Page 128 - Intellectual Property Disputes

As noted earlier in this section, courts may take into consideration the cost of a corrective advertising
campaign that the trademark owner conducts in order to repair the effect of the defendant’s misleading
advertising. The purpose of such a campaign is to correct any misimpressions that were formed in the
marketplace due to the infringers’ actions and thereby return the plaintiff to a pre-infringement state. To
prevent the double-recovery of damages, the district court in Callaway Golf Co. v. Dunlop Slazenger fn 84
granted the defendant’s motion for judgment as a matter of law by vacating a $1.1 million award for
corrective advertising. After a trial, a jury awarded $1.1 million in unjust enrichment damages and $1.1
million in prospective corrective advertising damages. The defendant sought to overturn the false
advertising damages award, arguing that the award resulted in a windfall for the plaintiff. In this matter,
the judge found that corrective advertising damages could be awarded when the plaintiff shows that the
corrective advertising is a surrogate for actual damages. The court further found that "there is no
economic rationale to support an award of ‘prospective corrective advertising’ damages" because the
defendant had long since stopped selling the infringing product. The plaintiff’s own expert had testified
that corrective advertising and unjust enrichment were alternative damages awards. Therefore, the court
found that awarding the plaintiff an additional $1.1 million in corrective advertising on top of the $1.1
million award of unjust enrichment would be an unfair doubling of the damages award.

Corrective advertising was also an issue in Juicy Couture, Inc. v. L’Oreal USA, Inc. fn 85 In this case, the
damages expert opined on four distinct damages theories: prospective corrective advertising,
hypothetical royalties for the use of the trademarks at issue, the defendant’s profits, and the plaintiff’s
lost profits. The defendant challenged all four theories. The court excluded evidence on damages under
the prospective corrective advertising theory and hypothetical royalty theory; the defendant abandoned
the lost profits theory prior to any challenge; and the court denied the challenge on the defendant’s
profits.

In excluding the prospective corrective advertising theory, the court discussed that, for the most part,
awards of corrective advertising are granted when the plaintiff lacks the financial wherewithal to pay for
the necessary prospective advertising. In instances when the inability to pay was not present, the
circumstances were such that the trademarks needed to be rehabilitated. In this matter, the parties are not
competitors. The court found that Juicy Couture had not lost profits or sales, nor had its reputation
suffered. In summary, there is nothing for an award of prospective corrective advertising to correct. In
excluding the hypothetical royalties, for much the same reasons that comparability of license agreements
have become so important to the calculation of a reasonable royalty in patent infringement matters, the
court also disallowed the hypothetical royalty theory proffered by the expert in Juicy Couture. fn 86 The
court found that royalties for trademark infringement are usually awarded for an existing trademark
licensing agreement. Because Juicy Couture and L’Oreal did not have a previous licensing agreement,
the lack of prior licenses caused the expert’s opinion to be "speculative" in nature. This finding was
coupled with the fact that the only damage left at the time of trial were related to products first sold
years after the hypothetical royalty negotiation.

fn 84 Callaway Golf Co. v. Dunlop Slazenger, 384 F. Supp. 2d 735 (D. Del. 2005). The false advertising related to a claim that a golf
ball was "the longest ball on tour" and the trade secrets at issue relate to golf ball technology.

fn 85 Juicy Couture, Inc. v. L’Oreal USA, Inc., 2006 U.S. Dist. LEXIS 30219 (S.D.N.Y.) The trademarks at issue relate to the use of
"Juicy," "Juicy Couture," and "Choose Juicy" on women’s clothing and accessories. The defendant used the name "Juicy" for its long-
lasting lipstick.

fn 86 Id.

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