Free Trial Brief - District Court of Colorado - Colorado

Case 1:04-cv-00329-WYD-CBS

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Filed 04/27/2007

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.)

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United States District Court, C.D. California. TROVAN, LTD., a corporation of the United Kingdom; and Electronic Identification Devices, Ltd., a California corporation, Plaintiffs, v. PFIZER, INC., a Delaware Corporation, Defendant. No. CV-98-00094 LGB MCX. May 24, 2000. ORDER GRANTING AND DENYING DEFENDANT'S POST TRIAL MOTIONS; AND DENYING PLAINTIFFS' POST TRIAL MOTIONS BAIRD, J. I. INTRODUCTION *1 Plaintiffs are Trovan, Ltd. and its exclusive licensee EID, Inc. [FN1] Both plaintiffs are fairly small companies. Defendant is Pfizer, Inc., a large drug manufacturer. Plaintiffs sued defendant for trademark infringement, alleging both forward and reverse confusion. Having defeated defendant's motion for summary judgment based on the theory of reverse confusion, this case came to trial. After finding that defendant infringed plaintiffs' trademark, the jury awarded plaintiffs $8,000,000 ($5,000,000 in general damages and $3,000,000 in reasonable royalties) in compensatory damages and $135,000,000 in punitive damages. Defendant filed an array of post-trial motions challenging the verdict, asking for a new trial, and challenging prior Court orders. Plaintiffs also filed a motion to re-tax costs and a motion for attorneys' fees and non-taxable costs. II. FACTUAL BACKGROUND A. Plaintiffs' Product Since the early 1990s, plaintiffs have been selling passive transponder systems designed to overcome the limitations of bar codes for identification AND PROCEDURAL

purposes under the name Trovan. (Official Reporter Trial Transcript page ("Tr.") 880.) On July 2, 1991, the United States Patent and Trademark Office issued plaintiff Trovan a federal trademark registration for the name "Trovan." (Percy Decl.Ex. 26.) Plaintiffs sell different kinds of transponders for different uses. The Trovan ID-100A transponder was used for the identification of animals, including pets. (Tr. 1414.) This transponder was sold as the Trovan ID-100 with a syringe to inject the transponder under the animal's skin. (Tr. 496, 788-89.) In 1996, Trovan was permanently enjoined from selling this product because it infringed on Destron-Fearing's patent. (Tr. 496-98.) In October 1997, plaintiffs licensed the Zip Quill technology from Hopliet B.V. (Tr.Ex. 923 (Pagac Decl.Ex. 27).) The Trovan Zip Quill transponder was intended to replace the enjoined ID-100. (Tr. 501.) The Trovan Zip Quill is a radio frequency identification device encased in a starch compound with the microchip 100A in it surrounded by the starch compound. (Tr. 1411.) The Trovan Zip Quill was designed especially for animal identification. (Tr. 795, 2792.) Plaintiffs' other transponders have been used in a variety of industrial and commercial settings for identification purposes, including laundry and to ear tag livestock. (Tr. 498-500.) [FN2] Joseph Masin, EID's president, testified that his company is planning to use the Zip Quill as a delivery device for human pharmaceuticals. (Tr. 796.) In February 1999, Mr. Masin sent a letter to the Food and Drug Administration seeking approval for such use. (Tr. 1032; Tr.Ex. 446 (Pagac Ex. 28).) In late March, the FDA informed Mr. Masin that it would only review such application "in the context of an application for a specific drug or biological." (Tr.Ex.446) Pagac Decl.Ex. 28).) According to Mr. Masin, negotiations are ongoing with several companies, but no deal has been consummated with anyone. (Tr. 1021-22.) B. Defendant's Product *2 On October 28, 1996, Pfizer filed an application with the Patent and Trademark Office ("PTO") to register Trovan in International Class 5 (pharmaceuticals) for an antibiotic preparation, based on Pfizer's intent to use the mark. (Trial Ex. 437 (Pagac Decl.Ex. 38).) The PTO eventually issued a Certificate of Registration for that mark on August

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) 18, 1998 (Tr.Ex. 1042 (Pagac Decl.Ex. 44).) Based on Pfizer's "intent to use" application filed on October 28, 1996, the effective date on Pfizer's trademark registration referred back to that date. In February 1998, Pfizer began selling a new antibiotic, trovafloxacin, marketed as Trovan. (Tr. 1675.) Pfizer's antibiotic was sold only by prescription, and only for human use. (Tr. 1669- 1670.) C. Procedural Background On August 18, 1999, this case came to trial. The trial was conducted in three phases. The first two phases were tried to a jury. The third phase was tried before the Court. In the first phase, defendant's liability pursuant to the Lanham Act and California unfair competition common law was tried. On September 22, 1999, the jury returned a liability verdict on both claims. In the second phase, compensatory and punitive damages were tried. On October 12, 1999, the jury returned an $8,000,000 compensatory damage and $135,000,000 punitive damage verdict. Finally, in the third phase, defendant's profits from the sale of the Trovan drug were tried. The Court found that (1) profits were not warranted in this case, and (2) that even if profits were warranted, plaintiffs failed to show that defendant made any profits from the Trovan drug. As a result of these verdicts, defendant filed several post-trial motions. First, defendant filed a Renewed Motion for Mistrial. That motion was fully briefed and taken off-calendar pending the filing of all future post-trial motions by the parties. On March 15, 2000, defendant filed seven motions for judgment as a matter of law. The first motion was a Motion for Judgment as a Matter of Law on Plaintiffs' California Common Law Unfair Competition Claim and Their Claim for Punitive Damages or, in the Alternative for a New Trial On These Issues. The second motion was a Motion for Judgment as a Matter of Law on the Jury's Damage Award on Plaintiffs' Lanham Act Claims or, in the Alternative for a New Trial on the Issue or for a Remittitur. The third motion was a Motion for Judgment as a Matter of Law on Plaintiffs' Trademark Infringement, Unfair Competition, False Association or Sponsorship and Fraudulent Business Practices or, in the Alternative for a New Trial. The fourth motion was a Motion for Judgment as a Matter of Law in Favor of Pfizer Inc. on the Issues of Willfulness Under Federal Law and Malice, Fraud, or Oppression Under State Law or, in the Alternative for a New Trial. The fifth motion was a Motion for

