A recent opinion from the Third Circuit Court of Appeals provides much needed clarification on profit reimbursement and failing defenses in trademark infringement cases. In Kars 4 Kids Inc vs. America Can! (8 F 4^e 209 (3d Cir 2021), the court overturned $ 10.6 million in compensation against Kars 4 Kids Inc for its violation of America Can! Cars for Kids’s and sent the case back to the district court for further consideration.

Background

Kars 4 Kids and America Can are two non-profit entities that sell vehicles donated to fund children’s programs under similar brands. America Can claims to have started using their brand in Texas in the early 1990s, with Kars 4 Kids using it later in 1997. When Kars 4 Kids launched a series of nationwide advertising campaigns in the early 2000s, America Can sent him a ceasefire. -withdrawal letter. After it emerged that Kars 4 Kids had stopped advertising in Texas, America Can took no further action.

Almost 10 years later, America Can sent another letter to Kars 4 Kids after learning about the continued use of the mark. Over the next several years, the parties sued in the United States District Court for the District of New Jersey for federal and state trademark infringement, unfair competition and trademark dilution, and sought monetary and fair relief. Additionally, America Can has filed for revocation of one of Kars 4 Kids’ federal trademark registrations claiming that it was obtained fraudulently.

The jury ruled in favor of America Can, stating that it had state and common law protected trademark rights and that Kars 4 Kids had willfully infringed these rights in Texas. However, the jury was not convinced by the arguments regarding the cancellation of the Kars 4 Kids brand.

The district court then considered the possibility of a fair and pecuniary remedy for America Can, ultimately ruling against the defense of Kars 4 Kids, despite the 10-year gap (2003 to 2013) between the letters of termination and of abstentions sent by America Can. As America Can claimed she was not aware of any Texan advertisements for Kars 4 Kids between 2004 and 2011, the district court ordered Kars 4 Kids to return all profits from its sales in Texas, less advertising and general expenses of approximately $ 10.6 million. . This amount did not include America Can’s requests for further monetary relief or pre-judgment interest.

On appeal, the Third Circuit Court of Appeals considered the district court’s order regarding the defense of Kars 4 Kids, the appropriate analysis for a benefit remission and America Can’s demands for increased monetary relief and interest before judgment.

Defense of Laches

The Third Circuit determined that the district court had used the wrong test to determine whether a coward defense should apply to a claim. Under the Third Circuit precedent, the court must consider:

• the plaintiff’s “inexcusable delay in bringing an action”; and
• “Prejudice to the defendant due to the delay” (Santana Prods, Inc v Bobrick Washroom Equip, Inc, 401 F 3d 123, 138 (3d Cir 2005)).

While the district court considered the correct elements, the Third Circuit ruled that its limitation of these elements to Texas alone was inappropriate given the national use of its mark by Kars 4 Kids. In its ruling, the Third Circuit referred Laches’ defense claim back to the district court for it to consider whether America Can should have brought an action earlier under a standard of reasonableness and whether it had an impact on the damage caused to Kars 4 Kids.

Deposit of profits

The third circuit also found that the district court used an incorrect analysis for the reimbursement of profits. The correct test requires weighing the Banjo friends The factors:

• whether the infringer intended to confuse or deceive;
• whether sales have been misappropriated;
• the adequacy of other remedies;
• any unreasonable delay by the applicant in asserting his rights;
• the public interest in making misconduct unprofitable; and
• if it is an entrenchment (Banjo Buddies, Inc vs. Renosky, 399 F 3d 168, 175 (3d Cir 2005).

As the district court only considered the second factor, the third circuit returned with instructions to consider all six factors.

Increased cash relief and pre-judgment interest

The Third Circuit found that the district court acted within its discretion in denying the increased monetary relief requested by America Can. While Section 1117 (a) of the Lanham Act (15 US Code) allows discretion for this type of reward, America Can’s arguments only indicated punitive reasons that an enhanced monetary reward was appropriate because Kars 4 Kids did not obtain its trademark registration by fraud and could only have intentionally infringed in one state, Texas. Further, the Court of Appeal upheld the District Court’s ruling that Section 1117 (a) does not grant prejudgment interest and that America Can’s claim under the law of the State was also inappropriate.