Black & Decker Corp. v. Positec USA Inc.

• Decision Date: 05 August 2015
• Docket Number: Case No. 11–cv–5426
• Citation: 118 F.Supp.3d 1056
• Parties: The Black & Decker Corporation, Black & Decker Inc. and Black & Decker (U.S.) Inc., Plaintiffs, v. Positec USA Inc. and RW Direct Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

118 F.Supp.3d 1056

The Black & Decker Corporation, Black & Decker Inc. and Black & Decker (U.S.) Inc., Plaintiffs,

v.Positec USA Inc. and RW Direct Inc., Defendants.

Case No. 11–cv–5426

United States District Court, N.D. Illinois, Eastern Division.

Signed August 5, 2015

Raymond Pardo Niro, Jr., Kyle David Wallenberg, Niro, McAndrews, Dowell & Grossman, LLC, Frederick Christopher Laney, Joseph Albert Culig, Oliver D. Yang, Niro, Scavone, Haller & Niro, Ltd., Chicago, IL, for Plaintiffs.

Robert J. Theuerkauf, Henry Spencer Alford, Scot A. Duvall, Middleton Reutlinger, Louisville, KY, John Aron Carnahan, Husch Blackwell LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr., United States District Judge

The parties are competing power tool sellers. Plaintiffs allege that Defendants infringed (1) their patents in certain power tool devices and (2) their trademark-related rights in the yellow-and-black color combination appearing on Plaintiffs' products and packaging.¹ Plaintiffs request a jury trial as to all claims. Defendants move to strike Plaintiffs' jury demand as to their trademark-related claims for Defendants' profits. For the reasons stated below, the Court respectfully denies Defendants' motion [99].

I. Analysis

Under Federal Rule of Civil Procedure 38(a), "there is a right to a jury trial where either the Seventh Amendment or an ordinary statute of the United States so requires." Int'l Fin. Servs. Corp. v. Chromas Techs. Canada, Inc., 356 F.3d 731, 735 (7th Cir.2004). Where a district court applies "the substantive law of a state, federal procedural law controls the question of whether there is a right to a jury trial." Id. Thus, in a case like this, where Plaintiffs bring parallel state and federal trademark-related claims, the question is whether the Lanham Act or the Seventh Amendment creates a jury right.

A. Statutory Right to a Jury Trial

To avoid the constitutional question if possible,² the Court begins with a question that neither side has addressed: whether the Lanham Act creates a right to a jury trial on a claim for a defendant's profits. Relevant here is § 1117, which provides:

(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. The court shall assess such profits and damages or cause the same to be assessed under its direction. In assessing profits the plaintiff shall be required to prove defendant's sales only; defendant must prove all elements of cost or deduction claimed. In assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount. If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case. Such sum in either of the above circumstances shall constitute compensation and not a penalty. The court in exceptional cases may award reasonable attorney fees to the prevailing party.

15 U.S.C.A. § 1117(a).

The plain language of the statute, which states that a court "shall assess such profits and damages or cause the same to be assessed under its direction, " at least suggests the possibility of a jury determination in the first instance, even if a court may adjust the jury award as it "shall find to be just." 15 U.S.C. § 1117(a) (emphasis added). The statute "treats both profits and damages together, making no separate provision for the manner in which profits are calculated," at least suggesting that a right to a jury determination may exist as to both profits and damages. Ideal World Mktg., Inc. v. Duracell, Inc. , 997 F.Supp. 334, 339 (E.D.N.Y.1998). Moreover, as Judge Weisberg explained, "[t]hat profits were combined with damages in Section 1117 into a single monetary recovery which constitutes ‘compensation’, rather than included in Section 1116, the section authorizing injunctions, suggests that Congress considered an award of profits more in the nature of damages than as incidental to equitable relief." Oxford Indus., Inc. v. Hartmarx Corp., 1990 WL 65792, at *7 (N.D.Ill. May 2, 1990).

