Fishman Transducers, Inc. v. Paul

United States Court of Appeals
For the First Circuit
No. 11-1663
FISHMAN TRANSDUCERS, INC.,
Plaintiff, Appellant,
v.
STEPHEN PAUL, d/b/a Esteban; DAYSTAR PRODUCTIONS;
HSN INTERACTIVE LLC,
Defendants/Third-Party Plaintiffs-Appellees.
__________
FORCE USA, INC.; FORCE, LTD.,
Third-Party Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Boudin, Circuit Judge,
Souter,* Associate Justice,
and Thompson, Circuit Judge.
Sibley P. Reppert with whom Michael J. Markoff and Pearl Cohen
Zedek Latzer, LLP were on brief for appellant.
Edward T. Colbert with whom T. Cy Walker, Susan A. Smith,
William M. Merone, Erik C. Kane, Kenyon & Kenyon LLP, Michael B.
Keating and Foley Hoag LLP were on brief for appellees.
July 3, 2012
*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
BOUDIN, Circuit Judge. This appeal concerns claims by
Fishman Transducers, Inc. ("Fishman"), primarily for trademark
infringement and false advertising under the Lanham Act, 15 U.S.C.
§ 1051 et seq. (2006), against HSN Interactive LLC ("HSN"),
musician Stephen Paul and his company Daystar Productions. Fishman
failed to get the relief it sought in the district court and now
appeals. We refer to the Lanham Act throughout by its Title 15
section numbers rather than the sections in the original statute.
Fishman is a developer and manufacturer of electronic
equipment, specifically a highly-regarded line of acoustic
equipment that can be attached to individual musical instruments to
provide sound amplification. Fishman guitar "pickups" often
include both a transducer and a preamplifier or equalizer, although
the term can also refer to only the transducer. The Fishman
transducer is a small device usually installed inside the guitar
where it is not immediately visible.
HSN is a retailer of various consumer goods and sells
products on its website; its sister company sells products on the
television channel Home Shopping Network; for purposes of this case
the two entities were treated as one. In late 2006, HSN sold
through the website and television station about 70,000 "Esteban"
guitars that it identified in the programming and website--
inaccurately, it now concedes--as containing Fishman pickups. This
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trademark violation is the centerpiece of the litigation that led
to this appeal.
Esteban is the performance name used by musician Stephen
Paul who, with his company Daystar Productions, has collaborated
with HSN since 2001 to market and sell Esteban guitar packages
(usually a guitar equipped with a pickup as well as accessories
such as a strap, case, amplifier and instructional videos).
Beginning in October 2006 on the HSN channel, Paul lauded Fishman
pickups, emphasized that the guitars included them and boasted that
a Fishman pickup alone would sell for as much as the full HSN
package. Beginning in the second quarter of 2006, the HSN website
simply listed a Fishman pickup as a specification of the guitars.
Several months after the television advertising began,
Fishman contacted HSN and Daystar and demanded an end to claims in
the broadcasts and on the website that the guitars contained
Fishman pickups. HSN complied and ceased to make reference to
Fishman pickups in its sales pitches and on its website. Fishman
also brought suit in the district court, stating claims against
HSN, Paul and Daystar under the Lanham Act for trademark violation
and false advertising, the Massachusetts Consumer Protection Act,
Mass. Gen. L. ch. 93A, and state common law trademark infringement
and unfair competition.
After extensive discovery and shortly before trial, the
district court dismissed Fishman's chapter 93A claim, denied its
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request to present evidence of "trademark counterfeiting," 15
U.S.C. § 1114, and ruled that the parties were not in "direct
competition" (the latter relevant to damages under the Lanham Act).
Fishman Transducers, Inc. v. Paul, No. 07-cv-10071 (D. Mass. Mar.
7, 2011). During the trial, the district court ruled inadmissible
key damage evidence proffered by Fishman, but left open evidence of
disgorgement of profits for a separate hearing before the judge, 15
U.S.C. § 1117(a).
