Trademark infringement lawsuits are often resolved early on in the litigation lifecycle. Many defendants will simply change the mark they are using to limit damages and disincentivize a plaintiff from pushing forward with a claim. Further, many trademark lawsuits are resolved at the preliminary injunction stage. However, there are recent cases that suggest a growing trend of substantial verdicts being awarded to plaintiffs in trademark infringement lawsuits. These cases should serve as an opportunity for companies to think more strategically when it comes to allegations of trademark infringement.
For example, last month a jury returned a nearly $190 million verdict against Vivint Smart Home Inc., finding Vivint liable for trademark infringement, among other claims. The case against Vivint was brought by CPI Security Systems, Inc., the largest privately-held security provider in the Southeast. CPI is a provider of security solutions, including 24-hour monitoring and emergency response services. Vivint is a competing security provider. CPI alleged four claims against Vivint: (1) Unfair Competition in Violation of the Lanham Act; (2) Common Law Unfair Competition; (3) Violation of the UDTPA; and (4) Tortious Interference with Business Relationships. In its complaint, CPI alleged that Vivint’s sales agents were specifically targeting CPI’s customers in door-to-door sales visits to customers’ homes, and would use deceptive sales pitches intended to mislead CPI’s customers into believing that Vivint represents, or is in some way affiliated with, CPI. CPI alleged that these sales pitches were intended to induce CPI customers into granting the agents entry into customers’ homes, and, once inside, the agents would coerce the customers to sign Vivint contracts and install Vivint security systems, often under the mistaken belief that new CPI equipment was being received.
Although the defendant in this case, Vivint, appears to have been a particularly egregious bad actor, the damages awarded should give companies pause when considering challenging claims of alleged trademark infringement. Indeed, the Vivint case is not an isolated example. Consider Orange Bang Inc. and Monster Energy Company’s $175 million arbitration award against Vital Pharmaceuticals.
While every company that develops and protects branded goods and services can expect some degree of alleged trademark infringement to be inevitable, such disputes rarely need to rise to the level of formal litigation. The cases outlined above demonstrate that a non-reactionary, measured approach to addressing infringement claims is not only prudent, but critically important. So how should companies facing such claims proceed? The first step is to, as soon as possible after receiving notice, conduct an analysis of potential liability. In some cases—such as when a claimant’s assertions have questionable merits, or when the demands are unconscionable—lawsuits cannot be avoided. However, more often than not, a lawsuit can be averted by simply taking corrective action. Perhaps limiting the scope of goods and services covered by a particular trademark will alleviate the third party’s concerns. Maybe including certain disclaimer language on a website, or adding distinguishing features (i.e. a unique design element, additional terms or a house mark) to a mark is sufficient. Even seemingly small details, such as inclusion or removal of an apostrophe or changing out specific shades of a certain color in a mark, can be enough to amicably resolve a dispute. And in the event efforts such as these do not work, companies should seek to identify a damages ceiling in order to fully understand their vulnerability.
Approaching these matters with diligence, poise and logic, and developing a thoughtful strategy toward resolution should be the objective for in-house IP counsel faced with threats of trademark infringement. The stakes have grown too high for viewing trademark infringement claims as a cost of doing business.
For further information, please contact:
Kent B. Goss, Partner, Crowell & Moring