IP Law Daily, TRADEMARK—Minn. App.: Appeals court affirms finding of infringement, remands for reconsideration of damages, (Apr 18, 2023)

By Deirdre Kennedy, J.D.

The infringed-upon party failed to prove a causal link between the violation and damages.

After a jury found that Minnesota-based American Arena infringed upon All-American Arena’s trademark, a state district court did not err in granting a permanent injunction against American Arena, but the award of damages must be reconsidered, a Minnesota Court of Appeals has decided. The court reversed the district court’s award of actual damages, finding that All-American Arena had failed to establish a causal connection between the infringement and damages incurred (All-American Ice L.L.C. v. American Arena, L.L.C., April 17, 2023, Jesson, L.).

All-American Arena is a Minnesota-based company, founded in 2012, that sells ice-arena accessories, such as goal frames, netting, and rubber flooring for ice-skating rinks. American Arena is the new name of a Minnesota-based company—formerly known as Minnesota Ice—that builds ice rinks across the United States, offers design services, and sells ice-arena accessories. Minnesota Ice was founded in October 2013. In May 2020, American Arena emailed over 1,400 ice-arena operators announcing its name change and that it was expanding its business to include the sale of ice-rink accessories. After receiving multiple emails from customers confused between the two companies due to the name change, All-American Arena sent a cease-and-desist letter to American Arena, alleging trademark infringement and unfair competition. The letter demanded that American Arena cease any further use of the mark “American Arena.” And the letter demanded that American Arena fully account to All-American Arena with regard to its use of the mark “American Arena” and stated that, once it had, All-American Arena would “determine if any settlement remuneration is in order.” When American Arena did not acquiesce to these demands, All-American Arena filed a complaint in October 2020, alleging trademark infringement under Minnesota law.

In November 2021, All-American Arena filed a motion for partial summary judgment, requesting judgment in its favor on liability and a permanent injunction, but reserving the issue of damages for trial. The district court denied All-American Arena’s motion. It stated that because a genuine issue of material fact existed as to the third requirement of trademark infringement—likelihood of confusion—it would grant neither summary judgment nor injunctive relief.

Before the jury trial, the parties disagreed over a few of the proposed jury instructions and the admissibility of an email from the United States Patent and Trademark Office (USPTO) to American Arena. American Arena proposed two jury instructions that asked the jury to consider the descriptiveness of its own mark. This request relied upon an email from the USPTO stating that, when American Arena attempted to federally trademark its logo, it had to disclaim the words “American Arena” because they were descriptive, and thus not protectable. But American Arena did not request a jury instruction with regard to the descriptiveness of All-American Arena’s mark. The district court did not include American Arena’s requested descriptiveness instruction in the final jury instructions. Nor did the district court admit the USPTO email, ruling that it did not constitute a final decision.

At the outset of the three-day jury trial, the district court offered preliminary instructions about trademark law. One instruction explained that to obtain a trademark, the trademark owner registers the trademark with the Minnesota Secretary of State, and after registration, it may exclude others from using that trademark by bringing an action for infringement. American Arena did not object to the form or substance of this jury instruction.

At trial, All-American Arena’s CEO, Sean Passingham, introduced evidence of customer confusion, including emails from customers asking if All-American Arena and American Arena were the same company; an invoice for American Arena that was accidentally sent to All-American Arena; and a quote for a product that All-American Arena did not ask for, but presumably American Arena had. Passingham also testified about a business deal in Mason City, Iowa, that All-American Arena lost because the potential customer had been told by a representative of American Arena that the timing for the project would not work, and the customer thought the representative worked for All-American Arena. And Passingham testified that the company spends an average of $33,700 on advertising per year.

After All-American Arena rested its case, American Arena—without moving for a directed verdict—called three of its sales representatives and its CEO to discuss the type of work American Arena does, the lack of confusion between its company and All-American Arena, and the nature of its ice-arena-accessory sales. American Arena never asserted during testimony, nor before the verdict, that All-American Arena’s mark was descriptive.

