Opinion
CV 20-06745-RSWL-JCx
07-26-2022
VITAL PHARMACEUTICALS d/b/a Bang Energy; and JHO INTELLECTUAL PROPERTY HOLDINGS, LLC, Plaintiffs, v. PHD MARKETING, INC., Defendant.
Complaint Filed: May 19, 2020
Trial Dated: May 31-June 1, 2022
ORDER RE: FINDINGS OF FACT & CONCLUSIONS OF LAW IN RULING FOR PLAINTIFFS
HONORABLE RONALD S.W. LEW Senior U.S. District Judge
Plaintiffs Vital Pharmaceuticals, Inc. (“Vital”) and JHO Intellectual Property Holdings, LLC (“JHO”) (collectively, “Plaintiffs”) initiated this Action against Defendant PhD Marketing, Inc. (“Defendant”) for trademark infringement and unfair competition arising from Defendant's infringement of Plaintiffs' registered “BANG” mark and “B” logo. On May 31 and June 1, 2022, the Court conducted a bench trial. Having considered the evidence, the parties' objections to the evidence, the credibility of the trial witnesses, and both parties' arguments at trial, the Court issues the following findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.
I. FINDINGS OF FACT
1. The Parties
Vital has manufactured and sold energy drinks consistently using its “BANG” and “B” logos (the “BANG Marks”) since at least February 2016. Day 1 Vol. 1 Tr. 35:15-19, 39:4-12, 40:9-13; Ex. 98 at 42. Vital uses its BANG Marks to promote its products and its brand, and most of Vital's promotion takes place on social media. Day 1 Vol. 1 Tr. 36:12-17; Ex. 103. Vital also sells other merchandise using the BANG Marks, such as clothing, coolers, and pens. Day 1 Vol. 2 Tr. 9:5-10:1; Ex. 34. In advertising its BANG products, Vital places large emphasis on its drink being the “healthy energy drink on the market.” Day 1 Vol. 1 Tr. 37:20-24.
Defendant runs a “cash and carry” business out of an approximately 12,000 square-foot warehouse. Day 2 Vol. 1 Tr. 45:22-25. Defendant's customers typically come to the warehouse and choose the products they would like to purchase, and then customers either carry out the products themselves or have Defendant ship the products to them. Id. at 45:25-46:1.
2. The Infringing Products
In June 2019, Defendant received a sample shipment of vaping products from VTEK, a Chinese supplier. Id. at 30:10-16, 55:25-56:5; Ex. 2014. The packaging for these products contained the word “bang” and a starshaped symbol in the middle of the “b.” Ex. 2006. Defendant refers to this logo as “Design One.” Day 2 Vol. 1 Tr. 8:20-9:7. Below is a side-by-side comparison of the BANG Mark (taken from Exhibit 93) and Design One (taken from Exhibit 2006):
(Image Omitted)
In July 2019, Defendant sent the VTEK vaping products to its customers to get feedback on their quality and functionality. Id. at 56:14-17. By April 2020, Defendant had agreed to order more vapes manufactured by VTEK and began regularly selling them to customers. Id. at 56:21-57:5; Ex. 2014. Defendant had agreed to be responsible for all sales and distribution of VTEK's vaping products within the United States. Day 2 Vol. 1 Tr. 54:24-56:2, 69:10-14. Defendant sold two different models of vape pens using Design One, one known as “Bang Bars” and the other known as “XL” vape pens. Ex. 2014. Defendant typically sold Bang Bars to its customers at a price of around $4 and typically sold XL vape pens to its customers at a price of around $5. Jaber Dep. 129:2-20.
Once Defendant began selling VTEK's vaping products, a VTEK representative known as Bob would frequently visit Defendant's warehouse to verify the quantity of vape pens remaining on the shelves and to discuss future orders. Day 2 Vol. 1 Tr. 61:10-13. Bob and Samir Jaber, Defendant's CEO, would agree on the models and quantities of products to be ordered from VTEK, and those products would be shipped to Defendant's warehouse with an accompanying invoice. Id. at 62:2263:1. Defendant would often receive quantities that varied from the amount reflected on the invoice, so Defendant would count what it received and log that amount into Defendant's QuickBooks account. Id. at 63:1-8.