Page 2 Judgment as a Matter of Law on the Jury's Punitive Damage Award or, in the Alternative for a New Trial or Remittitur on the Award. The sixth motion was a Motion for Judgment as a Matter of Law Based on the Improper Admission of the Jacoby Physician Survey and Accompanying Testimony by Dr. Jacoby. The seventh motion was a Motion for a New Trial on Damages Based on the Erroneous Admission of Trial Testimony by Weston Anson. On March 30, 2000, defendant also filed two additional motions, a Motion for Clarification of the Court's February 24, 2000 Order and a Motion for Issuance of a Letter of Request for the Production of Documents in the Netherlands Pursuant to the Hague Evidence Convention. Furthermore, both parties filed a Motion to Re-tax Costs, and plaintiffs filed a Motion for Awards of Attorneys' Fees and Non-Taxable Expenses. III. LEGAL STANDARD A. Judgment as a Matter of Law *3 Judgment as a matter of law is proper only if there is no legally sufficient evidentiary basis for a reasonable jury to find for the non-movant with respect to the issue. Fed.R.Civ.P. 50(a)(1). Thus, "[t]he jury's verdict is reviewed to determine whether it is supported [by] substantial evidence.... Substantial evidence is such 'relevant evidence as reasonable minds might accept as adequate to support a conclusion.' " Mockler v. Multnomah County, 140 F.3d 808, 815 n. 8 (9th Cir.1998). B. New Trial The threshold for a new trial is lower than that for a judgment as a matter of law. A new trial is appropriate where the Court finds that the jury verdict is against the clear weight of the evidence and or was a miscarriage of justice. See Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1371 (9th Cir.1987). The Court has much wider discretion in ruling on a motion for a new trial and may assess the credibility of the witnesses. See Chronicle Publ'g Co. v. Legrand, 24 U.S.P.Q.2d 1881, 1887 (N.D.Cal .1992) (citing cases). C. Remittitur Where an award of damages is "grossly excessive or monstrous, clearly not supported by the evidence, or only based on speculation or guesswork," Los

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) Angeles Memorial Coliseum Comm'n v. National Football League, 791 F.2d 1356, 1360 (9th Cir.1986), and gives rise to an inference that "passion and prejudice" tainted the jury's finding of liability, a new trial may be in order. See, e.g ., Seymour v. Summa Vista Cinema, Inc., 809 F.2d 1385, 1387 (9th Cir.1987). However, the Ninth Circuit has held that "[w]here there is no evidence that passion and prejudice affected the liability finding, remittitur is an appropriate method of reducing an excessive verdict." Seymour, 809 F.2d at 1387. D. Mistrial A mistrial is the appropriate remedy for persistent prejudicial attorney misconduct. See, e.g., AnheuserBusch, Inc. v. Natural Beverage Distrib., 69 F.3d 337 (9th Cir.1995). A mistrial is particularly warranted where "the flavor of misconduct ... sufficiently permeates the entire proceeding to provide conviction that the jury was influenced by passion and prejudice in reaching its verdict." Id. at 346. In order to determine whether the misconduct of counsel was prejudicial and warrants a new trial, the Court examines, on a case-by-case basis, "the totality of the circumstances, including the nature of the comments, their frequency, their possible relevancy to the real issues before the jury, the manner in which the parties and the court treated the comments, the strength of the case (e.g., whether it is a close case), and the verdict itself." See City of Cleveland v. Peter Kiewit Sons' Co., 624 F.2d 749, 756 (6th Cir.1980). IV. ANALYSIS A. Defendant's Motion as a Matter of Law on Plaintiffs' California Common Law Unfair Competition Claim And Their Claim For Punitive Damages Or, in The Alternative For a New Trial on These Issues (Motion No. 1) *4 The jury awarded plaintiffs $135,000,000 in punitive damages. Punitive damages are not available under the Lanham Act. Thus, plaintiffs' common law unfair competition claim (the only state claim asserted in this case) must be the predicate for the jury's punitive damage award. Plaintiffs do not dispute that contention. Consequently, defendant argues that it is entitled to a judgment as a matter of law on the punitive damage claim because: (1) the jury was never (properly) instructed on plaintiff's common law unfair competition claim (thereby removing from the jury the only claim which

Page 3 supports the punitive damage award); and (2) even if the claim was properly before the jury, California unfair competition common law does not recognize claims for reverse confusion, thus plaintiffs are not entitled to monetary damages because they failed to show direct competition among the parties and palming-off (both of which are a predicate for money damages under current California unfair competition common law). Plaintiffs challenge each of these claims. 1. The Common Law Unfair Competition Claim Was Properly Before The Jury First, plaintiffs argue that the issue of unfair competition was in front of the jury. [FN3] Plaintiffs point to Pfizer's proposed jury instruction ten, and ultimately, the Court's final jury instruction eleven which states: In this case, the plaintiffs, Trovan, Ltd. and Electronic Identification Devices, Ltd. ("EID"), contend that defendant, Pfizer, Inc. ("Pfizer") has infringed plaintiff Trovan, Ltd.'s trademark; that Pfizer's use creates a false impression of association that the plaintiffs sponsor Pfizer's product or that Pfizer is affiliated with plaintiffs; and that Pfizer has engaged in unfair competition, and fraudulent business practices. Pfizer denies each of these claims. The plaintiffs have the burden of proving each of their claims by a preponderance of the evidence. (Court's Jury Instruction No. 11, Liability Phase.) [FN4] Furthermore, plaintiffs argue that the jury was instructed on the elements of that common law claim. Namely, plaintiffs point to the Court's jury instruction seventeen, which states: On plaintiffs' claim for unfair competition, the plaintiff has the burden of proving each of the following elements by a preponderance of the evidence: 1. Defendant used the TROVAN mark on or in connection with goods; 2. The use of the TROVAN mark by Pfizer is likely to cause confusion, mistake, or deception, as to: a. the origin of defendant's goods; b. the affiliation or connection of defendant's goods with another person; or c. the sponsorship of defendant's goods by another person. 3. Plaintiffs were or are likely to be damaged by

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) the actions of defendant. If you find that each of these element has been proved, your verdict should be for the plaintiffs on the unfair competition claim. On the other hand, if any of these elements has not been proved, your verdict should be for the defendant on the unfair competition claim. *5 (Court's Jury Instruction No. 17, Liability Phase (emphasis added)). Thus, in light of the record, it is clear that the issue of common law unfair competition was in front of the jury. 2. California Unfair Competition Common Law Does Not Recognize Claims For Reverse Confusion Without a Showing of Competition Pfizer further claims that even though the instructions were given, the most they could support is the entry of an injunction, as California law requires a finding of direct competition and passingoff in order to support any award of damages on that claim. Thus, plaintiffs' failure to seek an instruction on these two elements prevents them from getting an award of damages on that claim, and thus limits their recovery on that state claim to an entry of injunctive relief. Put simply, defendant's argument requires this Court to answer the following question: does California require the showing of (1) competition and (2) palming off in order to support an award of damages in a common law unfair competition case? If so, then a plaintiff cannot recover damages for reverse confusion in California. [FN5] If not, then plaintiffs' common law claim, and its corresponding verdict, must stand. The California courts have never squarely addressed this issue. [FN6] Plaintiffs insist, however, that California common law provides for monetary remedies in cases where evidence of direct competition and palming-off were lacking. To support that assertion, plaintiffs cite to Ojala v. Bohlin, 178 Cal.App.2d 292 (1960) and A & M Records, Inc. v. Heilman, 75 Cal.App.3d 554 (1977). In Ojala, the plaintiff conceived and developed the design of the "Hollywood Fast Draw Holster," which enabled a quicker draw of one's pistol. See Ojala, 178 Cal.App.2d at 296. After conceiving of the design, plaintiff entered into an agreement with defendant (a holster manufacturer) for the manufacture of the design. See id. As part of their agreement, defendant promised not to compete with plaintiff. See id. Thereafter, however, defendant started advertising and selling a holster named "the lightning draw," which was identical to plaintiff's original design and

