Vital Pharmaceuticals, Inc. v. PhD Marketing, Inc.

• Court: District Court, C.D. California
• Decided: July 26, 2022
• Docket: 2:20-cv-06745
• Status: Unknown

Opinion

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10! 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 VITAL PHARMACEUTICALS CV 20-06745-RSWL-JCx 12 | d/b/a Bang Energy; and JHO 13 | RSIBHRES Bice | grame ges Penatoay of rac 14 Ruling for Plaintiffs Ls Plaintiffs, 16 v. Complaint Filed: May 19, 2020 17 Trial Date: May 31-June 1, PHD MARKETING, INC., 2022 18 19 Defendant.

21 Plaintiffs Vital Pharmaceuticals, Ince. (“Vital”) 22 | and JHO Intellectual Property Holdings, LLC (“JHO”) 23 (collectively, “Plaintiffs”) initiated this Action 24 | against Defendant PhD Marketing, Inc. (“Defendant”) for 25 | trademark infringement and unfair competition arising 26 | from Defendant’s infringement of Plaintiffs’ registered 27 | “BANG” mark and “B” logo. On May 31 and June 1, 2022, 28 | the Court conducted a bench trial. Having considered

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1 the evidence, the parties’ objections to the evidence,

2 the credibility of the trial witnesses, and both

3 parties’ arguments at trial, the Court issues the 4 following findings of fact and conclusions of law 5 pursuant to Rule 52(a) of the Federal Rules of Civil 6 Procedure. 7 I. FINDINGS OF FACT 8 1. The Parties 9 Vital has manufactured and sold energy drinks 10 consistently using its “BANG” and “B” logos (the “BANG 11 Marks”) since at least February 2016. Day 1 Vol. 1 Tr. 12 35:15-19, 39:4-12, 40:9-13; Ex. 98 at 42. Vital uses 13 its BANG Marks to promote its products and its brand, 14 and most of Vital’s promotion takes place on social 15 media. Day 1 Vol. 1 Tr. 36:12-17; Ex. 103. Vital also 16 sells other merchandise using the BANG Marks, such as 17 clothing, coolers, and pens. Day 1 Vol. 2 Tr. 9:5-10:1; 18 Ex. 34. In advertising its BANG products, Vital places 19 large emphasis on its drink being the “healthy energy 20 drink on the market.” Day 1 Vol. 1 Tr. 37:20-24. 21 Defendant runs a “cash and carry” business out of 22 an approximately 12,000 square-foot warehouse. Day 2 23 Vol. 1 Tr. 45:22-25. Defendant’s customers typically 24 come to the warehouse and choose the products they would 25 like to purchase, and then customers either carry out 26 the products themselves or have Defendant ship the 27 products to them. Id. at 45:25-46:1. 28 /// 2 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 3of24 Page ID #:3005

1] 2. The Infringing Products 2 In June 2019, Defendant received a sample shipment 3 | of vaping products from VTEK, a Chinese supplier. Id. 4} at 30:10-16, 55:25-56:5; Ex. 2014. The packaging for 5 | these products contained the word “bang” and a star- 6 | shaped symbol in the middle of the “b.” Ex. 2006. 7 | Defendant refers to this logo as “Design One.” Day 2 8} Vol. 1 Tr. 8:20-9:7. Below is a side-by-side comparison 9} of the BANG Mark (taken from Exhibit 93) and Design One 10 (taken from Exhibit 2006): 11 es 12 || 13

15 POTENT BRAIN AND BODY FUEL” 16 18 19 In July 2019, Defendant sent the VTEK vaping 20 | products to its customers to get feedback on their 21] quality and functionality. IRd. at 56:14-17. By April 22 | 2020, Defendant had agreed to order more vapes 23 | manufactured by VTEK and began regularly selling them to 24] customers. IERd. at 56:21-57:5; Ex. 2014. Defendant had 25 | agreed to be responsible for all sales and distribution 26 | of VTEK’s vaping products within the United States. Day 27 2 Vol. 1 Tr. 54:24-56:2, 69:10-14. Defendant sold two 28 | different models of vape pens using Design One, one

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1 known as “Bang Bars” and the other known as “XL” vape

