Intellectual Property Law

Western District Reduces Jury's $10M False Advertising Damages to $500k

By Michael Atkins

National Products, Inc., sued Gamber-Johnson LLC in the Western District for false advertising. At issue in the suit, discussed here and here, was Gamber-Johnson’s promotional video that favorably compared the safety benefits of Gamber-Johnson’s emergency vehicle laptop mounting system with one developed by National Products (NPI).

The case was tried to a jury in April 2010. Trial lasted four days. The jury deliberated less than three hours. It returned a verdict finding that Gamber-Johnson had deliberately engaged in false advertising and awarded National Products $10 million in damages.

The next day, Western District Judge James Robart ordered the parties to submit supplemental briefing on Gamber-Johnson’s motion for judgment as a matter of law addressing the jury’s award of damages.

On August 13, the court reduced the jury’s award to $492,332.

Key to the court’s decision was its finding that National Products did not seek actual damages for lost sales. Given that finding, the court only considered damages based on an unjust enrichment theory or disgorgement of Gamber-Johnson’s profits and did not consider whether substantial evidence existed to support a finding of actual damages to the tune of $10 million.

The court particularly considered that: “(1) a remedy should not be granted as a matter of right; (2) the remedy must represent compensation for damages and not a punishment to the defendant; (3) NPI is not entitled to a windfall; (4) there must be some evidence of damage attributable to the false advertisement; (5) the court must look to the ‘totality’ of the circumstances; and (6) the court should consider the jury’s findings that Gamber-Johnson engaged in deliberate false advertisement.”

Applying these principles, the court accepted the testimony of Gamber-Johnson’s damages expert but applied the higher Gamber-Johnson profit margin that National Product’s damages expert calculated.

Gamber-Johnson’s expert “opined that NPI’s lost profit from sales during this time period of approximately $365,000 was the best indication of Gamber-Johnson’s gained profit from a diverted sales that would have gone to NPI. This calculation is also consistent with [NPI’s expert’s] trend analysis of NPI’s lost sales during the relevant time period. [Gamber-Johnson’s expert], alternatively, performed a trend analysis on Gamber-Johnson’s profits to determine if it made a profit during the relevant time period. [Gamber-Johnson’s expert] first assumed that there were no other factors that could have increased Gamber-Johnson’s profits other than diverted sales from NPI. He then calculated Gamber-Johnson’s revenue over the relevant period and identified an increase in sales of $1,183,492, in relation to Gamber-Johnson’s historical revenue trend. Using the lower profit margin he calculated of 29.8%, [Gamber-Johnson’s expert] determined that based on the historical trend analysis, Gamber-Johnson’s additional profits during this time were $352,796. NPI did not offer additional evidence to refute this calculation. However, the court notes that had [Gamber-Johnson’s expert] used the higher profit margin posited by [NPI’s expert] of 41.6%, Gamber-Johnson’s net profit during the relevant time-period, based on a trend analysis, would have been approximately $492,332.”

The case cite is National Products, Inc. v. Gamber-Johnson LLC, No. 08-0049 (W.D. Wash. Aug. 13, 2010) (Robart, J.).

Full post as published by Seattle Trademark Lawyer on August 17, 2010 (boomark / email).