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					                             IN THE SUPREME COURT OF TEXAS



               ASTORIA INDUSTRIES OF IOWA, INC. -                       Petitioner

                                                 v.

        SNF, INC. DIBIA BRAND FX BODY COMPANY - Respondent


                         On Appeal from the Court ofAppeals for the
                               Second District-Fort Worth
                                Cause No.: 02-05-315-CV


                                          APPENDIX


Trial court judgment .......................................................................... 'rAB 1

Court's charge ................................................................................. TAB 2

Court of appeals' opinion and judgment ................................................... TAB 3

Westlaw text of 15 U.S.C. §§ 1117 and 1125 ............................................. TAB 4

Magistrate judge's opinion in Balance Dynamics Corp. v. Schmitt Industries, Inc. TAB 5

Text of hearing on SNF's motion for judgment notwithstanding the verdict ......... TAB 6

"Dare to Compare" ad ........................................................................ TAB 7

BFX's topper with ladder racks ............................................................. TAB 8

Astoria's topper built for Cook's Pest Control ......... :: ................................. TAB 9
TAB 1
                                       CAUSE NO. 017-205066,.04

SNF Inc. d/b/a Brand FX Body                        §                       IN THE DISTRICT COURT OF "
                                                                                   I
Company,                                            §
                                                    §
                  Plaintiff,                        §
                                                    §
v.                                                  §                        TARRANT COUNTY, TEXAS
                                                    §
Astoria Industries of Iowa, Inc.,                    §
                                                     §
                  Defendant.                         §                         17th JUDICIAL DISTRICT

                                         FINAL JUDGMENT

           Came on to be heard the above entitled and numbered cause. The Plaintiff, SNF Inc.

 dJbfa Brand FX Body Company ("Brand FX").appeared wough its designated corporate

 representative and attorneys· of record and announced ready for trial. The Defendant, Astoria

 Indus1J:ies ofIowa, Inc. ("Astoria"), appeared through its designated corporate representative and

 attorneys of record and also announced ready for.trial. Trial 'by jury having been previously

 demanded, a jury consisting of twelve qualified jurors was duly impaneled and sworn, and the

 case proceeded to tria1.

           At the conclusion of the evidence and arguments of cou11se1, the Court submitted the
 --    --_.,-   ----------.------------~--------                       ----- ----------   ~-   ------------~   -------

 questions of fact in this case, along with instructions and definitions, to the jury. The verdict of
                                          .' . .   . . : i.   l   ,~    1

 the jUl'Y was returned on January 15;2008, anci"1ibcePted by the Court. The Charge of the Court

 and the verdict of the jury are incorporated herein for all purposes by niferenoe.

            After the jtu:y retumed the verdict, Brand FX filed Plaintiff s Motion for Judgment

     Notwithstanding the Verdict and, Motion to Disregard Jury Finding, which the Court granted.

     Thereafter, Brand FX filed a Motion for Entry of Final Judgment, requesting the Court to render

     judgment based on the evidence presented at trial, the jUl'J'S verdict, the legal and· equitable

     powers vested ill the Court> and 15 U.S.C. §§ 1116, 1117(a), and 1125.

     FINALJuDGMENT~PAGE        1 oF5
 ~.




                     The evidence presented at trial, 'anc;l. the,yerdic(<;>fthe Jmy was for Brand fX and, ~gfcinst
      . .'             '. .                .' :..          ,,......   ':. I.                    ..   .'         ,.".. . :.." .. .~ . ". :1,:.... ".   j   •   .




- "'~-- - . -Astoria-onJ3r.and-F)Cs-cause~-Of-actiori.forJr.adeu:lressJnfringe1il~nt.;~~'1i~ap;P1...!\pnatl0iLpi)1.~~fsu;_::'_ :~' . . _~ . _ .

             and fals~. advertising. Therefore, based on the evidence p:resel1t~d at trial, the jury's verdict, the

             legal and equitable powers of the C01.1rt, and 15 U.S.C. §§                             1116~      1117(a), and 1125, the Court

             finds and concludes the following:

                     A.        Astoria infringed Brand FX's                   stair~step         topper trade dress under 15 U.S.C. §

             1125.

                      B.       Astoria's 11lfringement of Brand FX's stair-step. topper tr&de dress is likely to

             cause confusion in the marketplace. Any future use by Astoria of the stair~step topper trade

             dress is also l~kely to cause COID1..1Sion in the marketplace.
                                                       I    '~        I   ~    I", 'r'   ". .             , .
                      C.       Astoria's hlfringemeilt' of:Bl'attcf' EX's" stair-step topper trade' dress was

             "exceptional," as that term is defIned in 15 U.S.C. § 1117(a), thereby entitling Brand FX to

             reoover its reasonable attomeys' fees in prosecuting the trade dress ,claim.

                      D.       Astoria misappropriated Brand FX's stairwstep topper design.

                      E.       Disgorgement of Astoria's profits related to sales of its infringing stair-step

             toppers is appropriate l.mder 15 U.s.C. § 1117(a).

------.- - -- . -----F....·-- -Asteria-' sproflts-related-to-sales- of· its-infringing stair-step topper-are-$705,OOO. .OO. - ~-.:.

                      G.       Astoria committed false advertising against Brand FX in its "Dru. e to Compare"

             advertisement under 15 U.S.C. § 1125(a).

                      H.       Astoria's false adveltising included literally false statements of fact about Brand

              FX's utility bodies. Astoria's false         'aa~ertis~~ {~' ~:ls6; likely to deceive consumers.
                      1.        Disgorgement of Astoria's 'profits related to sales of its advertised utility bodies

              during the period of time the "lDare to Compare" adveltisement ran is appropriate under 15

              u.s.c. § 1117(a).
              ;FINAL JUDGMENT-PAGE 2 OF 5
       J.-.    Astoria's profits rell:l-ted to sales of its advertised utilhybodies during· the period ..

oftime tile "Dare to Compare" advertisement ran are $630,000.00.

       K.      Brand FX suffered $52,200.00 in corrective advertising damages as a result of

Astoda's false advertising.

       1.      Astoria's fal~e advertising was "exceptional'" as that term is defined in 15 U.S.C.

§ 1117(a), thereby entitling Brand FX to recover its reasonable attorneys' fees in prosecuting the

false advertising claim.

        Therefore, based· on the e-yidence presented at trial, the jury's verdict, the legal and

equitable power of the Court, and 15 U.s.C. §§ 1116, 1117(a) and 1125, Final Judgment is

hel'eby rendered against Astoria and in favor of Brand FX.

        It is therefore ORDERED, ADJUDGED, AND DECREED that Brand FX have and

recover·from Astoria the following specific reiief:

        A.     The sum of$1,387,200.00 as damages.:

        B.     Reasonable attorneys'· fees in the amount of $
                                            •I       .




                i.     Additional reltsonab~e attorneys' .fees in .the, runmmt of
                       $ /~ "lYe?          1U the evel~t AstorIa appeals tIllS Fmal Judgment to.
                       the Com?of Appeals.




                iii.       Additional reasonable attorneys~ fees in the alnount of $----=~~~-'"""-_
                           in the event the Texas Supreme Court grants Astoria's
                           Review.
                                                         .                 .   .     ~

        C.      Pre..judgment interest in the amount of $      3 ~S; ?,s1J           ,based   011   a rate
                                                                       7
                of seven and onewquarter percent (7.25%) simple interest calculated flOm April 7\

               . 2004 (the date Brand FX filed suit against Astoria) and extending through the date
                                        •        r

                preceding the dayth1s Filml Jud~nent i~ signed.

 ~)NALJUDGMENT-PAGE3 011'5
     ~.   '

<.
"




                         D.    Costs incurred ill prosecllting this action in the amount of$              ce CJlr,3..>"':
                         E.     Post~judgment   interest at a rate of2.90%, compounded annually.
                                                                  .                          ,                  ,

                         In addition to the monetary relief awarded         above~     the jury also awarded Brand FX

              $577,000.00 as its lost profits in connection with Astoria's trade dress infringement and

              misappropriation. Following rendition of the verdict, Brand FX elected to recover disgorgement

              of Astoria's profits related to its sales of the :ixrlHnging stair-step toppers. However, Brand FX

              has expressly reserved its right to seek affirmation of the jury verdict on its $.577,000.00 in lost
                                                         i                      .

              profits.

                              FURTHER ORDERED pursuant to 15 U.S.C. § 1116 t t Astoria's                               condu~t

                                   X with i.rnminent harm and irrepaxable illJury for               .ch there is no adequate

              remedy at law, Bran J;iX is entitled to the following injunctive

                         A.                                      officers, dire      01'S,   shareholders,' affiliates, agents,

                                                                 employe , parent and subsidiaty corporations,



                                                                  SS,   or any other colorable imitation of Brand FX's

                                                                        way in the work topper industry or any related

                  - -- ----- -- inclustTy-without-the-   '.press-~i~e~- -   nsellt of-Brand-Fif;-and--- ------ --- -- . -------

                         B.                                                         ctors, shareholders, affiliates, agents,

                                                   employers, employees, par t and subsidiary corporations,

                                predeces rs, successors and assigns, is permanent                enj oined hi the utility b9dy

                                       'y 01' any related industry, without the express wri           n consent of Brand FX,

                                  om making the following statements, or colorable varia' n8 thereof, about

                                 Brand FX or its utility bodies: (1) Low Quality Brand FX Bodies                    e built with

                                 sub-standard materials; (2) Low QuE\lity Brand FX Bodies involv(:, ShOI te11n cost


               FINAL JUDGMENT-PAGE 4 OF 5
       It is FURTHER ORDERED that Astoria have and recover nothing against Brand FX by

reason of any claims that Astoria may have asserted in tins case.

       It is FURTHER ORDERED that all writs and processes for the enforcement and

collection for this judgment -may issue as necessary. All other relief n.ot expressly granted herein

is denied. This judgment finally disposes of all claims and all parties and is appealable .
                            ..........
       It is FURTHER ORDERED tilat execution issue for this judgment.



       IT IS SO ORDERED.

"SIGNED this   !I-   day of February, 2008.




 FINAL JUDGMENT-PAGE 5 OF 5
TAB 2
..                                                                      .
                                                               -,-~ ..:..-~--~~------------------
            I ...




                                                                                                                    ORIG\NAl,'
                                                         .'        ,
       SNF          r~c.,        n/B/A BRAND FX                BOn~'                 §
       COMPANY                                                                       §
                                                                                     §
       VS.                                                                           §                        . 'l'~ COtrn'l'Y, TEXAS
                                                                                     §
                                                                                     §                        17~   JODIaXAL   DISTR!C~

                                                                              .,
                                                                       . .G.trAItGE OF' THE COtm.T   1




      . tADIES It.N.D G~LBMEN .Ol? .~.HE JORY:
                               ,            .
              'l'his case is submitted to you by (isking questions about the facts r whidh
        you'must decide'from the evidence you have heard intpis trial. You. a~e the
        sole judges 'of the credibility of the witnesses and the. weight to be given .,
        their testimonYl hut in matters' of la'W', you :mu.st be gove'X':n,ed by the
  ,,' instructions in. this charge.' In aischarging your responsibility .on this
   '.. jury, you will observe all the instructions which ha.ve previously been gi"ve:u
     .: you .. I s4all now give you additional in.structions '\.I!hich you. should. care:J;ully
    .. and f;ltrictly' follow dtL~.ing your deliberl;l:j:ions.      .           . ;, : .'
                                        '.           ,

   .":' .   1.   Do not let bias t .' prejudice or sYmpathy                                               play      any part - iri.. your.
     , deliberations •
                   I~ ~rr~Vi~g' at' ~D~ "amilwe~"~,' .~onsider' 'O~l;~3;J.e· ~~idep.Ce'· ~ntroduced. /
  .' . ,:.'.'.. ' '2.':'
     . here 'under oath. and' such eXhibit$, .if any, as have been ~ntroduced for your                                                            .
      ·cor,l.sideration under the :rulingS of tbe court, that is, what you have seen and
' ... heard in this oourtroom, together with the law as given .you by the court. In
       your deliber?f.tio:ns you' will not' consider or dis'ouss anything that is not
       :re;presented ·by·.th~ evidence, in 'this ·case. "            . ' ",'        .      '
          . 3 , ' Since' every answer that is requirea. :by' the' charge is important, no '.
  .' . juror' should state or consider. that ·any requ.ired answer is not ·im.pol:'tan~ . . "                                                 "   ."