Defendant's General Manager, Khajadour Semikian, testified that Bob and Jaber would confer on the proper amount to be paid to VTEK and would instruct Semikian to pay that amount. Id. at 77:15-78:5. Semikian would then input the amount paid and apply it to the invoices in the QuickBooks system. Id. at 78:5-6. The payments made by Semikian did not tie directly to particular invoices; the payments sometimes covered only a portion of an invoice and sometimes covered multiple invoices. Id. at 78:7-9.
In June 2020, VTEK changed the design of its vape pens to use what is known as “Design Two.” Day 2 Vol. 1 Tr. 59:25-60:5. Design Two is the same as Design One with the addition of the words “vape with a” above the word “bang.” Day 2 Vol. 1 Tr. 11:25-12:3; Ex. 2008. VTEK began shipping vape pens using Design Two to Defendant in June 2020, and Defendant sold vape pens using only Design Two from June 2020 until it ceased selling VTEK's products. Day 2 Vol. 1 Tr. 60:2-12; Ex. 2014. Defendant only sold XL and XXL vape pens using Design Two. Ex. 2014. Defendant typically sold XXL vape pens, which were bigger and heavier than the other two models, to its customers at a price between $7.50 and $9. Day 2 Vol. 1 Tr. 59:3-7.
The vaping products using either Design One or Design Two will collectively be referred to as the “Infringing Products."
3. Vital Receives Notice of Infringing Products
Meanwhile, on April 2, 2020, Vital received an email from a marketing and distribution company requesting more information about a vaping product labelled with Design One. Ex. 45. After receiving notice of this product and believing that Design One infringed on Plaintiffs' trademark rights, Vital sent cease-and-desist letters in May 2020 to companies that it believed were selling vaping products using Design One. Exs. 2002-04. On May 4, 2020, Semikian sent a letter to one of Defendant's customers agreeing to indemnify it from any trademark claims made by third parties. Day 2 Vol. 1 Tr. 7:22-24, 23:6-24:13; Ex. 2. On May 13, 2020, Semikian received a letter from the same customer notifying Semikian that it had indeed received a cease-and desist letter from Vital. Day 2 Vol. 1 Tr. 26:20-27:4; Ex. 1.
On June 2, 2020, Vital's customer service department received an email regarding a product quality control concern. Ex. 42. In the email, the customer stated that he loves the BANG brand and frequently buys BANG energy drinks but was “highly disappointed” with the quality of their vape pen. Id. He stated that he was excited to try all the vape flavors, but because of his negative experience, he did not think he would buy another one. Id. On July 11, 2020, a Facebook account for a vendor posted a picture of BANG energy drinks together with the Infringing Products to notify followers that the store had both in stock. Ex. 112. From December 2020 through March 2021, Defendant also received inquiries about its affiliation with BANG energy drinks. Day 2 Vol. 1 Tr. 35:10-19; Exs. 2019-23. In October 2020, Defendant sought to obtain copyrights over Design One and Design Two. Ex. 2017.
4. Defendant Ceases Sales of Infringing Products
Defendant stopped selling the Infringing Products in April 2021, in part because of its ongoing litigation with Plaintiffs, and in part because it became difficult to compete with other companies that had started selling “copycat” products with packaging using Design One and Design Two. Day 2 Vol. 1 Tr. 67:25-68:19. Once Defendant decided to stop selling the Infringing Products, it sold off its remaining inventory. Id. at 31:22-24.
In total, Defendant sold 730,207 vape pens that used Design One and 1,097,629 vape pens that used Design Two. Ex. 2032. Defendant's total revenue for Design One was $3,520,968.53. Ex. 2028 at 4-5. Defendant's total revenue for Design Two was $7,252,971.95. Id. at 2-3. Thus, Defendant's total revenue for its sales of the Infringing Products was $10,773,940.48. Id.
II. CONCLUSIONS OF LAW
On February 4, 2022, the Court entered judgment in favor of Plaintiffs and against Defendant for Plaintiffs' trademark infringement and unfair competition claims and dismissed Defendant's counterclaims with prejudice [151]. Thus, the only issues remaining are the equitable remedies to be awarded for Defendant's trademark infringement. Specifically: (1) whether Plaintiffs are entitled to disgorgement of profits under the Lanham Act, and if so, the amount of net profits to be awarded; (2) whether Plaintiffs are entitled to a permanent injunction; and (3) whether Plaintiffs are entitled to attorneys' fees under the Lanham Act.
