JL Beverage Company, LLC v. Fortune Brands Inc. et al

Filing 252

ORDER that Jim Beam's motion in limine #1 (ECF Nos. 208 and 209 ) is denied without prejudice. Signed by Judge Miranda M. Du on 4/18/2018. (Copies have been distributed pursuant to the NEF - LH)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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JL BEVERAGE COMPANY, LLC, a
Nevada limited liability company,

Case No. 2:11-cv-00417-MMD-CWH
ORDER

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Plaintiff,
v.

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BEAM, INC., a Delaware corporation, et
al.,

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Defendants.
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I.

SUMMARY

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Before the Court is Defendants Beam Inc. and Jim Beam Brands Co.’s (collectively,

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“Jim Beam”) motion in limine #1 (“Motion”) (ECF Nos. 208 (sealed version), 209 (redacted

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version)). The Court has reviewed Plaintiff JL Beverage Company, LLC’s (“JL”) response

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(ECF No. 220) and Jim Beam’s reply (ECF Nos. 227 (redacted version), 228 (sealed

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version)). For the reasons discussed below, the Court denies Jim Beam’s Motion.

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II.

BACKGROUND

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The facts giving rise to this action are set out in detail in the Court’s previous orders

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and in the Ninth Circuit’s opinion reversing an earlier order granting summary judgment

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on different grounds. (ECF Nos. 98, 107, 147.)

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In brief, JL manufactures and sells vodka (JOHNNY LOVE vodka) whose bottles

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feature stylized depictions of lips that JL has trademarked. Jim Beam also sells vodka

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(PUCKER vodka) whose bottles feature stylized depictions of lips. JL alleges that Jim

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Beam’s use of the lips constitutes trademark infringement and false designation of origin

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under the Lanham Act as well as common law trademark infringement and unfair

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competition. (See ECF No. 30 at 9-11; see also ECF No. 160 at 1-2 (clarifying what claims

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were revived by the Ninth Circuit’s decision); ECF No. 162 at 3 (same).) The Court has

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previously held that JL may not seek actual damages or royalties on any of its claims.

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(ECF No. 185 at 10.)

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III.

LEGAL STANDARD

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“A motion in limine is a procedural mechanism to limit in advance testimony or

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evidence in a particular area.” United States v. Heller, 551 F.3d 1108, 1111 (9th Cir. 2009).

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It is a preliminary motion that is entirely within the discretion of the Court. See Luce v.

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United States, 469 U.S. 38, 41-42 (1984). In limine rulings are provisional. Such “rulings

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are not binding on the trial judge [who] may always change his mind during the course of

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a trial.” Ohler v. United States, 529 U.S. 753, 758 n.3 (2000); accord Luce, 469 U.S. at 41

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(noting that in limine rulings are always subject to change, especially if the evidence

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unfolds in an unanticipated manner).

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IV.

DISCUSSION

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JL apparently will seek disgorgement of profits at trial based on Jim Beam’s total

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nationwide sales of PUCKER vodka. (See ECF No. 220 at 2.) Jim Beam seeks to exclude

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evidence of the sales altogether, arguing that JL has failed to distinguish between those

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sales that resulted from infringing activity and those that did not. (Id.; ECF No. 209 at 4.)

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The Court will deny Jim Beam’s Motion because granting the motion would amount to

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dismissal of JL’s claim for damages, though the denial will be without prejudice given the

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serious concerns Jim Beam has raised regarding JL’s evidentiary basis for seeking profits

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based on Jim Beam’s nationwide sales of PUCKER vodka.