2 pens. Ex. 2014. Defendant typically sold Bang Bars to

3 its customers at a price of around $4 and typically sold 4 XL vape pens to its customers at a price of around $5. 5 Jaber Dep. 129:2-20. 6 Once Defendant began selling VTEK’s vaping 7 products, a VTEK representative known as Bob would 8 frequently visit Defendant’s warehouse to verify the 9 quantity of vape pens remaining on the shelves and to 10 discuss future orders. Day 2 Vol. 1 Tr. 61:10-13. Bob 11 and Samir Jaber, Defendant’s CEO, would agree on the 12 models and quantities of products to be ordered from 13 VTEK, and those products would be shipped to Defendant’s 14 warehouse with an accompanying invoice. Id. at 62:22- 15 63:1. Defendant would often receive quantities that 16 varied from the amount reflected on the invoice, so 17 Defendant would count what it received and log that 18 amount into Defendant’s QuickBooks account.1 Id. at 19 63:1-8. 20 In June 2020, VTEK changed the design of its vape 21 pens to use what is known as “Design Two.” Day 2 Vol. 1 22 Tr. 59:25-60:5. Design Two is the same as Design One 23 with the addition of the words “vape with a” above the 24 1 Defendant’s General Manager, Khajadour Semikian, testified 25 that Bob and Jaber would confer on the proper amount to be paid to VTEK and would instruct Semikian to pay that amount. Id. at 26 77:15-78:5. Semikian would then input the amount paid and apply it to the invoices in the QuickBooks system. Id. at 78:5-6. The 27 payments made by Semikian did not tie directly to particular invoices; the payments sometimes covered only a portion of an 28 invoice and sometimes covered multiple invoices. Id. at 78:7-9. 4 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 5 of 24 Page ID #:3007

1 word “bang.”2 Day 2 Vol. 1 Tr. 11:25-12:3; Ex. 2008.

2 VTEK began shipping vape pens using Design Two to

3 Defendant in June 2020, and Defendant sold vape pens 4 using only Design Two from June 2020 until it ceased 5 selling VTEK’s products. Day 2 Vol. 1 Tr. 60:2-12; Ex. 6 2014. Defendant only sold XL and XXL vape pens using 7 Design Two. Ex. 2014. Defendant typically sold XXL 8 vape pens, which were bigger and heavier than the other 9 two models, to its customers at a price between $7.50 10 and $9. Day 2 Vol. 1 Tr. 59:3-7. 11 3. Vital Receives Notice of Infringing Products 12 Meanwhile, on April 2, 2020, Vital received an 13 email from a marketing and distribution company 14 requesting more information about a vaping product 15 labelled with Design One. Ex. 45. After receiving 16 notice of this product and believing that Design One 17 infringed on Plaintiffs’ trademark rights, Vital sent 18 cease-and-desist letters in May 2020 to companies that 19 it believed were selling vaping products using Design 20 One. Exs. 2002-04. On May 4, 2020, Semikian sent a 21 letter to one of Defendant’s customers agreeing to 22 indemnify it from any trademark claims made by third 23 parties. Day 2 Vol. 1 Tr. 7:22-24, 23:6-24:13; Ex. 2. 24 On May 13, 2020, Semikian received a letter from the 25 same customer notifying Semikian that it had indeed 26 received a cease-and desist letter from Vital. Day 2 27 2 The vaping products using either Design One or Design Two 28 will collectively be referred to as the “Infringing Products.” 5 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 6 of 24 Page ID #:3008

1 Vol. 1 Tr. 26:20-27:4; Ex. 1.

2 On June 2, 2020, Vital’s customer service

3 department received an email regarding a product quality 4 control concern. Ex. 42. In the email, the customer 5 stated that he loves the BANG brand and frequently buys 6 BANG energy drinks but was “highly disappointed” with 7 the quality of their vape pen. Id. He stated that he 8 was excited to try all the vape flavors, but because of 9 his negative experience, he did not think he would buy 10 another one. Id. On July 11, 2020, a Facebook account 11 for a vendor posted a picture of BANG energy drinks 12 together with the Infringing Products to notify 13 followers that the store had both in stock. Ex. 112. 14 From December 2020 through March 2021, Defendant also 15 received inquiries about its affiliation with BANG 16 energy drinks. Day 2 Vol. 1 Tr. 35:10-19; Exs. 2019-23. 17 In October 2020, Defendant sought to obtain copyrights 18 over Design One and Design Two. Ex. 2017. 19 4. Defendant Ceases Sales of Infringing Products 20 Defendant stopped selling the Infringing Products 21 in April 2021, in part because of its ongoing litigation 22 with Plaintiffs, and in part because it became difficult 23 to compete with other companies that had started selling 24 “copycat” products with packaging using Design One and 25 Design Two. Day 2 Vol. 1 Tr. 67:25-68:19. Once 26 Defendant decided to stop selling the Infringing 27 Products, it sold off its remaining inventory. Id. at 28 31:22-24. 6 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 7 of 24 Page ID #:3009

