The U. S. Court of Appeals for the Seventh Circuit reversed a district court decision holding that a trademark plaintiff had forfeited its entire damage award because of litigation misconduct—specifically, interfering with a witness. The Seventh Circuit thought the plaintiff had been punished enough and that the basis for the misconduct did not affect the outcome of the suit. Ty, Inc. v. Sofbelly's, Inc., Case Nos. 07-1452, -1519, -1782, -1793, -2401 (7th Cir., Feb. 22, 2008) (Posner, J.).
Ty is the manufacturer of the stuffed "Beanie Babies" toys. Ty sued Softbelly's for trademark infringement under the Lanham Act for producing a product called "Screenie Beanies" bean stuffed animals having a chamois belly for wiping a computer screen. Following a trial, Ty obtained a judgment as a matter of law and was awarded $713,000 in damages and an injunction. Softbelly's appealed, arguing that Ty Warner, the owner of Ty, had tampered with a witness who was to testify that "Beanie" was a generic term for a bean stuffed product. The Seventh Circuit ordered that the case be retried. In the second trial, the jury found for Ty on the trademark infringement issue, and the judge entered an injunction prohibiting Softbelly's from using any term confusingly similar to "Beanie Babies" to market screen-cleaning products. However, the district court judge awarded Ty no damages, based on her view of Ty's litigation behavior during the initial trial, even though Softbelly's did not call the witness Ty allegedly tampered with at the original trial. Both Ty and Softbelly's appealed.
On appeal, Softbelly's sought yet another new trial on liability and an order vacating the district court award of attorneys' fees awarded to Ty based on the trial court finding that Softbelly's infringement was willful. Ty sought to have the $713,000 damages award restored.
Judge Posner found that the Eighth Amendment limits the severity of the sanctions a court may impose for litigation misconduct. Here, Judge Posner found that the district court imposed a sanction amounting to nine times the amount (i.e., of Softbelly's attorneys' fees) necessary to compensate Softbelly's for any misconduct by Ty, "even though no harm was done by the misconduct beyond imposing a litigation expense on the opposing party that the misbehaving party is ready to make good." The Court found that Softbelly's could be fully compensated by an award of its attorneys' fees incurred in litigating the sanctions issues and that forcing Ty to surrender its entire damages award was excessive.
Turning to the trademark infringement issues, Judge Posner determined that since many "Screenie Beanies" looked nearly identical to "Beanie Babies," there was a high likelihood that consumers would think the Softbelly's products were manufactured by Ty. In the Court's view, the fact that Softbelly's abandoned its argument that "Beanie" is a generic term made this a simple case in which a seller attaches "a popular trademark to a product that is nearly identical to the trademarked one." The Court also found that the evidence supported the finding that Softbelly's infringement was willful.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