       . . ", 4... You 'must 'n~t' d'ecia~' who you. ~hink sllould win~ and then try' t~
  . "'answer'the ~estions'accordingly. Simply answer the questions J . and 'do not
., .. " discuss, nor concern yourselves with the effect of your ·answers.···. . ,.
                                                                       .    .
                                                                                      .. .... .-'
             . :5 ~ You wili, not d~~:l.de 'the answer' to a QUestion: by lot or by drawing:
         straws, or by any other method of chance. Do not return a qu,otient verdict.
          ',A quotient verdict means that the jurors agree· to abide by the result to be
         ;r~~Gp.e.(i by· adding to~ethe;r: eac~1. juror's figures and ¢iiviCling by the :number of
     ,. jurors to' get an, average. , Do not do any .trading ,OIl your answers; that is"
        ·one·juror agree to.answer ~ certain question one way if others will'agree to
       . answe~ another qUestion another way. '                                .' .     r
              6.  You may render you,r' verdict 'upon t')l6 yote t'en                                    of                  members of
       the jury. The same' ten or more of you must agree upon                                                              the answers'


 .   . mail<> and to the ""tire '1rerdict.
       :::~i::;hDund
                                             You o~l1lOt,
                                                                       a    major~( other                      .
                                                                                                                                into   <;Ul
                                                                                                                              .than ten' .




                                                                                              J
                                                              by
                                                                                                                                                       .'




. . Transaction, #2/ &'
  :.                                                     .'    . . ..•.               <) )\ .
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                       '.


             jUrors.   If the verdict and all of the. answers.' tllerein are reached by.
                       agreement, .the 'presiding jUror (:Iha11 sign' the verdict fox the
             una.l).imOllS .
             ~tire jury.   If any juror disagrees as to' any answer i'nade by the verdict)
             t~os~ jurors who agree to all findings shall each l3ign the verdiot.    '
                 .These, instruotions are given you because your conduct 'is ~ubject to'
         , re'View the same. as that of the witnesses. parties, attorneys and the judge.
           Xf it should' be' foUnd that you have disregarded any of these instruqtions, it
           will be jur,? misconduct and it may require another trial by another jury;
           then a.ll. of our time will have been "f!Jast!=d.·

                   ~e·pre6iding juror or any other wbo.observes a violation of the co~t'$
             infltructions shall il1llUediately 'warn the one who is violating tbe same and
             cautio~ the juror not to ,do so agai~.,

                                          When words are' used in this charge in a sense which varies from tbe
             meaning commonly understood, you are given a'proper legal definition, which
                            to acce~t .
             you are. hound . ' in place. of any'other meaning.
                   .                                        .

               Answer I'Yes l '                                     or
                                 "No'" to all questions ~less otherwise instructed, 'A
         "Yes answer :must be based on a preponderance of the evidenoe .. If you do' not,
                                     tt

       · find, that .a preponderance of the evidence supports. a . "Yes " answer I then
         answer . "No. \I Tbe term·, 11 PREPONDERANCE .oF THE. EVIDE~CE II lUeans the greater "
       · weight and degree of credible testimony or e.vidence introduced before you and .
         admitted in. this case. Whenever a ®E;:lStion requires other than a "Yes 11 or a··
    . . "No II answer, your answer mus t be based on a preponderance of the evidence.
                   ~
           .' A' fact·
    '<:'," . .                            by                ~ay b~' 'e8~ablished
                                                               or                                                                                  dir~c~ evidence                                                         :~~ .c~rc~ta.ntial'
     · evidence or' both.:, A fact is established by direct· evidence when proved by
    . documentary evidence.or by.witnesses who saw,the act.done 9r heard the words
     'spokel:i~' A fact. is' established by cirqumstantial evidence when· it !nay be·
, , . fairly and rea~onably inferred from, other facts proved., . '                   .
                       . .' Deposition                            testimo~y: is tes,t~ony ~ich' :has been previously taken: under
             oath.' You are .instructed .that such. testimony is'?ntitled to be given the
             same weight you would give it if it were presented by a witness appearing in'
             the "courtroom during trial..                             .
         •   }-:'~.'        :                 I   •           •                                    I




                , The tem' ·"Bra:na.· FX~' as us~d herein ·shall mean' Plaintiff SNF' Inc.'
             d/b/a ~ra~d FX· EDdy Company.                  ','

               The term "A.storia" as used herein shall mean Defendant A!3toria
         ,Ind.ustries of Iowa", Inc.




                                          .
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                  .Q1l:mSlI'IOm NO.1:                                                                                              .         ,                      I           •




                  nip.                     Astoria infringe                                          on Br~nd ·FX·' s                                             'trade' dress?

                                               Trade dress is the phys'ical detail and desig~'                                                                                                                                                               of              a' product o~: its
                  paokC).ging , which identifies the produ.ct1s source a.nd distinguishes. ,it
                  from the                                     prod.uc~$·                  of: other$. :.                                                                                                                       .
                                               In orde~ f~r Asto~ia to be held liabls, BraridFX~st ~stablish the
                  following                                        e;t~snts:                                                                                                                              .
                                               (1) :Phs
                                                      .                  ~sserted ··trade· dress. is ,pr~~iiy' non~functionai;
                                                                                                         .        .         .
                                                                           . .    '
                                                                                        . '                                                                                          '                                                                                                        '


                                           '(2) . The alleged inb~ing~mEmt creates 'a l:i.k~lihood "of confusion; and
             ,    ~: : ' ,:            I
                                           . ,(3)          Th~ a~~'e~t~d 't~ade":d~~SS
                                                          ' .             "   ,                               .            '       .
                                                                                                                                                             ha:s
                                                                                                                                                                        •
                                                                                                                                                                            ~cqu~re'~' 's~conda~ 'mea:ni~g~
                                                                                                                                                                                         •                                           •    '.                                      •



                                                                                                              ..                                                                                                                "

                             .             A product feature .is ':c'~nr3iderea: . functional                                                                                                     is. essential to                             if' 'it
     .,' the use -or purpose of. the· product or' if ,it. affepts. the cost                                                                                                                             O;C. guali ty'
     .            of, the' produc~ .. ': "" ".... .....                                                                                              .' ....                ..' .. , ' : ..... '. ",' .'
                 . . ' ·r.
                   Trade dress'. ac.guires '. 'I secondary meaning J! if it is unic;tuely
             . associated . with a specifio. source and identifies the source of the
               product rather than' the ·product itself ~:. .  .,' ,   ' .        .     ..
                                           ~               '            .                                          •       '.'                                                                       4             "                                                                              •




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                      . QUES''I'ION NO. :2:' .

                      Did. Astoria m..isavpropriatt,=· tr1;lde                                                                                                           sec~et,g'      ,owned by Brand Fie?
                                                                                                                                                                                                          ' .                                                                                               .
                                                  In order for Astoria to be held liable, Brand FX must establish the
                      following elements:
                                                  (1) Brand FX owned a trade· secret,
                                                  (2) Astoria used or disclosed tha.t ·trade E3ecret,
                                                                                 .   "
                                (a), after acquiring the trade secret by improper means; ~
                            ; . (b) after acquiring the trade. secret with nbtice that the
                      disclosure was improper;,
                          .            . ,         .
                            . . (~) resulting. ill: damages •. , .
                                                       .   ,                                            "
                                                                                                                                                                                             '   ..           r       0   ~.

                                                                                                                                                                                                                                                                          "                .
                                              A' "trade'                           secret'~
                                          is any formula I patten+. device, or co:m;pilation of
                   information used in Brand'FX1S trade ox b~siness that gives the. holder
                   of the. infor.mat~on,a competit~ve advantage over those,whQ.~o not know
                . 'or use itr and that is· in'. fact· substantially a. secret:. ". ' .
                      .',                                              '.     ' .                  •           ",1       :   :'       "                        "     .'      : ••••'                      , , '                      .'.                       " .                                                            •


                ":pnpro);,er' means'" are those' that fall'. helow· ...tlle· generally accepted
       , . standards of -co:romeJ:;'cial morality (;md. reasonable co:o.¢iuct '. :.
       .    '                                                                 .
   '. " .. " ,',. .Answer, "Yes"
                 'f    '.             "                        '        ,.'        , .
                                                                                                   or ·;"\]}'Jo.                  ,
                                                                                                                                          II' •
                                                                                                                                          •




                                              ANSWER:                               '1'10'
       .' "                                                                                                                                                                                  ..   '


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                                                                                                                                                                                                                                          --..::... . . .             -.-:..---~_-.--r""'.                                 _ _ __
.,



                                    QUESTION' NO. 3=
                                                                                                                                               ,                                                    "

                                   Pid Astoria. misappropriate the design of                                                                   Bra~d                          FX'g ·topper at issue in
                              this lawsuit?
                                   The te:on' \\:misappropriation ll me.ans                                                           'the wrongful ,taking' sn4 use . o:f '
                              another' s p:copert~. '
                                              '·In order for ',Astoria·'to be held'l5.abie , Brand FX· must:' establish the
                              following                          elements~
                                        ,.1                                                                                               ••

                             ,'. , ' , (1)' Brand lfX created                                           information 'or a ·prod.uct through the. investment 6f
                              extensivB time} labor r                                                 skill, an~ moneYi
                       (2) Astoria used tha~ infor.mation or product in competition with Brand'
                    'tnereby gaining a special advantage in that competition (i.e. a ~free'
                             PZ r
             " ride") because Astoria is burdened with little or none of the' expen.Ele
               in,t;lurred by Brand FX i and
                                              , (3).' t.'b:ere 'wa~ cOIl)lnercial.,damage                                   to Bra,n.d Fi.,
                             ,                 Ac9mpetitor'                                is ,free           to   copy'a   ·~ct~~nal.attribuie
                   •
                             unpatented produot.
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                                                                                        or "No ..
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                       . , I.                  ~swer                 "Yesll

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                                                              :.,                                                                                                            "                                                ,

                                Did Astoria tortiously interfere with prospective oontractual                                                                                                                                                                                                         o~
                           business relations between Brand FX and a third party(ies)?

                                In oraer for Ast-oria to. be held liable,. :erand PX                                                                                                                                                         mu~t                    establish the
                           following elements:
                         (1) a' reasonable. probabili'ty that the' parties. would have ente.red ,.,'
                    into a business relatiol'lsbipi "
                   ..
                  ,"
                                (2) 'an intentionaL', malicio~s intervention or an ~ndepeDden.tly·
                           tortious or unlawful act performed by the defendant with a conscious
                           desire to prevent the relationship from occurring or with knowledge
                           that the'interfe.rence·was certain or substantially likely· to occur as a
                           result of ·its conduct;·                       '..
                                                     (3)            a lack. 'of priv-ilegre or .. justificatfon for                                                                                                                                 the.                      o.e~endantls·
                           actions j and.                                                  '                 ..                                                                                               •   I",         •




                                                 damages suffered 'b~ ·~li.~:-:plaintiff as:' a restD.t'" 'of' .
                                                                                                               or                                                                                                                                                                                                              ,:     ,
                               . ,.                  (4') actual. harm
            ·th~ d~:!=f,;:;r;tq.~t' I? . int~rfe.rencef . i. e. I' that;· the' defendant t s aotions"
                           the
       .'.Ii,!·prevented . . relationship from occurring.
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                                                    Answer "Yes II .or "No ~ " ",
                                                                                                                                                                                                                    '.



                                                    ANSWER:                               N'O                                                                                                                                                                                                     .   ';

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                                                                                                                                                                                                                   -

                QUESIJ:'ION NO.5
                    If' you answered Question Nos. 1, 2 3; or 4 \\Yes ,I/then answer                                              I

                Question Nos. 5.' Otherwif;3e do not answer QUestion Nos. 5 and proceedI

                to Question No. 6 ~,

                 , ' Wl1at sum of money," if any, 'if paid'now in' cash, would fairly and
                reasonably ao:r:p.pensate Brand FX for the damages, if any, that, were
                cause~ by Astoria?         '
                      In' cp.lculating Astoria,' s profits, if any, Brand FX has the burden
           , :, to prove by a preponderance of the evidence ~storia' 13 gross sales of
                infringing toppers. Astoria bas the burden to prove by a preponderance
           "of the evidence all costs or' elements of deduction.                    ,"Costs or
            , ,elements of deduction /' are, the ,amounts A:ator.ia proves contributed to,'
            , Astoria's, revenues 'and ,which a.re not ,attributable in any way' to
           , Astoria J s infringement. . This' may include expenr:;es related to, the
                production of tbe infringing' product. ,$uch expenses must be proved
                -With -evidence showing the expenses were specifically related ,to the
           , . :i.nfringern.ent / ' and not some other produqt 'or service ~' , " " " , ' ,
                     In '~sweri:ng thee e ques t'ions' ab6~tda:mage~', answer each, qUestion
            , ,·separately.    Do' p"pt, ;i:l.J.<;:J:'t;!a$e or reduc~ the amount in, one answer because"
           , of "your answer to any other question about' damages. ,Do no, speculate.
       :,:~. 'about what, any' party's ultimate recovery mayor may not be.                           ]1...:ny'
        ··~~:)i~'recove.iy, will be determined by ,the Court when it applies the law to '
          , your answers at ,!:he ',tirQ.e of judgment"                    ,,.


                     ~swe2~ ,     in' dollars" Md                                      cen~s i if' any I for each                                                                                of     the'. categories,'
                                                                                                                                                                                                                 . .                                      ~




                listed below:
                                                                                                                                                                                                                                                                    ."

