWPROT product merely transposed two letters in the NEWPORT name and mimicked each and every element of the NEWPORT® trade dress. Further, Judge Gibney found, defendants' product was used in connection with smoking products and was sold in similar channels of commerce.
Lastly, Judge Gibney found that the defendants intended to trade on the goodwill of the NEWPORT® marks based on the defendants' decade-long involvement in the retail tobacco business.
In addition to his findings on trademark infringement, Judge Gibney found that the similarity between the NEWPORT® products and the defendants' products gave rise to an association among NEWPROT, NEWPORT and controversial synthetic marijuana which would harm Lorillard and its trademarks.
Attorneys' Fees and Costs
In the Fourth Circuit, unlike several other circuits, an exceptional case finding under 15 U.S.C. § 1117(a) of the Lanham Act requires both a showing of "deliberate and flagrant infringement" and a showing that the defendant acted in "bad faith."
Actions need not be malicious, however, to constitute deliberate or willful infringement. Here, both of the individual defendants were aware of the popularity of the NEWPORT® brand and admitted that the NEWPROT label looked very similar to the NEWPORT® package. As a result, Judge Gibney held, their decision to advertise, distribute and sell their NEWPROT amounted to "deliberate and flagrant infringement" even if those acts were not malicious.
As to bad faith, Judge Gibney found that the defendants had delayed in responding to discovery, failed to appear for depositions and provided inaccurate and misleading discovery responses. Further, Judge Gibney found that the defendants continued to give testimony at odds with the facts of the case at trial. These findings, the Court held, amounted to litigation misconduct which justified a finding of bad faith. While Lorillard had not suffered any actual damages from NEWPROT's advertising and sale, the existence of damages is only one of the factors in determining whether attorneys' fees are appropriate.
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