1 In total, Defendant sold 730,207 vape pens that

2 used Design One and 1,097,629 vape pens that used Design

3 Two. Ex. 2032. Defendant’s total revenue for Design 4 One was $3,520,968.53. Ex. 2028 at 4-5. Defendant’s 5 total revenue for Design Two was $7,252,971.95. Id. at 6 2-3. Thus, Defendant’s total revenue for its sales of 7 the Infringing Products was $10,773,940.48. Id. 8 II. CONCLUSIONS OF LAW 9 On February 4, 2022, the Court entered judgment in 10 favor of Plaintiffs and against Defendant for 11 Plaintiffs’ trademark infringement and unfair 12 competition claims and dismissed Defendant’s 13 counterclaims with prejudice [151]. Thus, the only 14 issues remaining are the equitable remedies to be 15 awarded for Defendant’s trademark infringement. 16 Specifically: (1) whether Plaintiffs are entitled to 17 disgorgement of profits under the Lanham Act, and if so, 18 the amount of net profits to be awarded; (2) whether 19 Plaintiffs are entitled to a permanent injunction; and 20 (3) whether Plaintiffs are entitled to attorneys’ fees 21 under the Lanham Act. 22 A. Disgorgement of Profits 23 The Lanham Act provides that once trademark 24 infringement has been established, a plaintiff is 25 entitled, “subject to the principles of equity, to 26 recover . . . defendant’s profits.” 15 U.S.C. § 1117. 27 This statute affords district courts “broad discretion” 28 in fashioning a remedy for trademark infringement. 7 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 8 of 24 Page ID #:3010

1 Maier Brewing Co. v. Fleischmann Distilling Corp., 390 2 F.2d 117, 124 (9th Cir. 1968).

3 1. Willfulness 4 While a finding of willfulness is not a 5 prerequisite to disgorgement of profits, “a trademark 6 defendant’s mental state [remains] a highly important 7 consideration in determining whether an award of profits 8 is appropriate.” Romag Fasteners, Inc. v. Fossil, Inc., 9 140 S. Ct. 1492, 1497 (2020). District courts should 10 therefore consider a defendant’s mental state in 11 determining what award of profits is appropriate. 12 Grasshopper House, LLC v. Clean & Sober Soc. Media, LLC, 13 2021 WL 3702243, at *3 (9th Cir. Aug. 20, 2021). 14 Here, the Court finds that Defendant’s mental state 15 sufficiently warrants disgorgement of the profits 16 Defendant received from its sale of the Infringing 17 Products. The evidence at trial revealed that Defendant 18 continued to sell the Infringing Products, and even 19 purchased additional products from VTEK, long after it 20 became aware of Plaintiffs’ BANG Marks. Day 2 Vol. 1 21 Tr. 23:6-24:13, 60:2-12; Exs. 2, 2014. Plaintiffs put 22 forth evidence of confused consumers, see Exs. 42, 60, 23 as well as confused vendors, see Exs. 61, 83, 112, 118. 24 Notably, the instances of consumer confusion included 25 emails received by Defendant directly, see Exs. 2019-24. 26 This confusion is unsurprising given the similarity of 27 the marks. 28 Defendant was therefore on notice of at least one 8 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 9 of 24 Page ID #:3011

1 instance of consumer confusion as early as June 30,

2 2020, but it did not stop selling the Infringing

3 Products until April 2021. Day 2 Vol. 1 Tr. 68:2-3. 4 Defendant also sought to obtain copyrights over Design 5 One and Design Two in October 2020, despite its 6 knowledge of Plaintiffs’ nearly identical BANG Marks. 7 Ex. 2017. Moreover, Defendant stopped selling the 8 products not in recognition of Plaintiffs’ trademark 9 rights, but because it was no longer profitable to 10 continue sales. Id. at 68:8-15. 11 Defendant’s continued sales despite its knowledge 12 of consumer confusion with Plaintiffs’ nearly identical 13 marks is indicative of an improper motive. See Lindy 14 Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1406 (9th 15 Cir. 1993) (internal quotation marks and citation 16 omitted) (“Willfulness and bad faith require a 17 connection between a defendant’s awareness of its 18 competitors and its actions at those competitors’ 19 expense.”); Monster Energy Co. v. Integrated Supply 20 Network, LLC, 533 F. Supp. 3d 928, 933 (C.D. Cal. 2021) 21 (finding willfulness where “[d]efendant continued to 22 sell the infringing products after it received 23 [p]laintiff’s cease and desist letters and after 24 [p]laintiff filed the instant lawsuit”); Color Me Mine 25 Enters. Inc. v. S. States Mktg. Inc., No. CV 12-00860- 26 RGK (JCx), 2013 WL 12119715, at *11 (C.D. Cal. Apr. 25, 27 2013) (finding a triable issue of fact as to willfulness 28 where defendant continued to sell infringing product 9 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 10 of 24 Page ID #:3012