In its closing argument, All-American Arena asked the jury to award both actual damages and profit damages for the harm it suffered. The actual damages requested included damages for injury to All-American Arena’s reputation and goodwill, along with the profits All-American Arena would have earned but for American Arena’s infringement. All-American Arena asked for damages equal to at least three years of its advertising budget to deal with the confusion created by American Arena’s infringement. For the other forms of actual damage, All-American Arena stated: “I leave it to the jury to decide . . . what measure of actual damages” it wants to award. To support profit damages, All-American Arena pointed to the revenue American Arena made in ice-arena-accessory sales in 2021 and the first quarter of 2022—$615,414—and asked to be awarded that amount because American Arena did not prove that this revenue was due to factors other than the trademark infringement.

Jury decision. The jury returned a verdict for All-American Arena, finding that (1) All-American Arena owns a protectable interest in the registered mark “All-American Arena Products,” (2) American Arena’s use of the trademark American Arena created a likelihood of confusion or mistake on the part of ice-arena operators and vendors, and (3) All-American Arena suffered actual monetary damages as a result of American Arena’s wrongful use of the trademark American Arena. The jury awarded $340,000 in actual damages. The jury also found that American Arena derived profits from its wrongful use of the trademark American Arena, and it awarded All-American Arena an additional $50,000 in profit damages. Finally, the jury found that American Arena’s wrongful use of the trademark was done with knowledge of All-American Arena’s trademark and in bad faith.

After trial, the district court orally granted All-American Arena’s motion for a permanent injunction against American Arena’s use of its name. The subsequent written order stated that American Arena is “hereby permanently enjoined and restrained from any and all direct or indirect use, adoption or employment of the words American Arena as a trademark, tradename, domain name or otherwise in connection with its business operations, advertising, marketing, promotion or sale of products or services.” The district court included no further analysis on the injunction on the record at trial or in the written order.

All-American Arena then filed a motion for treble damages, attorney fees, and prejudgment interest. The district court denied All-American Arena’s motion for treble damages, stating that doing so “based on the facts of this case would be punitive rather than compensatory.” The district court also denied All-American Arena’s motion for attorney fees, explaining that attorney fees are only awarded in the rare case that a party’s conduct is so unreasonable as to justify such an award and American Arena’s conduct here was not exceptional enough for this remedy. But the district court granted prejudgment interest at the statutory rate of 10% from the date of the cease-and-desist letter on the damages award of $390,000.

American Arena filed a motion for judgment as a matter of law, or in the alternative, for a new trial, alleging several trial errors including the exclusion of the USPTO email and erroneous jury instructions. The district court denied the motion. American Arena appeals.

American Arena’s motion for judgment as a matter of law or new trial. In arguing that the district court erred by denying its motion for judgment as a matter of law, American Arena asserts that the central legal issue before this court is whether the claimed mark “All-American Arena Products” is a descriptive, as opposed to distinctive, mark. The classification of this mark matters because a descriptive mark is not registrable under Minnesota law, so it cannot be infringed. The question of the classification of All-American Arena’s mark was not presented to the district court or the jury. American Arena requested neither a preliminary nor a final jury instruction in this regard. Nor did it make this argument in opposition to All-American Arena’s summary-judgment motion.

In fact, American Arena did not object at trial to the district court’s preliminary instruction that “registration alone may be used to exclude another from using the same mark.” The appeals court noted that while true, it is also incomplete, as a mark may not be registered under Minnesota trademark law when it is merely descriptive. American Arena, however, did not raise this argument until after the jury had rendered its verdict. Because of this, the appeals court did not need to decide whether All-American Arena’s mark was descriptive rather than distinctive. American Arena’s argument that by pointing to the descriptiveness of its own mark, it was also calling into question the descriptiveness of All-American Arena’s mark was without merit.

Likelihood-of-confusion. American Arena contended on appeal that because no consumers testified that they accidentally made a purchase from the wrong company as a result of the confusion, the confusion did not rise to the level required by law. But actual purchases are not a required element of Minnesota trademark law. Nor are they required by federal law, which lists six factors to consider in determining whether a plaintiff has established likelihood of confusion (strength of the plaintiff’s mark; similarity between the plaintiff’s and defendant’s marks; the degree to which the allegedly infringing product competes with the plaintiff’s goods; the alleged infringer’s intent to confuse the public; the degree of care reasonably expected of potential customers; and evidence of actual confusion).