                $     ~PS; DOO                                                                          value at" what ,Astoria' has                                                                         gained~
                                                                                                        iric'luQ,ing its profits

. '"   "   ~.
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                $     5'"77't          DOD"                                                             value of what Brand FXhas lost,
                                                                                                        including its lost l?rofits


                                                                                                        v~lue              of
                                                                                                                 a reasonabie royalty: me~ng,
                                                                                                        what a willing buyer and willing selle;c' , ' ': ' .
                                                                                                        would,agree'to in, ~ hypothetical
                                                                                                        negotiation




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                   CtFESTI:ON NOM 6=
                        " Did Astoria, make: any false or ioisleading deJ3cription of fact that
               misrepresented the nature, characteristics, or,qualities of Brand FX's
               utility bodies?                                '
                    In order for Astoria to be held liablet' Brand FX must establish the
               fqllowing elements:                                   " ,           '
                                                                                                                                                                                                                 ,                                                                ,


                     (l) , A false Dr misleading description or representation of 'fact
               about' a produ,ct or.' service;  ,                    ,~;,;'

           "   ,', (2),' Such description or :cep:resl;:!ntation 'of fact was either:
                     , (a) ;J.iteral1y,falsej or          "
        ":".'     ,    '(b)' deceived' or, had' tha- capacity to. deceive: a substantial
            segment of potential,' cOllsumers and the 'deception, was material in 'tl1:at
           i t is li~ely to influipnce the cons'Umer's purchasing decisioni and,'·:'
                    (3) Brand FX' has been or is likely t~' be' inj ured as a result 'of ,tp.e
               statement Cl,t issue ..




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                                                                                                "

           If' you answered Question No. 6 "Yes; ", then answer Question Nos'. 7
      and 8. . Otherwise, proce~d to Question: No.9 ..

          What is the amount ofAstor~al$ protits, if any, for its utility
      bodies during the period of time it ,oommitted false ~dvertising? '
          In caiculating Astoria's profits 'if any, Brand FX :Q.as the burden                       I

     to prove by a preponderance' of the evidence Astoria's groBs sales of
    ,utility· bodies.              '
            . Astoria has the burd~ to prove by a prepo~dsrance of the evidence
         all 'costs or, e.lements' of dedt:\.ction.. " "Costs or elements of deductioh" ",
        'are the. amounts Astoria proves contributed to'Astoria J s revenues and
  " " which are not attributable' ill any.way to Astoria's, false advertising,
         This may include expenses' related to the production of the advertised
...... product.      Such expel.lSeS must be proved with.' evidenoe showing the
... ,' .expenses were specifically related to the advertised, product r and not
, . some other proq,uct or service. .
   . ,"                                                        .                                                            "


              Answer i~ dollars         cents r if any,   and
                     "   P,
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                    ANSWER! ,       ',A\. t:>l)
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         . . QUESTION NO. B:
                                                                                                                                                                                                                                                                                           ,.
                        What sum of money; if anYt if paid now in: cash, would fairly and
                   reasonably compensate Brand FX for its damages, if any I resulting from
                   Astoria I s false advertising?

                                                          Answer .in dollars and cent$'; if q.:ny:
                                                                                :   .
                                                                                                                                                                                                                                ·the .. cost of . future corrective
                           ,   ... ..
                                    ~             ~
                                                                                                                                                                                                                                 advertising reasonably reqUired
                                                                                                                                                                                                                                 to correct any public confus ion'
                                                               ,.                                                                                                                                                                   caused by                                         Ast~~ia


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                                                                                                                                                           , "
                      QUESTION NO.9:.

                           Answer the following question only" if 'you "unanimously answer'ad
                      "Yes" to Question Nos, '2f 3, or 4. 'Othel"Wise, do not' answer Question
             ,No.9.

                                               To, anSwer 'IYes" to any part of the following question, your answer
                 ,must be unanimous, You ,may answer ";Noll, to any part of the f:ollDwing ,
                  question only'upon a vote of ten or more jurors. otherwise I you must
                  pot, answer that part of the following qUeetion.
                           , Do you find by clear' and convincing evia,ence that the har.m t.o Brand
                      'Pi. 'resulted from malice? , ' ,                                      '
    , .:', ':  '\ciear and convincing' 'evidence'f, me~s' the measure or degree of
         "proof' that, produces a ,firm belief or conviction'of the truth,of the
        " allegations Bought to be established., ' "                         '",.'
                           "Malice" means a. specific intent by Astoria to                                                                                                                                                        caus~               substantial
                      injurY or ham to Brand FX .
                         .   .. '          '


                                                                                                                                                                                                                                                                              . '.
                                                                                                                                                                                                                                                                                             '"    .
                                            .Ai1swer "Yes J " or \\:J.iJQ'~
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                                                                                                                                          If
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                                     After you retire to the' jurY room, you will select your own presiding
                                juror. It is the duty of .the presidin~ juror:
                                                     1-                  to preside during your deliberations;
                                                     2.                  to see that your deliberations are conducted in an orderly manner
                                                                         and. in accordat.J.ce with the instructions in this charge';
                                                     3.                  to writ€ out and hand to the bailiff any communications concerning
                                                                         tbe case that you desire to have delivered to the judge;
                                                                                                                                                                                                                                                                      ,
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                                                     4.                  to vote                         o~           the, questiousi
       .   .
                                                     5.                  to write yoUr answers ,to the questions in the spaces provided, and
                                                     6.          to certify to your verdict in the space provided ;for the preSiding
                                                               , juror 1 s signature or to obtain the' signatures of all the jurors who
                                                                 agree with 'the yerdict'if your ver~ict is less than 'unanimous ,
                                                                                     ..             .                                                    "



                        , You should :not q.iscuss the case with anyone, not even with othex' members
                 . of·the jury, unless all of you are present and assembled in' the jurY room .
               .... Should. anyone attempt to talk to you about the cape before the verdict: is,
                  . returned,. whether at the courtho'Use,' at you:r homel or elsewhere, please'
                   ·infor.m the judge ~f this ~act. '.                '
                                                                                                                                                                                                                                                                                                                                              --
                      When you havEl. answered' all the questions you are required to answer
           .' ,. under 'the instructions of the judge and yow:: presiding juror has placed your
               . <. answers in the     space~ provided and signed the verdict as ,presiding juror or
                    : obtained the signatures I you . will inform the bailiff at the door of the jury
                     . room that you have reached a verdi~t, and then you will return intq· court
                       with' your verdict.       ,                       ,
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                                                                                                                certificate
                          We, the juryJ have answered the above and foregoing questions as herein
                     indicated, and herewith return same into court as our verdict.
                                           (To b.e signed by the :.presiding juror                                                                      i~' ~:nanimous.                        )


                                                                                                                                                                                               Presiding Juror'
                     . . " [To :be sigp.ed by thDse rendering the verdict if not unanimous ~)
             .                      The following jurors I                                               by their signeLture) coniil.J11 that this is their
         , verdict and that each agree to all the findings,                                                                      the charge.               in
                                                                                                                                                                              "    .:...
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                                                                                                                                              7,   liTAME                WALDIE

                                                                                                                                              SIGNATURE
                                                                                                                                              B.   NAME                  GRAHAM




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TAB 3
                          COURT OF APPEALS
                           SECOND DISTRICT OF TEXAS
                                 FORT WORTH




Astoria Industries of Iowa, Inc.            §   From the 17th District Court

                                            §   of Tarrant County   (017-205066~04)

v.                                          §   April 8, 2010

Brand .fX Body Company                      §   Opfnion by Ju.stice McCoy

                                     JUDGMENT'

         Thls, c~)Urt has conside.red the record on appeal in this ,case and holds that

 there was some error in the trial court's judgment.            It is ordered that the

, juqg~ent of the trial court is modified to reflect that Brand FX Body Company
     ,        ,



 is only eligible to receive appellate attorney's fees if successful on appeal.


                  ,                   .
 pay all of the cots of this appeal, for which let execution issue.
                                    COURT OF APPEALS
                                    SECOND DISTRICT OF TEXAS
                                         . FORT WORTH




         ASTORIA INDUSTRIES OF IOWA I INC.                                        APPELLANT

                                                   v.
         BRAND FX BODY COMPANY                                                      APPELLEE


                            ,   .    .
                      FROM THE 1,7TH DISTRICT COURT OF TARRANT COUNTY



                                    MEMORANDUM OPINION'


---- -- - -,----,-In·six-issuesrappellant~Astoria-lndustries·of-1owa,lnc.-(Asteria)-0omplains--- .. - -- ...

          of the trial court's judgment awarding appellee Brand FX Body Company (Brand

          FX) damages in, th.e amount of $705,000 for tr~de dress 'infringement and'

        . common law misappropriation, $682,200 for false advertising, and $400 1 000

          in attorney's' fees on appellee's trade dress infringement and false advertising



                 1   See Tex. R: App. P. 47.4.
   claims, in addition to $150,000 for attorney's' fees on appeal. We affirm the

   judgment as modified.

                       I.    BACI{GROUND AND JURISDICTIONAL FACTS

             Astoria and Brand FX are business competitors. They manufacture and

   sell fiber9la~s utility bodies and work toppers 2 for commercial vehicles. Brand

   FX's work topper uses a stair-step roof line that it claims is unique and

   brand-distinguishing. Initially, Astoria's topper had a rounded or domed roof

   line. In late 2002, however, Astoria developed a topper with a st~ir-step roof

       design virtually identioal to Brand FX's topper.

          , Astoria engineer ~andy T~'ole acknowledged that Astoria developed its

   .stair-step topper to 'be
      .
                                    as   similar'to Brand FX' s d~sign as possible: Astoria
                                              . ..
                               .                    .
   . obtained from, one of its oustomers,. Cook's Pest Control (CQok's), the

       engineering drawings of Brand FX's predecessor, Fibre Body, and .used a Fibre
                                         '.     .
       Body topper from Cook's a~ a Jl p lug ,,3 to make a mold to manufacture its look~
----    - - - - - - -- - - - - _ . _ -                  ------- -   ---
                      bodies" afe covered cabinets that mountonthe-back-portionof--- __
              2 11 Utility                                                                    00-




       a commercial truck frame, and l'work toppers" are covered cabinets placed on
       top of a pickup truck bed. Brand FX/s utility bodies are the subject of its false
       advertising claim, and the stair"step roof design of its work topper is the subject
       Qf its trade dress infringement claim. Trade dress refers to the design or
       packaging of a product that 'serves to identify the product's manufacturer or
       source. TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 28, 121 S.
       Ct. 1255, 1259 (2001).

              3A plug is typioally a wooden part ~hat is supposed to look identical to the
        finished product and used to build a mold. The mold is then used to produce

                                                        2
         alike topper.     Astoria then sold its        stair~step   toppers to Cook's for

         approximately one-half of the price    charg~d   by Brand FX.

               Thereafter, in February 2003, Astoria began running a "DARE TO

         COMPARE" advertisement for its. utility bodies in an industry trade journal. The
                                 .

         advertisement ran ten times· over the course of ·fourteen months.               The

         advertisement begins by stating/ IIWhen choosing fiberglass utility bodies,

         Astoria lndustries of Iowa should be y·our supplier! tf          The. advertisement

         compares J/Hi,gh Quality AstoriE! Bodies vs. L.ow Quality Brand .X Bo.dies. 1/

         Regarding the latter, the advertisement states: (1) JJ[B}uilt with sub-standard

         m~t~rials"; (2) "Short term c~st wit~ 'Iong terll1 expenses"; {3) J/Built to their

         standard"; and (4) "1.~year warranty."

              . In late May 2003, Brand FX notified Astoria of Brand FX's belief that the

          "DARE TO COMPA.RE If advertisement was false and disparaging and asked

         . Astoria to stop running it.   Brand FX contended that Astoria's reference to .

-- -- - --~grand-X--Bodies~-was-a-poorly.~disguised-reference.-to-Brand-pX-Emdc-that-the- --.- .- _. _. -_...

          advertisement's first three statements about Brand FX are demonstrably false.

          Astoria continued to run the aqvertisement for another eleven months.




          the finished product to the dimensions of the plug.

                                                    3
                           As a result of Astoria's conduct, Brand FX sued Astoria under the Lanham,

            Act4 for infringement of its trade dress topper design and false advertising of

            utility bodies.             Brand FX also broLight claims of business disparagement,

            defamation per se, common law and trade. secret misappropriation, a!1d tortious

            interference with prospective relations. Astoria obt~i~ed,su~mary judgment

                dismissing Brand FX f s business disparagement claim,5 and the remaining claims

                were presented to the jury.


                      415 U,S,C,A. '§ 1125(a) (West 2009}, The lanham Act provides civil
                remedies for trade dress infringement and false advertising of trademarks or
                trade dress. See id. Section 1125(a) sp'ecific~lIy proyides:

                               Any person' who ...

