Trademark Infringers Can Limit The Damages They Must Pay If The Trademark Owner Fails To Prove That The Parties' Marketing Areas Overlap

by McNair Law Firm, P.A.

It has long since been the rule that an infringing trademark use may only be prevented in the geographic areas where use of the infringing mark and owner's trademark overlap.i In the recent case of Variety Stores, Inc. v. Wal-Mart Stores, Inc.,iithe Eastern District of North Carolina stressed the importance that geographical overlap plays in recovering damages from such infringement. In fact, proof of geographic overlap can be more important than evidence of lost sales resulting from the infringement. While the District Court awarded Variety Stores damages for Wal-Mart's infringement, it limited the award to the profits Wal-Mart made under the infringing mark solely in the states where both parties actually used their competing marks. And it did so despite Variety Stores' failure to present evidence that the infringement actually caused it to lose any sales.

The Lanham Act states in relevant part that "when a violation of any right of the registrant of a mark... shall have been established... the plaintiff shall be entitled... subject to the principles of equity to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action."iii The Lanham Act grants courts broad discretion to adjust the amount of the recovery "as the court shall find to be just, according to the circumstances of the case."iv This discretion allows the court to ensure that the interests of justice are served and the recovery does not constitute a penalty.v

In determining the appropriateness and amount of any monetary relief, the Eastern District analyzed the following factors: "(1) whether the defendant had the intent to confuse or deceive; (2) whether sales have been diverted; (3) the adequacy of other remedies; (4) any unreasonable delay by the plaintiff in asserting his rights; (5) the public interest in making the misconduct unprofitable; and (6) whether this is a case of palming off."vi

The District Court determined that damages were appropriate, in large part, because Wal-Mart adopted a mark that its legal team warned was likely to infringe upon Variety Stores' trademark rights. In the Court's view, this fact evidenced both Wal-Mart's intent to confuse consumers and the inadequacy of simply enjoining Wal-Mart's continued use of the mark in Variety Stores' market areas. Wal-Mart's intent also overshadowed the lack of direct evidence "that any single customer was diverted from Variety to Wal-Mart's grilling products."

Having found that a damages award of Wal-Mart's profits was warranted, the District Court turned to the amount of those profits. Wal-Mart argued that none of its sales could be attributed to the infringing mark and, therefore, there were no profits to be awarded. The Court rejected this argument, noting that Wal-Mart would not have chosen the infringing mark after repeated warning from its legal counsel if it really had no value or effect on Wal-Mart's sales. Wal-Mart was successful, however, in arguing that the damages should be limited to the market areas in which the use of the parties' marks overlapped. Therefore, the District Court limited the award of profits that Wal-Mart made to states in which Variety Stores actually operated.

Had the evidence not clearly shown the willful nature of Wal-Mart's infringement, Wal-Mart may have been able to show that injunctive relief (rather than damages) would have been sufficient to remedy its infringement by emphasizing the lack of a negative impact the infringement had on Variety Stores' sales. Instead, Wal-Mart was only able to limit its damages to the market areas in which injunctive relief would have been appropriate. While Wal-Mart attempted to define the market areas as only including a 25-mile radius from the locations of Variety Stores, the Court broadened the area to include the entirety of each state where Variety Stores operated.vii The District Court's market area was commensurate to the geographic scope of the injunctive relief that is typically fashioned in trademark cases.

It is good practice for companies to avoid the adoption and use of trademarks or service marks that are confusingly similar to another party's mark. It should be remembered, however, that even if the use of an infringing mark gives rise to liability, it may not give rise to injunctive relief or monetary damages. Any relief awarded should be limited to the areas in which both parties operate. Because the geographic scope can be the same for both injunctive and monetary relief, a good argument exists that if the goods or services involved are "local" in nature, the relief should be limited to the area(s) where the plaintiff actually markets and sells its goods and/or services.viii This area may be more akin to the 25-mile radius suggested by Wal-Mart and, therefore, substantially less than the entire state in which the trademark owner operates.


Dawn Donut Company, Inc. v. Hart's Food Stores, Inc, 267 F.2d 358 (2d Cir. 1959). See also Armand's Subway, Inc. v. Doctor's Associates., Inc., 60 F.2d 849, 851 (4th Cir. 1979).

ii Id. at 2016 U.S. Dist. LEXIS 161512, 2016 WL 6906704 (E.D.N.C. Nov. 21, 2016).

iii15 U.S.C. § 1117(a).

iv15 U.S.C. § 1117(a).

Shell Oil Co. v. Commercial Petroleum Inc., 928 F.2d 104, 108 (4th Cir. 1991).

vi Synergistic Intern., LLC v. Korman, 470 F.3d 162, 175-76 (4th Cir. 2006).

viiWhile the District Court limited the damages award to the profits made in states where Variety stores actually operated, the award still reached a staggering amount of $32,521,671.40.

viii George A. Z, Johnson, Jr., Inc. v. Sosebee, 397 F.Supp.2d 706,710-11 (D.S.C. 2005).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McNair Law Firm, P.A. | Attorney Advertising

Written by:

McNair Law Firm, P.A.

McNair Law Firm, P.A. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.