During the eight-day trial, defendants did not seriously
deny infringing the Fishman trademark and falsely advertising the
guitars as containing Fishman pickups; much of the extensive
testimony and argument focused on whether the defendants'
violations were willful. The evidence showed that the guitars in
question had been manufactured for HSN in China by Force Limited
("Force"), which had previously made Esteban guitars for HSN using
pickups supplied by a company named Belcat.
Then, in 2006, Force substituted another Belcat pickup
that Belcat told Force was a Fishman or "Fishman-type" pickup;
Force then advised HSN that the guitars contained Fishman pickups
and so identified the pickups in the specifications; HSN passed on
the information to Paul. Whether or not Fishman made the new
Belcat pickup or supplied technology for it,1 defendants now
1
Fishman, it appears, both competed with and sold to Belcat,
and some of Belcat's sales to a Japanese manufacturer married
Fishman pickups and Belcat preamps. Fishman also has an agreement
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concede that the HSN advertising and sales in question used the
Fishman trademark without authorization.
At the close of trial, the jury found trademark
infringement and false advertising in violation of the Lanham Act;
but the jury also found that neither violation was "willful." In
a post-trial decision, Fishman Transducers, Inc. v. Paul, No. 07-
10071, 2011 WL 1157529 (D. Mass. Mar. 29, 2011), the judge agreed
that willfulness had not been shown, adding that the jury's finding
would bind him anyway. Because the violations were not willful,
and separately because of conventional equitable balancing, he
chose not to order disgorgement of profits. Id.Fishman has now appealed. The applicable standard of
review varies with the issue and whether the claim was properly
preserved. Fishman's appeal is directed primarily to its claims
under the Lanham Act. Section 1125 of the Act creates federal
causes of action both for misuse of a trademark and false
advertising that misrepresents the source of goods; section 1117
permits trebling of a damage award, a recovery of defendant's
profits, and an award of attorney's fees in "exceptional" cases.
15 U.S.C. §§ 1117(a), 1125(a).2
with Belcat allowing it to manufacture pickups with Fishman-
patented technology, but Belcat is precluded from advertising them
as Fishman products.
2
The structure of the Lanham Act's remedial provisions is
confusing, Mark A. Thurmon, Confusion Codified: Why Trademark
Remedies Make No Sense, 17 J. Intell. Prop. L. 245 (2010), but in
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Fishman's first claim is that the district court
mishandled the central issue of willfulness, both in its
instructions and in responding to two jury questions.
Interestingly, the term "willful" appears in section 1117 only in
relation to two provisions not of immediate importance here--one
relating to dilution claims (section 1125©) and another with
counterfeit marks (section 1116(d)), 15 U.S.C. § 1117(a), (c)(2)--
and similarly in section 1125 only in relation to dilution of a
famous mark and domain name registration, 15 U.S.C. §
1125(c)(5)(B), (d)(2)(D)(ii).
Rather, the governing language provides:
The court shall 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 discretion enter judgment for such sum
as the court shall find to be just, according
to the circumstances of the case.
15 U.S.C. § 1117(a).
addition to sections 1125(a) and 1117--themselves no models of
clarity or consistent interpretation--a number of other provisions
deal with specialized violations (e.g., counterfeiting marks),
other remedies (such as injunctions and destruction) and special
situations (e.g., liability of printers and publishers).
-6-
Nevertheless, in Lanham Act cases, courts (including this
one) have used willfulness as a gloss or screen in deciding what
remedies to provide for ordinary infringement. While damages in
trademark or false advertising cases can be awarded without any
special showing of scienter or equitable factors, e.g., Hot Wax,
Inc. v. Turtle Wax, Inc., 191 F.3d 813, 819-20 (7th Cir. 1999), our
cases usually require willfulness (one primary exception involving
direct competition is discussed below) to allow either (1) more
than single damages or (2) a recovery of the defendant's profits.3
Because the district court excluded testimony on damages,
Fishman's remaining hope was to recover the defendant's profits,
but this required a showing of willfulness. The jury found that
trademark infringement and false advertisement occurred but that
the violations were not willful. The judge treated the finding as
binding, adding that his own view was the same and that no other
equitable ground for awarding profits to Fishman had been
established.
