Pandora Jewelers 1995, Inc. v. Pandora Jewelry, Inc., 2011 WL 2295269 (S.D. Fla.)(June 8, 2011)
The plaintiff is a full-service jeweler that has maintained a single store in a strip mall in southern Florida for over 30 years. In 1999, it launched a web site, pandorajewelers.com, which accounts for 6% of its total sales and includes customers beyond south Florida. It claims to have built a reputation for its store, web site, and product packaging based on consistent advertising and various registered trademarks using the name “Pandora.”
The defendant is a multinational, high-end jewelry designer and manufacturer that sells its products under the registered trademark Pandora Jewelry, among others. In 2004, the plaintiff became an authorized retailer for the defendant’s products in its store and on its web site. In 2008, however, the defendant’s affiliate filed suit against Google and 67 others, including the plaintiff, to enjoin them from using its registered marks as AdWords. In response, Google terminated the plaintiff’s ability to use the defendant’s trademarks as AdWords.
Thus, when a user enters any Pandora-related terms, Google’s search engine no longer prominently displays the plaintiff’s web site. At about the same time, the defendant began opening retail stores that sold its products under the registered mark Pandora Jewelry. By 2009 it had 35 “concept stores” in various U.S. locations, including five in Florida.
In 2009 the plaintiff terminated its contract and sued for trademark infringement. Prior to trial, the defendant challenged the plaintiff’s damages expert under Daubert, asserting that his methodology was flawed largely because he included all the defendant’s U.S. profits instead of limiting them to local Florida sales and apportioning them to the alleged infringement. The defendant also challenged the expert’s assumptions regarding liability and scope of the trademarks and his calculation of damages based on corrective advertising.
Expert constructs six alternative scenarios. After reviewing the defendant’s sales and expense information, the plaintiff’s expert calculated damages in six “scenario constructions,” which attempted to account for various outcomes of the litigation—for example, whether the jury determined the plaintiff’s use of its trademarks was national in scope or limited to Florida, or just South Florida; and whether infringement began in 2003, 2007, 2008, or 2009. For the scenarios that used the defendants’ 2003 through 2009 profits, the expert reduced his calculations by the pro-rata share attributable to the defendant’s net sales to the plaintiff.
After reviewing the evidence and the defendant’s claims, the federal district court found that they “did not hold water.” An expert witness may assume liability for purposes of calculating damages, it held; in fact, a damages model would “necessarily assume liability,” it said. On the other hand, an expert cannot render an opinion regarding the geographic scope of plaintiff’s trademark use, because that was a factual issue for the jury to decide, the court held.
As to the expert’s failure to sufficiently apportion or attribute profits to the alleged infringement, these claims misstated the law. Federal trademark law (15 U.S.C. 1117, the Lanham Act) requires the plaintiff to prove the defendant’s sales only, leaving the defendant to prove all expenses or other deductions. Further, “it is the infringer’s burden to prove any proportion of its total profits which may not have been due to the infringement,” the court held. In this case, the plaintiff’s expert used the sales figures that the defendant produced during discovery; he used net revenue and/or deducted defendant’s cost of sales and operating expenses. Although he did not provide any methodology to apportion profits attributable to the alleged infringement, “he does not have to,” the court said. “That is the defendant’s burden.”
Accordingly, the court found that the expert’s six-scenario model employed a reliable methodology that would help the jury and admitted this portion of his damages calculation under Daubert. Under the prevailing standard for using corrective advertising as a basis for damages, however—which requires estimating costs for concrete and specific forms of corrective advertising (court’s emphasis)—the expert’s opinion fell short. His calculations were not based on any specific forms of advertising necessary to correct any consumer confusion regarding the parties’ various trademarks, the court held, and excluded the same.
