Tamko Roofing v. Ideal Roofing CV-99-388-JD 10/19/00 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Tamko Roofing Products, Inc.
v. Civil No. 99-388-JD Opinion No. 2000 DNH 219 Ideal Roofing Company, Ltd.
O R D E R
By order dated August 21, 2000, the court awarded the
plaintiff, Tamko Roofing Products, monetary damages in the form
of the defendant's profits on sales in the United States of its
"Heritage Series" product pursuant to 15 U.S.C. § 1117(a). The
court ordered the defendant. Ideal Roofing Company, to submit
evidence of the costs of its sales by September 8, 2000. Tamko
was given until September 20, 2000, to respond. Ideal filed a
report on profits on September 8 (document no. 95), and Tamko
filed an opposition on September 20 (document no. 99). Tamko
also filed a motion to strike the "Review Engagement Report"
attached to Ideal's report on profits (document no. 98), and
Ideal objects to this motion.
A. Amount of Gross Sales
In its order dated August 21, 2000, the court found that
Ideal's gross sales in the United States of its "Heritage Series"
product from November of 1997 through February 29, 2000, amounted to $503,464 in American dollars. The court derived this figure
from Ideal's response to an interrogatory. In its report on
profits. Ideal now claims that the accurate figure is $371,913.
Ideal's vice president, Rene LaPlante, affirms that he relied on
a print-out containing figures in Canadian dollars when he
prepared his interrogatory responses and erroneously reported the
figures in American dollars. LaPlante claims he did not discover
the error until preparing the report on profits. Ideal has not
submitted the print-out to the court.
In its objection to Ideal's report, Tamko notes that
LaPlante testified at an earlier hearing that Ideal sold
approximately $500,000 American dollars of "Heritage Series"
products yearly in the United states. See Prelim. Inj. Hr'g Tr.
(document no. 36) at 112-13. Joel Cauley, Ideal sales
representative, testified at trial that sales in a portion of the
United States of "Heritage Series" products were between $700,000
and $800,000 yearly, in American dollars. See Test, of Joel
Cauley (document no. 91) at 87. Ideal has not supplied the court
with direct documentary evidence of its actual sales, such as
computer records or sales receipts.
While the burden is on the plaintiff to prove the
defendant's gross sales, a plaintiff relies on the defendant's
discovery responses to produce reliable evidence of those sales.
2 If the defendant "controls the most satisfactory evidence of
sales" and refuses to make such evidence available to the
plaintiff, or fails to keep adequate records, the plaintiff
"needs only establish a basis for a reasoned conclusion"
concerning the amount of sales. Louis Vuitton S.A. v. Spencer
Handbags Corp., 765 F.2d 966, 973 (2d Cir. 1985); see Chesa
Int'l, Ltd. v. Fashion Assocs., Inc., 425 F. Supp. 234, 238
(S.D.N.Y. 1977). A reasoned conclusion may be based on
statements made by the defendant. See Louis Vuitton, 765 F.2d at
973 (upholding use of defendants' statements on videotape as
proof of sales). Where the defendant fails to counter the
plaintiff's evidence of sales with sufficiently reliable
evidence, "the court must rely on less certain methods of proof."
Id. "Moreover, when the amount of damages cannot be ascertained
with precision, any doubts regarding the amount must be resolved
against the infringer." Lam, Inc. v. Johns-Manville Corp., 718
F.2d 1056, 1065 (Fed. Cir. 1983) (discussing damages in patent
case); H-D Michigan Inc. v. Biker's Dream Inc., 48 U.S.P.Q.2d
(BNA) 1108, 1113 (C.D. C a l . 1998).
Ideal's vice president and sales representative both
testified that Ideal's United States sales of its "Heritage
Series" product were considerably higher than the figure Ideal
now asserts is accurate. Despite being given numerous
3 opportunities to produce documentary evidence of its sales. Ideal
has consistently failed to do so. Without more concrete
evidence, the court resolves the inconsistencies in Ideal's
statements against Ideal, and does not amend its earlier
assessment of Ideal's gross profits. Ideal is left with the
consequences that flow from its lack of diligence in this matter.
B. Amount of Costs and Motion to Strike
Ideal attaches to its report on profits a "Review Engagement
Report" prepared by an accounting firm. A letter on the
accounting firm's letterhead addressed to Ideal's Board of
Directors states that the firm reviewed Ideal's statement of
earnings but did not conduct an audit, and concludes that the
statement of earnings appears to be in accordance with generally
accepted accounting principles. A second page lists gross sales
of Ideal's "Heritage Series" product sold in the United States,
as well as various costs, resulting in a net loss to Ideal.
Tamko moves to strike the report on the grounds that it is
irrelevant, hearsay, inadmissible as an expert opinion, and
noncompliant with the court's local rules. Ideal contends that
the report is submitted merely to show that its method of
subtracting certain categories of expenses from gross sales is
proper, and not to show that the amounts allocated to those
4 categories are accurate.