On this appeal, Fishman argues that the jury's finding
that the violations had not been willful was impaired both by
errors in the court's instructions to the jury and by inaccurate
3
E.g., Visible Sys. Corp. v. Unisys Corp., 551 F.3d 65, 81
(1st Cir. 2008); Tamko Roofing Prods., Inc. v. Ideal Roofing Co.,
Ltd., 282 F.3d 23, 36 & n. 11 (1st Cir. 2002); Aktiebolaget
Electrolux v. Armatron Int'l, Inc., 999 F.2d 1, 5 (1st Cir. 1993);
see also La Quinta Corp. v. Heartland Props. LLC, 603 F.3d 327, 345
(6th Cir. 2010); J. Thomas McCarthy, 5 McCarthy on Trademarks and
Unfair Competition § 30.62 (4th ed. 2012).
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answers that the court gave to questions the jury asked during
deliberations. We address these claims on the merits--several have
ongoing importance for future trademark cases--but conclude finally
that such errors as occurred did not affect the outcome.
In federal civil litigation willfulness requires a
conscious awareness of wrongdoing by the defendant or at least
conduct deemed "objectively reckless" measured against standards of
reasonable behavior.4 The criminal standard is slightly more
demanding because it requires a subjective indifference to risk for
recklessness--sometimes called willful blindness--as the minimum
condition for a willfulness finding. See United States v. Griffin,
524 F.3d 71, 80 (1st Cir. 2008).
The district judge in this case instructed the jury that:
In order to consider whether it's willful,
consider whether the defendants knew or should
have known about the mark and that it belonged
to the plaintiff; second, that the defendants
knew or should have known that their own
conduct was infringing the plaintiff's mark;
and third, and importantly, the defendants
intentionally sold products in connection with
the infringing mark with the knowledge that it
infringed. An act that is done willfully is
done voluntarily and intentionally as opposed
to by mistake or accident.
4
Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57-58 (2007);
Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620
F.3d 1305, 1319 (Fed. Cir. 2010); accord In re Seagate Tech., LLC,
497 F.3d 1360, 1371 (Fed. Cir. 2007) (willful patent infringement),
cert. denied, 552 U.S. 1230 (2008); In re Barboza, 545 F.3d 702,
707-08 (9th Cir. 2008) (willful copyright infringement); Zazú
Designs v. L'Oréal, S.A., 979 F.2d 499, 507 (7th Cir. 1992)
(willful trademark infringement).
-8-
(Emphasis added.)
Fishman is right that the underscored language fails to
make clear that objective recklessness is also a basis for finding
willfulness in the civil context. Whether Fishman adequately
preserved the claim of error in its colloquy with the judge is
doubtful, Scarfo v. Cabletron Sys., Inc., 54 F.3d 931, 946 (1st
Cir. 1995) (requiring that an instructional error and the proposed
correction be adequately identified); but, if preserved (which we
need not decide), there is no doubt that the underlined portion set
the bar too high and might have confused the jury.5
The district judge also instructed the jury that the
plaintiff bore the burden of proving willfulness by clear and
convincing evidence. Fishman did preserve this objection and
argued that the appropriate burden is preponderance of the
evidence. The district judge denied the request relying on Tamko
Roofing, where this circuit noted in passing that the jury in the
district court found willfulness by clear and convincing evidence,
282 F.3d at 29; but the burden of proof was not a disputed issue
and our decision in Tamko Roofing did not adopt any standard.
5
Fishman's counsel pointed to a failure to mention
recklessness; the district judge replied that he had "said 'known
or should have known'"--which sets the standard too low--and
Fishman's counsel then gave a response that failed to point out
that on this reading the jury was being given two inconsistent
standards, one too high and one too low--neither being correct.