                                    (A) ;s likely to cause confusion, or to cause' mistake; or to
                                    deceive as to the affm.atio,n, connection,  or
                                                                                association of
                                    such 'person with another person, or as to the origin,
                                    sponsorship, or approval of his o,r her goods, services, or
                                    commercial activities by another person, Of

                                    (13) in commercial advertising or promotion, misrepresents the
-~-- -- ---~-   ------___ natur_e,_characteristicsLgualities or _geographic origin of his
                                                              J

                          or her or another person's goods, services, or commercial
                          activities, shall be liable in a civil action by any person who
                          believes that he or she is or is likely to' be damaged by such
                          act.

                 {d.

                      5Astoria Indus. of Iowa, Inc. v. SNF, Inc., 223 S.W.3d 616,639 (Tex.
                 App Fort Worth 2007 t pet. denied) (op. on reh' g) {reversing, on interlocutory
                       I   -




                 appeal, trial court's order denying Astoria's requested summary judgment and
                 rendering take nothing judgment on Brand FX's bl,lsiness disparagement claim).

                                                               4'
      The jury found Astoria liable -for trade dress infringement and common

law misappropriation and determined that Astoria gained $705,000 in profits

on sales of its t~ppers as a result. The jury also found that Astoria committed'

false advertising cif its utility bodies and that Brand FX1s corrective advertising

damages totaled $52,200, but they determined -that the false advertising

resulted in no profits for Astoria.             Brand FX moved for judgment

notwithstanding the verdict (JNDV) on the jury's finding that Astoria gained no

profits   fr~m   its false advertising and asked for an award of $4,200,000 in

profits on the false advertising claim. The trial cou.rt granted Brand FX's motion

in part l awarding. it $630,000 in Astoria'.s p~ofi~s for f.alse advertising, in

addition to the award. on the jury verdict 'of $705;000 in profits on the trade
                                                     ..                , .

                  .                         . .
dress infringement claim. The judgment. also awarded B.rand FX $400,000 in

attorney's fees       on the trade dress and false advertising claims and $150,000
in additional attorney's fees on 'appeal. This appeal followed.

----: ------------ ------- -----II.--JSSUES------------ ---- --- - ---- ~- -- - ----- --

          In its first two issues, Astoria contends that the evidence is not legally

'and factually sufficient to support two neces~ary elemen~s of Brand FX's trade

 dress claim: that ~he stair-step topper design. at issue is not functional and that




                                            5
             the design has acquired a secondary meaning. B Third , Astoria contends that

              Brand FX's state law design misappropriation claim is preempted by federal

              patent law.     Fourth Astoria challenges the legal and factual sufficiency of
                                    I




            . evidence supporting the award of its profits on Brand' FX's false advertising

              claim. Fifth, Astoria contends that the trial court erroneously admitted hearsay

              testimony without qualification and that this t.estimony is the only evidence

              supporting the award' of corrective advertising costs on the false advertising

              claim..    Sixth, Astoria complains that the award of attorney's fees is not

              authorized and, alternatively, that the appellate attorney's fee award is not

               properly conditioned on   ~.   successful appeal.




--- _._ ..' ---=-'7'
                   .~.--~-----                    - - - - - - - - - - ---   --   ---~   - - - - - - -------- - - - - - - -


                        6See '.5 U.S,C.A. § 1125{a)(3} ("In a civil action for trade dress
               infringement under this chapter for trade dress not registered on the principal
               register, .the person who asserts trade dress protection has the burden o'f
               proving that the matter sought to be protected is not fu·nctional. If); Wa/~Mart
               Stores, Inc. v. Samara Bros.; Inc., 529 U.S. 205,'210-11, 215, 120 S. Ct.
                1342-43, 1346 (2000) {holding trade dress is included under Lanham Act's
               trademark protections if it is inherently distinctive or distinctiveness is acquired
                by developing. secondary meaning, which denotes that, I'in the minds of the
                public, the primary significance of a Imark] is to identify the source of the
                product rather than the product itself"}. .

                                                            6
     III.   SUFFICIENCY OF THE EVIDENCE SUPPORTING BRAND FX'S
                   TRADE DRESS INFRINGEMENT CLAIM

A.     Standard of Review

       We may sustain a legal sufficiency challenge only when (1} the record

discloses a complete ~bsence of evidence of a vital facti (2) the court is barred

by rules o.f iaw or of evidence from giving weight to the only evidence offered

to prove a vital fact, (3) the evidence offered to prove a vital fact is no more

than a mere scintilla, or (4) the evideflce establishes conclusively the opposite
                   .                                            .
             .             .                                                     .
of 'a vital fact? In determining whether there is legally sufficient evidence to

support the finding under review, we must consider evidence· favor~ble to the

finding if a reasonable factfinqe'r could and disregard e~i~~~ce contrary to the

finding unless a reasonable fa.ctfinder could not. 8

        Anything more than a scintilla of evidence is legally sufficient to support

the finding. 9 When the evid~nce offered to prove a vital fact'-is so weak as to

do no more than create a mere surmise or suspicion of its existence, the


      7Uniroya/ Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex.
 1998) (op. on r~hfg), cert. denied, 526 U.S. 1040 (1999); Robert W, Calvert,
 "No Evidence "and "Insufficient Evidence" Points of Error, 38, Tex. L. Rev. 361,
 362-63 (1960).

      SCent. Ready Mix Concrete Co. v. Is/as, 228 S.W.3d 649, 651 (Tex.
 2007); City of Keller v. Wilson, 168 S.W.3d 802 , 807, 827 (Tex. 2005).

       9Cont'/ Coffee Prods. Co. v. Cazarez" 937 S.W.2d 444, 450 (Tex. 199B};
 Leitch v. Hornsby, 935, S.W.2d 114, 118 (Tex. 1996).

                                          7
         evidence is no more than a scintilla and, in legal effect, is no evidence. 10 More

         than a scintilla of evidence exists if the evidence furnishes some reasonable

         basis for differing conclusions by reasonable minds about the existence of a .

         vital fact. 11

                When reviewing an assertion that the evidence i,s factually insuf'ficient to

          support a finding! we set aside the finding only if, after considering and

          weighing all of the evidence in the record pertinent to that finding, we

          determine that the ~vidence supporting the finding is so weak r or so contrary

          to the overwhelming weight of all the evidence, that the answer should be set

          aside and a new trial ordered .12

          B.    . Trade Dress 'Infringement.....: FUlictiona Uty
                                                     ,                           ,   .
                 To prevail on a claim of trade dress 'infringement under the Lanham Act, ,

          a plaintiff must prove three elements: (1) the packaging or design is not

           primarily functional, (2) it has acquired a "secondary meaning'l by which the

-- -- '--- - --public-identifies--it-with-thesourde- of-the-product-rather-than-merely-tbe-prnduc1 _____ _



                  1°Kindred v. Con/Chem, Inc" 650 S.W.2d 61 r 63 (Tex. 1983)..

                  11Rocor Int'l, Inc. v. Nat'! Union Fire Ins. Co., 77 S.W.3d    253/262 (Tex.
           2002).

                 12POO! v. Ford Motor Co., 715 S.W.2d 629 / 635 (Tex. 1986) (op. on
           rehtg); Garza v. A/viar, 395 S.W.2d 821,823 (Tex. 1965}; In re King's Estate l
           150 Tex. 662, ,244 S,W.2d 660,661 (1951).

                                                         8
Itself, and (3) the alleged infringement creates a likelihood of confusion. 13 The

burden of proof is on the person who asserts trade dress protection. 14 All three

elements are questions of fact .for the jury.15
                                               .
          Generally ( a product is funct!onal if it (1) is essential to the use or purpo'~e

<?f the   article, or (2) affects the cost or quality of the article. 16 If the asserted

trade dress is not functional under this initial test, courts may also consider the

IIcompetitive necessity" test of whether the exclusive use of the feature or

design "would            put cOfTlpetitors   at. a significant non-reputation-related

disadvantage. ,..17




      13See 15 U.S.C.A. § 1125(a); TrafFix, 532.U.S. at 28, 1.21 S. Ct., at
 1257; Samara Bros., 529 U.S. at 21 O~ 11 T 2'15, 120 S. Ct. at 1342-43, 1346.

       14See 15 .U.S.C.A. § 1125(a}(3} (providIng that burden is on person
 asserting protection· to prov~ trade dress is not functional when trade dres~ is
 unregistered); Two Pesosr Inc. v. Taco Capanar Inc., 505 U.S. 763, 766 n:4,
 112 S. Ct. 2753, 2756 n.4 (1992) (holding burden is· on manufacturer to
 establish secondary meaning when trade dress is not inherently distinctive).

      15See Pebble Beach 90. v. To,!, 18 I Ltd,; 155 F.3d 526 1 537 (5th Cir.
 1998), abrogation on other grounds recognized by Eppendorf-Netheler-Hinz
 GMBH v. Ritter GMBH, 289 F.ad 351 i 356 (5th Cir.), cert. denied, 537 U.S.
 1071 (2002).                         .

           16 TrafFix,   532 U.S.' at 32-33, 121 S. Ct. at 1261-62.        Without
 objection, the jury was instructed that J/[a] product feature is considered
 functional if it is essential to the use or purpose of the product or if it affects
 the cost or quality of the product. t"

           17ld.; see also Eppendorf~Netheler-Hjnz GMBH, 289 F.3d at 356.

                                                9
                 The jury in this case found that the asserted trade dress, Brand FX's stair-

        step topper design, is "primarily non-functional." Astoria contends that the

        evidence is not legally sufficient to support this finding.

                 To establish that the stairMstep design is primarily nonfu'nctional, Brand FX

         offered the testimony of its owner. and operator, Alfred Finley. Finley has been
                       ' .      .


         in the industry since 1969. He formed and ran ,Fibre Body from 1984 until

         1999. He started Brand FX in 2001 and has run the company ever since.

         Finley tes~ified that the stair~step ~opper design is not essential to the use or

         purpose of the work topper and does not affect the work topper's cost or

        ',quality. Finley also testified that his competitors priryla,rily sold, dome-shaped

        , toppers, and that th!3 dome shape is not functional or essential to the use of the

         work, topper.

                     The iury also heard testimony regarding the stair-step design's lack of

         functionality from Sam Alfano, the Cook's employee in charge of purchasing its

---- - - ---work-toppers-and--overseeing-itstruek-fleet.--Alfanopul'chased-approximately __ _

         ninety to one hundred toppers per year on behalf of Cook's. He testified that,

        , to   hi~   knowledge, the   stair~step   design is not essential to the use or purpose of

          the work topper, nor does it affect the topper's cost or quality.                 Cook's

          purchased stair-step toppers from Astoria for the same price as Astoria's dome-

          shaped toppers.

                                                         10
         Testimony from three Astoria witnesses-Robert Wolf, Randy Thole, and

Jack Brannan- also relates to the stair-step design's lack of functionality. Wolf,

Astoria's president and owner, testified that the stair-step design is not
          .                                             ,




essential to a topper, that he preferred the dome-shaped roof design, and that

the stair-step d~sign was not good for manufacturing. Wolf stated that the

stair-~tep    design was only "essential" to Cook's in order to match its existing

fleet:

         0:     Is [th~ stairwstep topper desig~l essential or not essential? '

                !II   III   III   •




         A:     It is essential for what Mr, Cook's designed [sic] ,is l

         0:     ... You didn't, tell me, that in your deposition.    You said it
               , wasn,'t essential.                             '

         A:      It's not if you a/l01ll( me to design the topper. .f don't need
                 the stair step. But if you're going to use that design, it's
                 very essential. [Emphasis added.]

         Thole, Astoria's ,engineer who developed its version of the stair~step

 topper, also testified that the stairwstep design is not essential to the use or

 purpose of a work topper. Brannan, Astoria.'s former chief engineer, likewise

 testified that the stair~step design'is not essential to strengthen the roof of a

 topper because the dome shape gives the roof en~ugh stre~gth for the topper's

 intended use.


                                             11
             Based on our consideration of evidence favorable to the challenged

      finding if a reasonable factfinder could, and disregarding evidence contrary to

      the finding unless a reasonable factfinder could not, we hold that there is legal,ly

      sufficient ',evidence to support the finding that Brand FX's stair-step topper

      design is primarily nonfunctional.

             Astoria also contends that the evidence is factually insufficient to support

      the finding of nonfunctionality. As evidence contrary to the finding, Astoria

       cites the testimony of Finley I Brannan, and Wolf that the molded shape of the,

       design increases'the strength of the topper's roof without ,added materials, or

       increas<?s, the ,':topper'~ "sectional modulus. n1B       Finley testifie~ on "l)e,ctional "

       modulus" as follows:
                        , .

            .' Q:'     Tell 'us \'Yhat [sectional modulus} is.

             'A:       Basically, the higher the sectional modulus, the        hig~er   the
                       stiffness . . . of the laminate'.

