Trademark Infringement Damages Under the Lanham Act

In determining whether to bring a lawsuit for trademark infringement, an owner of a registered trademark should consider what types of damages are available in such a suit.  After all, filing and maintaining a lawsuit in federal court is expensive.  Under the Lanham Act—the primary federal trademark statute in the U.S.—a successful trademark infringement plaintiff can typically obtain injunctive relief.  For example, a court may order that the infringer cease engaging in the infringing conduct, recall certain products, or add a disclaimer to its materials going forward.  The plaintiff is also entitled to monetary damages if the plaintiff can show that the infringement caused actual customer confusion or that the infringer was unjustly enriched by the infringing conduct.  In other words, to receive money damages in most cases, you need to show that customers who thought they were purchasing from you instead made the purchases from the infringer’s business and/or that the infringer unfairly benefitted from its unauthorized use of your mark.   

Keep in mind that all monetary damages allowed for trademark infringement under the Lanham Act are compensatory and not punitive.  That means that, no matter how egregious and malicious the infringement is, the damages you’re entitled to must be based on actual harm to your business.    If you do have evidence of such harm, the Lanham Act provides for three main types of monetary damages for trademark infringement: (1) actual damages sustained by the plaintiff; (2) disgorgement of the profits the defendant made as a result of the infringement; and (3) the costs of the action. 

Actual Damages

The Lanham Act permits a plaintiff to recover its actual damages caused by the infringement.  You can show these damages in the form of lost profits, price erosion, or loss of goodwill.  Lost profits can be shown by demonstrating that you would have received certain revenue but for the infringer’s conduct.  Upon such a showing, both past lost profits and anticipated future profits can be recoverable.  Price erosion can be shown if you needed to lower prices due to the infringement.  Loss of goodwill can be shown if the value of the trademark decreased following the infringement.  Corrective advertising costs incurred by a plaintiff—i.e., if you pay for ads to correct customer confusion—also can be recoverable as actual damages if the parties are direct competitors in the same marketplace. 

Note that some courts, instead of awarding damages corresponding to losses, may award actual damages in the form of a “reasonable royalty,” which is the amount of a license fee that the infringer should’ve paid you instead of infringing. 

When thinking about actual damages, keep in mind that the Lanham Act gives courts broad discretion to consider the circumstances of each case.  For example, if a court determines that a plaintiff’s damages are difficult to calculate and/or the plaintiff would be undercompensated by whatever infringement damage is provable, it can award monetary damages of up to three times the amount of the actual damages the plaintiff can prove.  On the flip side, a court may decline to award monetary damages altogether if it finds injunctive relief to be sufficient.   

Disgorgement of Profits

Instead of actual damages—or, in some cases, in addition to them—the Lanham Act permits a plaintiff to disgorge the infringer’s profits.  Unlike actual damages, which typically require a showing of customer confusion, you don’t need to show actual confusion to disgorge the infringer’s profits.  Disgorgement can be imposed either to prevent the infringer from unfairly benefitting from the infringement of your mark or as a substitute for your lost profits in cases where you can’t provide sufficient evidence of lost sales.  If a plaintiff seeks disgorgement of profits on the basis that the infringer didn’t deserve them, the plaintiff needs to show that the defendant knew or should have known of the infringement.  This showing is not required when seeking disgorgement as a substitute for the plaintiff’s own lost profits.  

To recover disgorged profits, a plaintiff needs to establish the defendant’s gross revenues attributable to the infringement.  The burden then shifts to the defendant to challenge that all or some of those revenues resulted from the infringement and/or to prove appropriate deductions from the amount.  

Costs of the Action

The Lanham Act also provides for the recovery of reasonable attorneys’ fees in “exceptional cases.”  However, the act does not define what makes a case exceptional.  While courts have considerable discretion as to when to allow for the recovery of attorneys’ fees, most courts permit them only when the infringement is shown to be malicious, fraudulent, deliberate, or willful.  And some courts limit a plaintiff’s recovery of “costs of the action” to non-attorneys’-fee costs such as filing fees and fees for court reporters.  Keep in mind that courts have also awarded fees and costs to defendants in cases where a plaintiff brings a frivolous lawsuit or employs unsavory litigation tactics.  

Our firm regularly advises on and litigates trademark issues.  Feel free to contact us if we can be of help.