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The ordinary rule in civil cases is proof by a
preponderance of the evidence, Herman & MacLean v. Huddleston, 459
U.S. 375, 387 (1983), and the text of section 1117 does not
prescribe a different burden of proof. Fraud, a cousin to
willfulness, has an historical association with the clear and
convincing standard but the modern tendency in the Supreme Court is
to reserve the clear and convincing burden, unless dictated by
statute, for matters with constitutional implications like civil
commitment.6
This was the view taken in Herman & MacLean, holding that
the preponderance standard should govern the main anti-fraud
provision of the Securities Exchange Act. 459 U.S. at 382, 390.
The Court also noted that in prior cases, it had found the
preponderance standard applicable for "imposition of even severe
civil sanctions." Id. at 389; see also Grogan v. Garner, 498 U.S.
279, 291 (1991) (Bankruptcy Code fraud provision); Ramsey v. United
Mine Workers of Am., 401 U.S. 302, 311 (1971)(antitrust treble
damages). The one recent decision looking the other way, Microsoft
Corp. v. i4i Ltd. Partnership, 131 S. Ct. 2238 (2011), rested
primarily on statutory interpretation. Id. at 2249-50, 2252.
6
E.g., Broun et al., 2 McCormick on Evidence § 340 at 488-89
(6th ed. 2006); Sand et al., 4 Modern Federal Jury Instructions:
Civil, Instruction 73-3 (2012). Compare Addington v. Texas, 441
U.S. 418, 433 (1979) (establishing clear and convincing evidence
burden of proof for civil commitment).
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Authority in other circuits is divided on whether in
Lanham Act cases to equate fraud or willfulness with a heightened
standard of proof,7 but the modern guidance of Herman & MacLean and
Grogan supports the ordinary preponderance standard where, as here,
the statutory language does not call for more. The omission of the
term willful in the relevant portion of section 1117 contrasts with
its explicit use elsewhere in section 1117. So, as a matter of
first impression in this circuit, we think preponderance the proper
standard.
Finally, Fishman claims that the district judge erred in
responding to two questions from the jury during its deliberations
relating to willfulness. One question in substance was "whether a
failure to act can constitute willfulness"; to this the judge gave
the jury the reporter's transcript of the oral instruction on
willfulness (which contained a confusing mis-transcription to which
neither side objected after review). Fishman Transducers v. Paul,
2011 WL 1157529 at *1 n.1 (D. Mass. March 29, 2011). Fishman did
preserve a claim that the answer to the question should merely have
been "yes," but the judge could regard this as an oversimplified
answer and properly refuse to give it.
7
Compare Versa Prods. Co. v. Bifold Co. (Mfg.), 50 F.3d 189,
207-08 (3d Cir.) (applying a heightened burden of proof to the
intent to confuse or deceive in trade dress infringement cases),
cert. denied, 516 U.S. 808 (1995), with Harrods Ltd. v. Sixty
Internet Domain Names, 302 F.3d 214, 226-27 (4th Cir. 2002)
(applying a preponderance of the evidence standard to the bad faith
requirement in the Lanham Act's cyberpiracy provision).
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The second jury question was, "Is HSN responsible for
their own published document on the worldwide web when they are
aware of its incorrect information?". In response, the judge
sought to explain that HSN was "responsible" for the content of its
own website but, at least as to willfulness, not for something HSN
did not control. This was reasonable enough given evidence that
Fishman concedes that HSN sent warning letters to third party sites
later selling the Esteban guitars with the erroneous claims to
Fishman products.
Although the jury instructions were (understandably)
mistaken on burden of proof and potentially confusing on
recklessness, neither was harmful to Fishman because the evidence
was insufficient to justify a finding of willfulness even under the
correct preponderance standard and a perfect understanding of
willfulness. Under the standard governing review of jury verdicts,
we conclude that no reasonable jury could have found a willful
violation in this case.
Force, the maker of the guitar, orally represented to HSN
that it included a "Fishman-type" pickup and in a product
specification sheet noted that the guitars had a Fishman pickup.
