Legal Consequences of Being Sued for A Trademark Infringement?

As we stated in the last blog post, even if you took all the proper precautions to avoid infringing on someone else’s trademark, there is nothing stopping one party from filing a lawsuit and accusing another party of trademark infringement. Let’s run through what will happen when a party gets sued for trademark infringement?

A trademark owner who believes their mark is being infringed upon may file a civil action claiming trademark infringement. Typically, most cases are filed in federal court, but the plaintiff can choose to file in state or federal court depending on the circumstances, such as where the trademark was registered. If the lawsuit is filed in state court, it may be possible for the defendant to have the case "removed" to federal court.

Why Do Businesses Care If Their Trademark Is Infringed? 

Often, when a business infringes upon a trademark, they are trying to build off of the success of someone else’s business, product, or service, without having to do the hard work of creating that business, product, or service. This raises an important question, why do businesses care if their trademark is infringed upon? The biggest reason is businesses may lose revenue because of consumer confusion leading to customers buying the product or service from the infringing party. But there is also another important reason, to avoid reputational damage. The reputational impact of trademark infringement generally impacts a business in two major ways: 

• the loss of credibility and trust of their customers and business relationship; and 

• long-term detriment of the brand’s value and the company’s market position.

With regard to the long-term damage to the brand’s value and the company’s market position can occur in the following ways: 

1. Consumer Confusion and Brand Dilution: Trademark infringement via an unauthorized use of a similar mark can make it confusing for consumers to distinguish between the legitimate brand and the infringing party. Thus, the legitimate brand may lose the trust and loyalty they have developed with their customers over the years. Additionally, if other businesses are infringing upon a trademark, the legitimate brand will become less distinctive and recognizable.  

2. Negative Association and Perception: If someone sells subpar or counterfeit products or services and markets said products or services to resemble the legitimate brand or trademark of another business, then the legitimate brand could suffer the consequences of being associated with poor quality items. This could result in consumers who had bad experiences with the subpar or counterfeit products to attribute this negative experience with the legitimate brand. This will result in a negative association and perception of the legitimate product or service thereby damaging their reputation. 

3. Loss of Business Opportunities: Unauthorized parties may exploit a brand’s reputation by diverting potential customers away from that brand to the unauthorized products or services. Additionally, if the unauthorized products or services are subpar and that low quality is attributed to the legitimate brand, it could harm their reputation thereby preventing other companies from wanted to do business with the legitimate brand.  This could have long-lasting effects on that brand’s growth and profitability.

4. Legal Consequences and Damage to Relationships: Legal battles over trademark infringement will be time-consuming and costly. Additionally, these lengthy legal battles to can strain business relationships. There may be a direct impact on customers, partners, or distributors. 

5. Brand Identity Erosion: When a trademark is being infringed upon, the distinctive characteristics and unique identity of that brand is being threatened. In extreme cases, if a brand’s trademark becomes synonymous with infringement or counterfeit products, it can significantly damage that brand’s reputation and make it challenging to regain consumer trust.

Steps to Take if Sued for Trademark Infringement

It is always the best practice to consult an intellectual property attorney as soon as possible if you or your business is sued for trademark infringement. The attorney can review the validity of the allegations made against you or your business, such as whether or not your mark could be:

• Confusingly similar to another brand name

• Cause dilution of another brand by weakening their distinctiveness or reputation

• Similar or identical to the distinctive visual elements of another brand logo or design

• Considered a digital brand violation

• Using an industry specific term or prefix that is synonymous with a specific brand

An attorney can then help you develop a defense strategy to show the court that your mark does not reasonably cause a customer to be confused between your mark and another company’s trademark. The attorney will help guide you in knowing what evidence to gather to help support your defense. Such as: prior use or differences between your branding and the plaintiff’s mark. Lastly, an attorney can present settlement options. Even if you may prevail in a lawsuit, sometimes it may be better for your business and finances to avoid prolonged litigation. Thus, an attorney can help you weigh your options.

Penalties for Trademark Infringement

When a party is found liable for trademark infringement, the court has various tools and remedies to either stop the party in violation of the trademark or to remedy the harm caused to the victim of the infringement These penalties can severely impact the infringing party’s financial and reputational standing.

1. Injunctions

Injunctions are court orders that prohibit the infringing party from continuing the unlawful use of the trademark either on a temporary or permanent. Temporary injunctions are typically issued during the litigation process in order to prevent further damage to the plaintiff. Permanent injunctions are granted when the court rules in favor of the trademark owner. Permanent injunctions are granted after the resolution in the case and are meant to permanently bar the infringing party from using the trademark in question.

2. Seizure and/or Destruction of Goods

In cases of counterfeit goods bearing the trademark of another company, a party can request or a court can order the seizure and destruction of the goods infringing on a trademark.

3. Monetary Damages

The purpose of monetary damages is to compensate the trademark owner for losses incurred or caused by the infringement of their trademark. Monetary damages can come in the form of actual damages, statutory damages, and punitive damages.

• Actual damages which are calculated based on the financial loss suffered by the trademark owner. Examples of actual damages in a trademark infringement case are: lost profits, damage to the trademark's reputation, and the profits the infringer gained from their infringing activities. 

• Statutory damages are set by law and offer an alternative to providing actual damages to the victim. These can be used when actual damages and profits are difficult to determine. Statutory damages provide a fixed amount of compensation ranging from $1,000 and $200,000 per infringement, 

• Punitive damages are awarded as a punitive measure in cases of willful infringement or counterfeiting, and to deter future misconduct.  The courts can award enhanced damages of up to triple the actual damages.

4. Attorney Fees

In a trademark infringement lawsuit, the plaintiff may request attorney’s fees from the infringing party if the plaintiff prevails in the lawsuit. This additional remedy can often make a defendant re-evaluate their willingness to go through the litigation process. Because if the defendant loses, they would have to pay for their own legal defense fees, and then the plaintiff’s attorneys fees, if the plaintiff prevails. Attorney’s fees usually occurs when the court deems the infringement to be willful or in bad faith.

5. Potential Criminal Charges

In severe cases of trademark infringement criminal charges may be filed against the infringer. Cases where criminal charges are more likely to occur are: counterfeit or pirated goods, infringement that violate U.S. Customs & Boarder Protection laws, and reoccurring violations. If found guilty, the infringing part could face as much as ten years in prison depending upon the specific violation plus monetary fines. 

If you need any assistance with filing a trademark application or any other question we are here to help.