The defendant's burden of proving costs requires it to
produce documentary evidence, such as cancelled checks and
invoices, that proves the amount of the costs and ties those
costs to sales of the infringing product. See, e.g., Bambu
Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995)
(testimony of defendant plus "smattering of bills" "of no
probative value" and insufficient to prove deductible costs); H-D
Michigan, 48 U.S.P.Q.2d (BNA) at 1114; Project Strategies Corp.
v. National Communications Corp., 948 F. Supp. 218, 221 (E.D.N.Y.
1996); Playboy Enters., Inc. v. Dumas, 831 F. Supp. 295, 319
(S.D.N.Y. 1993). Ideal has provided no direct documentary
evidence, relying instead on a summarized statement of earnings
without any underlying documentation supporting the accuracy of
that statement. Without supporting evidence, the statement of
earnings is inadmissible for the purpose of proving the amount of
deductible costs Ideal incurred. See H-D Michigan, 48 U.S.P.Q.2d
(BNA) at 1113-14; see also Fed. R. Evid. 100 6; Air Safety, Inc.
v. Roman Catholic Archbishop of Boston, 94 F.3d 1, 8 (1st Cir.
1996) (discussing Rule 1006's requirement that underlying
information be made available in order for summary to be
admissible).
Ideal argues that the report establishes that Ideal's method
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Tamko Roofing v. Ideal Roofing CV-99-388-JD 10/19/00 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Tamko Roofing Products, Inc.
v. Civil No. 99-388-JD Opinion No. 2000 DNH 219 Ideal Roofing Company, Ltd.
O R D E R
By order dated August 21, 2000, the court awarded the
plaintiff, Tamko Roofing Products, monetary damages in the form
of the defendant's profits on sales in the United States of its
"Heritage Series" product pursuant to 15 U.S.C. § 1117(a). The
court ordered the defendant. Ideal Roofing Company, to submit
evidence of the costs of its sales by September 8, 2000. Tamko
was given until September 20, 2000, to respond. Ideal filed a
report on profits on September 8 (document no. 95), and Tamko
filed an opposition on September 20 (document no. 99). Tamko
also filed a motion to strike the "Review Engagement Report"
attached to Ideal's report on profits (document no. 98), and
Ideal objects to this motion.
A. Amount of Gross Sales
In its order dated August 21, 2000, the court found that
Ideal's gross sales in the United States of its "Heritage Series"
product from November of 1997 through February 29, 2000, amounted to $503,464 in American dollars. The court derived this figure
from Ideal's response to an interrogatory. In its report on
profits. Ideal now claims that the accurate figure is $371,913.
Ideal's vice president, Rene LaPlante, affirms that he relied on
a print-out containing figures in Canadian dollars when he
prepared his interrogatory responses and erroneously reported the
figures in American dollars. LaPlante claims he did not discover
the error until preparing the report on profits. Ideal has not
submitted the print-out to the court.
In its objection to Ideal's report, Tamko notes that
LaPlante testified at an earlier hearing that Ideal sold
approximately $500,000 American dollars of "Heritage Series"
products yearly in the United states. See Prelim. Inj. Hr'g Tr.
(document no. 36) at 112-13. Joel Cauley, Ideal sales
representative, testified at trial that sales in a portion of the
United States of "Heritage Series" products were between $700,000
and $800,000 yearly, in American dollars. See Test, of Joel
Cauley (document no. 91) at 87. Ideal has not supplied the court
with direct documentary evidence of its actual sales, such as
computer records or sales receipts.
While the burden is on the plaintiff to prove the
defendant's gross sales, a plaintiff relies on the defendant's
discovery responses to produce reliable evidence of those sales.
2 If the defendant "controls the most satisfactory evidence of
sales" and refuses to make such evidence available to the
plaintiff, or fails to keep adequate records, the plaintiff
"needs only establish a basis for a reasoned conclusion"
concerning the amount of sales. Louis Vuitton S.A. v. Spencer
Handbags Corp., 765 F.2d 966, 973 (2d Cir. 1985); see Chesa
Int'l, Ltd. v. Fashion Assocs., Inc., 425 F. Supp. 234, 238
(S.D.N.Y. 1977). A reasoned conclusion may be based on
statements made by the defendant. See Louis Vuitton, 765 F.2d at
973 (upholding use of defendants' statements on videotape as
proof of sales). Where the defendant fails to counter the
plaintiff's evidence of sales with sufficiently reliable
evidence, "the court must rely on less certain methods of proof."
Id. "Moreover, when the amount of damages cannot be ascertained
with precision, any doubts regarding the amount must be resolved
against the infringer." Lam, Inc. v. Johns-Manville Corp., 718
F.2d 1056, 1065 (Fed. Cir. 1983) (discussing damages in patent
case); H-D Michigan Inc. v. Biker's Dream Inc., 48 U.S.P.Q.2d
(BNA) 1108, 1113 (C.D. C a l . 1998).