Page 4 which was advertised in the same publication as plaintiff's product was advertised. See id. The court found that defendant was indeed a competitor of plaintiff. The Court also found, however, that defendant did not attempt to "palm off" plaintiff's goods, as defendant put his own name on the infringing holster. Nonetheless, even lacking the element of palming off, the court found that plaintiff was entitled to monetary damages. Recognizing the breadth of the state claim of unfair competition, the court stated that "[t]he scope of unfair competition may not be limited to a particular type of deception" and that "[t]he legal concept of unfair competition has evolved as a broad and flexible doctrine with a capacity for further growth to meet changing conditions, and there is no complete list of the activities which constitute unfair competition." Id. at 301. Thus, it concluded that "equity would grant appropriate relief." Id. *6 In A & M Records, 75 Cal.App.3d at 554, the defendant advertised and sold pirated copies of records and tape containing plaintiff's copyrighted works. See id. at 560. The trial court entered summary judgment in favor of plaintiff on plaintiff's unfair competition claim. See id. at 564. On appeal, defendant argued that the trial court erred because the record below failed to show that his conduct constituted palming off (a prerequisite of an unfair competition claim). The court of appeals affirmed the granting of summary judgment and held that although the plaintiff had not shown palming-off, defendant "ha[d] admitted ... that without authorization he duplicated performances owned by [plaintiff] in order to resell them for profit. This conduct present[ed] a classic example of the unfair business practice of misappropriation of the valuable efforts of another. Such conduct unquestionably constitutes unfair competition, even if there is no element of "palming off." Id. The facts of Ojala and A & M Records are clearly different from the present facts. Although the California courts may have recognized a cause of action lacking evidence of palming off, they have done so in the context of competing businesses, i.e., one party was obviously gaining from his use of the other party's "work ." Here, plaintiffs have disavowed any claims that Pfizer attempted to capitalize on plaintiffs' mark. (Tr. 5048.) Furthermore, as the record indicates, the parties here do not currently compete at all (even though an argument can be made

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) that the parties could potentially compete in the future). Thus, in light of these two cases, the law appears to be clear: in order to maintain a claim for unfair competition under California law, and in order to recover monetary damages for such claim, a plaintiff need not show palming off. However, a plaintiff still needs to show competition. [FN7] Plaintiffs urge, however, that this Court recognize a claim for reverse confusion under the California common law of unfair competition, even lacking the element of competition. To support this argument, plaintiffs state that the law of unfair competition "is fluid and encompasses the myriad of forms that unfair competition can take." (Pls.' Mem.P. & A. Opp'n Motion No. 1 at 9.) At present, "the common law tort of unfair competition is generally thought to be synonymous with the act of 'passing off' one's goods as those of another." Bank of the West v. Superior Court, 2 Cal.4th 1254, 1263 (1992). As explained by the Bank of the West court, "[t]he tort developed as an equitable remedy against the wrongful exploitation of trade names and common law trademarks that were not otherwise entitled to legal protection." Id. (citing 1 Callmann, Unfair Competition, Trademarks & Monopolies (4th ed.1981) § § 2.01-2.03.). The court recognized that the tort also includes "acts analogous to 'passing off,' such as the sale of confusingly similar products, by which a person exploits a competitor's reputation in the market." Id. (citing Rest., Torts, § § 711-743; 1 Callmann, supra, § 2.04.). However, the court recognized the limitations of that common law remedy by stating that the expansion of legal remedies against deceptive business practices in general occurred not so much through the common law as through the enactment of statutes, particularly the Federal Trade Commission Act. See id. The court noted that "[o]f particular importance was a 1938 amendment to the Act, which expanded the Federal Trade Commission's (FTC) preexisting jurisdiction over "unfair methods of competition" to include "unfair or deceptive acts or practices." 15 U.S.C. § 45. This amendment, which became a model for similar state regulatory statutes, gave the FTC jurisdiction over unfair business practices that harmed the public, whether or not such practices also implicated the interests of competitors. See FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 239-244 (1972).

Page 5 *7 A host of so-called "little FTC Acts" followed, including California's Unfair Business Practices Act. See Cal.Bus. & Prof.Code § § 17200 et seq.; Civ.Code, former § 3369. The primary purpose of these statutes was to "extend [ ] to the entire consuming public the protection once afforded only to business competitors." Barquis v. Merchants Collection Assn., 7 Cal.3d 94, 109 (1972). The common law tort of unfair competition, which required a showing of competitive injury, did not provide an effective remedy for consumers. See Committee On Children's Television, Inc. v. General Foods Corp., 35 Cal.3d 197, 209 (1983); Barquis, 7 Cal.3d at 109-110. In contrast, statutory "unfair competition" extends to all unfair and deceptive business practices. For this reason, the statutory definition of "unfair competition" "cannot be equated with the common law definition...." Barquis, 7 Cal.3d at 109 (interpreting Civ.Code, former § 3369) The only state law claim before the jury was the California common law claim for unfair competition. Although the Court believes that California courts, if presented with facts analogous to those in Big O Tires, would recognize a claim for reverse confusion under its common law, the Court believes it would do so only if the parties were competitors. Here, the undisputed evidence shows that plaintiffs do not currently sell antibiotics, and that the defendant does not currently sell transponders (or any other products manufactured by plaintiffs). Thus, there being no competition, the Court does not believe that California courts would allow the recovery of damages for the current claim. As such, having found no claim for damages under California law, the entire award of punitive damages is vacated. B. Defendant's Motion for Judgment as a Matter of Law on the Jury's Damage Award on Plaintiffs' Lanham Act Claims Or, in the Alternative for a New Trial on the Issue or for a Remittitur (Motion No. 2) This motion addresses the damages awarded under the Lanham Act only. In this motion, defendant argues that (1) plaintiffs failed to show with reasonable certainty that they suffered any damages from defendant's infringement; (2) that the jury's damage award was excessive because it exceeds the value of plaintiffs' mark; (3) that, in the absence of evidence of plaintiff's willingness to license the Trovan mark to Pfizer, an award of reasonable royalty is an inappropriate remedy; (4) that no court