              Q:     It gives you a stronger design without having to use
- --- ---   ---- ----additional materials;-isn't-that-eorreet?- ----- -------- -- -- -------

              A:       Correct.

              Q:       All right! Functionality; isn't that correct?


                   B
               See, e.g., Epic Metals Corp_ v. SouJiere, 99 F.3d 1034, 1038 (11th Cir.
               l
        1996)' (holding that a steel deck's corrugated dovetail profile impacts the
        sectional modulus of the deck, determining how much stress the product will
        tolerate and ultimately affecting the' product's strength).
                                                    12
            A:      I have been told that the definition of functional is essential,
                    and that the top can be built with'oLlt the stairwstep design
                    and still be functionaL Does it serve a function? Yes.

            Brannan also testified about the functionality of Brand FX's stair-step

     design:

             Q:     [Y]ou don't necessarily need the stair-step design to, have the
                    proper'strength for the'intended use of that', true?

             A:     If you wanted to minimize the cost am;J eliminate the need for
                    additional materials, then a stair-step design is really the way
                    to go.



             Q:     Your opinion is that the stair step design is functional in that
                    it irlCreas'~s the strength of the topper, true?

             A:     That's correct.

             The jury also heard 'eyidence from Wolf that the stair-step design allows-

      the topper to carry heavier loads on its roof without added material costs.
                     . .                                                                    '




      Photographs and draw~ngs were introduced showing the' placement of a -load:.

---carrying- rack on-the-roof-of-the-topper.- --- -- -- ---- --- -- - ------- ---- -- --- ---- -- ---
                                                             ,                   ,




              However, the jury also heard evidence showing that it is not essential for

       a topper :to have added roof strength or the ability to carry heavier loads on the

       roof: Brand FX's advertisements did not promote the topper's added strength




                                                     13
                   due to the stair-step design,19 and some introduced photographs of the topper

                   showing no roof rack and no load. on the top. Additiona"y I Brannan testified

                   that he was asked to look at ways to strengthen the roof design of another of

                   Astoria's products I a flat.-topped full utility body cover, and that he did not even

                   consider using a stair-step design to strengthen the roof of that product.

                                  Astoria also challenges evidence of nonfunctionality presented by Brand

                       FX.        Astoria contends that Finley provides the sale testimony supporting

                       nonfunctionality and that his testimony is conclusory.20 However, testimony

                       from          Alfano,            Thole l                       Brannan ,             and             Wolf     also" provides          evidence     of

                       nonfunctionality.                         ADd Finl.ey's· testimony was supported by h'is years of

                       experience a~ a flbergl~ss m'!l"!u~acturer and. designer and was bas,ed on his

                       specific knowledge of- the stair-st!;lp design and its manufacture beginning in

                       1996 when he bou'ght , the company that had owned the design, Northwest
                                                 ,




--   -   ..   _.   -    ._-_.- - - - ' - ' - - -   -   --   --   ...   -   ..   -_   ...   _.   --   - - ---- -   -   .-~    ---.-   -"-   --   ---   --._-"------   - - - . - ---

                             19Astoria points to a Brand FX advertisement stating that J/[wJith a
                       BRAND FX topper, you're assured of outstanding strength and durability in a
                       product weighing substantially less than steel or aluminum."        But that
                       advertisement promotes the advantages of Brand FX/s fiberglass product over
                       metal t~ppers, not any advantages of the stair-step design over toppers wi~h
                       other roof shapes.

                              20See City of San Antonio v. Pollock, 284 S.W.3d 809, 818 {Tex. 2009}
                        (holding that a scientific opinion is conelusory and cannot. be considered
                        probative evidence "if no basis for the opinion is offered, or the basis offered
                        provides no support").                                                  .

                                                                                                                  1"4
Body, and decided to incorporate it into. the .product .
                                                       line of his own company,

Fibre Body.

      Astoria also argues that Alfano's. testimony of nonfunctionality is

conclusory and is not probative because he was a fact witness and an

accountant by training.     However, Alfano testified based on his first-hand

experience as the person who purchases and manages Cook's fleet of toppers

and utility bodies, including toppers with stair-step and     ~ome-shaped    roofs.

Alfano's experience thus involved the use, purpo~e, cost, and quality of toppers

purchased a~d used by Cook's, all'factors relating to the stair-step ro,of design's

functjonality .~1

       Considering and weighhlg all of the,e~idence in the resord pertinent'to the
  ,                          "


finding of nonfunctionality,. we, determine that the evidence supporting the
                                            .                      .'
finding is not so weak, or so contrary to the overwhelming weight of         all the
evidenc6 t that tile answer should be set aside and a new trial ordered. 22



 jury's finding that Brand FX's stair-step topper design is primarily nonfunctional.

 We overrule Astoriafs first issue. ' .


         21See TrafFix r 532 U.S. at 32-33, 121 S. Ct. at 1261-62 (holding that
 a product is generally functional if it is essential to the use or purpose of the
 articl'e or affects ~he cost or quality, of the article).

        22See Pool, 715 S.W.2d at 635; Garza, 395 S.W.2d at 823',

                                          15
C.     Trade Dress Infringement-Secondary Meaning

       To prevail on its trade dress infringement claim, Brand FX also bore the

burd~n      at trial of proving that the topper' s     stair~step   design has acquired a

secondary meaning. 23 Trade dress acquires secondary meaning when, lIin the
                                                 "     ,




minds of the public, the primary significance qf [the desi'gnJ is to identify the

source of the product rather than the product itself. ,,24               The existence of

secondary meaning is a question for the trier of fact, and a trier ~f fact's, finding"

on this issue will not be disturbed unless clearly errone,ous. 26

       Secondary meaning may be established through a combination of the

following ,nonexhaustive list of evidentiary          !~ctors:   " (~) length and manner of

use   .of     the tra~e dre"ss, (2)   vOliune   of   sal~s, J3) amount a"no manner of"
                                        .                  ,


advertising, "(4) natura of use of the trade dress hi ~ewspapers and magazines,

(5)   consUnier~survey      evidence, (6)" direct consumer testimony, and (7) the




         23
              15 u,S,.e.A. § 1126(a); Samara Bros., 529 U.S. at 210,215,120 S.
 Ct. at 1343, 1346.

       24Samara Brqs., 529 U,S, at 211,215,120 S. Ct. at 1343,1346; see
 15 U.S.C.A. § 1125(a). The jury was' instructed without objection that'trade
 dress Jlacquires Jsecondary meaning' if it is uniquely associated with a specific
,source and identifies the source of the product rather than the product itself .'1

      26Sunbeam Prods. Inc. v. W. Bend Co" 123 F.3d 246, 253 (5th Cir.
 1997), cert. denied, 523 U.S. 11'18 (1998), abrogation on other grounds
 recognized by Eppendorf-NetheJer~Hinz GMBH, 289 F.3d at 356.

                                                16
defendant~s intent in copying the trade dress. 26 The ultimate determination of

w~ether   trade dress has acquired secondary meaning remains a question of

 consumer association. 27

       The jury found that the stair~step topper roof design ha'd acquired

 secondary meaning. Astoria contends that the evid.ence is not legally ~lI.fficient

 to support this finding.

       In support of secondary meaning, ~rand FX introduced evidence regarding

. length and manner of its use of the stair-step topper design. Br!3nd FX and its

 predecessors Northwest Body and Fibre Body have continuously used              tne
 design since at lea?t. the mid-1990s, and had done s? exclusively until Astoria

 copied the design in' late 2002.
             . -          -
                                                          of .
                                      As furthe'r support .. secondary msal}ing,
                                                                        .
                    ,                          .
 Brand FX also introduced evidence of Astoria's intent'in copying the design;

 Thole and Wolf testified that Astoria intentionally copied Brand FX~ s stair~step
                ,                                   , .

 design with the intent of having Astoria's design be as close as possible to

-- Brand FX'-s- design.' Additionally i" Brand FX presenteddireet-testimony from two -

  customers-one end user and one distributor-supporting a finding of sec.ondary'

  meaning because they uniquely identified or. associated ,the 'stair-step roof

  design with Brand FX. The customers also testified to actual confusion by


        26Pebble Beach Co., 155 F.3d at 541; Sunbeam Prods, 123 F.3d at 254.

        27Sunbeam Prods., 123 F.3d      at 254.
                                          17
Astoria's use of the trade dress by incorrectly identifying a picture of Astoria's

topper as Brand FX's based on its stair. . step roof design. Accordingly, Brand

FX introduced evidence supporting three of the factors relevant to consumer

association indicative of secondary meaning. 28

       Based an our consideration of evidence -favorable to the challenged

finding if a reasonable factfinder could I and disregarding evidence contrary to

the finding unless a reasonable factfinder could not, we hold that there is legally

suffi.cient evidenc;e to support -the 'finding that Brand FX's stair-step topper

design has acquired secondary meaning.
                                                               ."

                                                      insuffiqient to- support
       Astoria contends that the evidence is factually- . . ' the
                          .

finding of second,ary mea~i~g because there               is' purporte~lv   no evidence "

regarding other factors that traditionally indicate-secondary -meaning has been

         For .
acquired.' instance, consumer"survey eVidence of identification of the trade
                                                    .         ~




dre-SI$ with its source is the most direct and persuasive evidence 'to establish

 sec-ontiarY'- lil(raning-;-29 --- Here,-Brand -FX--performed--no - consumer--surveYSi-- --- - --- ---

 Moreover, there is no evidence of two other factors traditionally indicative of




        2BSee id.

        29See id. at 254-55.

                                             18
secondary meaning: media coverage and advertising expenditures by Br{ln~ FX

promoting its stair-step design,.30

       With regard to length and exclusivity of use, Astoria contends that the
                  ,                        ,
evidence offered by Brand FX actually 'contradicts a finding of secondary
   ,                                                               '



meaning because Brand FX did not begin 'selling its stair~step toppers unti,l

2002. However, evidence of a predecessor's use may establish the length and

exclusivity of a plaintiff's use. 31 Brand FX introduced evidenc~ that Northwest,

 Body developed the stair-step topper design before it was 'aqquired by Fibre,

 Body Industries in approximately 1996, and Brand FX subsequently acquired
              "                                                                '



 Fibre Body's intellectual property rights in 2002. The evidenc~ show'~ that only

" Brand FX and the prior owners of the design used it,
                           -   .      '            .
                                                           to the exclusion .of all.,   ,


 others, from at least 1996 until Astoria developed its fook~afike topper'in 20.02.

 Thus, the length and exclusivity of use by Brand FX and the' prior owners of the
                               ,                                  ,        ,




 design support a 'finding of secondary meaning,




         30See Pebble Beach Co., 155 F.3d at 541; Sunbeam Prods., 123 F.3d at
  254.

         318ee, e.g" Zatarain's, Inc. v. Oak Grove Smokehouse, Inc., 698 F.2d
  786, 791 (5th Cir. 1983) (holding that plaintiff established secondary meaning
  through predecessor's prior continued use of the mark and other fa'ctorsL
  overruled on other grounds by KP Permanent Make-Up, Inc. v. Lasting
  Impression /, Inc., 543 U.S. 111, 116, 124, 125 S. Ct. 542,547 551 (2004).
                                                                       1




                                         19
       Regarding direct customer testimony, Asto'ria contends that the testimony

 introduced by Brand FX was insufficient because it came from only two

 witnesses-one distributor and one end user-and their past association with

 Brand FX makes their testimony of little weight. However, cases Astor~a cites
                                                                                      .'
. in support of these c<?ntentions are distinguishable. For example! Astoria relies

 on a case in which the direct testimony of seven witnesses was outweighed by

 evidence of ·a consumer survey establishing a lack of customer identification,32

 but Astoria introduc~d at trial no. evidence establishing a lack of customer

 identification. Astoria also cites a case in which six customers' testimony. of

 confusion was insufficient in comparison ~o. the number of potential customers,
                                            .                          .     .
 consisting of all buyers of telephoDe and network histallation services in th.e.
                                      .        "             .         .

  Southern California area. 33 Here¥ the numb"er of customers who testified I twO",

  must be weighed against the number of potential customers, which' in this case

  are businesses that'purchase utiiity bodies and work toppers. 34



        32Vision Ctr. v. Opticks, Inc., 596 F.2d 111, 115 (5th Cir. 1979), cert.
  denied, 444 U.S. 1016 (1980).

        33Japan'   Telecom, Inc. v. Japan Telecom Am. Inc., 287 F.3d 866, 875
  (9th Cir. 2002).

        34As circumstantial evidence of the relevant number of potential
                                                                   in
  purchasers of utility bodies and work toppers, the trade journal which Astoria
  ran its 1JDARE TO COMPARE" advertising campaign ha'd a monthly circulation'
  of approximately 18,000.

