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Hard Candy, LLC v. Anastasia Beverly Hills, Inc.

United States Court of Appeals, Eleventh Circuit

April 23, 2019

HARD CANDY, LLC, a Florida limited liability company, Plaintiff - Appellant,
v.
ANASTASIA BEVERLY HILLS, INC., a California Corporation, Defendant-Appellee.

          Appeal from the United States District Court No. 1:16-cv-21203-KMW for the Southern District of Florida

          Before MARCUS, GRANT, and HULL, Circuit Judges.

          MARCUS, CIRCUIT JUDGE

         "Trial by jury," James Madison said in a speech urging the adoption of the Bill of Rights, "is as essential to secure the liberty of the people as any one of the pre-existent rights of nature." James Madison, Speech in Congress Proposing Constitutional Amendments, in Writings 445-46 (Jack Rakove ed., 1999). But courts have long held that a jury is guaranteed only for claims that would have been heard in courts of law at the time of the Founding, not for those that would have been heard in courts of equity. This appeal requires us to decide whether the Seventh Amendment right to trial by jury applies when a trademark plaintiff attempts to recover the profits the defendant made by selling the allegedly infringing goods. Plaintiff Hard Candy, LLC, a cosmetics company, seeks every remedy permitted by the Lanham Act besides actual damages -- that is, it asked for an injunction to prevent future infringement, an accounting and the disgorgement of profits that the defendant made from the allegedly infringing goods, and declaratory relief, along with fees and costs. Because the claim didn't include actual damages, the district court denied Hard Candy's request for a jury trial. After a bench trial, the court found that there was no likelihood of confusion and held that defendant Anastasia Beverly Hills, Inc., made out a fair use defense to infringement. Hard Candy challenges each of these determinations on appeal.

         As a threshold matter, this case requires us to resolve a Seventh Amendment question of first impression before reaching the merits. Hard Candy argues that a jury should have decided its claims because it was seeking to recover Anastasia's profits as a "proxy" for the damages it suffered due to infringement. This basis for seeking profits, the company argues, means that the remedy is legal, not equitable in nature and carries with it the right to a jury trial. We disagree. The remedy of an accounting and disgorgement of profits for trademark infringement is equitable in nature and has long been considered that way, so we hold that a plaintiff seeking the defendant's profits in lieu of actual damages is not entitled to a jury trial. As for the district court's merits determinations on infringement and fair use, we find no error and, therefore, affirm.

         I.

         Hard Candy, LLC, is a cosmetics company headquartered in Hollywood, Florida. The company's predecessor first filed a trademark application for the HARD CANDY mark in 1995. Since then, Hard Candy has continuously used the HARD CANDY mark in connection with the sale of cosmetics.[1] Hard Candy does not produce cosmetics itself; it licenses the mark to a third-party cosmetics producer, NuWorld Corporation, which makes nail polish, eye shadow, lip gloss, and various facial beauty products that are sold under the Hard Candy name. These items are sold exclusively at Wal-Mart stores and on Wal-Mart's website, and have generated sales in excess of $36 million each year since 2011.

         Anastasia Beverly Hills, Inc., a California-based corporation, is also in the cosmetics business. In December 2015, Anastasia announced the release of a new edition in its line of "Glow Kits," which are flip-open makeup palettes containing four different shades of facial highlighter. The Gleam Glow Kit included the words "hard candy" in capital letters on the back and inside of the package to designate a peach-pink shade of makeup. Anastasia says that it chose this name because the product had a "shimmer" that reminded the developer of candies that her grandmother gave her when she was young. The developer testified that she was aware of Hard Candy, LLC, as a seller of nail polish in the 1990s, but she was not aware of the company's continued existence when she came up with the name.

         The following pictures show the front, back, and inside of the kit offered by Anastasia:

         (Image omitted)

         The day after Anastasia announced the release of the Gleam Glow Kit, Hard Candy sent Anastasia a cease and desist letter asserting that it had infringed on its trademark. Anastasia's owner, Anastasia Soare, attempted to call the CEO of Hard Candy but she was unable to make contact; Anastasia's and Hard Candy's attorneys also exchanged emails without resolving the issue before discussions broke off. Anastasia went on to sell the kit -- with the "hard candy" shade -- online and in various retail stores, including Macy's, Ulta, and Sephora. The words "hard candy" appeared in Anastasia's marketing materials and social media posts, as well as on the product itself. In documents provided to retailers, the company described the shade as a "mood-changing golden peach with a pink pearl reflective finish." The Gleam Glow Kit was on the market from December 2015 until August 2016, consistent with Anastasia's initial plan to make it a limited-edition product.

         Hard Candy filed a complaint in the United States District Court for the Southern District of Florida against Anastasia, claiming trademark infringement under § 32(a) of the Lanham Act, 15 U.S.C. § 1114(1); unfair competition under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); common law trademark infringement; and common law unfair competition. Hard Candy sought an accounting and the disgorgement of Anastasia's profits, statutory damages, a permanent injunction barring Anastasia's use of its mark, declaratory relief, and fees and costs. The complaint included a request for actual damages, but, notably, Hard Candy dropped this application before trial. The district court then struck Hard Candy's jury trial demand because all of the remaining remedies were equitable in nature.

         To prevail on each of its claims, Hard Candy had to establish that Anastasia's use of the words "hard candy" created a likelihood of confusion. See Tally-Ho, Inc. v. Coast Cmty. Coll. Dist., 889 F.2d 1018, 1026 & n.14 (11th Cir. 1989) (noting that the elements of trademark infringement under common law and the Lanham Act "are the same," and that "an unfair competition claim based only upon alleged trademark infringement is practically identical to an infringement claim"). Applying our seven-factor likelihood of confusion test, the district court determined that Hard Candy had not met its burden. The court also concluded that even if Hard Candy could establish infringement, Anastasia had made out a fair use defense because it used the term "hard candy" in good faith as a description of the product, not as a mark.