A. Disgorgement of Profits
The Lanham Act provides that once trademark infringement has been established, a plaintiff is entitled, “subject to the principles of equity, to recover . . . defendant's profits.” 15 U.S.C. § 1117. This statute affords district courts “broad discretion” in fashioning a remedy for trademark infringement. Maier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 124 (9th Cir. 1968).
1. Willfulness
While a finding of willfulness is not a prerequisite to disgorgement of profits, “a trademark defendant's mental state [remains] a highly important consideration in determining whether an award of profits is appropriate.” Romag Fasteners, Inc. v. Fossil, Inc., 140 S.Ct. 1492, 1497 (2020). District courts should therefore consider a defendant's mental state in determining what award of profits is appropriate. Grasshopper House, LLC v. Clean & Sober Soc. Media, LLC, 2021 WL 3702243, at *3 (9th Cir. Aug. 20, 2021).
Here, the Court finds that Defendant's mental state sufficiently warrants disgorgement of the profits Defendant received from its sale of the Infringing Products. The evidence at trial revealed that Defendant continued to sell the Infringing Products, and even purchased additional products from VTEK, long after it became aware of Plaintiffs' BANG Marks. Day 2 Vol. 1 Tr. 23:6-24:13, 60:2-12; Exs. 2, 2014. Plaintiffs put forth evidence of confused consumers, see Exs. 42, 60, as well as confused vendors, see Exs. 61, 83, 112, 118. Notably, the instances of consumer confusion included emails received by Defendant directly, see Exs. 2019-24. This confusion is unsurprising given the similarity of the marks.
Defendant was therefore on notice of at least one instance of consumer confusion as early as June 30, 2020, but it did not stop selling the Infringing Products until April 2021. Day 2 Vol. 1 Tr. 68:2-3. Defendant also sought to obtain copyrights over Design One and Design Two in October 2020, despite its knowledge of Plaintiffs' nearly identical BANG Marks. Ex. 2017. Moreover, Defendant stopped selling the products not in recognition of Plaintiffs' trademark rights, but because it was no longer profitable to continue sales. Id. at 68:8-15.
Defendant's continued sales despite its knowledge of consumer confusion with Plaintiffs' nearly identical marks is indicative of an improper motive. See Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1406 (9th Cir. 1993) (internal quotation marks and citation omitted) (“Willfulness and bad faith require a connection between a defendant's awareness of its competitors and its actions at those competitors' expense.”); Monster Energy Co. v. Integrated Supply Network, LLC, 533 F.Supp.3d 928, 933 (C.D. Cal. 2021) (finding willfulness where “[d]efendant continued to sell the infringing products after it received [p]laintiff's cease and desist letters and after [p]laintiff filed the instant lawsuit”); Color Me Mine Enters. Inc. v. S. States Mktg. Inc., No. CV 12-00860-RGK (JCx), 2013 WL 12119715, at *11 (C.D. Cal. Apr. 25, 2013) (finding a triable issue of fact as to willfulness where defendant continued to sell infringing product despite knowledge of plaintiff's mark and the likelihood of consumer confusion). The Court therefore concludes that disgorgement of Defendant's profits is warranted here based on Defendant's willful infringement.
2. Net Profits
In determining the profits to be disgorged, the plaintiff bears the burden to prove the defendant's gross sales from the infringing activity with reasonable certainty. 15 U.S.C. § 1117(a). Once the plaintiff demonstrates gross sales, they are presumed to be the result of the infringing activity. Lindy Pen, 982 F.2d at 1408. The burden then shifts to the defendant to prove which, if any, of its total sales are not attributable to the infringing activity and any permissible cost deductions. 15 U.S.C. § 1117(a).
a. Gross Sales
At trial, Plaintiffs' damages expert relied on income statements provided by Defendant to determine that Defendant's total sales from January 2018 through April 2021 for products using Design One and Design Two were $10,773,940.48. Day 2 Vol. 2 Tr. 94:17-97:17; Ex. 2028. Defendant's damages expert agreed with this figure as an accurate representation of Defendant's gross sales. Day 2 Vol. 2 Tr. 28:23-29:8. This figure appears credible given the total number of vapes Defendant claims to have sold and the estimated price of the vapes sold to Defendant's customers. See Ex. 2032;
Indeed, while the Court accepts the figure provided by the parties as credible, it appears possible from the information provided by Defendant that its sales exceeded this amount.