                                          20
        Astoria also contends that its intent in copying the design does not

 support secondary meaning because it did not intend to fool Cook's as to the

 topper's source. Astoria argues that it was merely responding to Cook's own

 request that Astoria offer a look-alike topper. However, Astoria concedes that

 it developed its    stair~step   topper with the intent that it look as similar to Brand

  FX's design as possible. Thus, Astoria intended to confuse those looking at its

  topper into assuming that it had the same source' as, the Brand FX toppers in

  C09k'S existing fleet.

         Considering and weighing all of the evidence in the record pertinent to the

  'finding of secondary meaning, we determine             ttw~. the   evidence supporting the

  findin'g   is not so weal"   or' so contrary to the overwhelming weight of 'ali' the
                                             ,                                      ,



  evidence, that the answer should be set' ~;side' and a new tria\' ordered .. 35

  Accordingly, we hold that there is ,factually sufficient evidence to support the
                        ,                             ,                                     ,




  jury's finding that Brand FX's       stair~step   topper design has acqulred secondary

- --meaning.-We overrule-Astorla'-s secend-issue.. --, --- -------- --- --- --- --- -------




             35See Pool, 715 S.W.2d at 6~5; Garza, 395 S.W.2d at 823.

                                                 21
       IV.       FEDERAL PATENT LAW DOES NOT PREEMPT BRAND FX'S
                           MISAPPROPRIATION CLAIM

       In its third issue, Astoria contends .that Brand FX's common law·design

misappropriation claim conflicts with, and is thus preempted by, federal patent

law.

       A common law misappropriation claim alleges a form of unfair

competition under Texas law. 36 liThe law of unfair competiti~n is the umbrella

for all statutory and nonstatutory causes of action arising out of business

conduct which is contrary to honest practice in industrial or commercial

 m~tters.lr37. To prevail on a claim of common law misappropriation, the plaintiff

. hasthe burden of establishing: (1) the creation of its product through extensive

 timet "labor., skill ·and money, (2) the defendant's- use of that product ·in

 competition with the plaintiff,   -th~reby   gaining a special advantage in that

 competition (i.e., a "free ride") because the   defendan~   is burdened .with little or

 none of the expense incurred by the plaintiff, al"!d (3) commercial damage to the
                                                       -----------    - - - - - - - - - - - - - - - - - - -- - - ------




            36
       U.S. Sporting Prods., Inc. v, Johnny Stewart Game Cal/s, Inc., 866
        .
·S.W.2d 214,218 (Tex. App.-Waco 1993, writ denied).

       371d. at 217. Other unfair competition claims include the.ft of trade-
 secrets and "palming off" one's product as that of an·other, Id.

                                         22
   plaintiff,3a H~rel Brand FX claims that Astoria misappropriated the stairwstep

   roof design of its toppers.

          There, is a presumption against federal preemption of state actions. 39

   Ho~ever,    state laws are preempted if they conflict with valid federal law by

   creating an "obstacle to the accomplishme~t and execution of the full purposes

   and obj~ctives of Congress. 1140 Astoria asserts that Brand FXfs misappropriatio~

    claim' conflicts with Astoria's right, created under federal patent law, to copy

    and use product features that are in the public domain. 41

          The Supreme Court has held that state regulation of intellectual property

    "must yi~ld to .the extent that it ciashes. with /T federal patent law.. 42 The.Court·

    determined ' lithe efficient operation of the federal patent system depends
     .      .. that .                                        .    '   .

   'upon subst'a,ntially free trade in publicly known, unpatented design and




           38/d.   at 218.
-- - ._- - 39Wyeth-·v.--tevine;-l29-S;- et. -1181-;-1-194-95 &1195-n;3-{2009}-' - - ---
    (quoting Medtronic, Inc. v. Lohr, 518 U,S. '470, 485, 116 S. Ct. 2240, 2250
    (1996)).

     , . 4°Jd. at 1193 (quotin'g Hines ,v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct.
    399/ 404 (1941 )}; see BIC Pen Corp.. v. Carter, 251 S.W.3d 500, 504 (Tex.
     2008).

           41See B,onito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 152,
     109 S. Ct. 971 t 978 (1989}.
           421d. at 152, 109 S. Ct. at 978.

                                              23
utilitarian conceptions. 1'43 In the same opinion, the Court held that state unfair

competition laws, in contrast l . generally serve a different purpose by providing

Uprotection against oopying of nonfunctional aspects of consumer products. 'f44

Thus, the Court determined that state unfair competition laws typically are not

preempted 45 unless they. conflict with, federal patent' law by protecting or

regulating the II functional aspects" of a product. 46   .


       Turning'to the facts of our case, we already have held that the record

contains legally and factually sufficient evidence supporting the jury's finding

that Brand FX's stair-step topper designls not functional. 47 This holding is fatal

to Astori~'s pre~.mption,·argument, because federal patent law does not pre,empt




       4~/d. at 156( 109 S. Ct. at 980 (emphasis added).
             .  .
       441d.   at 158/109 S. Ct. at 981   (emphasis added) .

      . 451d. at 164, 109 S. Ct. at 985 (holding in part that lIthe law of unfair
--competition -;-; ~rha s]-coexisted-harmeniously -withfederal-p ate nt-protection Jor
  almost 200 years, and Congress has given no indication that [its] operation is
                                                                lt
  inconsistent with the operation of the federal patent laws         ).




       461d. at 156 / 159, 109 S. Ct. at 980, 982 (emphasis added) {holding
 Florida statute is pree'mpted because it is 'llaimed directly at preventing the
 exploitation of the design and utilitarian conceptions embodied in the product
 itself" and " cortstrict[s] the spectrum of useful public knowledge / (emphasis
 added».                                                                      '

       47See 15 U,S.C.A. § 1125{a); Samara 8(05.',529 U,S. at 210,215,120
 S. Ct. at 1343 1 1346.

                                          24
state unfair competition lavys that protect against the copying of product's

nonfunctional aspects. 48 Accordingly, we overrule Astoria's third issue.

 V.       AWARD OF PROFITS ON BRAND FX'S FALSE ADVERTISING CLAIM

      In its fourth issue, Astoria contends that the evidence is not legally or

factually suf'ficientto support an award of Astoria's utility body profits on Brand

FX's false advertising claim and that the award am'ounts to an impermissible

penalty.49 'The jury found that Astoria's profits,on its sale of 'utility bodies

during the relevant time period wa~ zero', Brand FX filed a motion for JNOV

contending that no . evidence supported the" jury's zero. profits finding and

requesting an ,award ·.of Astoria's utility bodies profits. After an evidentiary -

'hearing, tl"le"t~ial cour~. granted Brand FX's JNOV m'otion and 'awa~ded it '
                    ,                                                  -

$630,000 as the amount         of Astoria's profits related to sal~s of its advertised -
utility bodies'duri,ng ~he period of time the "DARE TO COMPARE" advertisement

ran. 60


          48See Bonito Boats, 489 U.S. at 158, 109 S. Ct. at 981, '

          49'On appeal, Astoria does not challenge the jury's finding that it is liable
  for false advertising or that Brand FX 'Lhas been or is likely to be injured n as a
. result; it only challenges lost profits awarded on the claim,

                     to its JNOV motion, Bran~ FX requested that the trial court
          50 Alternative
 disregard the jury's zero lost profits finding, As the following dated and initialed
 docket entry states, the court granted JNOV rather than the alternative relief
 Brand FX requested: 111/24/08 - P motion JNOV is granted awarded $630,000
 FWD [the Honorable Fred W. Davis]."

                                            25
A.·   JNOV Standard of Review

      A trial court may disregard a jury verdict and render a JNOV if no

evidence supports the jury finding on an issue necessary to liability or if a

directed verdict would haye been proper. 51 A directed verdict is proper only

under limited circumstances: (1) when th.6 evidence conclusively establishes the

right .bf the movant to judgment or negates the right of the opponent; or (2)

when the evidence is insufficient tq raise a material fact issue. 52

      - To determine whether the trial court erred by rendering a JNOV, we view.

the evidence in the light most favorable to the verdict unqer the well~settled

standards that govern. legal ~ufficienGY review,153 We must cre.dit evidence

 favoring the jury verdict if re~~onable jurors could and disregard contrary
                .        .

 evidence unless reasonable jurors could not. 54




.~.------ -5rSee-Tex~ R.-Civ~·P :-301-;~Tille-'v~ ~MuLure-; -1-21- S;W~ Sd-109,-=7-1-3·- (~ex. - - -- - - -
 2003); Fort Bend County Drainage Dist. v. Sbrusch, ~18 S.W.2'd 392, 394
 (Tex. 1991).

      52Prudentiallns. Go. ·of Am. v. Fin. Review Servs,1' Inc" 29 S:W.3d 74,
 77 (Tex. 2000); Farlow v. Harris Methodist Fort Worth Hasp., 284 S.W.3d
 903, 919 (Tex. App.-Fort Worth 2009, pet. denied).

        53S ee   Waf-Mart Stores, Inc. v. Miller, 102 S. W.3d 706, 709 (Tex, 200.3).

       54Cent Ready Mix Concrete Co., 228 S.W.3d at 651; see Tanner v.
  Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 830 (Tex. 2009).

                                                26
    B.    False Advertising Under the lanham Act and Available Remedies

          To establish a prima facie case of liability for false advertising under the

    Lanham Act, the plaintiff. must show that (1) the defendant made a false

    state'ment of fact about its product in a commercial advertisement, (2) the'

    statement actually deceived or has a tendency to deceive a substantial segment,

    of its audience, (3) the deception is likely to influence a purchl!'sing decision, (4)

    the defendant caused the false statement to enter interstate commerce, and (5)

    the plaintiff has been or is likely to be injured as a result. 55

           Remedies available to, a plaintiff on a Lanham Act false advertising claim
                                            ..
    in.elude the defendant's profits on          t~e   falsely advertised product:'

           [T]he pJ'aintiff shaIJ  be'entitled , .. subject to ttw principles         of
           equity, to recov(:lr'~  I defend[Jlirs profits . , >. The court shall
                                       'f



           assess such profits and damages or cause the same to be assessed
           under its dirf)ction. In assessing profits the plaintiff shall be
           required to prove defendant's sales only; defendant must prove all
           elements of cost or dedu'ction claime,d. . ',' If the court shall find
           that the, amount of the recovery based on profits is either
           inadequate or excessive the court may in its discretion enter'
-- - - -- -Judgment-for-sLlGh -8um-as-the-court-shaII-find--to-be-just;-acco.rding-- -- - - - ,-- . -, - ,--
            to the circumstances of the case. 'SUch sum in either of the above,
            ci'rcul1)stances shall constitute compensation and not' a 'penalty, 56




          ,55Logan v. Burgers Ozark Country Cured Hams Inc., 263 F;3d 447,462
     (5th Cir. 2001 )"
            56
                 15 U.S,C.A. § 1117(a) (West 200S) (emphasis added).

                                                       27
     These remedies are designed to compensate the plaintiff for any injury suffered,

     prevent unjust enrichment, or deter unlawful conduct. 57 In determining whether

     an award of the defendant's profits is appropriate, a trial court is afforded

     "-great latitude" and (Iwlde discretion, ,,58 8!1d we review the trial court's decision

     for an abuse of discretion. 59

           Evidentiary factors relevant to the determination of whether an award of

     profits is appropriate on a Lanham Act false advertising claim include but are

     not limited to:

            (1) whether the defendant had the intent to confuse or deceive, "(2)
            whether sales have been .diverted, (3}, the adequacy of other
            reme.di.es, (4) any unreasonable .delay by. the plaintiff in asserting
            his rights, (5)' the public i~~e.rest.          in
                                                      making the misconduct
            unprofitable, and (6) whether it.a case of. palming·off..60
             . '                     ..
                                             is . .




                                      -------------- ------._----   -   ---'- -- - -------- --


              57SeeAm. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 3~0 (5th
      Cir .. 2008); Qaddura v. Indo-European Foods, Inc., 141 S.W.3d 882,889 (Tex.
..    App.-Dallas 2004, no pet.) .

                     Herend Imports" Inc .. v. Diamond & 'Gem Trading USA,' Co. I
            68 Martin's
      112 F.3d 1296, 1304 (5th Cir. 1997).                         .

             59PebbfeBeach Co., 155 F.3d at 554.