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) has ever awarded a prospective royalty payment; and (5) that an award of both a reasonable royalty and corrective advertising is, in this case, inconsistent and duplicative. [FN8] 1. Plaintiffs Showed Sufficient Injury to Award Damages from Pfizer's Infringement At the damage phase of the trial, the jury was instructed on the categories of damages that plaintiffs could recover. (See Jury Instruction 8, Damages Phase). That instruction provided that the jury should consider: *8 1. the injury to the plaintiffs' reputation 2. the injury to plaintiffs' goodwill, including injury to the plaintiffs' general business reputation 3. the loss of plaintiff's sales as a result of the defendant's infringement 4. the loss of plaintiffs' profits 5. the expense of preventing customers from being deceived 6. the cost of future advertising which is reasonably required to correct any public confusion caused by the infringement 7. any other factors that bear on plaintiff's actual damages. (See Jury Instruction 8, Damage Phase.) The jury was also instructed to base their award on "evidence and not upon speculation, guesswork, or conjecture." (See Jury Instruction 8, Damage Phase.) In that instruction, items 1 and 2 refer to any damages to plaintiffs' reputation, or in the context of a business entity, plaintiffs' goodwill. Items 3 and 4 refer to actual monetary losses suffered by plaintiffs. Items 5 and 6 refer to the amount of corrective advertising plaintiffs would need to expend in order to remedy any damage caused by the confusion. Finally, item 7 refers to any other kinds of damages the plaintiffs may have proffered. [FN9] "Trademark remedies are guided by tort law principles." Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1407 (9th Cir.1993). In the tort context, damages which result from a tort must be established with "reasonable certainty." See id. (citing Dan B. Dobbs, Remedies § 3.3, at 151 (1973)). The Supreme Court has held that "[d]amages are not rendered uncertain because they cannot be calculated with absolute exactness," but there must be a reasonable basis for the computation. Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 379 (1927). Thus, the same rationale applies in a

Page 6 trademark case such as this one. Plaintiffs recognize this much. As stated in their opposition, "to merit an award of damage, Plaintiffs' proof of harm needs go no further than establishing liability and evidence of some harm, the amount which could be determined under one or more of the several formulations recognized by the courts." (Pls.' Mem.P. & A. Opp'n Motion No. 2 at 3 (emphasis added)) Following that very reasoning, and having found little evidentiary support "of some harm," "many courts have denied a monetary award in infringement cases when damages are remote and speculative." Lindy Pen Co., 982 F.2d at 1408 (citing Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636, 642 (D.C.Cir.1982) ("any award based on plaintiff's damages requires some showing of actual loss"); Burndy Corp. v. Teledyne Indus., Inc., 584 F.Supp. 656, 664 (D.C.Conn.) ("no assessment of damages is authorized if it is not based on actually proven damages."), aff'd 748 F.2d 767 (2d Cir.1984); Invicta Plastics (USA) Ltd. v. Mego Corp., 523 F.Supp. 619, 624 (S.D.N.Y.1981) ( "damages will not be awarded in the absence of credible evidence demonstrating injury to the plaintiff from defendant's sales."); Vuitton Et Fils, S.A. v. Crown Handbags, 492 F.Supp. 1071, 1077 (S.D.N.Y.1979) ("The discretionary award of either damages or profits assumes an evidentiary basis on which to rest such an award. Without such a basis there can be no recovery."), aff'd mem., 622 F.2d 577 (2d Cir.1980)). *9 Thus, in addressing Pfizer's motion on the issue of actual damages, the Court now turns to the record to determine whether there was an evidentiary basis to support the jury's verdict on the issue of actual damages. In doing so, the Court must turn to the evidence and determine whether plaintiffs offered proof that their reputation or goodwill was damaged or that they have shown the need for future advertising which is reasonably required to correct any public confusion caused by the infringement. a. The Injury to Plaintiff's Reputation or Goodwill Plaintiffs claim that they are entitled to damages in this case because they have shown injury to their goodwill and reputation. [FN10] Defendant argues, however, that plaintiffs offered no evidence of any damages to their goodwill. Instead, defendant argues that plaintiffs "suggested that the jury could 'infer the damages' from the 'confus[ion of plaintiffs' mark] with a drug that kills people.' " (Def.'s Mem.P. & A. Motion No. 2 (quoting Tr. 5227:19-23.)) Claiming

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) that it is improper for the jury to "infer" damage to goodwill from confusion alone, defendant urges this Court to enter judgment as a matter of law on the damages issue. Plaintiffs, on the other hand, argue that they have proven damages because (1) actual confusion damaged plaintiffs' goodwill and (2) plaintiffs' goodwill was further damaged by placing plaintiffs' mark on a harmful drug which had been linked to multiple deaths. Once that proffer was made, plaintiffs argue that they were entitled to have the jury decide the issue of compensatory damages, including the surrogate damages--namely corrective advertising and reasonable royalties. On that basis, plaintiffs argue that there is ample evidence to support the jury's $5,000,000 general compensatory damage award and the $3,000,000 reasonable royalty award. However, in their opposition to Pfizer's post-trial motion, plaintiffs cannot point to one instance where direct evidence of actual injury to goodwill or reputation was introduced. First, plaintiffs introduced no evidence relating to the decrease in value of their goodwill. Ms. Masin was not allowed to testify as to the relative change in plaintiffs' goodwill because she had no personal knowledge (and therefore no basis as a lay witness) "to support an opinion that ... the reputation [of plaintiffs] is not the same as it was before" the infringement. (Tr. 5172:2-4.) On the contrary, the evidence presented to the jury showed that the sales of EID products increased by $400,000 after defendant "infringed" its trademark. (Tr. 4663:2-20) Although the increase in sales does not necessarily indicate an increase in goodwill, it certainly indicates that plaintiffs' goodwill had not decreased. Thus, unable to point to direct evidence showing an actual decrease in goodwill, plaintiffs argue that the jury could infer damage to goodwill simply because Pfizer "plac[ed] Plaintiffs' mark on a harmful drug which has been linked to multiple deaths." (Pls.' Mem.P. & A. Opp'n Motion No. 2 at 4.) To support that statement, plaintiffs cite to transcript pages 4250:5-9, 4480:24 through 4481:5, 4519:16-19, 4523:9-16, 4955:17 through 4959:22, 5173:19-22, and 5227:19-23. Plaintiffs incorrectly cite to the record. Page 4250:5-9, is merely an excerpt of plaintiffs' opening statement, which is not evidence, and thus is irrelevant here. Furthermore, page 5173:19-22 is an excerpt of plaintiffs' closing