Jaber Dep. 129:2-130:1. Therefore, Plaintiffs have met their burden of proving Defendant's sales. See Monster Energy, 533 F.Supp. at 937 (finding that plaintiff met its burden where its damages expert based profits on defendant's financial documents and where defendant's CFO agreed on profit figure).
b. Deductions
Defendant claims a total of over $9.5 million in cost deductions, yet it has produced troublingly little evidence to support that figure. Not a single invoice, receipt, or other original source document has been produced to support the costs and expenses Defendant claims. Indeed, the only documents Defendant has offered in support of its claimed deductions are summary financial reports, which were created by Semikian in preparation for this litigation. See Exs. 2030-31. Defendant's damages expert, John Bone, relied on the summary financial documents to arrive at the $9.5 million deduction figure, but he did not review any original source documents in doing so. Day 2 Vol. 2 Tr. 32:7-15. In short, there is no evidence to support the specific figures set forth in either Exhibit 2030 or Exhibit 2031.
Bone repeatedly emphasized that Plaintiffs never requested that Defendant produce any original source documents, but that is irrelevant. It is Defendant's burden to produce evidence sufficient to support its deductions claim, regardless of the evidence Plaintiffs sought to discover prior to trial. See Lindy Pen, 982 F.2d at 1408.
First, the Court finds no credibility as to Defendant's claimed payments to VTEK of over $7.3 million. Aside from the lack of evidence to support the document summarizing these payments, see Ex. 2030, the Court has a number of concerns regarding the stated figures themselves. In particular, both the timing of payments and the amount of each payment were highly irregular. Day 2 Vol. 2 Tr. 100:8-102:6. Such a lax payment arrangement is unusual between two companies with no prior business relationship. Id. at 101:8-21.
It is possible that Defendant had a unique relationship with VTEK that allowed for irregular payments. But in light of such an unusual payment system, Defendant should have been especially mindful to keep clear records. Had an invoice, receipt, or other source document been produced during trial to support the VTEK payments, Defendant may very well have met its burden as to that deduction. But the only documentary evidence in support of the $7.3 million figure - aside from the made-for-litigation summary financial document, see Ex. 2030 - is Semikian's testimony that these payments did occur and are accurate. He testified that Bob and Jaber would agree on an arbitrary amount for Defendant to pay to VTEK that was not tied to any invoice. Day 2 Vol. 1 Tr. 77:20-78:11. Semikian would then manually input the amount he paid into Defendant's QuickBooks account. Id. This testimony is simply not enough to overcome Defendant's burden to prove that these payments occurred in light of the aforementioned irregularities. Without any corresponding invoices or other documentation to substantiate this unusual payment system, the Court has no way to confirm the accuracy of the payments listed in Exhibit 2030.
Defendant points to Voth's statement that if the average cost per unit of the Infringing Products was $4, and Defendant sold about 1.8 million units, then there is support for Semikian's claim that total costs were around $7 million. See Day 2 Vol. 2 Tr. 126:9-127:14. There is no evidence before the Court as to the Infringing Products' average cost per unit, however, so any assumption as to that amount is speculative. Moreover, Voth testified during trial that Jaber's deposition testimony about average cost per unit was vague and equivocal. Id. at 125:8-21.
The same lack of evidentiary support belies Defendant's claimed deduction for shipping and delivery expenses of over $2 million. While these payments are slightly more regular than Defendant's payments to VTEK, there are still some months with multiple payments and other months with no payments at all. See Ex. 2031. Moreover, the shipping and delivery costs increased drastically between September and November 2020. Id. The only explanations Defendant offered for this increase were the two-month gap in payments, the supply chain bottleneck, and the increased weight of the XXL vape as compared to the other two models. See Day 2 Vol. 1 Tr. 83:14-84:3. However, none of these explanations justifies a cost increase of over six times the previous monthly shipping cost, and other payments that were more than ten times prior shipping costs. In addition, there appears to be no correlation between the payments made to VTEK and the claimed shipping and delivery costs.
Without any additional support, the Court finds no credibility as to the summary financial documents put forth as Exhibits 2030 and 2031. Consequently, the Court finds that Defendant has failed to meet its burden to prove deductions based on either: 1) payments made to VTEK, or 2) shipping and delivery expenses.