             6°Am. Rice, 518 F.3d at 338; Quick Techs., Inc, v. Sage Group PLe, 313
      F.3d 338, 349 {5th Cir. 2002}, cert. denied, 540 U.S. 814 (2003).-

                                                    28
No one factor is fa~al o'r controlling, 61 In any event, an a:ward of profits is not

appropriate liunless there is some proof that plaintiff I~st sales or profits, or that

de'fendant gained them. 1T62

        As the Lanha'm Act provides, "[j]n assessing profits the plaintiff shall be

required to prove defendant's sales only; defendant must prove ·all elements of

cost or deduction claimed" against its gross sales,63, The Supreme Court

acknowledged that this method of calculating profits may result in the plaintiff

receiving a windfall in cases' "where it is impossible to isolate the profits" from

conduct that vio.lates the Lanham Act, but the ·.court determin,~d that "the

windfall should go.to the plaintiff rather than the yvr9ngdoer.lT64 And UCongress

did not put .upon the despoiled the burden .. , of " s·howing that but for the
          .                 "                           . .
                   .                          - .
defendant's unlawful [activity], particularcustomers·wo'uld have purchased the

 plaintiff's gC?ods. ,,65



         6iQuick Techs., 313 F.3d at 349. Brand FX does not contend that this
. is--acas-e-of-p-almi ng -off;-but-that-tha-reis-e-vraence· -of each-of-the ITtner-factors- --
  supporting an award of Astoria's profits.

         fJ2Logan, 263 F.3d at 464-65.
         63 15   U ,S,C,A. § 1117{a),

      64Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U,S.
 203, 207, 62 S. Ct. 1022, 1025 (1942); see also Qaddura, 141 S.W.3d at
 889.                                                   -,

         65Mishawaka, 316 U.S. -at 206 1 62 S. Ct, at 1024 (emphasis added),

                                             29
c.           JNOV Awarding Astoria's Utility Body Profits to Brand FX

             Brand FX presented evidence ,that utility body sales were diverted by

Astoria's false advertising. 66 Specifically, Finley testified for Brand FX that its

utility body safes decreased 21 % during Astoria's advertising campaign and

increased 54% thereafter. This type of statistical evidence is sufficien~ to show

sales diversion under § 1117 because the statute does not require the plaintiff

to show that, "but for the defendant's unlaw'ful [activity], particular customers
                                      ,                                                                 '


would have purchased the plaintiff~s goods. 1I67 In addition, Scott Metzger,
     ,   '                                                                                  ,




Astoria's head of sales and marketing, testified that Pt?tential customers sought

additional information fr9m Astoria in response to ,its ad~~rtising;                       Of those

potential customers, Astod'a and Brand FX competed for',sales- to Altec and
                   .        .     '               .      ..
                                                            ,                      ,


Omaha public Power' District; Altec is now one of Astoria's largest customers;

and Astoria ~eplace,d Brand FX as the supplier" for Omaha Public Power

District. as .

 - - - - - - - - - - -- - - - - - - - - -
                                                  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ----- --- - - - - -
              fJ6
             , See   Logan, 263 F.3d at 464~65; Pebble Beach Co., 155 F.3d at 555.

              67Qaddura, 141 S.W.3d at 88,9 (emphasis added).

       68Astoria argues that this evidence cannot support diversion of sales
 because it fails to establish that any particular sah;; wa's won by Astoria or lost
 by Brand FX. , However, this evidence is circumstantial evidence of sales
 diversion, particularly as Brand FX and Astoria comprise approximat~ly ninety
 percent of the fiberglass utility body and work topper market. Any ultimate fact
 may be proved by circumstantial evidence. Russell v. Russell, 865 S.W.2d
 929, 933 (Tex. 1993). A fact, is established by circumstantial evidence when

                                             30
                   Regarding Astoria's intent to' confuse or deceive, WaH, Thole" and

           Metzger each testified that they knew the advertisel}1ent contained false

           statements with respect to Brand FX. Astoria still continued to run the false,

           advertisement for approximately eleven months after Brand FX's attorney sent

           it a a,ease and desist letter.

                   Whether or not other remedies are adequate is also a 'factor courts

          , consider when determining whether an award of profits is appropriate. 69 In

           cases of VViliful misconduct in which th.e defendant is unjustly enriched r other

          ., remedies, such as injunctive relief, have been found inadequate because they

            will not,deter future miscon<;tu,ct,70, Here, the jury was not ~sked to find
                                            .                        .         .,




            whether Astoria' s false advertising was willful/' bLit 'evidence of Astoria's



            the fact may be fairly and rea'sonably inferred from other facts proved in ~he
            case. Id.                       '               "

                 69See MaltinaCorp. it, Cawv Bottling Co., 613 F.2d 582, 586 (5th Cir.
            1980).
- ------ - - -   ---70----- - -   -- - - ---, -   -------------------- --      ----------------~-------




                     See. id.

                     71The jury was asked if they found "by'clear and convincing evidence that
            the harm to Brand FX resulted from malice," and they were instructed that
            Ilmalice" means lIa specific .intent by Astoria to cause substantial injury or harm
                                                                     is
            to Brand FX, II ThB jury answered "No." This answer not controUing on the
            issue of willful misconduct because the court's determination of whether an
            award of lost profits is appropr.iate on a false advertising claim does not require
             JJcl ear and convincing evidence, TI and it, considers the defendant's intent to
            commit the violation, not its intent 'Ito cause substantial injury or harm. 11 See
             15 U.S.C.A. § 1117(a);     Am.   Rice, 518 F.3d at 338; Quick Techs., 313 F.3d

                                                     31'
        willful misconduct in the record includes testimony that Astoria knew the

        advertisement was false, as to Brand FX and still chose to continue running it

         even after' receiving Brand FX's cease and desist letter.         Based on the.

         willfulness of Astoria's violation, other remedies are not appropriate to

         compensate Brand FX and to deter future misconduct. 72 In addition, an award

         of profits 'serves the pubHc interest in this case by ensuring that willful false

         advertising violations are not profitable. 73

               The trial court implicitly determined that an equitable award of Astoria's

         profits was appropriate and determined the amount of the award based on. the

         framework established in 15 U.S.C.A .. S .1117(aL which requires the plai_ntiff

         "to'pJove d~fendant' s·sales only; defendant must prove all elements of cost or

         deduction claimed" against sales,14        Brand FX's damages expert, Daniel'

         Jackson, testified without objection that Astoria .had $4.2 mi'llion, in.. sales
                                           .


         revenue on its utHity bodies during 'the period it committed false advertlsing.

-- ------Jaekson-based--hi·s--testimeny-on-historical-salas· -figures-produced -by_AstoriB ____ ._

          during the lawsuit.



          at 349.
                72See Mattina Corp., 613 F.2d     at 586.

                73See Am. Rice, 518 F.3d     at 338.
                74See 15 U.S.C.A. § 1117(a).

                                                  32
                Although § 1117 provides that the defendant must prove all elements of

         cost or deduction claimed from its sales revenue/ 6 Astoria did not present any

         evidence of its costs or deductions. In addition, the manner in which Astoria

         produced its financial figures did not allow for a determination of its profit

        . margin on the product. The most analogous information presented to the jury

          regarding profit margin was Brand FX's 38.6% profit margin on the sales of its

          toppers.

                 Based on the    evjd~nce,    the trial court determined that Astoria obtained

          $4.2 million    in utility body sales revenue during the period it 'falsely advertised
          and that Astoria's profit ,margin was 'fifteen, percent. - Accordingly, the, court ':

          awarded Srand FX $630 /000 in Astoria/~ profits o~ the false adv~rtising 'claim.,
                                                           -                           ,


          Implicit in the court's    awa~d    is its determination that the amount ,awarded

          constitutes compensation for Brand FX 'and not a penalty.76 VieWing .. the
                                                                                   .
          evidence in the light most favorable to the jury's finding that Astoria had zero
                                          ,                           '

_________ utHi~¥__hod.y__ p[Q_fjts-~uri [}g:-th_e_(~JRv_a nLtimfLp-eri o_d ,~~w_e_hQld,_tb_aLtbELt[iaL ____ ______ -
                                                                                                          '

          courfs JNOV awarding Brand FX $630,000 in Astoria's utility body profits is

          proper because the evidence is insufficient to. raise a material fact issue


                 15See id.

                  76See id.

                  77See   Wal-MartStores~ Inc.    v. Millerr 102 S.W.3d 706, 709 {TeX. 2003}.

                                                      33
regarding the costs or deductions to be applied against Astoria's sales. 78 We

overrule Astoria's fourth issue.

         VI.    ADMISSION OF HEARSAY EVIDENCE OF BRAND FX'S
                     CORRECTIVE ADVERTISING COSTS

       In its fifth issue, Astoria argues that the ,trial court erred by admitting

Jackson's expert testimony regarding Brand FX's corrective advertising costs

because his testimony contained, and was merely a conduit for, hearsay

evidence Jackson obtained from advertising executive Torn Prikryl. Astoria
           "                                                                   '


contends that this portion of Jackson's testimony was, therefore, inadmissible

~nd,   in the alternative, should. only have been admitted with a proper limiting

instruction under Texas Rule of Evidence 705. 79


      78See Prudentia/lns. Co. of Am., 29 S.W.3d at 77; Farlowl 284 S.W.3d
at 919. Brand FX urges us tc? review the trial court's profits award for abuse
of discretion. See Pebble.Beach Co., 155 F.3d at 554. ,8ecaus~ the trial court
submitted the issue to the jury and granted JNOV, we review its decision under
the JNOV standard. See, e.g.,' Tex. Pig Stands, Inc. v. Hard Rock Cafe tnt'l,
Inc., 951 F.2d 684, 697 (5th Cir. 1992) (reviewing under JNOV standard trial
court's decision to overturn recovery based on jury's § 1117(a) ·finding).
Astoria presented no evidence o,f its costs or deductlonsas- requiredby------ -------
 § 11171a) and, thus, we would reach the same result under eith~r the JNOV
or the abuse of discretion standard. See id.

        79A'though Astoria challenges its admissibility, Astoria does not contest
 the competence of Jackson's opinion testimony regarding Brand FX's corrective'
 advertising damages as unreliable, irrelevant, or otherwise. And although we
 acknowledge Astoria's post submission letter brief enclosing a copy of the slip
 opini?n in City of San Antonio v. Pollock, 284 S',W.3d 809 (Tex. 2009), in
 which the supreme'Gourt reaffirms that Ilbare baseless opinions will not support
  a judgment even if there is no objection to their admission in evidence," Astoria

                                         34
    A.        Standard of Review

              A trial court's rulings in admitting evidence are reviewable under an abuse

        of discr!3tion standard. 80   An appellate court must upholp, the trial court's

   , evidentiary ruling if there is any legitimate basis in the record for the ruling. 81

        To determlne whether a trial court abused its discretion, we must decide

        whether the trial court acted without 'reference to any guiding rules or

        principles; in other words,   WF,}   must dec'ide whether the act was arbitrary or '

        unreasonable. 82 An appellate court cannot conclude that a trial'colJrt abused

        its.,discretion ,merely because the appellate court would have ruled differently
   .'
        in the same circumstances. 1l3

               To obtain reversal of a judgment based upon an error in the trial court, the

        appellant must show that the error .occurred and tha't it, probably caused




        does not assert that Jacksonts .opinion regarding corre'ctive advertising costs
        is h,8seless or conclusory,                      '
-,---~----




               aOln fe J.P.B., 180 S.W.3d 570 1 575, (Tex. 2005); Nettl Liab. & Fire Ins.
         Co. v. Allen, 15 S.W.3d 525', ,527-28 (Tex. 2000) (op. on reh'g).
               a10wens~Corning Fiberglas Corp. v: Malone,        972 S.W.2d 35, 43 {Tex.
         1998).    .

               82Lo~ v. Henry, 221 S.W.3d 609, 614 (Tex. 2007); eire v. Cummings,
         134 S.W.3d 835,838-39 (Tex.           ~004).

               83£.1. du Pont de Nemours &. Co. v. Robinson, 923 S.W.2d 549, 558
         (Tex. 1995); see also Low l 221 S.W.3d at 620.
rendition of an improper judgment or probably prevented the appellant from
  .                .


properly presenting the case to this court. 84 The complaining party must usually

show that the whole case turned on the evidence at issue. S5 If erroneously

admitted evidence was crucial to a key issue, the error was likely harmful. 86 We

examine- the entire record in making this dete~mination of harm. s7      Error in

admitting evidence is generally. harmless if the objecting party " open[s] the

door" by in~roducing the same or similar evidence/sS the objecting party later

permits the same or similar evidence to be intro.duced without objection,89 or




      84Tex.·R~ App. P. 44.1 (a); see Reliance Steel & Aluminum Co. v. Sevcik,
267· S..W.3d 867,871 (Tex. 2008); Romero v. ,<PH Consolidation, Inc. 166    t

·S.W.3d·.21·2, 225 (Tex. 2005).

                  Northborough P'ship v. State, 66 S.W.3d 213, 220 (Tex.
       85/n terstate
2001); City of Brownsville v. Alvarado, 897 S.W.2d 750, 753-54 (Tex. 1995).

      86State v. Cent. Expresswav Sign AS$oc$.,· 302 S.W.3d 866, 870 (Tex..
 2009); Reliance Steel, 267 S.W.3d at·a73.        .

       8:lnterstate Northborough P'ship, 66 S.w.3d at 220.
       88Bay Area Healthcare Group, Ltd.  v, McShane, 239 S.W.3d 231, 234
 (Tex. 2007); Sw. Elec. Power Co. v. Burlington N. R.R., 966 S.W.2d 467, 473
 (Tex. 1998).

