The other day, I got a call from a reporter who is covering the ongoing dispute between Yellowfin Yachts and Barker Boats. The case is currently pending in the Middle District of Florida. In a nutshell: Barker, who was formerly employed by Yellowfin, left the company and started his own boat manufacturer. Yellowfin sued alleging that Barker stole trade secrets and started selling boats that looked and felt a whole lot like Yellowfin boats. Let’s put aside the trade secret piece. The rest of the case involves a textbook trade dress claim: A knock-off product that has the same look and feel. But it takes more than that for a plaintiff to prevail. Let’s go back to the basics.
The Lanham Act
First, let’s get oriented in the right wheelhouse. The Lanham Act, also known as the Trademark Act, is the federal law that governs trademarks and unfair competition. If a Plaintiff brings a claim that implicates trademarks, consumer confusion or false advertising, they will most likely pursue that claim under the Lanham Act. Plaintiffs can also pursue a claim for unfair competition under Florida common law, but if that claim implicates the same issues, Florida courts will generally look to the Lanham Act for guidance. See, e.g, Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1193 (11th Cir. 2001) (evaluating common law unfair competition/trademark claim under Lanham Act framework).
Elements of Trade Dress
Trade dress is the overall look and feel of a product. In order for a plaintiff to succeed on a claim for trade dress infringement under the Lanham Act, the plaintiff must establish the following:
- That the trade dress of the product is inherently distinctive or has acquired secondary meaning;
- That the trade dress is primarily non-functional and
- That the allegedly infringing product causes a likelihood of confusion.
The upshot of all this: Red Bull. Think about Red Bull as we work through this. The first factor basically means that consumers associate the look, feel, or design of the product with a particular brand. Consider Red Bull: The color scheme and design on a can of Red Bull is immediately associated with that brand. It’s the Red Bull look. In evaluating the first factor, court’s will often consider the claimant’s volume of sales, the amount and manner or advertising, how long the claimant has manufactured that product, consumer testimony, consumer surveys, evidence of intentional copying by industry rivals among other factors. Red Bull checks all of these boxes: It has billions of dollars of annual sales, has spent billions in advertising, has built up its brand over the past 15+ years and has imitators copying its trade dress.
The second factor is self explanatory: The design is non-functional. Red Bull passes the test because there is no functional basis for the can design/color scheme.
Finally, likelihood of confusion, which is the touchstone of any trademark or Lanham Act claim. Among the factors courts will consider are:
- Degree of similarity between the claimant’s product and the allegedly infringing product;
- Channels of distribution and ultimate consumers;
- Degree of care exercised by consumers in making purchases;
- Strength of the secondary meaning;
- Actual consumer confusion;
- Bad faith or intent to deceive.
The most powerful piece of evidence is actual confusion. Courts and juries can find a likelihood of confusion without evidence of actual confusion. But if even a limited body of evidence establishes actual confusion, that is virtually dispositive. Back to Red Bull: There are dozens of knock-off products that have copied the Red Bull design, color scheme and overall look and feel. These competitors are hoping that the consumer makes a quick decision, grabs a can of what looks like Red Bull and heads for the cash register. Red Bull basically checks all of these boxes.
Damages for Trade Dress Infringement
The Lanham Act provides for a broad range of damages. A plaintiff that prevails on a claim of trade dress infringement under the Lanham Act may recover damages in the form of:
- Actual lost profits
- Disgorgement of the defendant’s profits
- Reasonable royalties
- Corrective advertising
The most notable category of damages is disgorgement of the defendant’s profits. Proving actual damages in the form of lost profits is considerably more difficult and requires some degree of speculation. Expert models for lost profits are routinely subject to attack. But proving the defendant’s profits from the sale of the infringing product is significantly easier. When disgorgement damages are sought, the damages fight often turns on what constitutes profit (vs. what constitutes an expense).
In exceptional cases involving “malicious, fraudulent, deliberate, or willful” infringement, the plaintiff may also be able to recover treble damages. Attorneys fees may also be awarded in exceptional cases.
Pollard PLLC is a litigation boutique focused on competition law and based in Fort Lauderdale, Florida. The firm and its members have extensive experience litigating a variety of unfair competition claims, including claims under the Lanham Act. For more information, call 954-332-2380.