HSN relayed this information to Paul before he went on-air.
Nothing indicates that defendants were any more than negligent in
passing on that representation. In particular, no evidence
indicated that the defendants had knowledge of the infringement or
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were reckless in failing to learn of it. When told of the error
HSN promptly stopped claiming that its pickups were Fishman
products.
Paul did say on the air that he had personally selected
Fishman's products for the guitars, which he admitted at trial was
not true; and he praised the Fishman pickups in terms exceeding
anything represented by Force Limited--for example, that the
pickups in the guitars were "top of the line." But none of these
statements remotely suggests that Paul knew--or was reckless in not
so suspecting--that HSN was mistaken or that Force was lying when
they said that the pickups in "his" guitars were Fishman pickups.
This brings us to damages and Fishman's other main basis
for appeal. Single damages can be awarded without a finding of
willfulness. But damages awards turn out to be comparatively rare
in trademark cases primarily, it appears, because of the difficulty
of proving them. Michael J. Freno, Trademark Valuation: Preserving
Brand Equity, 97 Trademark Rep. 1055, 1062-63 (2007). Various
damage theories are available, but proving causation and amount are
very difficult unless the two products directly compete (an issue
to which we return), and most cases that go beyond injunctive
relief involve an attempt to recoup the infringer's profits. Id.
at 1070.
The problem--of which this case is a good illustration--
is not theory but proof. The most straightforward theory of
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damages would be that the infringement had diverted specific sales
away from Fishman. See Aktiebolaget Electrolux v. Armatron Int'l,
Inc., 999 F.2d 1, 6 (1st Cir. 1993) (denying damages absent lost
sales). But Fishman does not sell guitars to consumers; rather, it
supplies its pickups to other guitar makers who in turn compete
with Esteban, or directly to consumers through retail channels, who
buy them to be installed in their own guitars.
Accordingly, on this theory, Fishman had to show--to take
the most obvious possibility--that the wrongful use of the Fishman
name during part of 2006 to describe pickups on the Esteban guitars
diverted sales from outlets--often big box stores--who purchased
competing guitars from guitar makers whom Fishman supplied; that
this sales diversion in turn reduced new orders to such competing
guitar makers; and that those manufacturers reduced their orders of
Fishman pickups for some period, largely after the defendants'
infringement ceased.
The district judge rejected the testimony of Fishman's
expert, Thomas Britven, finding that Britven furnished neither a
figure or range for damages suffered by Fishman nor supplied the
jury with data from which it could make an intelligent estimate of
Fishman's damages, if any, caused by the infringement. Fishman's
founder, Larry Fishman, also testified but the judge excluded him
from testifying about the cause of the damages. Fishman says that
these exclusionary rulings were error.
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Although some evidentiary rulings involve issues of fact
or law, this one was a classic judgment call reviewed for abuse of
discretion. Lynch v. Boston, 180 F.3d 1, 16 (1st Cir. 1999). The
question is whether the information tendered by the expert and by
Larry Fishman would help the jury to determine a fact in issue,
Fed. R. Evid. 702; see also Daubert v. Merrell Dow Pharms., Inc.,
509 U.S. 579 (1993). These witnesses' proffered testimony together
was the only substantial damage evidence offered; even taken
together, we agree that this evidence would not allow a reasonable
jury to assess damages.
Britven sought to testify (supplying the relevant
figures) that Esteban sold lots of guitars in 2006 and that (by
contrast to 2006) Fishman's low-end pickup sales both dipped and
missed Fishman projections for 2007. Larry Fishman sought to opine
that Esteban guitar packages did decrease Fishman pickup sales.
But Fishman's brief fails to explain how the jury was to make even
a crude estimate of diverted sales from the information sought to
be supplied.
Fishman's brief does offer generalities--that experts are
not always required for damages, that precision may itself be
misleading, and so on--but it does not offer a response to the
judge's concern that the jury was essentially being left adrift.