Other courts have similarly found that summary financial documents coupled with testimony, absent any documentary evidence, were insufficient to satisfy the defendant's burden to prove costs. See Brighton Collectibles, LLC v. Believe Production, Inc., No. 2:15-cv-00579-CAS(ASx), 2018 WL 1381894, at *7 (C.D. Cal. Mar. 15, 2018) (declining to deduct cost where only evidence in support of cost was witness testimony and spreadsheets produced by the witness); Brighton Collectibles, Inc. v. Marc Chantal USA, Inc., No. 06-CV-1584 H (POR), 2009 WL 10674076, at *10 (S.D. Cal. Aug. 12, 2009) (declining to deduct costs because defendant “did not submit any documentary evidence such as invoices to substantiate its claimed deductions”). Because Defendant has failed to meet its burden, the Court declines to make any deductions on these bases. See Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 514 (1985) (citing Russell v. Price, 612 F.2d 1123, 1130-31 (9th Cir. 1979) (“If the infringing defendant does not meet its burden of proving costs, the gross figure stands as the defendant's profits.”).
Defendant also seeks a deduction of $189,632 for selling and operating expenses. Plaintiffs' experts did not dispute this deduction at trial. The Court therefore deducts $189,632 in allocated selling expenses from Plaintiff's monetary award.
To arrive at this figure, Bone first determined Defendant's total selling expenses using its income statements. Day 2 Vol. 2 Tr. 21:7-14. He then used the same income statements to determine the percentage of total sales attributable to the Infringing Products. Id. Bone then allocated selling expenses based on this percentage to determine the amount of selling expenses attributable to the Infringing Products. Id. Courts have approved of similar allocation methods when actual overhead costs for individual products could not be determined. See Kamar Int'l, Inc. v. Russ Berrie & Co., Inc., 752 F.2d 1326, 1333 (9th Cir. 1984).
c. Apportionment
Disgorgement of profits “is intended to award profits only on sales that are attributable to the infringing conduct.” Lindy Pen, 982 F.2d at 1408. However, “[o]nce the plaintiff demonstrates gross profits, they are presumed to be the result of the infringing activity.” Id. It is therefore the defendant's burden to demonstrate which of its total sales are not attributable to the infringing activity. Id. District courts should not apportion profits where they cannot do so based on a “reasonable, nonspeculative formula.” Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 519 (9th Cir. 1985).
To argue that some of Defendant's profits are not attributable to the infringement of the BANG Marks, Bone relied on a likelihood of confusion survey conducted by Plaintiff's survey expert, Justin Anderson. The Anderson survey found that approximately 20% of survey respondents somehow associated Design One and Design Two with the BANG Marks. Thus, Bone reasoned that because 80% of survey respondents did not associate the two, then 80% of Defendant's sales cannot be attributed to its infringement of the BANG Marks. Day 2 Vol. 2 Tr. 26:8-18.
This logic is flawed for a number of reasons. First, the Anderson survey did not narrow respondents to actual purchasers of Bang vapes, so it reveals nothing as to why actual Bang vape consumers decided to purchase that product. Id. at 57:14-18. Second, consumer confusion as to affiliation is not an accurate measure of the importance a consumer places on a brand name and logo when deciding to purchase a product. Id. at 62:1663:25. It is therefore unsurprising that other courts have rejected the use of a likelihood of confusion survey to apportion profits. See Globefill Inc. v. Elements Spirits, Inc., No. 2:10-cv-02034-CBM (PLAx), 2017 WL 6520589, at *3 (C.D. Cal. Sept. 8, 2017); adidas America, Inc. v. Skechers USA, Inc., No. 3:15-cv-01741-HZ, 2017 WL 3319190, at *28 (D. Or. Aug. 3, 2017).
Defendant offers no additional evidence showing that any of its sales were not attributable to its unlawful infringement. Thus, the Court awards all of Defendant's net profits to Plaintiff because the “infringing and noninfringing elements of [the] work cannot be readily separated.” Nintendo of Am., Inc. v. Dragon Pac. Int'l, 40 F.3d 1007, 1012 (9th Cir. 1994) (quoting Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251, 261-62 (1916)).
3. Statutory Enhancement
If a court finds that recovery based on profits is either inadequate or excessive, the court in its discretion may enter judgment in an amount it finds to be just. 15 U.S.C. § 1117(a). If the court exercises its discretion to adjust the award, the sum “shall constitute compensation and not a penalty.” Id. To penalize defendants for misconduct by enhancing Lanham Act damages is an abuse of discretion; enhancement is only available to ensure that the plaintiff receives adequate compensation. Skydive Ariz., Inc. v. Quattrocchi, 673 F.3d 1105, 1115 (9th Cir. 2012).
