IP Law Daily, TRADEMARK—D.Conn.: Post-remand Lanham Act damages awarded in Laser boat boatbuilder case, (Jan 9, 2025)

By Linda Panszczyk, J.D.

The Lanham Act does not require willfulness for a finding of liability, though the Second Circuit had explained that willfulness is nonetheless a highly important consideration in determining whether an award of profits is appropriate.

The federal district court in Connecticut considered Lanham Act damages following the Second Circuit’s limited remand in the case and awarded damages under the Lanham Act in the amount of $451,094.37, as well as post-judgment interest on this award and on previously granted awards at the appropriate, federally mandated statutory rates. The plaintiffs—the Estate of Bruce Kirby and Bruce Kirby, Inc.—had argued that the district court should enter judgment in their favor in the amount of nearly seven million dollars. The defendants—LaserPerformance (Europe) Limited (LPE) and Quarter Moon, Inc. (QMI)—urged the court to decline to award profits as a measure of damages at all, and they disputed the amount and rate of post-judgment interest that the court should award (Bruce Kirby, Inc. v. LaserPerformance (Europe) Limited, No. 3:13-cv-00297-JAM (D. Conn. Jan. 2, 2025)).

Background. In 1969, Bruce Kirby revolutionized sailboat racing when he designed the “Laser”—a small, compact, and incredibly popular sailboat that could be carried atop a car. He incorporated Bruce Kirby, Inc. (BKI) as the company for his boat designs. The plaintiffs then entered into an agreement, called the Head Agreement, with two international sailing organizations—the International Sailing Federation (ISAF, now known as World Sailing) and the International Laser Class Association (ILCA, an association of Laser owners and builders)—to regulate the manufacture, sale, and registration of sailboats that use Kirby’s design. The plaintiffs also entered contracts with defendants LPE and QMI, called the Builder Agreements, to build the sailboats in conformity with the Head Agreement. These latter agreements granted LPE and QMI a license to manufacture, sell, and market the Laser sailboat. In exchange, LPE and QMI agreed to pay the plaintiffs royalties of 2% of the dealer's wholesale price. Under the agreements, a builder’s failure to timely pay royalties was a condition for default. The Builder Agreements also required that Lasers be built according to a Construction Manual, which mandated that each Laser have two small plaques affixed in its cockpit—one known as the “ISAF Plaque” and the other known as the “Builder Plaque.” BKI authorized ILCA to issue the ISAF Plaques on its behalf. Importantly, the ISAF Plaque was required for a Laser to compete in certain racing events.

For many years, the parties enjoyed smooth sailing as LPE and QMI paid the plaintiffs the royalties due from their sales of Lasers affixed with the two plaques. In 2008, however, Kirby decided to sell his rights in the Laser boat design, and he and his company entered a sales contract with a New Zealand company called Global Sailing Limited (GSL). BKI did not, however, sell the trademark to GSL, and at some point, after the sale to GSL, both LPE and QMI stopped paying royalties. Once LPE and QMI had stopped paying royalties, Kirby tried to stop them from selling Lasers with his name on them. Nonetheless, both LPE and QMI continued to sell Lasers with the plaques that bore Kirby’s name.

In March 2013, Kirby and BKI filed this lawsuit against LPE and QMI for breach of contract, for infringement and counterfeiting of Kirby’s trademark under the Lanham Act, for unfair trade practices under Connecticut Unfair Trade Practices Act, and for misappropriation of Kirby’s name. And on April 23, 2013, an ILCA and ISAF rule change went into effect, which eliminated the requirement for an authorized builder to have a Builder Agreement to build any Laser. After that rule change, neither LPE nor QMI sold Lasers with plaques that bore the Kirby name.