Ideal's vice president and sales representative both
testified that Ideal's United States sales of its "Heritage
Series" product were considerably higher than the figure Ideal
now asserts is accurate. Despite being given numerous
3 opportunities to produce documentary evidence of its sales. Ideal
has consistently failed to do so. Without more concrete
evidence, the court resolves the inconsistencies in Ideal's
statements against Ideal, and does not amend its earlier
assessment of Ideal's gross profits. Ideal is left with the
consequences that flow from its lack of diligence in this matter.
B. Amount of Costs and Motion to Strike
Ideal attaches to its report on profits a "Review Engagement
Report" prepared by an accounting firm. A letter on the
accounting firm's letterhead addressed to Ideal's Board of
Directors states that the firm reviewed Ideal's statement of
earnings but did not conduct an audit, and concludes that the
statement of earnings appears to be in accordance with generally
accepted accounting principles. A second page lists gross sales
of Ideal's "Heritage Series" product sold in the United States,
as well as various costs, resulting in a net loss to Ideal.
Tamko moves to strike the report on the grounds that it is
irrelevant, hearsay, inadmissible as an expert opinion, and
noncompliant with the court's local rules. Ideal contends that
the report is submitted merely to show that its method of
subtracting certain categories of expenses from gross sales is
proper, and not to show that the amounts allocated to those
4 categories are accurate.
The defendant's burden of proving costs requires it to
produce documentary evidence, such as cancelled checks and
invoices, that proves the amount of the costs and ties those
costs to sales of the infringing product. See, e.g., Bambu
Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995)
(testimony of defendant plus "smattering of bills" "of no
probative value" and insufficient to prove deductible costs); H-D
Michigan, 48 U.S.P.Q.2d (BNA) at 1114; Project Strategies Corp.
v. National Communications Corp., 948 F. Supp. 218, 221 (E.D.N.Y.
1996); Playboy Enters., Inc. v. Dumas, 831 F. Supp. 295, 319
(S.D.N.Y. 1993). Ideal has provided no direct documentary
evidence, relying instead on a summarized statement of earnings
without any underlying documentation supporting the accuracy of
that statement. Without supporting evidence, the statement of
earnings is inadmissible for the purpose of proving the amount of
deductible costs Ideal incurred. See H-D Michigan, 48 U.S.P.Q.2d
(BNA) at 1113-14; see also Fed. R. Evid. 100 6; Air Safety, Inc.
v. Roman Catholic Archbishop of Boston, 94 F.3d 1, 8 (1st Cir.
1996) (discussing Rule 1006's requirement that underlying
information be made available in order for summary to be
admissible).
Ideal argues that the report establishes that Ideal's method
5 of calculating its deductible costs is appropriate. However,
Ideal's burden at this stage of determining damages is to provide
the court with direct documentary evidence of its costs, not a
completed calculation or total of its costs without supporting
evidence. For these reasons, the "Review Engagement Report"
submitted by Ideal is not probative evidence of its deductible
costs. To the extent the report shows that Ideal consulted an
accountant in performing its own calculation of its costs, that
fact is irrelevant to the court's assessment of damages. Tamko's
motion to strike the "Review Engagement Report" is granted.
As discussed above. Ideal has failed to submit satisfactory
evidence of its costs. Under these circumstances, the court may
award the plaintiff the entire amount of the defendant's gross
sales of the infringing product. See Bambu Sales. 58 F.3d at
854; H-D Michigan. 48 U.S.P.Q.2d (BNA) at 1115; Chesa. 425 F.
Supp. at 238. Alternatively, the court may estimate the
defendant's costs based on the information already in the record.
See BASF Corp. v. Old World Trading Co., 41 F.3d 1081, 1095 (7th
Cir. 1994); Tonka Corp. v. Tonk-A-Phone, Inc., 805 F.2d 793, 794
(8th Cir. 1986); A & M Records, Inc. v. Abdallah, 948 F. Supp.
1449, 1459 (C.D. Cal. 1996).
Considering that Ideal must have incurred some costs in
selling the infringing product in the United States, the court
6 declines to award Tamko the full amount of gross sales. The
record reveals little evidence upon which to base an estimate of
Ideal's deductible costs. However, LaPlante previously testified
that Ideal's profit margin on sales of its "Heritage Series"
product is 40%. See Report and Recommendation, May 15, 2000, at
7. The court therefore estimates that Ideal's deductible costs
amounted to 60% of its gross profits and awards Tamko 40% of the
gross profits, or $201,385.60.
Conclusion
The plaintiff's motion to strike (document no. 98) is
granted. The plaintiff is awarded compensatory damages in the
amount of $201,385.60.
SO ORDERED.
Joseph A. DiClerico, Jr. District Judge
October 19, 2000
cc: Teresa C. Tucker, Esquire Christopher R. Benson, Esquire Michael B. Clapp, Esquire George R. Moore, Esquire