         This appeal followed.

         II.

         Hard Candy first argues that the district court erred in its denial of a jury trial. We review the grant of a motion to strike a jury demand de novo. FN Herstal SA v. Clyde Armory Inc., 838 F.3d 1071, 1080 (11th Cir. 2016).

         We have yet to address the question whether a plaintiff seeking the disgorgement of the defendant's profits and an accounting under the Lanham Act has the right to have its claims decided by a jury.[2] A plaintiff is entitled to a jury trial in an action that is "analogous" to a claim that would have been brought in the English law courts at common law, but not if the claims sounded in equity or admiralty. See Tull v. United States, 481 U.S. 412, 417 (1987). Hard Candy says that at least "where a plaintiff seeks to recover a defendant's profits as a 'proxy' for actual damages, the claim is a legal one that entitles the plaintiff to a jury trial."[3] Br. for Plaintiff-Appellants at 23. However, we agree with the district court's conclusion that the requested remedy is equitable in nature and thus does not confer a right to trial by jury.

         A.

         The Lanham Act provides that "[w]hen a violation of any right of the registrant of a mark . . . shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, . . . 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." 15 U.S.C. § 1117(a). In "exceptional cases," a prevailing party can be awarded attorneys' fees. Id. A different section of the Act vests courts with the "power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark Office or to prevent a violation under subsection (a), (c), or (d) of [15 U.S.C. § 1125]." Id. § 1116(a).

         The Act, therefore, provides a broad menu of remedies to a plaintiff claiming infringement. In "ordinary trademark infringement actions . . . complete injunctions against the infringing party are the order of the day." SunAmerica Corp. v. Sun Life Assurance Co. of Can., 77 F.3d 1325, 1336 (11th Cir. 1996). This is because "the public deserves not to be led astray by the use of inevitably confusing marks," and injunctive relief is the surest way to prevent future harm. Angel Flight of Ga., Inc. v. Angel Flight Am., Inc., 522 F.3d 1200, 1209 (11th Cir. 2008); 5 McCarthy on Trademarks and Unfair Competition § 30:1 (5th ed. 2018) [hereinafter "McCarthy"] (describing injunctive relief as the "usual and normal remedy" and the "usual historical practice" after a court has found infringement). Indeed, injunctive relief is the quintessential form of equitable remedy; it does not entitle a plaintiff to a jury trial.

         The monetary damages available to a Lanham Act trademark plaintiff can be divided into five rough categories: recovery of the defendant's profits, actual business damages and out-of-pocket losses (like corrective advertising), lost profits, punitive damages, and attorneys' fees. See id. § 30:57. "Actual damages" in this context covers everything from damages from lost sales or licensing fees due to the infringer's sale of offending goods to intangible harm like reputational damage and loss of good will. As we have said, a trademark plaintiff "may recover for all elements of injury to the business of the trademark owner proximately resulting from the infringer's wrongful acts." Bos. Prof'l Hockey Ass'n, Inc. v. Dallas Cap & Emblem Mfg., Inc., 597 F.2d 71, 75 (5th Cir. 1979) (quotations omitted) (permitting recovery of damages in the amount that the infringer would have had to pay the plaintiff for nonexclusive license to use the marks).[4] The primary limiting principle is that the damages may not be "speculative." See, e.g., Ramada Inns, Inc. v. Gadsden Motel Co., 804 F.2d 1562, 1564 (11th Cir. 1986) ("The partners stress that a trademark infringement award must be based on proof of actual damages and that some evidence of harm arising from the violation must exist. . . . We must decide whether the district court's assessment of the actual damages or harm suffered by Ramada Inns was speculative.").

         The disgorgement of profits and the closely related remedy of an accounting are much different. "The remedy of damages seeks to compensate the victim for its loss, whereas the remedy of an accounting . . . [seeks] disgorgement of ill-gotten profits." SCA Hygiene Prod. Aktiebolag v. First Quality Baby Prods., LLC, 137 S.Ct. 954, 964 (2017). The Lanham Act permits recovery of profits because actual damages are often difficult to prove. It "shifts the burden of proving economic injury off the innocent party, and places the hardship of disproving economic gain onto the infringer." George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1539 (2d Cir. 1992); Wesco Mfg., Inc. v. Tropical Attractions of Palm Beach, Inc., 833 F.2d 1484, 1487-88 (11th Cir. 1987). The statute does so by expressly providing that "the plaintiff shall be required to prove defendant's sales only," while the "defendant must prove all elements of cost or deduction claimed" against its profits. 15 U.S.C. § 1117(a). So, when a plaintiff seeks an accounting and disgorgement of profits as a remedy for trademark infringement, the focus is entirely on the alleged infringer's gain; the plaintiff is not required to present any evidence of particular financial harm that it suffered so as to justify legal redress.

         In its complaint, Hard Candy sought just about every form of relief available: declaratory relief; an injunction barring Anastasia from "[a]dvertising, promoting, selling, offering for sale, or distributing any services or products that use any words or symbols that so resemble the Hard Candy Marks," among other activities; an order "that Defendant hold in trust, as constructive trustee for the benefit of Hard Candy, LLC, its profits obtained from the infringement"; an "accounting of all amounts due and owing to Hard Candy, LLC as a result of Defendant's infringing activities"; money damages, including actual and statutory damages; punitive damages; and attorneys' fees and costs. Hard Candy dropped its claim for actual damages before trial, but it did not withdraw all of its claims for monetary relief, nor did it withdraw its demand for a jury trial. But just because Hard Candy seeks a monetary recovery does not mean that ...


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