The jury returned a verdict in favor of both Kirby and BKI and awarded damages of $4,337,157.49 to BKI for trademark infringement by QMI. The jury also found both LPE and QMI liable to Kirby for misappropriating his name and awarded damages of $2,520,578.81 against LPE and nominal damages against QMI. And it further found that both defendants should be liable for punitive damages for the misappropriation claim in an amount to be determined by the court. The district court awarded judgment in favor of BKI on its Lanham Act claims against QMI in the amount of $2,056,736.33, concluding that, especially on the basis of the evidence showing that QMI engaged in a willful trademark violation—that it was appropriate for the court to award profits as the measure of damages. The district court judge explained that sufficient evidence had been presented for the jury to find that, from the period February 1, 2011 (by which time QMI had ceased paying royalties) to April 23, 2013 (when the rule change led the defendants to stop using the protected trademark), QMI had used the Bruce Kirby trademark without BKI’s consent.

The defendants appealed, arguing that the damages awards were excessive and that the district court had erred in finding that QMI had willfully infringed on Kirby’s trademark. The plaintiffs cross-appealed, insisting that the court had erroneously denied their request for an award of prejudgment interest.

The Second Circuit affirmed the judgment for Kirby in connection with the common law misappropriation claim, but vacated the Lanham Act damages award, noting that, although a finding of willfulness is not required to award profits as a measure of damages under the Lanham Act, the district court had made it clear that its damage award against QMI rested on its conclusion that QMI engaged in a willful trademark violation. It explained that the evidence used to support the district court’s finding of willful infringement from February 2011 to April 2023—Kirby’s 2010 letter to ILCA and QMI’s February 2011 nonpayment of royalties—was insufficient to support the finding that the defendants were on notice of their infringement for that entire period. The Second Circuit therefore vacated the Lanham Act damages and remanded for reconsideration of the appropriate amount due.

Lanham Act damage award. Here, on remand, the federal district court awarded Lanham Act damages in favor of the plaintiffs in the amount of $451,094.37. The court also awarded post-judgment interest in their favor at the appropriate federally mandated statutory rates per 28 U.S.C. § 1961. This interest shall accrue from the date of this judgment for the Lanham Act damages and from the date of the district court’s prior judgment for all other awards.

As to the Lanham Act damages, the parties disputed how much the Second Circuit’s ruling should affect the Lanham Act damages award. The plaintiffs urged that, though the Second Circuit held that QMI could not have willfully infringed on Kirby’s trademark until Kirby sent QMI his October 2012 letter, this should not affect the total award. For its part, QMI argued that even Kirby’s October 2012 letter was insufficient to put it on notice of copyright infringement and that the court should therefore “decline to award profits as a measure of damages.” Both parties miss the mark, according to the court, which stressed that the Lanham Act does not require willfulness for a finding of liability, though the Second Circuit explained that willfulness is nonetheless a highly important consideration in determining whether an award of profits is appropriate.

The Second Circuit first noted that the district court’s award was based on its finding of willful infringement. Second, it considered when QMI received adequate notice of its infringement because QMI was, prior to such notice, required to use the Kirby mark under the builder agreement. And while the prior district court ruling determined that QMI received adequate notice in March 2010 (when Kirby mailed a letter to ILCA’s secretary), the Second Circuit explained that QMI could not have received adequate notice until October 2012 (when Kirby contacted QMI directly).

However, according to the district court, both parties seem to ignore, or misunderstand, the second step in that analysis. Although the plaintiffs rightly point out that the Lanham Act does not require willfulness for a finding of liability, they take this and run too far with it, overlooking the issue of when QMI could have received adequate notice of its infringement. Plaintiffs argue that even if QMI could have been a willful infringer only “from October 11, 2012 to April 23, 2013,” it does not matter that QMI might not have been willfully infringing on Kirby’s rights from February 2011 to October 2012 because willfulness is not a requirement for damages. Plaintiffs then conclude the award should remain unchanged.

However, said the district court, this ignores that the court’s prior award was largely based on QMI’s willful infringement, just as it ignores that the Second Circuit determined that the period of such infringement needs to be narrowed. Because the Second Circuit concluded that the period of willful infringement could not have possibly started until October 11, 2012 (when Kirby contacted QMI directly and insisted that it cease using his mark), there is no merit to the plaintiffs’ argument that the district court can simply reinstate its prior award.

QMI’s argument similarly misunderstands the Second Circuit’s decision. It argues that the district court should decline to award damages because Kirby’s 2012 letter was insufficient to provide it with notice of its trademark infringement. But Kirby’s letter clearly stated that QMI’s “right to build the licensed design (Kirby Sailboat) is hereby terminated,” and that QMI was “no longer entitled to obtain plaques or in any manner whatsoever take any action regarding the licensed design.