That said, other cases have indicated that the Lanham Act does not create a jury right. In Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962), the Supreme Court addressed whether plaintiffs requesting a trademark infringer's profits had a right to a jury trial. The complaint was ambiguous in that it arguably alleged breach of a trademark license, trademark infringement, or both. Id. at 476–77, 82 S.Ct. 894. The Supreme Court held that the plaintiffs had a Seventh Amendment jury right as to their demand for an accounting of the defendant's profits, reasoning that the complaint's request for an accounting was "wholly legal in its nature," regardless of whether the complaint was construed to allege a breach of contract, trademark infringement, or both. Id. at 477, 82 S.Ct. 894. The Court did not address, as an initial matter, whether a statutory right existed. Given the well-settled constitutional avoidance doctrine, see Nw. Austin Mun. Util. Dist. No. One, 557 U.S. at 205, 129 S.Ct. 2504, the fact that the Court resolved Dairy Queen on constitutional grounds at least suggests that it did not believe a statutory right to a jury trial existed. Since then, lower courts addressing the issue have found no statutory jury right. Although the analysis in these cases is not robust,³ this Court is hesitant to find a statutory right to a jury trial given Dairy Queen 's reasoning. Accordingly, the Court turns to address whether a jury right exists under the Seventh Amendment.

B. Constitutional Right to a Jury Trial

The Seventh Amendment provides that "[i]n suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." U.S. Const. amend. VII. This amendment does not create the right to a trial by jury. Rather, it generally "preserves the substance of the right to a jury trial which existed under English common law when the amendment was adopted." Rogers v. Loether, 467 F.2d 1110, 1113 (7th Cir.1972).

Courts apply a two-prong test to determine whether the Seventh Amendment preserves a right to a jury. "First, we must ‘compare the * * * action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature.’ The latter inquiry is more important than the former." Int'l Fin. Servs., 356 F.3d at 735 (quoting Tull v. United States, 481 U.S. 412, 417–18, 107 S.Ct. 1831, 95 L.Ed.2d 365 (1987) ). "Where history does not provide a clear answer, we look to precedent and functional considerations." City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 718, 119 S.Ct. 1624, 143 L.Ed.2d 882 (1999). Lastly, where an action involves both legal and equitable issues, a right to a jury exists as to the legal issues. Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 510–11, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959) ("[O]nly under the most imperative circumstances * * * can the right to a jury trial of legal issues be lost through prior determination of equitable claims."). Thus, the ultimate unit of analysis is "the issue to be tried rather than the character of the overall action." Ross v. Bernhard, 396 U.S. 531, 538, 90 S.Ct. 733, 24 L.Ed.2d 729 (1970).

Defendants move to strike Plaintiffs' request for a jury trial on their trademark-related claims for Defendants' profits. They do not move to strike Plaintiffs' request for a jury trial on their patent claims for monetary relief, nor do the parties dispute that the remaining requests for injunctive relief are equitable issues to be decided by the Court. Thus, the only issue is whether Plaintiffs have a right to a jury trial on their trademark-related claims for Defendants' profits.

Applying the two-prong historical test to this issue, the Court arrives at an inconclusive result. The history of trademark actions and remedies lies in the murky overlap of law and equity. As one district court cogently explained,

Trademark law draws on principles developed both at law and in equity. See Tandy Corp. v. Malone & Hyde, Inc., 769 F.2d 362, 364 (6th Cir.1985). Although in England and the United States, both equity and law courts were empowered to decide trademark cases, most suits for trademark infringement were brought in equity "because injunctive relief was generally considered the first and most effective step for courts to take in redressing a trademark infringement," id. (citing F. Schechter, The Historical Foundations of the Law Relating to Trademarks, at 122–145 (1925)), and because courts of equity were additionally empowered to award damages or profits as incidental relief. See Oxford Indus., 1990 WL 65792 (citing G. Ropski, The Federal Trademark Jury Trial–Awakening of a Dormant Constitutional Right, 70 Trademark Rep. 177, 179–180 (1980)); see also 1 Pomeroy's Equity Jurisprudence § 181, at 257–258 (Symons 5th ed.1941).

Ideal World Mktg., 997 F.Supp. at 336–37.⁴

Because "history does not provide a clear answer," the Court turns to "precedent and functional...