1 despite knowledge of plaintiff’s mark and the likelihood

2 of consumer confusion). The Court therefore concludes

3 that disgorgement of Defendant’s profits is warranted 4 here based on Defendant’s willful infringement. 5 2. Net Profits 6 In determining the profits to be disgorged, the 7 plaintiff bears the burden to prove the defendant’s 8 gross sales from the infringing activity with reasonable 9 certainty. 15 U.S.C. § 1117(a). Once the plaintiff 10 demonstrates gross sales, they are presumed to be the 11 result of the infringing activity. Lindy Pen, 982 F.2d 12 at 1408. The burden then shifts to the defendant to 13 prove which, if any, of its total sales are not 14 attributable to the infringing activity and any 15 permissible cost deductions. 15 U.S.C. § 1117(a). 16 a. Gross Sales 17 At trial, Plaintiffs’ damages expert relied on 18 income statements provided by Defendant to determine 19 that Defendant’s total sales from January 2018 through 20 April 2021 for products using Design One and Design Two 21 were $10,773,940.48. Day 2 Vol. 2 Tr. 94:17-97:17; Ex. 22 2028. Defendant’s damages expert agreed with this 23 figure as an accurate representation of Defendant’s 24 gross sales. Day 2 Vol. 2 Tr. 28:23-29:8. This figure 25 appears credible given the total number of vapes 26 Defendant claims to have sold and the estimated price of 27 the vapes sold to Defendant’s customers.3 See Ex. 2032; 28 3 Indeed, while the Court accepts the figure provided by the 10 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 11 of 24 Page ID #:3013

1 Jaber Dep. 129:2-130:1. Therefore, Plaintiffs have met

2 their burden of proving Defendant’s sales. See Monster

3 Energy, 533 F. Supp. at 937 (finding that plaintiff met 4 its burden where its damages expert based profits on 5 defendant’s financial documents and where defendant’s 6 CFO agreed on profit figure). 7 b. Deductions 8 Defendant claims a total of over $9.5 million in 9 cost deductions, yet it has produced troublingly little 10 evidence to support that figure. Not a single invoice, 11 receipt, or other original source document has been 12 produced to support the costs and expenses Defendant 13 claims. Indeed, the only documents Defendant has 14 offered in support of its claimed deductions are summary 15 financial reports, which were created by Semikian in 16 preparation for this litigation. See Exs. 2030-31. 17 Defendant’s damages expert, John Bone, relied on the 18 summary financial documents to arrive at the $9.5 19 million deduction figure, but he did not review any 20 original source documents in doing so.4 Day 2 Vol. 2 21 Tr. 32:7-15. In short, there is no evidence to support 22 the specific figures set forth in either Exhibit 2030 or 23 Exhibit 2031. 24 parties as credible, it appears possible from the information provided by Defendant that its sales exceeded this amount. 25 4 Bone repeatedly emphasized that Plaintiffs never requested 26 that Defendant produce any original source documents, but that is irrelevant. It is Defendant’s burden to produce evidence 27 sufficient to support its deductions claim, regardless of the 28 evidence Plaintiffs sought to discover prior to trial. See Lindy Pen, 982 F.2d at 1408. 11 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 12 of 24 Page ID #:3014

1 First, the Court finds no credibility as to

2 Defendant’s claimed payments to VTEK of over $7.3

3 million. Aside from the lack of evidence to support the 4 document summarizing these payments, see Ex. 2030, the 5 Court has a number of concerns regarding the stated 6 figures themselves. In particular, both the timing of 7 payments and the amount of each payment were highly 8 irregular. Day 2 Vol. 2 Tr. 100:8-102:6. Such a lax 9 payment arrangement is unusual between two companies 10 with no prior business relationship. Id. at 101:8-21. 11 It is possible that Defendant had a unique 12 relationship with VTEK that allowed for irregular 13 payments. But in light of such an unusual payment 14 system, Defendant should have been especially mindful to 15 keep clear records. Had an invoice, receipt, or other 16 source document been produced during trial to support 17 the VTEK payments, Defendant may very well have met its 18 burden as to that deduction. But the only documentary 19 evidence in support of the $7.3 million figure — aside 20 from the made-for-litigation summary financial document, 21 see Ex. 2030 — is Semikian’s testimony that these 22 payments did occur and are accurate. He testified that 23 Bob and Jaber would agree on an arbitrary amount for 24 Defendant to pay to VTEK that was not tied to any 25 invoice. Day 2 Vol. 1 Tr. 77:20-78:11. Semikian would 26 then manually input the amount he paid into Defendant’s 27 QuickBooks account. Id. This testimony is simply not 28 enough to overcome Defendant’s burden to prove that 12 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 13 of 24 Page ID #:3015