The Court finds that an award based on disgorgement of profits will adequately compensate Plaintiffs for Defendant's infringement. Indeed, Plaintiffs' argument in favor of a statutory enhancement is based on Defendant's conduct rather than any losses they suffered that disgorgement of profits would not compensate for. See Day 1 Vol. 1 Tr. 21:12-25. Enhancement based on Defendant's conduct alone would constitute a penalty, so the Court declines to enhance Plaintiffs' award.
For the foregoing reasons, the Court awards Plaintiffs a total of $10,584,308.48 in disgorged profits.
B. Permanent Injunction
The Lanham Act empowers district courts to grant injunctions to prevent the violation of a plaintiff's trademark rights. 15 U.S.C. § 1116(a). To be awarded a permanent injunction, a plaintiff must show that: (1) the plaintiff has suffered irreparable injury; (2) legal remedies are inadequate to compensate the plaintiff for the injury; (3) the balance of hardships favors an injunction; and (4) the public interest would be served by the injunction. eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006).
1. Irreparable Injury
Plaintiffs who prove a violation of the Lanham Act are entitled to a rebuttable presumption of irreparable harm. 15 U.S.C. § 1116(a). Because Defendant stipulated to trademark infringement and has offered no evidence to rebut the presumption, irreparable harm is presumed. See Nintendo of Am., Inc. v. Storman, No. CV 19-7818-CBM-(RAOx), 2021 WL 4772529, at *2 (C.D. Cal. Aug. 5, 2021).
2. Inadequate Legal Remedies
“Injunctive relief is the remedy of choice for trademark and unfair competition cases, since there is no adequate remedy at law for the injury caused by a defendant's continuing infringement.” Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1180 (9th Cir.1988). In addition, “[d]amage to reputation and loss of customers are intangible harms not adequately compensable through monetary damages.” Leadership Studies, Inc. v. ReadyToManage, Inc., No. 2:15-cv-09459-CAS(AJWx), 2017 WL 2408118, at *6 (C.D. Cal. June 2, 2017) (quoting Car-Freshner Corp. v. Valio, LLC, No. 2:14-cv-01471-RFB-GWF, 2016 WL 7246073, at *8 (D. Nev. Dec. 15, 2016)).
The Court has no evidence before it indicating that Defendant will never begin selling the Infringing Products again. While Defendant eventually stopped selling the Infringing Products, it did not do so until well into the litigation of this case. Moreover, Plaintiffs introduced evidence at trial of reputational harm they suffered as a result of the association between BANG energy drinks and the Infringing Products. See Exs. 42, 60-61. Plaintiffs have therefore established that legal remedies are inadequate.
3. Balance of Hardships
Defendant will not be harmed by an injunction preventing it from selling the Infringing Products because Defendant has already stopped selling products that use Design One and Design Two. Moreover, as discussed above, Plaintiffs have shown that they may suffer continued reputational harm and loss of good will if an injunction is not entered. Therefore, the balance of hardships favors granting an injunction. See AirWair Int'l Ltd. v. ITX USA LLC, No. 19-cv-07641-SI, 2021 WL 5302922, at *4 (N.D. Cal. Nov. 15, 2021) (citation and internal quotation marks omitted) (“Defendant will experience little to no hardship so long as defendant does not infringe and without an injunction plaintiff would be needlessly vulnerable to future infringement necessitating additional litigation.”).
4. Public Interest
Injunctive relief will serve the public interest here by preventing consumer confusion and will vindicate the Lanham Act by protecting the brands of authorized trademark users. See Knature Co., Inc. v. Duc Heung Grp., Inc., No. CV 20-3877-DMG (AFMx), 2021 WL 3913194, at *5 (C.D. Cal. Jul 2, 2021). There are no exceptional circumstances present here indicating that an injunction would be against the public interest. See Leadership Studies, Inc., 2017 WL 2408118, at *6. Thus, this factor favors entering a permanent injunction.
In sum, all of the eBay factors favor a permanent injunction in this case. The Court therefore GRANTS Plaintiffs a permanent injunction against Defendant preventing Defendant from selling any products using Design One or Design Two.
