Australian Gold Inc. v. Hatfield
436 F.3d 1228 (10th Cir. Okla. 2006)
Facts: The three plaintiffs in this case are Australian Gold and Swedish Beauty, manufacturers of indoor tanning lotions, and ETS, Inc., who is the exclusive distributor of these lotions. ETS contracts with smaller distributers who sell to the actual tanning salons. Part of their contracts stipulates that the products can only be sold to tanning salons or hair/beauty salons and on premise instructions must be offered to the salons as well as twice yearly training for employees. This clause is added to prevent sale on these products on the internet. The defendants, a family of four, operated at least seven websites, where they resold the plaintiff’s products after buying them from an authorized distributor. The defendants created several businesses and names in order to circumvent the plaintiff’s security measures and even lied to distributors about owning tanning salons. The defendant bought anywhere from $6000-$24000 worth of products anywhere from 1-3 times a week. The defendants also used the Australian Gold and Swedish Beauty trademarks on their website.
Procedural Posture: The plaintiff discovered the defendants’ actions in January 2001 and sued them in Indiana state court soon after under their Internet Marketing Guys company. A default judgment was entered. The current case was brought in Oklahoma state court in December 2001. The defendants removed to federal court. Plaintiffs claimed trademark infringement, unfair competition, false advertising, and conspiracy to breach agreements. Summary judgment was granted for the Hatfields concerning trademark infringement and false advertising. Defendants received judgment as a matter of law on the claim of unfair competition. The jury returned a verdict for Australian Gold and Swedish beauty of $ 325,000 and $ 125,000, respectively, on their trademark infringement claims; $ 35,000 and $ 15,000, respectively, on their false advertising claims. ETS was awarded damages of $ 500,000 on its interference claims. The jury found that each Defendant engaged in a conspiracy to interfere with ETS's contracts. Punitive damages were awarded against all Defendants in connection with the tortious interference and conspiracy claims: $ 1 million against both Mark and Matthew Hatfield, $ 320,000 against Brenda Hatfield, $ 350,000 against Joanna Hatfield; $ 780,000 against Palm Harbor; and $ 780,000 against Quality Tanning. Finally, the district court enjoined Defendants from selling Products over the internet, displaying Plaintiffs' trademarks on the internet, or using Plaintiffs' trademarks in the metatags or html code for their Web sites.
Issue: Whether the interference with contracts claims should have been dismissed because (1) the contracts with which defendants allegedly interfered were illegal, (2) defendants acted neither maliciously nor wrongfully, and (3) plaintiffs did not present evidence of damages for tortious interference. Whether under the Lanham act, the plaintiffs presented evidence of a likelihood of consumer confusion, if the defendants' activities were shielded by the first sale doctrine, and if the plaintiffs presented evidence of damages sufficient to support their Lanham Act claims.
Holding: The defendants’ appeals have no merit because all factors were met and evidence supported damages.
Analysis: The Court began by holding that jurisdiction was proper in accordance with 28 U.S.C. §§ 1441 and 1332. They found that removal was proper, even the original suit was against “John Does.†The parties were still diverse although they had not been properly named.
On the interference with contract claim, the appellate court found that the agreements between one of the manufacturers and its distributors, which required compliance with suggested price, were legal under the Sherman Act, 15 U.S.C.S. § 1. They found that the agreements were unilateral agreements of terms on which the plaintiff would deal with their distributors.
The court found that the concealment of activities supported a finding that the defendant acted with malice. The Court found that the defendants knew that their actions were forbidden under the plaintiffs agreements, and the steps they took to conceal their actions show they did not act with “fair and honest intent.â€
The Court found damages to be fair because adequate evidence was presented to show the amount of products purchased by defendants, the value of what they sold products for over the internet, and costs the plaintiffs spent in enforcing their contracts.
The Court found that under the Lanham Act, the appellate court recognized the existence of "initial interest confusion," caused by defendants' use of the manufacturers' trademarks and metatags on defendants' web sites. The Court found that the marks were identical, which favored the plaintiff; the intent of the defendant favored the plaintiff because they were deliberately trying to undercut the plaintiff; the products were identical, which favored the plaintiffs; the degree of care of the purchaser weighed in favor of the plaintiffs because the defendants products were cheaper; and the strength of the trademark weighed in favor of the plaintiff because over half the tanning salons in the country carry their products. The court found there was no actual evidence of confusion and the defendant did place disclaimers of their website, which the court found inadequate.
The Court found that the first sale doctrine did not protect the defendants when they held the trademark out to sanction them as authorized distributors because this causes consumer confusion.
Again, the Court held that damages were proper because consumer confusion could be shown through direct evidence or diversion of sales. The Court also upheld the injunction to protect the plaintiffs from further violations as the lower court had the power to do.