1 these payments occurred in light of the aforementioned

2 irregularities. Without any corresponding invoices or

3 other documentation to substantiate this unusual payment 4 system, the Court has no way to confirm the accuracy of 5 the payments listed in Exhibit 2030.5 6 The same lack of evidentiary support belies 7 Defendant’s claimed deduction for shipping and delivery 8 expenses of over $2 million. While these payments are 9 slightly more regular than Defendant’s payments to VTEK, 10 there are still some months with multiple payments and 11 other months with no payments at all. See Ex. 2031. 12 Moreover, the shipping and delivery costs increased 13 drastically between September and November 2020. Id. 14 The only explanations Defendant offered for this 15 increase were the two-month gap in payments, the supply 16 chain bottleneck, and the increased weight of the XXL 17 vape as compared to the other two models. See Day 2 18 Vol. 1 Tr. 83:14-84:3. However, none of these 19 explanations justifies a cost increase of over six times 20 the previous monthly shipping cost, and other payments 21 that were more than ten times prior shipping costs. In 22

23 5 Defendant points to Voth’s statement that if the average cost per unit of the Infringing Products was $4, and Defendant 24 sold about 1.8 million units, then there is support for 25 Semikian’s claim that total costs were around $7 million. See Day 2 Vol. 2 Tr. 126:9-127:14. There is no evidence before the 26 Court as to the Infringing Products’ average cost per unit, however, so any assumption as to that amount is speculative. 27 Moreover, Voth testified during trial that Jaber’s deposition testimony about average cost per unit was vague and equivocal. 28 Id. at 125:8-21. 13 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 14 of 24 Page ID #:3016

1 addition, there appears to be no correlation between the

2 payments made to VTEK and the claimed shipping and

3 delivery costs. 4 Without any additional support, the Court finds no 5 credibility as to the summary financial documents put 6 forth as Exhibits 2030 and 2031. Consequently, the 7 Court finds that Defendant has failed to meet its burden 8 to prove deductions based on either: 1) payments made to 9 VTEK, or 2) shipping and delivery expenses. 10 Other courts have similarly found that summary 11 financial documents coupled with testimony, absent any 12 documentary evidence, were insufficient to satisfy the 13 defendant’s burden to prove costs. See Brighton 14 Collectibles, LLC v. Believe Production, Inc., No. 2:15– 15 cv–00579–CAS(ASx), 2018 WL 1381894, at *7 (C.D. Cal. 16 Mar. 15, 2018) (declining to deduct cost where only 17 evidence in support of cost was witness testimony and 18 spreadsheets produced by the witness); Brighton 19 Collectibles, Inc. v. Marc Chantal USA, Inc., No. 06-CV- 20 1584 H (POR), 2009 WL 10674076, at *10 (S.D. Cal. Aug. 21 12, 2009) (declining to deduct costs because defendant 22 “did not submit any documentary evidence such as 23 invoices to substantiate its claimed deductions”). 24 Because Defendant has failed to meet its burden, the 25 Court declines to make any deductions on these bases. 26 See Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 27 F.2d 505, 514 (1985) (citing Russell v. Price, 612 F.2d 28 1123, 1130–31 (9th Cir. 1979) (“If the infringing 14 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 15 of 24 Page ID #:3017

1 defendant does not meet its burden of proving costs, the

2 gross figure stands as the defendant’s profits.”).

3 Defendant also seeks a deduction of $189,632 for 4 selling and operating expenses.6 Plaintiffs’ experts 5 did not dispute this deduction at trial. The Court 6 therefore deducts $189,632 in allocated selling expenses 7 from Plaintiff’s monetary award. 8 c. Apportionment 9 Disgorgement of profits “is intended to award 10 profits only on sales that are attributable to the 11 infringing conduct.” Lindy Pen, 982 F.2d at 1408. 12 However, “[o]nce the plaintiff demonstrates gross 13 profits, they are presumed to be the result of the 14 infringing activity.” Id. It is therefore the 15 defendant’s burden to demonstrate which of its total 16 sales are not attributable to the infringing activity. 17 Id. District courts should not apportion profits where 18 they cannot do so based on a “reasonable, nonspeculative 19 formula.” Frank Music Corp. v. Metro-Goldwyn-Mayer, 20 Inc., 772 F.2d 505, 519 (9th Cir. 1985). 21 To argue that some of Defendant’s profits are not 22 6 To arrive at this figure, Bone first determined 23 Defendant’s total selling expenses using its income statements. Day 2 Vol. 2 Tr. 21:7-14. He then used the same income 24 statements to determine the percentage of total sales 25 attributable to the Infringing Products. Id. Bone then allocated selling expenses based on this percentage to determine 26 the amount of selling expenses attributable to the Infringing Products. Id. Courts have approved of similar allocation 27 methods when actual overhead costs for individual products could not be determined. See Kamar Int’l, Inc. v. Russ Berrie & Co., 28 Inc., 752 F.2d 1326, 1333 (9th Cir. 1984). 15 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 16 of 24 Page ID #:3018