Page 7 statement, also not evidence. Also, page 5227:19-23 contains an exchange between the attorneys and the Court outside of the presence of the jury, which clearly is not evidence. Some of the other references do not support anything, much less the assertion that the jury could infer damage to goodwill simply because Pfizer "plac[ed] Plaintiffs' mark on a harmful drug which has been linked to multiple death." For example, pages 4480:24 through 4481:5 memorializes an exchange between Ms. Masin, both sides' attorneys, and the Court (in front of the jury) which states: *10 A. (Ms. Masin): The telephone communications; secondly, the press releases; and thirdly, development of the marketing program. We also had earlier retained the services of a marketing professional who assisted us with or assisted me in targeting some of these approaches Q. (Mr. Morris): Now, is that all corrective advertising? A. Correct Q. Being-MR. LIPPERT: Objection THE COURT: You are leading the witness. Additionally, the pages referenced by plaintiffs do not even identify the person testifying, or the person asking the question, thereby making it impossible for the court to determine what the evidence is. (Tr. 4519.) Presumably, it is Ms. Masin testifying. However, all of Ms. Masin's testimony, including the testimony quoted above, which pertained to corrective advertising only, was stricken from the record. (Tr. 4959:7-22 (the Court stated that Ms. Masin could not testify as "to any corrective advertising, marketing, public relations, anything as far as corrective advertising goes; advertising, marketing, public relations, whatever label you put on it" and that prior testimony to that effect was "stri[c]ke[n] ... with regard to a corrective advertising plan.")) The other excerpts of record presented by plaintiffs only support defendant's position that plaintiffs have not lost any sales and fail to show that any evidence of damage to goodwill was presented. (Tr. 4523:9-16) (Q. "Do you have any proof that you lost any sales ..." To that Ms. Masin replied: "I don't have any proof ...") Some of the examples support defendant's assertion that there was no admitted evidence of corrective advertising. Presumably, plaintiffs mis-cited the record and intended to reference another portion of the trial. [FN11] However, even assuming that plaintiffs had presented evidence that defendant "plac[ed]

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) Plaintiffs' mark on a harmful drug which has been linked to multiple deaths," and that the jury had made the inference that such act caused a decrease in goodwill, the Court must determine whether such an inference suffices to show "actual injury." Defendant argues that actual damages, such as damages to reputation or goodwill, cannot be inferred, but rather must be supported by actual evidence of injury. (See Def.'s Mem.P. & A. Motion No. 2 at 10.) To support that argument, defendant points to Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197 (9th Cir .1989). In Harper House, plaintiff sued Thomas Nelson, Inc. for, inter alia, false and deceptive advertisements under the Lanham Act. See id. at 208. The jury found the defendant liable on that claim and awarded plaintiff $1,860,307. See id. at 201. The defendant brought a motion for judgment notwithstanding the verdict on that claim. In denying the motion, the district court found that the "jury could reasonably find that plaintiff was injured." Id. at 209. However, the district court did not refer to any proof of injury, but rather relied on a presumption "that a plaintiff's damages equal the amount of money spent by defendants on advertising." Id. at 209. The Ninth Circuit reversed the district court's denial of the motion. It held that although the amount of money spent on advertising may constitute a proper basis for the amount of damages eventually awarded to a plaintiff, it cannot form the basis for "the fact of injury." See id. (holding that courts must "distinguish between the amount of proof needed to show that some damages were the certain result of a section 43(a) violation and the amount of proof needed to ascertain the exact amount of damages."). Thus, following that reasoning, plaintiffs here must point to some evidence showing that "some damages were the certain result" of defendant's infringement. [FN12] *11 Here, plaintiffs assert that their reputation was damaged by the acts of the defendant. That is the harm which, they claim, forms the basis of the damage award. Thus, the Court now turns to the record to determine whether plaintiffs have presented any evidence relating to actual injury to their reputation. Plaintiffs cite to pages 2557-2563, 17611763 of the trial transcript, and trial exhibits 2112 and 2131. Pages 2557 through 2563 memorialize an exchange between Dr. Buffam (a veterinarian) and Ms. Dwight, one of plaintiffs' attorneys. Although Dr. Buffam testified that he was "confused," he disavowed any confusion as to source. (Tr. 2561.)

Page 8 Rather, he testified that he did not think that an advertisement for Pfizer's Trovan was "referring to Mr. Masin's product." (Tr. 2561.) Apparently, what this witness was confused about was "why [defendant] named [its product] Trovan?" (Tr. 2561.) Confusion as to one's business decision does not constitute confusion as to source. However, even more relevant to the instant inquiry, this witness's testimony does not provide any evidence of injury to goodwill. On the contrary, this witness knew that Mr. Masin had a registered trademark in the name Trovan. (Tr. 2561.) Thus, there is no chance that this witness thought that it was plaintiffs who were possibly infringing on Pfizer's trademark. [FN13] Transcript pages 1761 through 1763 memorialize the testimony of Ms. Benefiel. Additionally, trial exhibit 2112 is an e-mail written by Ms. Benefiel to InfoPET. The e-mail states that Ms. Benefiel had just read about the dangers of Pfizer's Trovan (namely that it was causing deaths) and wanted to know whether that was the same product which was implanted in her cat. (See Trial Ex. 2112.) Although her testimony and her e-mail may show that she may have been confused as to the source of the products, it does not provide any evidence that plaintiffs' goodwill was damaged. She never testified as to what she thought of plaintiffs' reputation before, or after, she read the article in the paper. She did not testify that, because of this article, she refrained from purchasing any of plaintiffs' products. She did not testify that she advised her friends or colleagues not to purchase plaintiffs' product. In spite of this lack of evidence, plaintiffs urge this Court to ratify the jury's presumption of injury. There are no reported cases in this jurisdiction which analyze the degree of proof required to show injury to reputation in the trademark context. However, such analysis has been undertaken in the context of defamation. Defamation is an invasion of the interest in reputation. See 5 Witkin, Summary of California Law, Torts § 471 (1988). It may be libel or slander. See id. Some types of defamatory statements, such as the charge of a serious crime, "would be damaging in the minds of everyone." Id. However, other types of defamatory statements may only be defamatory if they have a tendency to injure the reputation among members of some substantial group of persons. See id. at § 474 (citing Rest.2d, Torts, Comment e.) Of course, a corporation may be defamed by "matter which has a tendency to injure its business reputation, as by deterring persons from dealing with

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) it." Id. (citing Western Broad. Co. v. Times-Mirror Co., 14 Cal.App.2d 120, 124 (1936)). *12 Within each category of defamation (libel and slander), the courts, followed by the legislature, have devised a two tier system of remedies. If the defamatory statement is libel per se (meaning that the statement is defamatory on its face, without the need for explanatory matter such as surrounding circumstances, inducement, innuendo, or other extrinsic fact to make its meaning clear), then damages may be inferred. See 5 Witkin, supra, § 481. Similarly, if the defamatory statement is slander per se, [FN14] the plaintiff also need not allege or prove special damages. See id. 490. The reason for that rule is that statements which are libel per se or slander per se are so bad, that damages are inferred. However, if the defamation is not libel per se or slander per se, then a plaintiff must prove special damages. This analogy, although imperfect, sheds some light as to the degree of proof plaintiffs should provide in order to show actual injury. If the "bad publicity" caused by Pfizer's Trovan's side effects is of such nature that it would "directly ... injure [plaintiff] in respect to [its] ... trade or business ... by imputing something with reference to [its] ... business that has a natural tendency to lessen its profits" then a presumption of injury should be sufficient to find actual injury. Cal.Civ.Code § 46. Certainly, if those statements were made in the context of a defamation cause of action, [FN15] the plaintiff in that case would certainly need not make a showing of special damages. Therefore, upon hearing that the drug Trovan was responsible for one or more deaths, plaintiffs' customers (if they are confused about the origin of plaintiff's product) are almost certainly not going to look favorably on plaintiff's product. Thus, the negative publicity is bound to have a tendency to lessen plaintiff's profits. As such, the inference that the jury may have made relating to actual harm to plaintiff's goodwill is permissible here as well. Because it is permissible, and reasonable, plaintiffs have shown sufficient injury to warrant an award of damages. b. Corrective advertising Plaintiffs then claim that they have made a sufficient showing that they are entitled to corrective

