United States: Legal And Equitable Profit Disgorgement In A Trademark Case

In many instances, trademark and trade dress cases are directed to injunctive relief, with damages being almost an afterthought.  Not sharply focusing in damages from the outset of a case may be a mistake, particularly given what may be recovered as legal and equitable damages and the ability to disgorge an infringer's profits as a proxy for the trademark owner's lost sales.

15 U.S.C. § 1117(a) provides as follows:

(a) Profits; damages and costs; attorney fees

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.

Legal Damages: Disgorgement as Lost Sales Proxy

It is well-established that a jury can award a trademark owner its lost sales.  In an infringement action, "[d]amages are typically measured by any direct injury which a plaintiff can prove, as well as any lost profits which the plaintiff would have earned but for the infringement."  Lindy Pen Co. v. Bic Pen Corp., 982 F.2d 1400, 1407 (9th Cir. 1993) abrogated on other grounds by SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179 (9th Cir. 2016).  Because proof of actual damage is often difficult, however, disgorgement of the defendant's profits may be used by the jury as a proxy for lost sales in making a damages award.

The "proxy theory of profits is based on the idea that the defendant diverted sales that would have gone to the plaintiff but for the infringement.  This theory is designed to 'compensate the plaintiff for sales which he has lost as a result of his customers being diverted to the infringer.'"  SpinMaster, Ltd. v. Zobmondo Entm't, LLC, 944 F. Supp. 2d 830, 840 (C.D. Cal. 2012)(citation omitted).  To recover under this theory, the plaintiff and the infringer must be direct competitors; "if there is no competition, there can be no diversion of customers."  Id. (citing Maier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 121 (9th Cir. 1968)).  When a plaintiff seeks the defendant's profits as a measure of his own damages, willful infringement is not a prerequisite.  Adray v. Adry–Mart, Inc., 76 F.3d 984, 988 (9th Cir. 1995), as amended on denial of reh'g (Feb. 15, 1996); see also Paramount Farms Int'l LLC v. Keenan Farms Inc., No. 2:12-CV-01463-SVW-E, 2012 WL 12892420, at *2–3 (C.D. Cal. Dec. 6, 2012) ("[W]here, as here, a plaintiff relies on the defendant's profits to establish its actual damages under a 'proxy theory of lost profits,' the plaintiff need not show that the infringement was willful.").  See also Ninth Circuit Model Civil Jury Instruction No. 15.26 "Trademark Damages – Defendant's Profits."

While § 1117(a) uses the phrase "subject to the principles of equity," any discretion of the court in fashioning damages applies only to equitable remedies like unjust enrichment (discussed infra), enhanced damages, and attorneys' fees, and not to legal damages awarded as compensation by a jury.  For example, while cases such as Taco Cabana Int'l, Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1127 (5th Cir. 1991) state that "Section 35 of the Lanham Act endows district courts 'with considerable discretion in fashioning an appropriate remedy for infringement,'" such discretion is with respect to determining equitable enhancement of legal damages by the district court or allowing unjust enrichment damages, but does not limit the damages awardable by a jury.

One interesting use of disgorgement of profits theory in a related context is in a trademark or trade dress contempt proceeding.   "[D]isgorgement of profits is a traditional trademark remedy and the district court's use of profits as a measure for the contempt sanction is hardly a novel proposition." Jerry's Famous Deli, Inc. v. Papanicolaou, 383 F.3d 998, 1004 (9th Cir. 2004); see Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448, 456 (1932) ("In a suit in equity against an infringer, profits are recoverable not by way of punishment but to insure full compensation to the party injured").  Such an approach was recently used in Toyo Tire & Rubber Co. v. H.K. Tri-Ace Tire Co., 2017 U.S. Dist. LEXIS 214878 (C.D. Cal. November 27, 2017) to fashion a significant sanctions award.

Equitable Damages: Disgorgement for Unjust Enrichment

A district court is separately empowered to order disgorgement of a  defendant's profits as an equitable remedy under 15 U.S.C. § 1117(a) under an unjust enrichment theory.  To obtain disgorgement of profits under an unjust enrichment theory, the plaintiff must prove that infringement was committed willfully. Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d 426, 441 (9th Cir. 2017), cert. denied, No. 17-731, 2018 WL 2186227 (May 14, 2018); Spin Master, 944 F. Supp. 2d at 839 (no willfulness test applied to "profits-as-proxy" theory, but willfulness was applied for equitable disgorgement).  "To demonstrate willful infringement, a party only needs to show "a connection between a defendant's awareness of its competitors and its actions at those competitors' expense." Fifty-Six Hope Road, 778 F.3d at 1074; see also D.C. Comics v. Towle, 802 F.3d 1012, 1026 (9th Cir. 2015) ("Willful trademark infringement occurs when the defendant's actions are 'willfully calculated to exploit the advantage of an established mark.'").

Such disgorgement might be done either as part of a bench proceeding or at the request of the plaintiff to supplement a jury award that was deemed insufficient.  Such disgorgement is different from the use of disgorgement as a proxy for legal damages. See, e.g., Paramount Farms, 2012 U.S. Dist. LEXIS 196005, at *13 (equitable disgorgement theory allowed in the alternative to proxy theory disgorgement).

Disgorgement as a lost sales proxy or under an unjust enrichment theory may actually simplify the damages issues.  As such, analysis of it should be a priority in a trademark case.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions