Bikini. Findings of Fact, supra, No. 27. VS Catalogue advertises almost exclusively through its own catalog. Findings of Fact, supra, No. 22. VS Catalogue distributes more than 145 million catalogs throughout the United States in a given year. Findings of Fact, supra, No. 26. Indeed, VS Catalogue is now the leading mail-order retailer of swimwear, holding almost 40% of the market. Findings of Fact, supra, No. 11. We believe that given these and other circumstances, a disclaimer can effectively inform much of the target pool of MIRACLESUIT customers that THE MIRACLE BRA Bikini is not made by the same company as MIRACLESUIT thereby helping to restore and/or prevent the erosion of Plaintiffs' goodwill and reputation. Given the effectiveness of a disclaimer in serving Plaintiffs' narrow interest, we believe that a full permanent injunction prohibiting Defendants from using a "miracle" mark for swimwear would be inequitable. Restatement (Third) of Unfair Competition § 35, comment (c) ("If the defendant has acted in good faith and prospective purchasers can be adequately protected by disclaimers or other limited relief...the scope of the injunctive may be appropriately narrow."); Findings of Fact, supra No. 20, 22, 24.
4. The harm likely to result to the legitimate interests of the parties
We believe that this factor weighs in favor of granting injunctive relief in the form of a disclaimer. Defendants had a legitimate interest in extending their own mark - THE MIRACLE BRA. See A&H Sportswear, 926 F. Supp. at 1264 ("A trademark owner's expansion of its use of its trademark into related fields, provided it does not conflict with the rights of a prior user of the same or a similar mark, does strengthen the owner's rights.") Indeed, Defendants have a legitimate right in extending their mark to the extent that it does not create a possibility of confusion with Plaintiffs' product. We believe that a disclaimer will effectively remedy much of any possibility of confusion, helping Defendants to extend their mark legitimately. We believe that a great deal is at stake for Defendant VS Catalogue, because The MIRACLE BRA swimwear has helped VS Catalogue to position itself as the leading mail-order retailer of swimwear. Findings of Fact, supra, No. 3. See also Findings of Fact, supra, No. 6, 7, 8). These interests would be harmed unnecessarily if a full permanent injunction prohibiting Defendants from using a miracle mark for swimwear was issued.
We also believe that the harm to the legitimate interests of Plaintiffs if all injunctive relief is denied weigh in favor of granting injunctive relief in the form of a disclaimer. We do not think a full injunction is appropriate because, among other reasons, Defendants' products are not inferior to Plaintiffs' products and because Defendants have not been riding on the success of Plaintiffs. However, we believe that denial of an injunction in the form of a disclaimer would harm Plaintiffs unnecessarily. Defendant VS Catalogue's wide distribution of its catalog might permit the targeted pool of THE MIRACLE BRA and MIRACLESUIT customers to believe that both products are from the same maker. On the other hand, the same distribution when linked with a disclaimer would permit that same target pool to become informed as to the distinct sources of the MIRACLE BRA Swimsuit and MIRACLESUIT products.
We think this factor weighs neutrally with respect to denying a full permanent injunction against VS Stores. The harm to VS Stores appears to be minimal. Defendant VS Stores has not had THE MIRACLE BRA swimwear in its stores for well over a year. Findings of Fact, supra, No. 27. Furthermore, it has no plans to include swimwear in its line in the future. Findings of Fact, supra, No. 27. However, VS Catalogue would be harmed if a full injunction was issued with respect to VS Stores because such an injunction would impair its ability to conduct point of sale research even when the disclaimer in their catalog as well as on hangtags eliminated most infringement by eroding any possibility of confusion. However, we do not believe the legitimate interests of Plaintiffs would be similarly harmed. There is no reason to believe that the quality of Defendant VS Store's swimwear would be inferior. Given the existence of an a disclaimer in the widely distributed catalog and on any hangtags dispelling much of any possibility of confusion, we doubt permitting VS Stores to sell THE MIRACLE BRA swimwear in the future when accompanied by a disclaimer would substantially harm Plaintiffs' legitimate interests.
5. The interests of third persons and of the public
The interests of the public weigh in favor of granting a partial injunction in the form of a disclaimer. We are very concerned here with the public interest in preventing confusion as to the source of products and in facilitating legitimate competition. The public has indicated a wide desire to purchase Defendants' THE MIRACLE BRA goods. We have found that this public desire has not been a result of direct diversion of Plaintiffs' goods. We believe that the public is well served by being able to identify Defendants' swimwear and its cleavage enhancing purpose and construction through the use of Defendants' THE MIRACLE BRA mark. If Defendants were completely prohibited from using the trademark THE MIRACLE BRA in conjunction with its cleavage enhancing swimwear the public may well become more confused as to the swimwears' source and relevant features.
We also believe that this risk of misunderstanding would have resulted to some degree even if initially Defendants had chosen to use another name for a collection of mostly cleavage enhancing swimwear. To the extent that Defendants cannot brand extend their strong THE MIRACLE BRA mark even when a disclaimer eliminates much of any possibility of confusion, the public interest in the facilitation of legitimate competition is also jeopardized.
The public also has an interest in understanding the distinct source and function of Plaintiffs' products and in ensuring that trademarks in general can be relied upon. We believe that a disclaimer will serve both purposes without circumventing the public interest in readily identifying the source and purpose of Defendants' products. A disclaimer will permit the public to disassociate Plaintiffs' MIRACLESUIT from Defendants' products. Because the Defendants have not acted in bad faith we believe that such a disclaimer will not substantially encourage the infringement of trademark laws. While such a disclaimer will not eliminate confusion in a case in which a consumer is looking at a display of MIRACLESUITS and believes that such a display contains cleavage enhancing products, we believe that the disclaimer remedy will eliminate much of any possibility of confusion.
6. Any unreasonable delay or wrongful conduct by Plaintiffs
Plaintiffs did not delay in bringing suit in this action or requesting injunctive relief. However, their promptness does not alter our judgement that the balance of the factors weighs in favor of granting an injunction in the form of a disclaimer.
We do not feel that Plaintiffs' conduct weighs decidedly in favor or against a particular form of relief. However, while not necessarily wrong, Plaintiffs' failure to present its own formulation of a disclaimer at the damages stage of the trial or to outline a counter proposal for a form of corrective advertising, gives this court increased confidence in Defendants' own display of good faith and corresponding formulation of a disclaimer.
7. The practicality of framing and enforcing an injunction
Similarly, we do not believe that the practicality of framing and enforcing an injunction recommends the use or disuse of any particular remedy. While Plaintiffs have expressed concern about the need to return to court if a disclaimer is granted, we do not believe that that concern should prevent our grant of an disclaimer. Plaintiffs have not proven Defendants acted in bad faith. In addition, Defendants' management harbors a sincere belief that they can comply with the instructions of this court. Findings of Fact, supra, No. 20, 22. Accordingly, we remain convinced that a disclaimer is an appropriate remedy and should be applied to both Defendants.
D. Conditioning Use on Payment of a Reasonable Royalty
We have stressed the appropriateness of a disclaimer and the inappropriateness of a full permanent injunction prohibiting Defendants from using a "miracle" mark for swimwear because, as discussed above, our remedy should be no broader than necessary to provide full relief to Plaintiffs and should not prohibit legitimate competitive activities. However, this court will also issue an injunction prohibiting Defendants from using a "miracle" mark for swimwear unless Defendants periodically pay Plaintiffs a reasonable royalty for the use of a "miracle" mark. In addition to the reasons discussed below, we award this relief because (1) a disclaimer will eliminate much, but not all, of the possibility of confusion in this case, (2) the scope of injunctive relief is typically resolved against the wrongdoer, and (3) although Plaintiffs have not proven bad faith Defendants as infringers are the more culpable.
An injunction conditioning use upon the payment of a reasonable royalty has support in the law of intellectual property, especially with the law of trade secrets. However, as we discuss this form of relief, we reiterate that we have substantial discretion in defining the terms of an injunction and that injunctive relief is to be molded to the necessities of a particular case. Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250, 1256 n.16 (9th Cir. 1982); Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 61-62, 45 L. Ed. 2d 12, 95 S. Ct. 2069 (1975).
1. Patent Law
Conditioning future use upon the payment of a reasonable royalty has only limited support in patent law. However, we believe the factors that might disfavor such relief in patent law are less salient in trademark law. In Stickle v. Heublein, 716 F.2d 1550, 1561 (Fed. Cir. 1983), the Federal Circuit held that the appropriate damage award was a lump sum payment of a reasonable royalty since an actual negotiation between the parties would have yielded a paid-up license for making and using the patented inventions. The court in Stickle held that an injunction must be modified to permit the use of the existing machines because the lump sum payment created an implied in law license. Id. at 1563. The Court did distinguish an implied in law license from a compulsory license. Id. In essence, injunctive relief against use was inappropriate in Stickle because the infringer had already made the patent holder whole. Id. In Trans-World Mfg. Corp. v. Al Nyman & Sons, Inc., 750 F.2d 1552, 1565 (Fed Cir. 1984), the Federal Circuit stated that if the jury in that case awarded damages based upon a flat fee for use of the patent, the district court may then modify the injunction to eliminate the prohibition against use. The court in Trans-World noted that while a district court has discretion on whether to enter an injunction, the exercise of that discretion cannot be arbitrary and "[a] patent gives "'the right to exclude others from making, using or selling the invention.'" Id. at 1564. While the district court could have denied injunctive relief, once it determined to provide such relief "it could not properly deny the one element of that relief that was necessary to make it effective." Id.
The statutory authorization for an award of injunctive relief is nearly identical under both patent and trademark law. Under 35 U.S.C. § 283, a court "may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable." Similarly, federal courts may grant injunctive relief according to the principles of equity and upon such terms as they deem reasonable, "to prevent the violation of any right of the registrant of a mark." The Lanham Act § 35, 15 U.S.C. § 1116. Thus, for both patent and trademark law, the justification for the issuance of any injunction is to prevent the violation of the holder's rights.
Although they are similar, the rights of a patentee and a trademark registrant are far from identical. The patent statute grants a patentee the right to exclude others from making, using, or selling the patented invention for a fixed and definite period of either 17 or 20 years. 35 U.S.C.A. §§ 154, 271(a) (West 1997). For this period of time the patentee may choose to do nothing with the patent. King Instruments Corp. v. Perego, 65 F.3d 941, 950-51 (Fed. Cir. 1995), cert. denied, U.S. , 134 L. Ed. 2d 778, 116 S. Ct. 1675 (1996). Thus, the nature of the patent right itself is the right to exclude others. ALM Surgical Equipment, Inc. v. Kirschner Medical Care, 1990 U.S. Dist. LEXIS 14584, 15 U.S.P.Q.2D (BNA) 1241, 1253 (D.S.C. 1990). The exclusion of others is tied powerfully to the policy justification for the issuance of a patent - promoting the progress of the useful arts:
Without this injunctive power of the courts, the right to exclude granted by the patent would be diminished, and the express purpose of the Constitution and Congress, to promote the progress of the useful arts, would be seriously undermined. The patent owner would lack much of the 'leverage' afforded by the right to exclude, to enjoy the full value of his invention in the market place. Without the right to obtain an injunction, the right to exclude granted to the patentee would have only a fraction of the value it was intended to have, and would no longer be as great an incentive to engage in the toils of scientific and technological research.
ALM Surgical Equipment, 15 U.S.P.Q.2D at 1254 (quoting Smith Int'l, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1577-78 (Fed Cir.), cert. denied, 464 U.S. 996, 78 L. Ed. 2d 687, 104 S. Ct. 493 (1983)).