Page 9 advertising. However, all of the evidence relating to corrective advertising was stricken from the record, and thus, not before the jury. Nancy Budd's report on corrective advertising, and any testimony related to that report, was excluded. (Tr. 40). Furthermore, the only other testimony which could support an award of corrective advertising was Ms. Masin's. All of that testimony, however, was stricken from the record. (Tr. 4959:7-22) (the Court stated that Ms. Masin could not testify as "to any corrective advertising, marketing, public relations, anything as far as corrective advertising goes; advertising, marketing, public relations, whatever label you put on it" and that prior testimony to that effect was "stri[c]ke[n] ... with regard to a corrective advertising plan."). Thus, plaintiffs have failed to present any evidence to support a corrective advertising award. [FN16] 2. The Jury's Damage Award Is Excessive Because it Exceeds the Value of Plaintiffs' Mark *13 Defendant next argues that even if plaintiffs are entitled to damages, the $5,000,000 general damage award is excessive because it exceeds the value of plaintiffs' mark. Consequently, defendant asks this Court to remit the amount of damages not to exceed the reasonable value of plaintiffs' mark, or in the alternative, to order a new trial. a. Standard on Remittitur A reviewing court should uphold a jury's award of damages unless that award is based on speculation or guesswork. See City of Vernon v. Southern Cal. Edison Co., 955 F.2d 1361, 1371 (9th Cir.1992). Trademark remedies are guided by tort law principles. As a general rule, damages which result from a tort must be established with reasonable certainty.... Many courts have denied a monetary award in infringement cases when damages are remote and speculative. Lindy Pen Co., 982 F.2d at 1407-08. b. Analysis i. Was the Amount of Damages Excessive? An award of damages in a trademark case is intended to compensate a plaintiff for any harm suffered. See 15 U.S.C. § 1117(a). Defendant argues that here, plaintiffs were overcompensated because the award of general damages far exceeds the value of their mark. As Professor McCarthy wrote,

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) There is something basically unseemly and grossly uneconomical in an award to a small company of an amount of money several times its net worth to use to resuscitate an infringed trademark. When such an award is many times the value of the trademark property, then it appears that plaintiff has received a windfall, not compensation. J. Thomas McCarthy, 5 McCarthy on Trademark § 30:84 (5th ed.1999). Case law seems to support that statement. See Adray v. Adry-Mart, Inc., 76 F.3d 984, 989 (9th Cir.1995); Zazu Designs v.. L'Oreal S.A., 979 F.2d 499, 506 (7th Cir.1992). However, both cases (as well as professor McCarthy's comment) address damages based on corrective advertising. [FN17] Nonetheless, there is no reason why that same rationale should not apply in the context of loss of goodwill (which is the only remaining basis for plaintiffs' general damage award). The purpose of compensatory damages in tort cases (as well as trademark cases) is to place the injured person as nearly as possible in the condition he would have occupied if the wrong had not occurred. See Freeport Sulphur Co. v. The S.S. Hermosa, 526 F.2d 300, 304 (5th Cir.1976) (citing C. McCormick, Damages 560 (1935)). Also, in the context of tangible property torts, when there is a tortious injury to property and the market value of that property is unknown, the amount of damages must be determined by the cost of repairs to the property. See id. (citing D. Dobbs, Law of Remedies 392 (1973); F. Harper & F. James, The Law of Torts 1311-12 (1956)). These two principles are in apparent conflict, however, when the repairs that are necessary to correct the damage caused by whatever tort enhance the pre-tort value of the plaintiff's property. See id. In such a case, the increase in value should be deducted from the plaintiff's recovery for the "cost of repairs." Id. *14 Adopting this principle here, it is irrelevant whether plaintiffs were awarded damages under the corrective advertising or loss of goodwill theory. In either case, the damages awarded were to "repair" plaintiffs' reputation. Thus, the amount of "repair" cannot exceed the value of the thing being repaired-namely, plaintiffs' mark and its underlying goodwill. [FN18] Here, defendant argues that plaintiffs' mark was not worth $5,000,000 (much less the $8,000,000 total compensatory damage award). Rather, defendant argues that the undisputed evidence shows that (1)

Page 10 plaintiff EID purchased in 1990 for $500,000 the exclusive license in perpetuity for the use of the Trovan mark (and the underlying technology) (Trial Ex. 1145; Tr. at 1266:2-1267:6); (2) the sale of the implantable transponder upon which plaintiffs predicate their claim of infringement has been permanently enjoined (Tr. 552:3-9; 2792:8- 11); (3) EID at best has been marginally profitable (Tr. at 4486:4-5); (4) Plaintiff Trovan Ltd. maintains no profit or loss statements (Tr. 5115:8-11); and (5) plaintiffs have undertaken no corrective advertising (Tr. 4598:24- 4599:5; 4657:13-19; 5093:17-5097:22). Thus, defendant argues that the award was excessive as a matter of law and, as such, that the Court should remit the award to an amount not to exceed the reasonable value of plaintiffs' mark, an amount not in excess of $500,000. In the alternative, defendant requests that the Court vacate the jury's general damage award and order a new trial. Plaintiffs argue, however, that the jury's verdict did not exceed the value of the mark. Although the mark may have been purchased for $500,000 back in 1990, the plaintiffs argue that the mark appreciated in value due to (1) substantial evidence of actual use and marketing of the mark (Tr. 485); [FN19] (2) Internet marketing (Tr. 1010:23); [FN20] and (3) the "enormous potential for the mark in presentations for further exploitation [FN21] ... from which the jury may well have concluded that the value at the time of the infringement exceeded the value at acquisition." (Mem.P. & A. Opp'n Motion No. 2 at 17.) Furthermore, plaintiffs argue that the jury was instructed on that very issue and that at this stage, the Court may not assume that the jury failed to follow the Court's instruction. The plaintiffs seem to concede that the amount of damages is somewhat uncertain, however they argue that any uncertainty in the amount of damage should be borne by the defendant. See Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 265 (1946). [FN22] None of that evidence, however, supports the magnitude of the general damages ($5,000,000) awarded by the jury. To the contrary, the evidence introduced at trial shows that, other than the $500,000 spent by EID to acquire the exclusive right of the Trovan mark and its underlying technology, there is no direct evidence of the value of plaintiffs' goodwill prior to the infringement. Nor is there any direct evidence that the value of plaintiffs' goodwill increased between the time it acquired the mark and the time just before the infringement began. On the

