Third Circuit Vacates $10.6 Million Trademark Infringement Award

• Published date: 07 December 2021
• Subject Matter: Intellectual Property, Trademark
• Law Firm: Taft Stettinius & Hollister
• Author: Ms Amy L. Wright, Elizabeth Baumhart and Victoria Sedinger

A recent Third Circuit Court of Appeals opinion provides some much-needed clarity surrounding disgorgement of profits and laches defenses in trademark infringement cases. In Kars 4 Kids Inc. v America Can! (8 F 4th 209 (3d Cir 2021), the court vacated a $10.6 million award against Kars 4 Kids Inc. stemming from its infringement of America Can! Cars for Kids' trademark and remanded the case back to the district court for further consideration.

Background

Kars 4 Kids and America Can! are both nonprofit entities that sell donated vehicles to fund children's programs under similar trademarks. America Can! claims that it commenced use of its mark in Texas in the early 1990s, with Kars 4 Kids later using it in 1997. When Kars 4 Kids launched a series of nationwide advertising campaigns in the early 2000s, America Can! sent it a cease-and-desist letter. After it appeared that Kars 4 Kids ceased advertising in Texas, America Can! took no further action.

Almost 10 years later, America Can! sent another letter to Kars 4 Kids after it learned of the continued use of the trademark. In the following years, the parties sued each other in the US District Court for the District of New Jersey under claims of federal and state trademark infringement, unfair competition, and trademark dilution, and sought monetary and equitable relief. In addition, America Can! requested the cancellation of one of Kars 4 Kids federal trademark registrations by claiming that it had been fraudulently obtained.

The jury found in favor of America Can! by stating that it had protectable state and common law trademark rights and that Kars 4 Kids willfully infringed those rights within Texas. However, the jury was not persuaded by the arguments regarding the cancellation of the Kars 4 Kids trademark.

The district court then considered available equitable and monetary relief for America Can!, ultimately finding against Kars 4 Kids' laches defense, despite the 10-year gap (2003 to 2013) between the cease-and-desist letters sent by America Can!. As America Can! claimed that it was unaware of any Texas advertising by Kars 4 Kids between 2004 and 2011, the district court ordered Kars 4 Kids to disgorge all profits made from its Texas sales, minus advertising and overhead expenses - which amounted to approximately $10.6 million. This amount did not include America Can!'s requests for enhanced monetary relief or pre-judgment interest.

On appeal, the Third Circuit Court of Appeals reviewed the district...