Can willful trademark infringement be assumed if the defendant does not rebut it? 4 PILLAR v. NY&C

Can willful trademark infringement be assumed if the defendant does not rebut it? 4 PILLAR v. NY&C

A trademark is something that a manufacturer uses to identify that they are the source of a product.  Traditionally a trademark was a word, phrase or symbol used to label the product but it is possible to trademark things such as colors or scents.  Trademarks are intended to protect consumers from inferior quality products.  Trademark owners are granted the exclusive right to brand their goods with a trademark to prevent consumer confusion about who manufactured a product.  If someone other than the trademark owner uses a trademark in a way which creates consumer confusion, that can be considered trademark infringement.  A trademark owner can file a lawsuit to stop trademark infringement with an injunction and to get monetary damages for trademark infringement which has already occurred.

The behavior of a Defendant in trademark infringement lawsuit is relevant to the damages which can be awarded at trial.  A Defendant that innocently infringed on a trademark is considered less culpable than a defendant that acted willfully.  While the Lanham Act does not explicitly define what is considered willful infringement, courts have applied the definition of willfulness given in the Copyright Act.  The factors that support a finding of willfulness in a Lanham Act case mirror those that apply in suits brought under the Copyright Act, 17 U.S.C. § 504(c): a plaintiff
must show (1) that the defendant was actually aware of the infringing activity, or (2) that the defendant’s actions were the result of reckless disregard or willful blindness.

The question then becomes what evidence needs to be presented by a Plaintiff to demonstrate that a trademark defendant willfully infringed, and what burden of proof does a Defendant have when they are accused of willful trademark infringement?

4 PILLAR DYNASTY LLC, v. NEW YORK & COMPANY, INC., 17‐2398 (2nd Cir. 2019) is a case which deals with this very question.

Plaintiff in this case designs and sells women’s active wear.  Plaintiff registered the trademark “Velocity” in 2014 with the United States Patent and Trademark Office.  Plaintiff’s products include a line of leggings, capris, sports bras, tank tops, and hooded sweatshirts.  Plaintiff does not operate any brick‐and‐mortar stores, it sells its clothing wholesale to retailers, and to customers online, through its own website and third‐party retail websites.

Defendant is a specialty women’s apparel retailer operating hundreds of retail stores across the United States. It sells branded clothing both through its stores and its website. In 2016, Plaintiff sued Defendant for trademark infringement, alleging that Defendant’s products labelled “NY & C Velocity” infringed the “Velocity” trademark.  At trial Plaintiff presented a single witness that testified about his discovery of Defendant’s use of the “NY & C Velocity” trademark.  In opening statements, Defendant’s counsel said that two witnesses employed by Defendant would testify that they had never heard of the “Velocity” trademark.  However when it came time for Defendant to call witnesses, Defendants rested their case without presenting any evidence or testimony.

The District Court found in favor of the Plaintiff and awarded Defendants gross profits of “NY & C Velocity”.  Defendant then appealed to the Court of Appeals for the Second Circuit.

On appeal the Defendant’s primary argument was that the District Court erred in concluding that Plaintiffs presented sufficient evidence of willfulness.  The Second Circuit noted that Defendants provided no evidence to explain or justify their failure to cease selling the infringing sportswear once they received actual notice of Plaintiffs’ allegations. Instead, Defendant’s argument at trial focused on the weakness of Plaintiffs’ trademark and on attacking Plaintiff’s credibility and business practices.  Defendant did not present evidence of their good faith entitlement to use the “NY & C Velocity” trademark.

The Second Circuit held that Defendants did not have an affirmative obligation to present evidence of good faith to avoid a finding of willfulness, however when a Defendant refers to witnesses who will show good faith and then fails to call those witnesses, a court may make a negative inference.  The assumption is that the witnesses would be less than credible.  Failure to call a witness does not require a court to draw a negative inference, however when a court chooses to do so it is not an error that will be reversed on appeal.  Because the district court did not clearly err, the Second Circuit affirmed the judgement.

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