Damage experts customarily provide the jury some means, even if the
premises and line of extrapolation are open to debate, to make a
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reasonable estimate. That task, quite difficult where the products
are not substitutes, was not done in this instance.
The essence of Britven's support for actual damages is
that while Fishman projected its revenues from sales to
manufacturers to increase from 2006 to 2007, those revenues instead
decreased by nearly $750,000, felling short of projections by
nearly $1.5 million. But by limiting annual sales data to the
period from 2005 through 2007, Britven does not address the
possibility that Fishman's decline in sales was merely an ordinary
year-to-year fluctuation.
Britven also reports, based on discussions with Fishman's
management, that several of Fishman's customers reduced orders in
2007 after having trouble selling guitars with Fishman pickups
through retail channels, but neither Britven nor Larry Fishman
provided any information regarding the reasons that Fishman's
customers suffered declining retail sales, or why it should be
supposed that Esteban's infringement had anything to do with this
decline.
Nor does Britven's report provide any basis for the jury
to attribute all, or any particular amount of the decline in
revenue or the shortfall from projections, to infringement or false
advertising by Esteban. Further, Britven's report contains no
information about Fishman's profit margins or any financial
information other than revenues that a jury could use to estimate
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lost profits, which is the ultimate measure of damages. Visible
Sys. Corp., 551 F.3d at 75.
Economists do have means of moving from data indicating
correlation to a fair inference of causation. In this case, such
means may have included direct testimony from customers, market
research surveys of guitar purchasers as to their reasons for
purchases, or sales data for Fishman's competitors that might show
that Fishman's sales decline was unique or unusual rather than part
of broader industry wide conditions.8 These are often difficult,
time-consuming and expensive efforts; but without them, Britven's
report was merely a basis for jury speculation and his testimony
was properly excluded.
The expert added to his report specific figures to show
Esteban's revenues but they were mainly relevant to the
disgorgement of profits theory, and surely not all attributable to
the trademark violation. And, while the expert report also
includes million dollar estimates for a campaign of "corrective
advertising" allegedly planned by Fishman, proposed expenditures by
the plaintiff that are likely to boost sales are not self-verifying
damages from infringement.
8
According to Britven, American sales of acoustic/electric
guitars--which are acoustic guitars equipped with a pickup
amplification system--declined from 242,000 in 2006 to 208,000-
213,000 in 2007, a decline of 12-14 percent. By comparison,
Fishman's sales to guitar manufacturers declined from $7,398,789 in
2006 to $6,652,658 in 2007, a decline of just 10 percent.
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Fishman's president himself was allowed to testify as to
some specific information--e.g., identified reductions in orders by
specific Fishman guitar maker customers--but neither he nor any
other witness offered evidence that Esteban's infringements had
caused the customers to reduce their orders. In the absence of
organized economic evidence that allowed the jury to estimate
damages, this information would not have been sufficient for an
award of damages.
Fishman next argues that an alternative ground for
awarding damages based on defendant's profits was wrongly rejected
by the district judge when he ruled that Fishman pickups and
Esteban guitars were not in "direct competition." Under this
direct competition theory, the plaintiff and defendant products may
be such complete substitutes that a sale by the infringer under the
infringed party's mark is almost automatically a lost sale by the
plaintiff, so the issue of causation almost vanishes from the case.
And, if the two companies are in the same line of
business, defendant's profits may be presumptively similar to what
plaintiff would have earned on the sale. Congress has further
provided that where profits are the measure of recovery, the
plaintiff need only prove the defendant's sales and the defendant
must prove costs and other deductions. 15 U.S.C. § 1117(a); Tamko
Roofing, 282 F.3d at 37. So, if direct competition had been
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established, the evidence tendered of Esteban's revenues might have
been sufficient.