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“Section 35 of the Lanham Act, 15 U.S.C. § 1117(a), governs the award of monetary

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remedies in trademark infringement cases and provides for . . . . an award, subject to

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equitable principles, of ‘any damages sustained by the plaintiff.’” Lindy Pen Co. v. Bic Pen

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Corp., 982 F.2d 1400, 1405, 1407 (9th Cir. 1993), abrogated on other grounds by

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SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179 (9th Cir. 2016). “A plaintiff
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must prove both the fact and the amount of damage.” Id. at 1407. “Because proof of actual

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damage is often difficult, a court may award damages based on defendant’s profits on the

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theory of unjust enrichment.” Id. “[A]n accounting [and disgorgement of the defendant’s

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profits] is intended to award profits only on sales that are attributable to the infringing

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conduct.” Id. at 1408. Thus, a plaintiff seeking disgorgement of profits under the Lanham

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Act bear the initial burden of establishing defendant’s gross profits attributable to infringing

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activity with reasonable certainty. Id. Defendant then bears “the burden of showing which,

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if any, of its total sales are not attributable to the infringing activity, and, additionally, any

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permissible deductions for overhead.” Id. Gross profits cannot be attributed to infringing

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activity when registrants have used the marks in distinct and geographically separate

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markets from the unauthorized users because no public confusion is possible. Kerzner

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Int’l Ltd. v. Monarch Casino & Resort, Inc., 675 F. Supp. 2d 1029, 1047 (D. Nev. 2009)

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(quoting Dawn Donut Co., Inc. v. Hart’s Food Stores, Inc., 267 F.2d 358 (2d Cir.1959));

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see also Russell Rd. Food & Beverage, LLC v. Spencer, No. 2:12-CV-01514-LRH, 2013

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WL 321666, at *2 (D. Nev. Jan. 28, 2013).

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Jim Beam relies primarily on Lindy Pen, 982 F.2d 1400, to argue that JL should not

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be permitted to introduce evidence of Jim Beam’s profits from total nationwide sales of

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PUCKER vodka. (ECF No. 209 at 4.) In Lindy Pen, the plaintiff sued the defendant for

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trademark infringement, and the Ninth Circuit ultimately found that the plaintiff had

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established a likelihood of confusion in one particular market—the telephone order market.

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982 F.2d at 1403-04. Nevertheless, the plaintiff sought disgorgement of profits based on

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the defendant’s total sales of goods—not just telephone order sales—following remand.

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Id. at 1407-08. The district court found that an award of damages based on total sales was

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inappropriate because the total sales included sales outside the telephone order market,

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where confusion was not likely to occur. See id. at 1408. The Ninth Circuit affirmed the

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district court, finding that the plaintiff failed to carry its initial burden of establishing the

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defendant’s gross profits attributable to the infringing conduct. Id.

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Here, Jim Beam argues, JL seeks disgorgement of profits based on Jim Beam’s

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total nationwide sales of PUCKER vodka even though Jim Beam’s total nationwide sales

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include sales in geographic locations where JL did not sell any product. (ECF No. 209 at

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3.) Jim Beam further argues that while JL theoretically might be able to demonstrate that

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the infringing market comprises the entire United States, JL cannot do so here because

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JL has failed to disclose sufficient evidence under Rule 26(a) to support such a showing.

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(ECF No. 227 at 5.)

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JL argues in response that it need not identify any particular market because

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federally registered trademarks afford nationwide protection. (ECF No. 220 at 2.) While

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trademark registration affords nationwide protection against infringement, infringement

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exists only where infringing products are sold in the same market as authorized products.

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See Kerzner, 675 F. Supp. 2d at 1047 (quoting Dawn Donut Co., Inc. v. Hart’s Food

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Stores, Inc., 267 F.2d 358 (2d Cir. 1959)) (“[I]f the use of the marks by the registrant and

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the unauthorized user are confined to two sufficiently distinct and geographically separate

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markets, with no likelihood that the registrant will expand his use into the defendant’s

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market, so that no public confusion is possible, then the registrant is not entitled to enjoin

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the junior user’s use of the mark.”); Russell, 2013 WL 321666, at *2. Courts have referred

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to markets in which both infringing and authorized products are sold as “infringing

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markets.” See, e.g., Lindy Pen, 982 F.2d at 1408. While JL theoretically might demonstrate

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that the infringing market here comprises the entire United States, JL still bears the initial

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burden of identifying an infringing market from which Jim Beam’s profits derived. See id.

