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Boston Professional Hockey Association, Inc. v. Dallas Cap & Emblem Manufacturing, Inc.

United States Court of Appeals for the Fifth Circuit · 1975 · Constitutional Law

Constitutional LawPropertyTortsTrademarkLanham ActDamagesLanham Acttrademark infringement

Facts

Dallas Cap manufactured and sold embroidered cloth emblems substantially duplicating NHL team insignia after unsuccessfully seeking a license from National Hockey League Services, the plaintiffs' exclusive licensing agent. On remand, the district court treated Dallas Cap's June 17, 1971 letter as showing a $25,000 offer for a three-year exclusive license for three-inch emblems, prorated that figure over four years, assigned an equal amount for larger emblems, and then doubled the total for bad faith. The record also showed, however, that another company, Lion Brothers, already held an authorized license, so Dallas Cap could not have obtained an exclusive right. Dallas Cap's letter separately offered $15,000 for a three-year nonexclusive right to distribute three-inch emblems through retail outlets.

Issue

How should actual damages be measured under the Lanham Act when the defendant wrongfully usurps the plaintiff's licensing right to manufacture and sell trademarked emblems, and whether the district court properly doubled damages based on its bad-faith findings? The court also considered whether attorney's fees were recoverable under the version of the Lanham Act applicable to this suit.

Rule

Under 15 U.S.C. § 1117, a trademark owner may recover defendant's profits, damages sustained by the plaintiff, and costs, including all elements of injury to the business proximately resulting from the infringement. Where the infringement consists of usurpation of the plaintiff's licensing right, actual damages may be measured by the value of the licensing right wrongfully taken, but that value must correspond to the right actually appropriated; if only a nonexclusive license could have been granted, damages cannot be based on an exclusive-license value. Enhanced damages above actual damages must be supported by specific findings that permit appellate review and are grounded in proper circumstances under the statute, and attorney's fees were unavailable under the pre-1975 version of the Act.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakefront Rowing Club in Chicago licenses its registered crest for use on souvenir pennants. After Ridgeway Stitchworks in Milwaukee is denied permission, it sells pennants bearing the crest for two years through retail stores. The evidence shows Ridgeway had earlier offered $18,000 for a two-year nonexclusive retail license covering the same pennants.

If the club seeks Lanham Act actual damages based on usurpation of its licensing right, which measure is most appropriate?

Explanation. The majority held that actual damages may include the value of a wrongfully usurped licensing right. Where the defendant took a nonexclusive right to make and sell the marked goods, the proper measure is the value of that right, as reflected by the defendant’s own offer for the comparable nonexclusive license. Proof of quantified diverted sales or reputational harm is not the only route to damages.