The jury instructions included the six factors, and the evidence supported the jury’s determination. The jury heard testimony about All-American Arena’s longstanding reputation in the ice-arena community, saw images of both marks, which include similar words and colors, and heard testimony about instances of actual confusion from customers and vendors. Thus, the district court did not err in denying American Arena’s motion for judgment as a matter of law on this argument and did not err in finding that sufficient evidence supported the likelihood-of-confusion prong of All-American Arena’s trademark-infringement claim.

Damages. On appeal, American Arena asked the court to reverse the damages award because the damages were speculative and were not proven to a reasonable certainty. The jury awarded All-American Arena $340,000 in actual damages as a result of the wrongful use of its trademark and $50,000 for profits derived from the wrongful use of its trademark.

Addressing actual damages, the appeals court noted that All-American Arena asked for damages worth at least three years of its advertising budget to deal with the problems created by American Arena’s infringement. For the other forms of actual damages, All-American Arena left it to the jury to decide “what measure of actual damages” it wanted to award.

A plaintiff must prove a causal link between the violation and damages. The appeals court found that All-American Arena proved neither. There was no testimony at trial about All-American Arena’s reputation or goodwill being damaged, only the strength of its reputation overall. All-American Arena presented evidence of one potential lost sale in Mason City but no evidence as to whether they would have made that sale without American Arena’s infringement. And, while the advertising budget was discussed as a past expense, there was no explanation of why the confusion in market led to necessary future corrective advertising.

Because All-American Arena did not submit enough evidence to support the award, the appeals court vacated the district court’s award of actual damages.

The appeals court affirmed the award of profit damages, however, finding that All-American Arena put forth sufficient evidence to establish the profits that American Arena made after infringing on its trademark, and there was evidence to support the jury’s finding that American Arena did not completely meet its burden to refute the profit-damages evidence.

The court also remanded the question of treble damages and attorney fees to allow the district court, in its discretion, to reevaluate its decision on these in light of the appeal court’s reversal of the actual damages award.

Permanent injunction. On appeal, American Arena argued that All-American Arena was not entitled to a permanent injunction because it could not establish liability under the trademark statute and, further, that the injunction was so broad as to enjoin American Arena’s behavior worldwide, which it asserts a Minnesota court cannot do under Minnesota trademark law. In this case, the district court orally granted All-American Arena’s motion for an injunction—with no analysis—after the jury returned its verdict. While the district court was authorized to issue an injunction at its discretion, the appeals court determined that because of the lack of any explanation or findings by the district court regarding the scope of the injunction, there was not enough analysis for it to conduct a proper appellate review and determine whether the district court had abused its discretion in the breadth of its injunctive relief. Therefore, this issue was also remanded for additional findings without reversing the injunction.

Prejudgment-interest award. The district court awarded prejudgment interest at the statutory rate of 10% from the date of the cease-and-desist letter. American Arena argued that All-American Arena was not entitled to prejudgment interest from the date of the cease-and-desist letter because there was not sufficient notice of the damage All-American Arena would claim to allow American Arena to assess its liability from the cease-and-desist letter. The court determined that the cease-and-desist letter provided American Arena with sufficient information about potential legal claims and the extent of damages, given the trademark context. The information in the letter met the low bar of indicating the existence of a claim and the extent of potential damages. The court, therefore, affirmed the district court’s award of prejudgment interest.

The case is No. A22-1394.

Attorneys: Timothy C. Matson (Fox Rothschild LLP) for All-American Ice L.L.C. d/b/a All-American Arena Products. Mark R. Bradford (Bassford Remele, P.A.) for American Arena, L.L.C.

Companies: All-American Ice L.L.C. d/b/a All-American Arena Products; American Arena, L.L.C.

Cases: Trademark MinnesotaNews