It could hardly be clearer from this letter, according to the district court, that Kirby was serving notice that QMI’s continued building of the licensed design would infringe the trademark rights. As noted above, the construction of the Laser sailboat required the use of two plaques bearing the Kirby name, and BKI had retained ownership of the trademark when it otherwise sold the building agreements to GSL in 2008. Therefore, when Kirby revoked QMI’s authority to obtain the required plaques bearing his mark, QMI, having been in receipt of communications revoking that authority, could no longer produce Lasers in accordance with the Builder Agreement without willfully infringing on Kirby’s mark.

In light of these facts, and especially due to the clear language in Kirby’s letter of October 11, 2012, on remand, the district court concluded that QMI’s continued use of Kirby’s trademark after that date was willful and, in its prior ruling, the period of willful infringement on Kirby’s mark ended on April 23, 2013. On that date, a rule change went into effect that eliminated the requirement for any authorized builder to affix plaques with Kirby’s mark on Lasers that they sold.

Accordingly, the district court awarded Lanham Act damages from the period beginning October 11, 2012 through April 23, 2013. This is, in fact, what QMI suggests should be done if the Court again concludes that an award of profits is justified. Per QMI’s own filings, that amounts to an award of $462,431.73. However, this amount needs to be adjusted slightly to account for, and exclude, the days October 1 through 10 before the letter was sent. That is because they fall outside the period of willful infringement and some of the 24 units sold during October 2012 may have been sold during that ten-day period. Such an adjustment would total October net sales of $21,927.21. This leads to a total award amount under the Lanham Act of $451,094.37.

Attorney fees. QMI further argued that the district court should revisit its conclusion that this was an “exceptional case” warranting an award of attorney fees for the Lanham Act claims—all on the purported basis that the Second Circuit found QMI was not a willful infringer. But the Second Circuit made no such finding. Rather, it only narrowed the possible period of willful infringement. Nonetheless, said the district court, QMI’s willfulness was not the only reason that the court, in its prior ruling, found the case to be “exceptional.” Other reasons included QMI’s unreasonable litigation techniques and its violations of discovery orders. Further, the manner in which this case was litigated, with its complex history, weighs in favor of qualifying this action as an exceptional case under the totality of the circumstances. For example, certain of the defendants’ actions roughly two months before trial, which led to the district court imposing sanctions for violating discovery orders illustrate the unreasonable manner in which the case was litigated at times. In light of this, the district court declined to revisit its decision to award attorney fees for the Lanham Act claims.

Post-judgment interest. As for the post-judgment interest award, the district court awarded post-judgment interest on the state claim, the Lanham Act claims, and the attorneys’ fees at the appropriate federal statutory rates. One clarification is that, because the Second Circuit vacated the Lanham Act damages, interest should not accrue as of the date of the district court’s prior judgment. Rather, interest should accrue from the date of entry of the Court’s new judgment on remand.

As to the common law misappropriation award and attorney fees for the Lanham Act claims, however, post-judgment interest should accrue from the date of the Court’s prior judgment. This is because the post-judgment interest is mandatory and because the Second Circuit affirmed these awards.

Moreover, the Second Circuit has explained that, with an eye to uniformity, a single rule should govern interest on any [judgment] debt, the nature of the original claim[s] having become irrelevant under the doctrine of merger. The judgment debt, exclusive of the vacated Lanham Act damages and despite originally being constituted of (1) the state law claim award and (2) attorney fees, should have a uniform date of accrual.

The Case is No. 3:13-cv-00297-JAM.

Judge: Meyer, J.

Attorneys: Robert Devin Keeler (Ice Miller LLP) for Bruce Kirby, Inc. Corey S. Fitzgerald (Pepe & Monteith, P.C.) for LaserPerformance [Europe] Ltd.

Companies: Bruce Kirby, Inc.; Estate of Bruce R.W. Kirby; LaserPerformance (Europe) Ltd.; Quarter Moon, Inc.

Cases: Trademark ConnecticutNews