Defendant requests clarity as to whether it may continue to use the “vape with a bang” tagline on products sold under brand names other than "Bang." See Def.'s Closing Arg. Brief 23:16-20, ECF No. 199. Plaintiffs do not appear to oppose this request. See generally Pls.' Reply to Def.'s Closing Arg. Brief, ECF No. 200. The Court agrees that Defendant should be permitted to continue using this tagline on products that do not use Design One or Design Two. Plaintiffs have not shown that use of the word "bang" alone, when detached from Designs One and Two, is likely to cause consumer confusion. Therefore, these sales need not be enjoined. See Craigslist, Inc. v. Naturemarket, Inc., 694 F.Supp.2d 1039, 1062 (N.D. Cal. 2010) (“Generally, an injunction must be narrowly tailored to remedy only the specific harms shown by a plaintiff, rather than to enjoin all possible breaches of the law.”).
C. Attorneys' Fees
The Lanham Act authorizes courts to award reasonable attorneys' fees to the prevailing party in “exceptional cases.” 15 U.S.C. § 1117(a). “[D]istrict courts analyzing a request for fees under the Lanham Act should examine the ‘totality of the circumstances' to determine if the case was exceptional . . . using a preponderance of the evidence standard.” SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., 839 F.3d 1179, 1181 (9th Cir. 2016). Factors to consider include: “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 n.6 (2014)).
In short, “an ‘exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position . . . or the unreasonable manner in which the case was litigated.” Id. at 554. A court's finding that a defendant's infringement was willful does not automatically compel an award of attorneys' fees to the prevailing plaintiff. See UL LLC v. Space Chariot Inc., 250 F.Supp.3d 596, 615 (C.D. Cal. 2017).
Here, while the Court determined early on that Plaintiffs had a high likelihood of success on the merits of their trademark infringement claims, Defendant raised nonfrivolous arguments that led the Court to twice deny Plaintiffs' requests for a preliminary injunction. And while the Court has found that Defendant's infringement was willful, it cannot say that Defendant's litigating position was objectively unreasonable. Plaintiffs put forth no evidence that Defendant was aware of the BANG Marks when it began selling the Infringing Products. Energy drinks also occupy a distinct market from vaping products, and Plaintiffs have not exhibited an intent to expand into the vape industry. See Globefill Inc. v. Elements Spirits, Inc., No. 2:10-cv-02034-CBM (PLAx), 2017 WL 6520589, at *3-4 (C.D. Cal. Sept. 8, 2017) (finding a case to be unexceptional where plaintiff's product was different from infringing product and plaintiff had no plans to expand into infringing product's market).
Attorneys' fees are also not necessary for purposes of compensation or deterrence. The disgorgement award will fully compensate Plaintiffs for Defendant's infringement, and the permanent injunction will sufficiently deter any risk of future infringement. Cf. Y.Y.G.M. SA v. Redbubble Inc., No. 2:19-cv-04618-RGK-JPR, 2021 WL 4553186, at *4-5 (C.D. Cal. Oct. 5, 2021) (finding a risk of future infringement where the court denied injunctive relief and defendant could not guarantee that its policing techniques would completely eliminate future infringement). Defendant also did not litigate this case in an unreasonable manner that requires deterrence for future cases. While Defendant had a low likelihood of success in defending against trademark infringement, it stipulated to its own liability and thereby streamlined issues for trial.
Under the totality of the circumstances, the Court finds that this is not an exceptional case that stands out from others. See UL LLC, 250 F.Supp. at 615 (finding a case to be unexceptional despite defendants' willful infringement and failure to cooperate during discovery); Eko Brands, LLC v. Adrian Rivera Maynez Enters., Inc., No. 20-35369, 2021 WL 3630225, at *2 (9th Cir. Aug. 17, 2021) (finding that district court did not abuse its discretion in concluding the case was unexceptional despite defendant's willful infringement). The Court therefore exercises its discretion to DENY Plaintiffs' request for attorneys' fees.
III. CONCLUSION
Based on the foregoing, the Court awards Plaintiffs $10,584,308.48 in disgorged profits. The Court also GRANTS Plaintiffs' request for a permanent injunction. Defendant is hereby enjoined from selling any products using Design One or Design Two. Finally, the Court DENIES Plaintiffs' request for attorneys' fees. Within seven (7) days of this Order, Plaintiff shall lodge a Proposed Judgment with the Court consistent with the conclusions set forth herein.
IT IS SO ORDERED.