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) contrary, the evidence shows that plaintiffs were enjoined from selling one of their products--namely, the implantable transponder--which indicates a decrease in goodwill. (See 552:3-9; 2792:8-11.). Furthermore, the evidence showed that EID was, at best, a marginally profitable business, which also indicates a reduction in goodwill. (Tr. 4486:4-5.) [FN23] This evidence supports the conclusion that the value of plaintiffs' goodwill just prior to the time of infringement was less than the value of plaintiffs' goodwill at the time it purchased the rights to the mark. *15 Taking all the inferences in favor of plaintiffs, however, the value of plaintiffs' goodwill at the time of infringement cannot, based on the undisputed evidence in the record, exceed $500,000. Thus, (1) having previously found that the jury could have found damage to plaintiffs' goodwill based on the negative publicity about Pfizer's Trovan, (2) that such damage could have, in the light most favorable to plaintiffs, destroyed the entire value of the goodwill, and (3) based on the fact that a trademark cannot be worth less than zero, [FN24] the most the jury could have awarded plaintiffs on their general damage claim, according to the evidence, was $500,000. Thus, the $5,000,000 award was excessive as a matter of law. ii. Remedies If a court determines that the evidence supported the "fact of injury" (as it did here) but the losing party challenges the size of the award on the basis of prejudice, (and the court finds that such prejudice existed) that court's discretion is somewhat limited. In such a case, the Ninth Circuit has held that: When the court, after viewing the evidence concerning damages in a light most favorable to the prevailing party, determines that the damages award is excessive, it has two alternatives. It may grant defendant's motion for a new trial or deny the motion conditional upon the prevailing party accepting a remittitur. The prevailing party is given the option of either submitting to a new trial or of accepting a reduced amount of damage which the court considers justified. Fenner v. Dependable Trucking Co., 716 F.2d 598, 603 (9th Cir.1983) (citing Linn v. United Plant Guard Workers, 383 U.S. 53, 65-66 (1966)). Accordingly, the Court remits the amount of general damages to $500,000. Plaintiffs therefore have the option of accepting this amount. Should plaintiffs

Page 11 refuse the remitted amount, the Court finds that the jury verdict on the issue of general damages is against the clear weight of the evidence, was a miscarriage of justice, and the Court, thus, orders a new trial. 3. The Ninth Circuit Does Not Recognize Reasonable Royalties as a Measure of Damages Where There Is No Evidence That a Party Intended to License Their Trademark [FN25] Defendant argues that "[n]o reported opinion by any court in the Ninth Circuit has awarded any trademark infringement plaintiff damages based on a hypothetical royalty rate." (Def.'s Mem.P. & A. Motion No. 2 at 16.) Plaintiffs concur with that statement and further state that "[a] reasonable royalty award is, by its very nature, hypothetical. Evidence is presented as to what the parties might have agreed in a theoretical licensing negotiation that never took place." (Pls.' Mem.P. & A. Opp'n Motion No. 2 at 9 (emphasis in original).) Plaintiffs argue, however, that "there is no basis on which to conclude the Circuit would not accept this form of relief." (Pls.' Mem.P. & A. Opp'n Motion No. 2 at 7.) Plaintiffs further argue that this Circuit's recognition of other measures of surrogate damages (mainly corrective advertising) indicates that it would recognize a reasonable royalty as an appropriate form of damages in trademark infringement cases. Thus, plaintiffs urge this Court to recognize such measure of damages here. *16 It is true that some circuits have allowed an award of reasonable royalties in trademark infringement cases. See, e.g., Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 963 (7th Cir.1992), remanded and affirmed, 34 F.3d 1340 (7th Cir.1994); Howard Johnson Co. v. Khimani, 892 F.2d 1512, 1519 (11th Cir.1990); Boston Prof'l Hockey Ass'n v. Dallas Cap & Emblem Mfg., 597 F.2d 71, 75-76 (5th Cir.1979). However, in all of those cases (save one), the Court has recognized that such damages were appropriate when the parties had shown a willingness to license the mark. See Howard Johnson, 892 F.2d at 1519; Boston Prof'l Hockey Ass'n, 597 F.2d at 75-76. The only circuit which has allowed the award of a reasonable royalty in spite of no evidence of a prior licensing relationship is Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947, 963 (7th Cir.1992) (Sands I ), remanded and affirmed, 34 F.3d 1340 (7th Cir.1994) (Sands II ).

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) In Sands I, the holder of the registered trademark "Thirst-Aid" sued Quaker Oats Company for infringement based on their advertising slogan for the drink Gatorade. See Sands I, 978 F.2d at 949-51. The district court held a bench trial and found infringement. See id. As a result, the court awarded monetary damages and injunctive relief. See id. Of relevance here, the court awarded plaintiff ten percent of defendant's pre-tax profit on Gatorade for the period during which Quaker used "Thirst Aid" in its advertising. See id. at 951. It did, however, refuse to award damages for corrective advertising, as it found that plaintiff had not made concurrent use of the Thirst-Aid mark, [thus] there was no need to counteract Quaker's advertising." Sands II, 34 F.3d at 1343. The Seventh Circuit affirmed the district court's liability decision and the granting of the injunction, but remanded the case for a more precise determination of the monetary damages. See Sands I, 978 F.2d at 963. On remand, the district court was to recalculate the award of damages in accordance with the following principles: (1) the court may not simply award [plaintiff] a percentage of Quaker's profits; (2) the court should use a reasonable royalty as a baseline or starting point for determining the appropriate award; (3) in determining the appropriate award, the court may take into account the possible need for deterrence, which may involve consideration of the amount of Quaker's profits. Id. n. 19. On remand, the district court recalculated the amount of damages using a reasonable royalty. See Sands II, 34 F.3d at 1346. The court also increased that award pursuant to 15 U.S.C. § 1117(a). In doing so, the district court found that "the imposition of a hypothetical licensing royalty [would not] deter predatory conduct such as defendant's." Sands II, 34 F.3d at 1346. Ultimately, however, the Seventh Circuit upheld the damage calculation based on the reasonable royalty, but remanded the case for further proceedings so that the district court could state with more precision the basis for the enhancement. See id. at 1352. *17 Sands I and Sands II, however, are not binding precedent on this Court. Furthermore, these opinions' persuasiveness relating to this very issue (reasonable royalty) is undermined by the peculiar facts involved in that case. First, Sands I used unjust enrichment as an underlying justification of the award of reasonable royalty, which tends to take the matter away from the