436 F.3d 1228 (10th Cir. Okla. 2006)
Facts: The three plaintiffs in this case are Australian Gold and Swedish Beauty, manufacturers of indoor tanning lotions, and ETS, Inc., who is the exclusive distributor of these lotions. ETS contracts with smaller distributers who sell to the actual tanning salons. Part of their contracts stipulates that the products can only be sold to tanning salons or hair/beauty salons and on premise instructions must be offered to the salons as well as twice yearly training for employees. This clause is added to prevent sale on these products on the internet. The defendants, a family of four, operated at least seven websites, where they resold the plaintiff’s products after buying them from an authorized distributor. The defendants created several businesses and names in order to circumvent the plaintiff’s security measures and even lied to distributors about owning tanning salons. The defendant bought anywhere from $6000-$24000 worth of products anywhere from 1-3 times a week. The defendants also used the Australian Gold and Swedish Beauty trademarks on their website.
Procedural Posture: The plaintiff discovered the defendants’ actions in January 2001 and sued them in Indiana state court soon after under their Internet Marketing Guys company. A default judgment was entered. The current case was brought in Oklahoma state court in December 2001. The defendants removed to federal court. Plaintiffs claimed trademark infringement, unfair competition, false advertising, and conspiracy to breach agreements. Summary judgment was granted for the Hatfields concerning trademark infringement and false advertising. Defendants received judgment as a matter of law on the claim of unfair competition. The jury returned a verdict for Australian Gold and Swedish beauty of $ 325,000 and $ 125,000, respectively, on their trademark infringement claims; $ 35,000 and $ 15,000, respectively, on their false advertising claims. ETS was awarded damages of $ 500,000 on its interference claims. The jury found that each Defendant engaged in a conspiracy to interfere with ETS's contracts. Punitive damages were awarded against all Defendants in connection with the tortious interference and conspiracy claims: $ 1 million against both Mark and Matthew Hatfield, $ 320,000 against Brenda Hatfield, $ 350,000 against Joanna Hatfield; $ 780,000 against Palm Harbor; and $ 780,000 against Quality Tanning. Finally, the district court enjoined Defendants from selling Products over the internet, displaying Plaintiffs' trademarks on the internet, or using Plaintiffs' trademarks in the metatags or html code for their Web sites.
Issue: Whether the interference with contracts claims should have been dismissed because (1) the contracts with which defendants allegedly interfered were illegal, (2) defendants acted neither maliciously nor wrongfully, and (3) plaintiffs did not present evidence of damages for tortious interference. Whether under the Lanham act, the plaintiffs presented evidence of a likelihood of consumer confusion, if the defendants' activities were shielded by the first sale doctrine, and if the plaintiffs presented evidence of damages sufficient to support their Lanham Act claims.
Holding: The defendants’ appeals have no merit because all factors were met and evidence supported damages.
Analysis: The Court began by holding that jurisdiction was proper in accordance with 28 U.S.C. §§ 1441 and 1332. They found that removal was proper, even the original suit was against “John Does.†The parties were still diverse although they had not been properly named.
On the interference with contract claim, the appellate court found that the agreements between one of the manufacturers and its distributors, which required compliance with suggested price, were legal under the Sherman Act, 15 U.S.C.S. § 1. They found that the agreements were unilateral agreements of terms on which the plaintiff would deal with their distributors.
The court found that the concealment of activities supported a finding that the defendant acted with malice. The Court found that the defendants knew that their actions were forbidden under the plaintiffs agreements, and the steps they took to conceal their actions show they did not act with “fair and honest intent.â€
The Court found damages to be fair because adequate evidence was presented to show the amount of products purchased by defendants, the value of what they sold products for over the internet, and costs the plaintiffs spent in enforcing their contracts.
The Court found that under the Lanham Act, the appellate court recognized the existence of "initial interest confusion," caused by defendants' use of the manufacturers' trademarks and metatags on defendants' web sites. The Court found that the marks were identical, which favored the plaintiff; the intent of the defendant favored the plaintiff because they were deliberately trying to undercut the plaintiff; the products were identical, which favored the plaintiffs; the degree of care of the purchaser weighed in favor of the plaintiffs because the defendants products were cheaper; and the strength of the trademark weighed in favor of the plaintiff because over half the tanning salons in the country carry their products. The court found there was no actual evidence of confusion and the defendant did place disclaimers of their website, which the court found inadequate.
The Court found that the first sale doctrine did not protect the defendants when they held the trademark out to sanction them as authorized distributors because this causes consumer confusion.
Again, the Court held that damages were proper because consumer confusion could be shown through direct evidence or diversion of sales. The Court also upheld the injunction to protect the plaintiffs from further violations as the lower court had the power to do.