1 attributable to the infringement of the BANG Marks, Bone

2 relied on a likelihood of confusion survey conducted by

3 Plaintiff’s survey expert, Justin Anderson. The 4 Anderson survey found that approximately 20% of survey 5 respondents somehow associated Design One and Design Two 6 with the BANG Marks. Thus, Bone reasoned that because 7 80% of survey respondents did not associate the two, 8 then 80% of Defendant’s sales cannot be attributed to 9 its infringement of the BANG Marks. Day 2 Vol. 2 Tr. 10 26:8-18. 11 This logic is flawed for a number of reasons. 12 First, the Anderson survey did not narrow respondents to 13 actual purchasers of Bang vapes, so it reveals nothing 14 as to why actual Bang vape consumers decided to purchase 15 that product. Id. at 57:14-18. Second, consumer 16 confusion as to affiliation is not an accurate measure 17 of the importance a consumer places on a brand name and 18 logo when deciding to purchase a product. Id. at 62:16- 19 63:25. It is therefore unsurprising that other courts 20 have rejected the use of a likelihood of confusion 21 survey to apportion profits. See Globefill Inc. v. 22 Elements Spirits, Inc., No. 2:10–cv–02034–CBM (PLAx), 23 2017 WL 6520589, at *3 (C.D. Cal. Sept. 8, 2017); adidas 24 America, Inc. v. Skechers USA, Inc., No. 3:15-cv-01741- 25 HZ, 2017 WL 3319190, at *28 (D. Or. Aug. 3, 2017). 26 Defendant offers no additional evidence showing 27 that any of its sales were not attributable to its 28 unlawful infringement. Thus, the Court awards all of 16 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 17 of 24 Page ID #:3019

1 Defendant’s net profits to Plaintiff because the

2 “infringing and noninfringing elements of [the] work

3 cannot be readily separated.” Nintendo of Am., Inc. v. 4 Dragon Pac. Int’l, 40 F.3d 1007, 1012 (9th Cir. 1994) 5 (quoting Hamilton–Brown Shoe Co. v. Wolf Bros. & Co., 6 240 U.S. 251, 261–62 (1916)). 7 3. Statutory Enhancement 8 If a court finds that recovery based on profits is 9 either inadequate or excessive, the court in its 10 discretion may enter judgment in an amount it finds to 11 be just. 15 U.S.C. § 1117(a). If the court exercises 12 its discretion to adjust the award, the sum “shall 13 constitute compensation and not a penalty.” Id. To 14 penalize defendants for misconduct by enhancing Lanham 15 Act damages is an abuse of discretion; enhancement is 16 only available to ensure that the plaintiff receives 17 adequate compensation. Skydive Ariz., Inc. v. 18 Quattrocchi, 673 F.3d 1105, 1115 (9th Cir. 2012). 19 The Court finds that an award based on disgorgement 20 of profits will adequately compensate Plaintiffs for 21 Defendant’s infringement. Indeed, Plaintiffs’ argument 22 in favor of a statutory enhancement is based on 23 Defendant’s conduct rather than any losses they suffered 24 that disgorgement of profits would not compensate for. 25 See Day 1 Vol. 1 Tr. 21:12-25. Enhancement based on 26 Defendant’s conduct alone would constitute a penalty, so 27 the Court declines to enhance Plaintiffs’ award. 28 For the foregoing reasons, the Court awards 17 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 18 of 24 Page ID #:3020

1 Plaintiffs a total of $10,584,308.48 in disgorged

2 profits.

3 B. Permanent Injunction 4 The Lanham Act empowers district courts to grant 5 injunctions to prevent the violation of a plaintiff’s 6 trademark rights. 15 U.S.C. § 1116(a). To be awarded a 7 permanent injunction, a plaintiff must show that: (1) 8 the plaintiff has suffered irreparable injury; (2) legal 9 remedies are inadequate to compensate the plaintiff for 10 the injury; (3) the balance of hardships favors an 11 injunction; and (4) the public interest would be served 12 by the injunction. eBay, Inc. v. MercExchange, LLC, 547 13 U.S. 388, 391 (2006). 14 1. Irreparable Injury 15 Plaintiffs who prove a violation of the Lanham Act 16 are entitled to a rebuttable presumption of irreparable 17 harm. 15 U.S.C. § 1116(a). Because Defendant 18 stipulated to trademark infringement and has offered no 19 evidence to rebut the presumption, irreparable harm is 20 presumed. See Nintendo of Am., Inc. v. Storman, No. CV 21 19-7818-CBM-(RAOx), 2021 WL 4772529, at *2 (C.D. Cal. 22 Aug. 5, 2021). 23 2. Inadequate Legal Remedies 24 “Injunctive relief is the remedy of choice for 25 trademark and unfair competition cases, since there is 26 no adequate remedy at law for the injury caused by a 27 defendant’s continuing infringement.” Century 21 Real 28 Estate Corp. v. Sandlin, 846 F.2d 1175, 1180 (9th Cir. 18 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 19 of 24 Page ID #:3021

