Summary: Vape Company’s Apportionment Argument Goes Up in Smoke
Plaintiffs Vital Pharmaceuticals (VPX) and JHO Intellectual Property Holdings filed a trademark infringement and unfair competition suit against defendant PHD Marketing, Inc (PHD). (Vital Pharmeceuticals d/b/a Bang Energy; and JHO Intellectual Property Holdings, LLC v. PHD Marketing, Inc., No. 20-CV-06745 (C.D. Cal. July 26, 2022)) VPX has manufactured and sold energy drinks using the “bang” name and “b” logo since 2016. PHD operates a “cash and carry” warehouse where buyers buy in-store or PHD ships products to them. In December of 2019, PHD began selling disposable vapes manufactured by a Chinese supplier, VTEK, that used the name “bang” and a “b” logo. After receiving evidence of actual consumer confusion, VPX sent PHD a cease and desist letter, and ultimately filed this lawsuit, alleging that PHD’s vapes infringed VPX’s “bang” trademarks.
Expert Opinions and Testimony
VPX provided a likelihood of confusion survey conducted by Dr. Justin Anderson, a survey expert at MMR Strategy Group. The survey found a 20.1% likelihood of confusion. After receiving VPX’s survey, PHD conceded infringement, and the matter moved to trial solely to determine damages.
VPX’s damages expert determined that PHD’s total revenue from sales of the infringing vapes was $10,773,940. PHD’s damages expert agreed with the total revenue calculation. PHD’s damages expert then subtracted costs that were provided by PHD to calculate the total profits that PHD made from sales of the infringing vapes as $1,175,590. Finally, PHD’s damages expert used the 20.1% likelihood of confusion from VPX’s survey and applied that as an apportionment percentage to calculate that profits due to the infringing use of the “bang” name and “b” logo were $236,294.
At trial, Dr. Anderson testified that PHD’s reliance on the likelihood of confusion measure as an apportionment percentage was flawed and unreliable. He argued that his likelihood of confusion survey included consumers who are likely to purchase any disposable vape, but a survey designed for apportionment should have measured consumers who purchased PHD’s infringing vapes. Further, Dr. Anderson argued that his likelihood of confusion survey asked questions to measure whether consumers believe that the infringing vapes were made by or affiliated with VPX, but an apportionment survey should have measured the importance of the “bang” name and “b” logo in consumers’ decisions to purchase PHD’s infringing vapes.
Court Ruling and Restitution
After hearing the testimony that these experts provided during the bench trial, the court ruled for the plaintiff in the amount of $10,584,308. The court did not allow PHD to deduct very much of its alleged costs due to lack of supporting documentation for those expenses. On the issue of apportionment, the court ruled that a likelihood of confusion measure does not serve as a reliable measure for apportionment. In its decision, the court cited the same arguments that Dr. Anderson discussed during his testimony. The court also cited to prior decisions on this issue, including Globefill Inc. v. Elements Spirits, Inc., 2017 WL 6520589 (C.D. Cal. Sept. 8, 2017) and adidas America, Inc. v. Skechers USA, Inc., 2017 WL 3319190 (D. Or. Aug. 3, 2017).
Of note to MMR is that Dr. Bruce Isaacson, a survey expert and President of MMR Strategy Group, conducted a likelihood of confusion survey on behalf of the plaintiff in Globefill Inc v. Elements Spirits, 2017 WL 6520589 (C.D. Cal. Sept. 8, 2017). In that case, the court also rejected an attempt to use a likelihood of confusion survey to apportion damages for trademark infringement.