$2.4 Million in Trade Dress Damages, D’oh!

BrandFX (BFX) issued a press release on August 5, 2011 announcing that it just received a $2,400,000.00 check from its competitor, Astoria Industries of Iowa, Inc. (Astoria) Asset purchase?  Licensing fees?  Debt repayment?  Nope, nope and nope.

That check was for a damages and attorneys’ fees award for trade dress infringement and false advertising under the Lanham Act, as well as common law misappropriation under Texas law.  According to the press release, the litigation took seven years, including two appeals — the first to the Texas Court of Appeals, before going all the way up to the Texas Supreme Court.  Having read an order on an interlocutory appeal regarding a denial of summary judgment — and yes, lawyers have their own language, commonly known as legalese (legal-ease) — here’s what I learned about the case . . .

Astoria and BFX both manufacture fiberglass utility and service bodies and toppers for commercial vehicles.  BFX has a topper whose design it claims functions as a unique brand.  In 2002, Astoria changed its topper to resemble BFX’s, but offered the topper for over $1,000 less than BFX charges for its topper.  BFX alleged that Astoria illegally obtained BFX’s drawings and used them along with an actual BFX topper to create Astoria’s infringing design.  Astoria then ran a “DARE TO COMPARE” advertisement in an industry trade journal ten times during fourteen months.

According to the interlocutory order:

The Advertisement begins, “When choosing fiberglass utility bodies, Astoria Industries of Iowa should be your supplier!”  Then the Advertisement compares “High Quality Astoria Bodies vs.  Low Quality Brand X Bodies.”  Regarding the latter, the Advertisement states, (1) “No Engineering and built with sub-standard materials”; (2) “Short term cost with long term expenses”; (3) “Built to their standard”; and (4) “1-year warranty.”

Astoria failed to cease and desist upon receipt of BFX’s claims of defamation.  BFX then filed suit against Astoria for: business disparagement and defamation per se, false advertising under the Lanham Act, tortious interference with prospective relations, trade dress infringement, unfair competition, common-law misappropriation, and trade secret misappropriation.  BFX claimed that the “Brand X” in the Ad’s comparisons to “Low Quality Brand X Bodies,” was a not-so-subtle reference to Brand FX.  Seven years(!!) later the litigation finally concluded and BFX received compensation for its trade dress, false advertising and state misappropriation claims, and at least a portion of its legal fees.

Litigation is expensive!  While damages and attorneys’ fees awards are not very common in trademark cases, when they are awarded they always seem to be HUGE.  Keep in mind, that’s $2.4 million on top of Astoria’s own legal fees and costs, plus the devotion of time, resources and all the other incidental costs of litigation.