Trademark rights differ in several respects from patent rights. First, the Lanham Act affords the trademark registrant an exclusive right to the use of the registered mark for specified goods and services. 15 U.S.C. § 1057(b); See Park ' N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 204, 83 L. Ed. 2d 582, 105 S. Ct. 658 (1985). However, such an exclusive right can last indefinitely, provided that the registrant does not abandon the mark or fulfill the requisites for another enumerated defense. See 15 U.S.C.A. §§ 1127, 1115 (West 1997); Philadelphia Jaycees, 639 F.2d at 137-138; Defiance Button Machine Co. v. C & C Metal Products Corp., 759 F.2d 1053, 1059-60 (2d Cir.), cert. denied, 474 U.S. 844, 88 L. Ed. 2d 108, 106 S. Ct. 131 (1985). Indeed, in marked contrast to the rule in patent law, "trademark ownership results only from use, not from registration." Jean Patou, Inc. v. Theon, Inc., 9 F.3d 971, 974 (Fed. Cir. 1993). Finally, the policy justification for trademark protection is more complex than the justification for the grant of a patent.
More specifically, "the Lanham Act was intended to make 'actionable the deceptive and misleading use of marks' and to 'protect persons engaged in ... commerce against unfair competition.'" Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 767-68, 120 L. Ed. 2d 615, 112 S. Ct. 2753, (1992) (quoting 15 U.S.C. § 1267); See also Intel Corp. v. Terabyte International, Inc., 6 F.3d 614, 618 (9th Cir. 1993). "Trademark policies are designed '(1) to protect consumers from being misled as to the enterprise, or enterprises, from which the goods or services emanate or with which they are associated; (2) to prevent an impairment of the value of the enterprise which owns the trademark; and (3) to achieve these ends in a manner consistent with the objectives of free competition.'" Anti-Monopoly, Inc. v. General Mills Fun Group, 611 F.2d 296, 300-01 (9th Cir. 1979). The Senate Report on the Lanham Act elaborated on the consumer and business protection functions:
"The purpose underlying any trade-mark statute is twofold. One is to protect the public so it may be confident that, in purchasing a product bearing a particular trade-mark which it favorably knows, it will get the product which it asks for and wants to get. Secondly, where the owner of a trade-mark has spent energy, time, and money in presenting to the public the product, he is protected in his investment from its misappropriation by pirates and cheats."
Two Pesos, 505 U.S. at 782 (Stevens, J. concurring) (quoting S. Rep. No. 1333, 79th Cong., 2d Sess., 3 (1946)). Unlike in a typical patent law case, the court in a trademark case aims to provide equitable relief which protects the consumer, the trademark registrant, and the spirit of fair competition. To provide such an equitable result, courts may find it more appropriate to grant an injunction conditioning use upon the periodic payment of a reasonable royalty rather than to grant a full permanent injunction against use of a trademark.
In any case, as explained below, we are convinced of the exceptional circumstances involved in this case. Given these exceptional circumstances and our discretion, we believe the most appropriate relief will condition Defendants' future use of a "miracle" mark with regard to swimwear on the payment of a reasonable royalty.
2. The law of trade secrets
Conditioning future use upon the payment of a reasonable royalty is permitted in exceptional cases in the law of trade secrets. The Uniform Trade Secrets Act (UTSA) has been adopted in modified form by thirty-six states, including the District of Columbia. Donald J. Curry, Obtaining and Enforcing Effective Injunctive Relief in Trade Secret Cases, 340 PLI/Pat 565, 587 (citing Melvin F. Jager, Trade Secrets Law Handbook, § 3.04 (1991)); Christopher Rebel J. Pace, The Case for a Federal Trade Secrets Act, 8 Harv. J.L. & Tech. 427, 469 n.17 (1995). The act generally codifies common law principles. Mod Int. Prop. CH 1, II, B (citing Unified Trade Secrets Act § 1, 14 U.L.A. 402 (1985 & Supp. 1990). See also Laurie Visual Etudes, Inc. v. Chesebrough-Pond's, Inc., 105 Misc. 2d 413, 422, 432 N.Y.S.2d 457, 463 (1980) (trade secret misappropriation case in which the court established a perpetual royalty) ("Plaintiff is also entitled to a declaration in the judgment that its share in all ensuring gross sales commencing August 1, 1980, shall be ten percent, to be remitted quarterly on the fifteenth day following the completion of each quarter together with a verified statement of gross sales."), rev'd on other grounds, 83 A.D.2d 505, 441 N.Y.S.2d 88 (1981). The UTSA provides:
§ 2. Injunctive Relief....