IP Law Daily, TRADEMARK—N.D. Ill.: Rolling paper manufacturer not entitled to profits from competitor’s false advertising, (Apr 21, 2023)

By Kevin M. Finson, J.D.

The equitable remedy of disgorgement of profits was not appropriate because there was no evidence to show how much impact the statements had on sales.

A tobacco rolling paper company was not entitled to disgorgement of a competitor’s profits after a finding of liability for common law unfair competition and violation of the Illinois Uniform Deceptive Trade Practices Act, the federal district court in Chicago has held. There was no evidence in the record from which the court could apportion profits attributable to the defendant’s false statements. However, the plaintiff was entitled to an award of attorney fees limited to the defendant’s false claims regarding the geographic origin of its rolling papers (Republic Technologies (NA), LLC v. BBK Tobacco & Foods, LLP, April 19, 2023, Durkin, T.).

Republic Technologies (NA), LLC and Republic Tobacco, L.P. (collectively, Republic) were sellers of tobacco rolling papers. They brought suit against a competitor, BBK Tobacco & Foods, LLP, d/b/a HBI International, (HBI) for false advertising under the Lanham Act, unfair competition, and violation of the Illinois Uniform Deceptive Trade Practices Act (IUDTPA). The suit alleged that HBI had made several false statements, including describing its RAW rolling papers as originating from a historical tradition in Alcoy, Spain, as being the world’s first or only organic hemp rolling papers, and that Republic’s products were knock offs or fakes of HBI products. HBI counterclaimed that Republic infringed on its copyright and trade dress.

After trial, a jury found for HBI on one of its copyright and trade dress claims, awarding HBI $979,620 in lost profits and $40,000 in statutory damages. Additionally, the jury ruled for Republic on its unfair competition and IUDTPA claims, but found that HBI did not engage in false advertising. Republic was not awarded any monetary damages for unfair competition because plaintiffs cannot seek monetary damages under the IUDTPA. The court granted Republic’s request for a permanent injunction to enjoin the false statements HBI had made about its products. Before the court was Republic’s motion for disgorgement of profits and attorney fees.

Disgorgement. The court noted that while the equitable remedy of disgorgement, alternately described as an accounting or accounting of profits, appeared to be a proper remedy for unfair competition under Illinois common law, no Illinois case had commented on the issue for the last 75 years. The court therefore relied on the Restatement (Third) of Unfair Competition.

Republic argued that it should be entitled to the entirety of HBI’s profits on tobacco papers because the false statements HBI made about its goods were a central part of their brand identity. The court found that there was insufficient evidence to attribute any of HBI’s profits to the statements at issue and that Republic failed to provide any survey data, consumer testimony, or anything else from which the court could apportion the profits. Absent proof that the false statements were a substantial factor in HBI’s sales, a disgorgement of profits was not appropriate.

Attorney’s fees. Attorneys fees were awardable under IUDTPA for willful violations. The court noted that it had already held that HBI acted with willfulness in its statements about its papers being manufactured in Alcoy, Spain, a city with a long history of producing tobacco rolling papers, when in fact its papers were manufactured elsewhere. The court held that time spent on other issues was not recoverable.

The court denied the motion for disgorgement of profits and directed the parties to file a statement of the attorney fees attributable to the deceptive language related to manufacture of its rolling papers in Alcoy, Spain.

The Case is No. 1:16-cv-03401.

Attorneys: Antony Joseph McShane (Neal, Gerber & Eisenberg LLP) for Republic Technologies (NA), LLC, and Republic Tobacco, L.P. Charles S. Price (Dickinson Wright PLLC) for BBK Tobacco & Foods, LLP, d/b/a HBI International.

Companies: Republic Technologies (NA), LLC; Republic Tobacco, L.P.; BBK Tobacco & Foods, LLP, d/b/a HBI International

Cases: Trademark IllinoisNews