1 1988). In addition, “[d]amage to reputation and loss of

2 customers are intangible harms not adequately

3 compensable through monetary damages.” Leadership 4 Studies, Inc. v. ReadyToManage, Inc., No. 2:15-cv-09459- 5 CAS(AJWx), 2017 WL 2408118, at *6 (C.D. Cal. June 2, 6 2017) (quoting Car-Freshner Corp. v. Valio, LLC, No. 7 2:14-cv-01471-RFB-GWF, 2016 WL 7246073, at *8 (D. Nev. 8 Dec. 15, 2016)). 9 The Court has no evidence before it indicating that 10 Defendant will never begin selling the Infringing 11 Products again. While Defendant eventually stopped 12 selling the Infringing Products, it did not do so until 13 well into the litigation of this case. Moreover, 14 Plaintiffs introduced evidence at trial of reputational 15 harm they suffered as a result of the association 16 between BANG energy drinks and the Infringing Products. 17 See Exs. 42, 60-61. Plaintiffs have therefore 18 established that legal remedies are inadequate. 19 3. Balance of Hardships 20 Defendant will not be harmed by an injunction 21 preventing it from selling the Infringing Products 22 because Defendant has already stopped selling products 23 that use Design One and Design Two. Moreover, as 24 discussed above, Plaintiffs have shown that they may 25 suffer continued reputational harm and loss of good will 26 if an injunction is not entered. Therefore, the balance 27 of hardships favors granting an injunction. See AirWair 28 Int’l Ltd. v. ITX USA LLC, No. 19-cv-07641-SI, 2021 WL 19 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 20 of 24 Page ID #:3022

1 5302922, at *4 (N.D. Cal. Nov. 15, 2021) (citation and

2 internal quotation marks omitted) (“Defendant will

3 experience little to no hardship so long as defendant 4 does not infringe and without an injunction plaintiff 5 would be needlessly vulnerable to future infringement 6 necessitating additional litigation.”). 7 4. Public Interest 8 Injunctive relief will serve the public interest 9 here by preventing consumer confusion and will vindicate 10 the Lanham Act by protecting the brands of authorized 11 trademark users. See Knature Co., Inc. v. Duc Heung 12 Grp., Inc., No. CV 20-3877-DMG (AFMx), 2021 WL 3913194, 13 at *5 (C.D. Cal. Jul 2, 2021). There are no exceptional 14 circumstances present here indicating that an injunction 15 would be against the public interest. See Leadership 16 Studies, Inc., 2017 WL 2408118, at *6. Thus, this 17 factor favors entering a permanent injunction. 18 In sum, all of the eBay factors favor a permanent 19 injunction in this case. The Court therefore GRANTS 20 Plaintiffs a permanent injunction against Defendant 21 preventing Defendant from selling any products using 22 Design One or Design Two.7 23 7 Defendant requests clarity as to whether it may continue 24 to use the “vape with a bang” tagline on products sold under brand names other than “Bang.” See Def.’s Closing Arg. Brief 25 23:16-20, ECF No. 199. Plaintiffs do not appear to oppose this request. See generally Pls.’ Reply to Def.’s Closing Arg. Brief, 26 ECF No. 200. The Court agrees that Defendant should be permitted 27 to continue using this tagline on products that do not use Design One or Design Two. Plaintiffs have not shown that use of the 28 word “bang” alone, when detached from Designs One and Two, is likely to cause consumer confusion. Therefore, these sales need 20 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 21 of 24 Page ID #:3023 1 C. Attorneys’ Fees 2 The Lanham Act authorizes courts to award