The case law amply supports this approach where there is
direct competition, Aktiebolaget Electrolux, 999 F.2d at 5 ("[A]
plaintiff seeking an accounting of defendant's profits must show
that the products directly compete, such that defendant's profits
would have gone to plaintiff if there was no violation . . . ."),
but not otherwise. Valmor Prods. Co. v. Standard Prods. Corp., 464
F.2d 200, 204 (1st Cir. 1972) ("Since Standard's products do not,
concededly, compete with Valmor's, Standard can hardly be thought,
in the absence of fraud or palming off, to be a trustee for profits
which but for the infringement would have been Valmor's . . . .").
But a showing of direct competition requires a
substantial degree of equivalence and substitutability,9 and a
pickup is not a substitute for a guitar but merely a potential
ingredient, and is even less of a substitute for a package that
included additional materials. See Quabaug Rubber Co. v. Fabiano
Shoe Co., 567 F.2d 154, 162 (1st Cir. 1977). So while HSN's
violations could damage Fishman sales, no plausible one-to-one
9
E.g., Bos. Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d
1, 26 (1st Cir. 2008); Members First Fed. Credit Union v. Members
1st Fed. Credit Union, 54 F. Supp. 2d 393, 402 n. 15 (M.D.Pa.
1999). The phrase has a similar meaning outside of the trademark
context, see, e.g., Aegerter v. City of Delafield, 174 F.3d 886,
891 (7th Cir. 1999)(telecommunications); United States v. Gillette
Co., 828 F. Supp. 78, 83 (D.D.C. 1993) (Clayton Act).
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equivalent exists here as the number of sales diverted or the
profits transferred.
What remains are two distinct claims which the district
court declined to entertain. The first was for trademark
counterfeiting under section 1114 of the Lanham Act. The district
court rejected any attempt to pursue this theory because it was not
pled in the complaint which, for federal claims, relied only
specifically upon trademark infringement and unfair competition
under section 1125(a). Whether or not the facts in the complaint
might have supported a trademark counterfeiting claim does not
matter so late in the process (on the eve of trial, over four years
after the initial filing of the complaint).
Sections 1114 and 1125 are distinct claims and support
different remedies. Compare 4 McCarthy on Trademarks & Unfair
Competition § 25:10 with Res. Developers, Inc. v. Statue of
Liberty-Ellis Island Found., Inc., 926 F.2d 134, 139 (2d Cir.
1991). Fishman could not wait until discovery was over and then
announce without amendment of the complaint that it wanted to
assert a new federal cause of action.
The second excluded claim, under Massachusetts' unfair
competition statute, was rejected by the district court because it
requires that the wrongful actions and transactions "occurred
primarily and substantially within the commonwealth [of
Massachusetts]." Mass. Gen. Laws Ann. ch. 93A, § 11 (2011).
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Fishman concedes that the HSN advertising was not particularly
targeted to Massachusetts customers and that no more than a "small
portion" of HSN's guitar sales occurred within Massachusetts.
Instead Fishman argues that section 11's "primarily and
substantially" test--most recently framed by Massachusetts' highest
court as a "center of gravity" test, Kuwaiti Danish Computer Co. v.
Digital Equip. Co., 781 N.E.2d 787, 799 (Mass. 2003)--is
nonetheless satisfied because Fishman is a Massachusetts-based
corporation so all of the harm occurred there. That a
Massachusetts company was arguably deprived of sales may be
relevant, In re Pharm. Indus. Average Wholesale Price Litig., 582
F.3d 156, 194 (1st Cir. 2009), but here the direct impact of the
deception--to the extent it occurred--was on customers all over the
country, few of whom were in Massachusetts.
Where wrongdoing is not focused on Massachusetts but has
relevant and substantial impact across the country, the "primarily"
requirement of section 11 cannot be satisfied. "Kuwaiti Danish did
not retreat from the proposition that, if the significant contacts
of the competing jurisdictions are approximately in the balance,
the conduct in question cannot be said to have occurred primarily
and substantially in Massachusetts." Uncle Henry's Inc. v. Plaut
Consulting Co., Inc., 399 F.3d 33, 45 (1st Cir. 2005).
Affirmed.
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