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Accordingly, JL’s first argument—that it need not identify an infringing market—is

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unavailing.

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JL does in fact argue that the infringing market comprises the entirety of the United

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States. JL alleges that it advertised, marketed, and promoted goods bearing its trademarks

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throughout the United States and that it has distributors in at least twenty states. (ECF No.

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220 at 2-3.) Jim Beam counters that JL has no evidence showing national sales, however.

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(ECF No. 227 at 7-8.) For example, Jim Beam cites deposition testimony by JL’s principal,
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Mr. Diab, that JL never sold any of its product in Florida. (Id. at 10.) However, Jim Beam’s

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argument goes to the weight rather than the admissibility of JL’s evidence.

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JL further argues that there is no need to show perfect geographical overlap

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between the markets in which its product was sold and the markets in which Jim Beam’s

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PUCKER vodka was sold. (ECF No. 220 at 3.) Regardless of the degree of geographical

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overlap, however, JL must at least carry its initial burden of showing that Jim Beam’s gross

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profits derived from an infringing market. Lindy Pen, 982 F.2d at 1408. While Jim Beam

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has persuasively argued that it is unlikely JL will be able to bear its burden at trial, such

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argument goes to the merits of the case rather than the admissibility of JL’s proposed

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evidence.

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JL further argues that Jim Beam seeks to improperly shift the burden of production

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to JL. (ECF No. 220 at 4.) JL insists that once it has proven infringement, the burden shifts

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to Jim Beam to show that its profits were not attributable to the infringing mark. (Id.) JL

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misstates its burden, however. The plaintiff in Lindy Pen made the same argument as JL,

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and the Ninth Circuit rejected it, finding that “[t]he plaintiff has . . . the burden of

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establishing the defendant’s gross profits from the infringing activity . . . .” Lindy Pen, 982

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F.2d at 1408. Only when the plaintiff has isolated the gross profits attributable to the

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infringing conduct does the burden shift to the defendant to demonstrate that those profits

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resulted from something other than infringement, such as the defendant’s reputation. Id.;

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see also Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 206

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(1942) (describing sources of profits other than infringement). Accordingly, JL’s argument

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regarding the burden of production is unpersuasive.

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JL further argues that excluding all evidence of Jim Beam’s profits under Fed. R.

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Civ. P. 37(c)(1) is too harsh a sanction because it amounts to dismissal of a claim. (ECF

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No. 220 at 4.) The Court agrees that excluding evidence of Jim Beam’s profits altogether

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would amount to dismissal of JL’s claim for damages in light of the Court’s prior orders

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restricting JL’s remedies. When a discovery sanction amounts to dismissal of a claim, a

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district court is required to consider whether the claimed noncompliance involved
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willfulness, fault, or bad faith as well as the availability of lesser sanctions. R & R Sails,

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Inc. v. Ins. Co. of Penn., 673 F.3d 1240, 1247 (9th Cir. 2012). Jim Beam has made no

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showing of willfulness, fault, or bad faith. Accordingly, the Court will deny Jim Beam’s

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Motion. However, given the serious concerns Jim Beam has raised regarding JL’s

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evidentiary basis for seeking damages based on Jim Beam’s total nationwide sales of

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PUCKER vodka, the denial will be without prejudice.

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V.

CONCLUSION

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The Court notes that the parties made several arguments and cited to several cases

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not discussed above. The Court has reviewed these arguments and cases and determines

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that they do not warrant discussion as they do not affect the outcome of the motion before

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the Court.

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It is therefore ordered that Jim Beam’s motion in limine #1 (ECF Nos, 208, 209) is
denied without prejudice.
DATED THIS 18th day of April 2018.

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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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