3 reasonable attorneys’ fees to the prevailing party in 4 “exceptional cases.” 15 U.S.C. § 1117(a). “[D]istrict 5 courts analyzing a request for fees under the Lanham Act 6 should examine the ‘totality of the circumstances’ to 7 determine if the case was exceptional . . . using a 8 preponderance of the evidence standard.” SunEarth, Inc. 9 v. Sun Earth Solar Power Co., Ltd., 839 F.3d 1179, 1181 10 (9th Cir. 2016). Factors to consider include: 11 “frivolousness, motivation, objective unreasonableness 12 (both in the factual and legal components of the case) 13 and the need in particular circumstances to advance 14 considerations of compensation and deterrence.” Octane 15 Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 16 545, 554 n.6 (2014)). 17 In short, “an ‘exceptional’ case is simply one that 18 stands out from others with respect to the substantive 19 strength of a party’s litigating position . . . or the 20 unreasonable manner in which the case was litigated.” 21 Id. at 554. A court’s finding that a defendant’s 22 infringement was willful does not automatically compel 23 an award of attorneys’ fees to the prevailing plaintiff. 24 See UL LLC v. Space Chariot Inc., 250 F. Supp. 3d 596, 25 26 not be enjoined. See Craigslist, Inc. v. Naturemarket, Inc., 694 F. Supp. 2d 1039, 1062 (N.D. Cal. 2010) (“Generally, an 27 injunction must be narrowly tailored to remedy only the specific harms shown by a plaintiff, rather than to enjoin all possible 28 breaches of the law.”). 21 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 22 of 24 Page ID #:3024

1 615 (C.D. Cal. 2017). 2 Here, while the Court determined early on that

3 Plaintiffs had a high likelihood of success on the 4 merits of their trademark infringement claims, Defendant 5 raised nonfrivolous arguments that led the Court to 6 twice deny Plaintiffs’ requests for a preliminary 7 injunction. And while the Court has found that 8 Defendant’s infringement was willful, it cannot say that 9 Defendant’s litigating position was objectively 10 unreasonable. Plaintiffs put forth no evidence that 11 Defendant was aware of the BANG Marks when it began 12 selling the Infringing Products. Energy drinks also 13 occupy a distinct market from vaping products, and 14 Plaintiffs have not exhibited an intent to expand into 15 the vape industry. See Globefill Inc. v. Elements 16 Spirits, Inc., No. 2:10–cv–02034–CBM (PLAx), 2017 WL 17 6520589, at *3-4 (C.D. Cal. Sept. 8, 2017) (finding a 18 case to be unexceptional where plaintiff’s product was 19 different from infringing product and plaintiff had no 20 plans to expand into infringing product’s market). 21 Attorneys’ fees are also not necessary for purposes 22 of compensation or deterrence. The disgorgement award 23 will fully compensate Plaintiffs for Defendant’s 24 infringement, and the permanent injunction will 25 sufficiently deter any risk of future infringement. Cf. 26 Y.Y.G.M. SA v. Redbubble Inc., No. 2:19-cv-04618-RGK- 27 JPR, 2021 WL 4553186, at *4-5 (C.D. Cal. Oct. 5, 2021) 28 (finding a risk of future infringement where the court 22 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 23 of 24 Page ID #:3025

1 denied injunctive relief and defendant could not

2 guarantee that its policing techniques would completely

3 eliminate future infringement). Defendant also did not 4 litigate this case in an unreasonable manner that 5 requires deterrence for future cases. While Defendant 6 had a low likelihood of success in defending against 7 trademark infringement, it stipulated to its own 8 liability and thereby streamlined issues for trial. 9 Under the totality of the circumstances, the Court 10 finds that this is not an exceptional case that stands 11 out from others. See UL LLC, 250 F. Supp. at 615 12 (finding a case to be unexceptional despite defendants’ 13 willful infringement and failure to cooperate during 14 discovery); Eko Brands, LLC v. Adrian Rivera Maynez 15 Enters., Inc., No. 20-35369, 2021 WL 3630225, at *2 (9th 16 Cir. Aug. 17, 2021) (finding that district court did not 17 abuse its discretion in concluding the case was 18 unexceptional despite defendant’s willful infringement). 19 The Court therefore exercises its discretion to DENY 20 Plaintiffs’ request for attorneys’ fees. 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 23 Case 2:20-cv-06745-RSWL-JC Document 201 Filed 07/26/22 Page 24 of 24 Page ID #:3026 1 III. CONCLUSION 2 Based on the foregoing, the Court awards Plaintiffs

3 $10,584,308.48 in disgorged profits. The Court also 4 GRANTS Plaintiffs’ request for a permanent injunction. 5 Defendant is hereby enjoined from selling any products 6 using Design One or Design Two. Finally, the Court 7 DENIES Plaintiffs’ request for attorneys’ fees. Within 8 seven (7) days of this Order, Plaintiff shall lodge a 9 Proposed Judgment with the Court consistent with the 10 conclusions set forth herein. 11 IT IS SO ORDERED. 12 13 DATED: July 26, 2022 _____/s_/ _R_o_n_a_ld_ _S_.W__. _L_e_w_______ HONORABLE RONALD S.W. LEW 14 Senior U.S. District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24