Page 12 jury and into the hands of the Court. See Sands I, 978 F.2d at 963 ("A reasonable royalty, perhaps related in some way to the fee [plaintiff] was paid by [another party previously for the use of the mark] would more accurately reflect both the extent of Quaker's unjust enrichment...."). Second, the "reasonable royalty" to be determined by the district court in Sands I was only to serve as "a baseline or starting point for determining the proper award." Id. at 963 n. 8. This contention reinforces the point previously made--that the award was equitable in nature, and thus outside the province of the jury. Finally, in Sands I, the court had evidence that plaintiff had previously licensed its name to another company. See id. Indeed, it suggested that the district court use a royalty "related in some way" to the royalty that plaintiff had demanded for others to use its mark. See id. at 963. This fact is glaringly absent in the current case. [FN26] For those reasons, the Court finds that neither Sands I or Sands II provide a persuasive framework for this Court to follow. As such, the Court refuses to follow this precedent here. Lacking any direction, the Court is obligated to address this matter as a matter of first impression. In doing so, the Court relies on the aforementioned principle that a reviewing court should uphold a jury's award of damages unless that award is based on speculation or guesswork. See City of Vernon, 955 F.2d at 1371. As discussed above, Trademark remedies are guided by tort law principles. As a general rule, damages which result from a tort must be established with reasonable certainty.... Many courts have denied a monetary award in infringement cases when damages are remote and speculative. Lindy Pen Co., 982 F.2d at 1407-08. This principle is a fundamental tenet of tort law. As such, it has been applied by California courts in the context of lost profits. Lost profits analysis is relevant here, because reasonable royalties, by nature, are a subgroup of lost profits. After all, a reasonable royalty is the money the plaintiff would have made if the defendant had obtained a license. In California, "in order to support a lost profits award the evidence must show 'with reasonable certainty both their occurrence and the extent thereof.' " Sanchez-Corea v. Bank of Am. 38 Cal.3d 892, 907 (1985) (emphasis deleted). Damages for loss of profits are often denied to an "unestablished" or new business because they are too uncertain and speculative if they cannot be calculated with reasonable certainty. See S. Jon

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) Kreedman & Co. v. Meyers Bros. Parking-Western Corp., 58 Cal.App.3d 173, 184-185 (1976). "The ultimate test is whether there has been 'operating experience sufficient to permit a reasonable estimate of probable income and expense,' or, in other words, whether 'anticipated profits dependent upon future events are allowed where their nature and occurrence can be shown by evidence of reasonable reliability.' " Edwards v. Container Kraft Carton & Paper Supply Co., 161 Cal.App.2d 752, 760 (1958) (quoting Natural Soda Prods. Co. v. City of L.A., 23 Cal.2d 193, 199 (1943); Grupe v. Glick, 26 Cal.2d 680, 693 (1945), respectively). *18 There is no question that an award of reasonable royalty, lacking any previous negotiations among the parties rests on a legal fiction. Created in an effort to "compensate" when profits are not provable, the "reasonable royalty" device conjures a "willing" licensor and licensee, who like Ghosts of Christmas Past, are dimly seen as "negotiating" a "license." There is, of course, no actual willingness on either side, and no license to do anything.... Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 1159 (6th Cir.1978). Lacking any evidence that plaintiffs in this case would have licensed the rights to the mark, the award of reasonable royalties has no basis in reality, much less any basis in fact. Thus, it cannot be said to have been made "with reasonable certainty." Sanchez-Corea, 38 Cal.3d at 907. Thus, the jury's reasonable royalty award is vacated. [FN27] C. Defendant's Motion For Judgment as a Matter of Law on Plaintiffs' Trademark Infringement, Unfair Competition, False Association or Sponsorship And Fraudulent Business Practices Or, in The Alternative For a New Trial (Motion No. 3) In its third motion for judgment as a matter of law, defendant argues that plaintiffs (1) failed to show that the products were related, (2) failed to establish a likelihood of confusion, and (3) even if the plaintiffs did show likelihood of confusion, the Court should grant a new trial because such finding of confusion was tainted by the admission of the fraudulent letters. [FN28] In a case of reverse confusion, the plaintiff must still show likelihood of confusion. In order to do so, the plaintiff is bound by the same factors used in cases of forward confusion. That contention has been undeniably confirmed by Judge Kozinski's

Page 13 opinion in Dreamwerks, and the parties do not dispute it here. 1. Relatedness of The Goods In its February 24, 1999 Order Denying Summary Judgment, the Court found that "a jury could find that the parties' lines of goods are sufficiently related that consumers doing business with the senior users, Trovan and EID, might mistakenly believe that they are dealing with the junior user, Pfizer." (See Feb. 24, 1999 Order at 23.) Thus, the Court could not "find that the parties' goods are unrelated as a matter of law." (See Feb. 24, 1999 Order.) Those findings of relatedness were partly predicated on Trovan and EID's "Zip Quill," which is, according to plaintiffs, "a system which allows the implantation of a pharmaceutical ... into animals and human beings." (See Feb. 24 Order at 24.) It is true that where the nature of the goods is undisputed, the relatedness of the goods is a matter of law. See J.B. Williams Co. v. Le ContEe Cosmetics, Inc., 523 F.2d 187, 190-93 (9th Cir.1975). It is also true that where the products are totally unrelated, there can be no confusion as a matter of law. See Dreamwerks Production Inc. v. SKG Studio, 142 F.3d 1127, 1129 (9th Cir.1998). Defendant argues here that the evidence adduced at trial negates any finding of relatedness, [FN29] and thus it is entitled to a judgment as a matter of law. As the Court ruled above, the evidence on the record is sufficient to support a finding that plaintiffs' and defendant's "Trovan" products are sufficiently related, or that there is at least sufficient disputed facts as to each product's application, to allow the claim to go to the jury. As such, the Court finds that the products are not so unrelated as to warrant judgment as a matter of law. 2. Likelihood of Confusion *19 Although the evidence may show that the products were slightly related, relatedness is not the cornerstone of trademark infringement. Rather, the jury must decide whether there is likelihood of confusion. In forward confusion cases, the test for likelihood of confusion is whether a "reasonably prudent consumer" is likely to be confused as to the origin of the good or service bearing one of the marks. See Dreamwerks, 142 F.3d at 1129. In order to facilitate the inquiry into "likelihood of confusion," the Ninth Circuit listed eight factors: (1) strength of

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Not Reported in F.Supp.2d, 2000 WL 709149 (C.D.Cal.) the mark; (2) proximity or relatedness of the goods; (3) similarity of sight, sound and meaning; (4) evidence of actual confusion; (5) marketing channels; (6) type of goods and purchaser care; (7) intent; and (8) likelihood of expansion. See AMF Inc. v. Sleekcraft Boats, 599 F .2d 341, 348-49 (9th Cir.1979). Those factors were "intended to guide the court in assessing the basic question of likelihood of confusion." E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir.1990). "In the usual infringement case, these factors are applied to determine whether the junior user is palming off its products as those of the senior user." Dreamwerks, 142 F.3d at 1130. In other words, the question is whether "a consumer who finds a running shoe marked Mike [would] be bamboozled into thinking that it was manufactured by Nike?" Id. Conversely, in a reverse confusion case, palming off is often not in issue, as neither junior nor senior user wishes to profit from the other's goodwill. See id . The question in such cases is whether consumers doing business with the senior user might mistakenly believe that they are dealing with the junior user. More specifically, the question here is whether a reasonable consumer [purchasing plaintiffs' transponder and related material] might do so believing that it is [buying such product from Pfizer] Id. This is a case of reverse confusion. [FN30] (See Feb. 28, 1999 Order.) Thus, the Court must look at the reco