August 14, 2014

Statutory Damages under Lanham Act Section 35(c) Related to the Use of Counterfeit Marks

Sharmian L. White – October 16, 2014

Section 35 of the Lanham Act, 15 U.S.C. § 1117, provides monetary remedies for trademark infringement, unfair competition, and willful trademark dilution. Subsection 1117(a) allows for the recovery of a defendant's profits, any damages sustained by the plaintiff, costs of the action, and, "in exceptional cases," the plaintiff's attorney fees. Subsection 1117(b) applies with respect to violations that involve the intentional use of a known counterfeit mark, and it requires the court to treble the profits or damages referenced in subsection 1117(a) and to award reasonable attorney fees "unless the court finds extenuating circumstances."

A "counterfeit mark" is defined at 15 U.S.C. § 1116(d)(1)(B)(i) as, in relevant part,

a counterfeit of a mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered.

While recovery under subsections 1117(a) and (b) is focused on a plaintiff's "actual damages," subsection 1117(c) provides an alternative to proving actual damages with respect to violations that involve the use of a counterfeit mark. Subsection 1117(c) allows a plaintiff to seek statutory damages instead of actual damages. The option to recover statutory damages was provided in light of Congress's recognition that counterfeiters' records are frequently "nonexistent, inadequate, or deceptively kept[,] . . . making proving actual damages in these cases extremely difficult if not impossible." S. Rep. No. 104-177, at 10 (1995). The ability to elect statutory damages can provide a powerful incentive for a trademark holder to pursue infringement litigation that might otherwise not be undertaken because of the inability to obtain information to support recovery.

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