CHAPTER 10 - § 10.03

• Jurisdiction: United States

§ 10.03 DISGORGEMENT OF DEFENDANT'S PROFITS

In addition to providing for injunctive relief, the Lanham Act provides for monetary remedies.⁹⁰ As with injunctions, monetary remedies are awarded based on the principles of equity.⁹¹ This section explores the primary monetary remedy sought in trademark and trade dress cases, namely, the defendant's profits. This remedy may sometimes be referred to as "disgorgement" because the effect of the remedy is to "disgorge" the profits earned by the infringer to the trade dress owner.

A defendant's profits may be awarded to a trade dress plaintiff to compensate for the plaintiff's loss caused by the defendant's infringing activity, particularly where the plaintiff and defendant are competitors.⁹² This remedy presumes that the defendant's infringing activities have wrongfully diverted profits from the plaintiff.⁹³ Thus, awarding defendant's profits to a prevailing plaintiff is a way of undoing or taking back the monies that were unjustly earned by the defendant.⁹⁴ At the same time, this remedy provides a deterrent to future infringers by making it clear that infringement will not be permitted to be profitable.⁹⁵

This remedy presumes that the plaintiff would have made all of the sales made by the defendant had it not been for the defendant's infringement. Because of the inherent difficulties in proving that sales were actually diverted, courts often assumed that the infringer's profits consisted entirely of profits on sales that would have been made by plaintiff but for the infringing actions.⁹⁶ However, this also assumes that the plaintiff and defendant are market competitors. Where the litigants are not competitors, courts are split on whether an award of defendant's profits can be justified on the basis of either unjust enrichment or deterrence.⁹⁷

Because monetary damages are awarded based on equitable principles, they are not guaranteed once likelihood of infringement is proven.⁹⁸ In determining whether it is equitable to award the defendant's profits (or any other monetary damages, for that matter), many courts consider and weigh a combination of the six factors⁹⁹ sometimes referred to as the Pebble Beach factors:

1. Whether an injunction alone is sufficient to remedy the situation

2. Whether the defendant intended to confuse or deceive the public

3. Whether sales were actually diverted from the plaintiff to the defendant

4. Whether the plaintiff delayed in asserting his rights

5. Whether the public interest (in making infringement unprofitable) would be served by the award of profits

6. Whether the infringement was a

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