       Bay Area Healthcare Group, 239 S.W.3d at 235; Richardson v. Green,
       89
 677 S.W.2d 497, 501 (Tex. 1984).

                                        36
        the contested evidence is merely cumulative of properly admitted evidence and

        is not' controlling on a material issue dispositive of the case,eo

        B.     Error Admitting the Contested Hearsay Evidence, if Any, is Harmless

               Outside'the prasenc,e, of the jury and before Jackson testified at trial,

        Astoria objected to the admi~sion of ,"any evid~nce obtained from Tom Prikryl"

        as being   /lthird~party   hearsay" and to Brand FX using Jackson as a "conduit for

        hearsay.", Alternatively I Astoria sought a limiting instruction under rule 705 of

        the Tex.as Rules of        Evidenc~   that t,he jury Ilbe instrl;1cted not to -accept the

                                      .
         information obtained from [Prikryl] for the truth of the matter asserted ,"91 The
                                                                                '   ,




                90lnfer.state No (thb 0 rough P'ship, 66 S.W.3d at 220; Gee v. Uberty M'ut.'
         Fire Ins; CO~, 765S.W.2d 394,. 396 {Tex. 1989}.

               91Ad'mi~sion of otherwise inadmissible facts or data underlying an 'expert's
         opinion   is governed 'by Texas Rule ot Evidence, 705, which provides in relevant
         part:                                                    .

                         (a') Disclo'sure ,of Facts or Data. The expert may testify ,in
             terms of opinion or inference and give the expert's reasons therefor
             without prior disclosure of the underlying facts or data, unless the
-----------;,c oul't requires otherwise, The expert may in any~eveift-t1isclose on-'
              ..........
             direct examination, oibe required to disclose on cross~examination,
             the underlying facts or data.

                       (d) 'Balancing test; limitin'g instructions. When the underlying
                facts or data would be inadmissible in evidence, the court shall
                exclude the underlying facts or data if the danger that they will be
                used for a purpose' other than as explanation or support for the
                expert's opinion outweighs theit value as explanation or support or
                 are unfairly prejudicial. If otherwise inadmissible facts Of data are
                 disclosed before the jury, a !i'miting instruction by the court shall be

                                                     ·37
court overruled' the objections and denied' Astoria's motion for a limiting

instruction. Astoria did not object at trial and does not argue on appeal that

Jackson cannot rely on facts not otherwise admissible in evidence, including

hearsay evidenced            from   an advertising   executive regarding corrective

advertising costS. 92

      Jackson testified that his opinion regarding Brand FX's corrective

advertising costs was ba~ed on in'formation provided. to him by Prikryl: :

      Q:     Did you summarize your damages as it relates to this IIDare
             to C9mpare" advertisement?

       A:   ' Yes., I did.:

       Q:    And \I\'~'~t are 'the summary ~amages that you c~lculated?

       A:    ... '.If yoti look at tnecorrectiveadvertising based upon Mr.
             Prykel's -[sic] inforri1~tion and what he believed would be
             necessary to accomplish it, it's $76,200.




       given upon request.

  Tex. R. Evid. 705(a), (d) (emphasis added).

         921n its briefing before the court, Astoria states that l'[n]o one can dispute
 that Tex[as1 Alule of] Evid[ence] 703 allows an expert to rely on facts not
 otherwise admissible in evidence" and that Itexperts are typically allowed to
 disclose otherwise inadmissible hearsay for the limited purpose of explaining the
 basis of their opinions" even though such hearsay is not admissible for its truth
  [citation omitted].   11




                                             38
Jackson also testified that it was "reasonable and customary" in his profession

as a certified public accountant to rely on an advertising expert to determine the

proper cost of corrective advertising.,

      W~ether   or not the trial court erred in admitting Jackson's testim'ony

about information provided' by Prikryl, ,such testimony is . cumulative of other
                                               ,




testimony that was admitted without objection.          Separately and without

reference to Pril<ryl( Astoria's counsel solicited the following testimony from

Jackson:

      Q:     [Y]ou'ie the one telling [the jury] to award $76,000 for
             future co~rective advertising on something that hadn't run
             since four years ago' and had no impact on the two people
             who came here, [to testify]? .

       A:    If they d~termine ~storia dic,l falsely advertise. If they
             determine [Astoria] didn"t falsely advertise, I'd say don't
             award [Brand FX] a penn'y~ [Emphasis added.~

 This testimony establishes J·ackson's opinion regarding Brand FX's corrective

 advertising costs, does not reference information provided by Prikryl, and was,
                                                    - - ------- - - - - - - - - - - - - -

, ,admitted without objection.. Any error by the trial court in admitting the

, contested testimony is harmless because Astoria later permitted similar

 evidence to' be introduced' without ob-jection during its cross~examination of

 Jackson and the contested evidence is merely cumulative of properly admitted

 evidence on Jacksonrs opinion regarding Brand FX's corrective advertising



                                          39
       COst5,93     Accordingly, we hold that the trial court's error in admitting the

       contested heresay testimony, if any, did not probably cause the rendition of an

       improper judgment. 94 We overrule Astoria's fifth issue.

                                   VII.       ATTORNEY'S FEES

              In its si~th and final issue, Astoria contends that the trial court erred by

        awarding attorney's fees on Brand FX's trade dress infringement and false,

        advertising claims because this is not an "exceptional case" in which     an award

        of fees is authorized by the Lanham Act and, alternatively, because appe!la~e

        fees were not properly conditioned on a. successful appeal.

              ~h~ Lanham Act provides th~t "the court in'exceptional cases may award
                                               ,         .
        reasonable attorney fees to the· p'revailing party. "95 The' prevailing party has the
                                                      ..                    -              .
                                          .                  ,


        burd~n      to demonstrate the exceptional ,nature of the case by clear and

        convincing evidence. 96 Clear and' convincing evidence is that measu're or degree




_ _ _ _ _ _9_3See-Bay-Ar.ea-ldealthcal'e-GrouP-r-2.39-S..W_ ..      3.d_at_23S;_Inters.tate.
         Nor~hboroughP'ship, 66 S.W.3d at 220; Gee, 765 S.W.2d at 396; Richardson,
         677 S.W.2d at 501,                                            '

              94See Tex. R. App, P. 44.1 (a){1); Interstate' Northborough P'ship, 66
         S.W.3d at 220.
               95
                    15 U,S.e,A. § 1117{a).

                96Seven-Up Co. v. Coca-Co/a Co., a6 F.3d 1379, 1390 (5th Cir. 1996)
         {citing CJC Holdings~ Inc. v. Wright & Lata, Inc., 979 F.2d 60, 65 (5th Cir.
         1992)).

                                                   '40
         of proof that will produce in the mind of the trier of fact a firm belief or

         conviction as to the truth of the allegations sought to be established. 97

                Exceptional casas include when the defendant's violation of the Lanham

         Act is malicious, fraudulent, ~eliberater or willful. s8    The trial court should

          decide whether a case is         exception~1   "by examining all the facts and

          circumstances."99 lIThe determ·ination as to whether a case is exceptional is

          left to the sound discretion of the trial court.fll0D We review a decision. to

          award attorney's fees for an abuse of discretion, an,d the trial court's finding as

          to whether the case is eXceptional for clear error. 101

                Regardir:g. Ast.oria~s trade dress infringeIT!~nt, the evidence establishes

          that ,Astoria kneW that Brand FX owned'the rights to the unique ~tair-step

          design and that Cook's warned Astoria notto violate Brand FX's rights" Astoria

          proceeded to copy Brand FX's design anyway, ~sing Brand FX's drawings'and ,

          one of its toppers as a Ilplug" to produce a stair-step topper mold. Thole, the

-
    ------=============-======--         ~-----------------------
                                                                                         - --------
                 97Tex. Civ. Prac. & Rem. Code Ann. § 41.001 (2) {Vernon 200S}; Tral1sp.
          Ins, Co, v. MofieJ, 879 S.W.2d 10 r 31 {Tex. 1994}.

                 98Seven-Up Co., 86 F.3d at 1390.

                 99CJC HoJdings, 979 F.2d at 65.

                 lOOSeven-Up Co., 86 F.3d at 1390.

                 101S   chlotzsky's, Ltd. v; Sterling Purchasing & Nat'! Distribution Co., 520
           F.3d 393,402 15th Cir. 2008).

                                                    41
Astoria engineer in charge   o·r the project,       stated at the time that he knew that

Astoria's actions were Ilimproper and "wrongful. "
                                      lf
                                           ,




       Regarding Astoria's false advertising, three Astoria witnesses conceded

that the IIDARE TO COMPARE" advertisement contained statements that were

false with respect to Brand FX. Astoria nonetheless ran the advertisement, and

continued to run it for eleven months after receiving Brand FX's cease and

desist letter.

        Based on the record in this case, we hold that the trial court could find

by clear and convincing evidence that Astoria deljberately and willfully -,

committed trade dres,s Jnfri~gement and false advertisi~'g,.            The trial court's

finding that this i.s an exc'eptional case is not Clearly erroneou~, and its'decisiofl

to award attorney's'fees is not an abuse of discretion. 102.,

       , A trial court may'not,   however, grant a party, an unconditional award of

appellat~   attorney"s fees} because to do so 'could penalize the other party for




   ,   ,102See,e..g. Schlotzsky's, Ltd., 520 F.3d at 402 (affirming award of
 attorney's fees based on defendant's bad faithmisrepresentations iry violation
 of Lanham Act); Taco Cabana Inf'l, 932 F.2d at 1127·-28 (affirming award- of
 attorney's fees based on defendant's I'brazen imitation" of direct competitor's
 trade dress).

         103Weynand v. Weynand, 99'0 -S.W.2d 843, 847 (Tex. App.-Dallas
 1999, pet. denied).

                                               42
'failing to condition the award of appellate fees on a successful appeal, 104

Accordingly, we modify the judgment to reflect that Brand FX is only eligible to

·receive attorney's fees upon successful appeal, and we affirm the .award of

attorney's fees as modified,10G

                             VIJI.   CONCLUSION'

      We modify the trial court's judgment to reflect that Brand FX is only

eligible to receIve appellate attorney's fees if successful on appeal, and we

affirm the judgment as modified.


                                                 ~~
                                                  BOBMCCO~'
                                                  JUSTICE', .
 PANEL: LIVINGSTON and MCCOY, JJ.

 DELIVERED: April 8, 2010




       104See   J.e.
                Penney Life Ins. Co. v. Heinrich, 32 S.W.. 3d 280, 290 (Tex.
 App.-San Antonio 2000, pet. denied). .

       105SeeTex. R. App. P. 43.2(b) (providing appellate court may modify
 judgment and affirm as modified); see also Tully v. Citibank (South Dakota),
 MA., 173 S~W.3d 212, 219 (Tex. App.~ Texarkana 2005, no pet.) (modifying
 judgment to condition attorney's fees on successful appeal);' Heinrich, 32
 S.W.3d at 290 (same).

                                        43
TAB 4
15 U.S.C.A. § 1117

United States Code Annotated Currentness
Title 15. Commerce and Trade
"IilChapter 22. Trademarks (Refs & Annas)
"IilSubchapter III. General Provisions
....§ 1117. Recovery for violation of rights


(a) Profits; damages and costs; attorney fees

When a violation of any right of the registrant of a mark registered in the Patent and Trademark
Office, a violation under section 1125(a) or liD. of this title, or a willful violation under section
1125(c) of this title/ shall have been established in any civil action arising under this chapter! the
plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and
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. The court shall assess such profits and damages
or cause the same to be assessed under its direction. In assessing profits the plaintiff shall be
required to prove defendant's sales only; defendant must prove all elements of cost or deduction
claimed. In assessing damages the court may enter judgment, according to the circumstances of
the case, for any sum above the amount found as actual damages, not exceeding three times
such amount. If the court shall find that the amount of the recovery based on profits is either
inadequate or excessive the court may in its discretion enter judgment for such sum as the court
shall find to be just, according to the circumstances of the case. Such sum in either of the above
circumstances shall constitute compensation and not a penalty. The court in exceptional cases
may award reasonable attorney fees to the prevailing party.

(b) Treble damages for use of counterfeit mark

In assessing damages under subsection (a) for any violation of section 1114(1)(a) of this title or
section 220506 of Title 36, in a case involving use of a counterfeit mark or designation (as
defined in section 1116(d) of this title), the court shall, unless the court finds extenuating
Circumstances, enter judgment for three times such profits or damages, whichever amount is
greater, together with a reasonable attorney's fee, if the violation consists of

(1) intentionally using a mark or designation, knowing such mark or designation is a counterfeit
mark (as defined in section 1116(d) of this title), in connection with the sale, offering for sale, or
distribution of goods or services; or

(2) providing goods or services necessary to the commission of a violation specified in paragraph
(1), with the intent that the recipient of the goods or services would put the goods or services to
use in committing the violation.

In such a case, the court may award prejudgment interest on such amount at an annual interest
rate established under section 6621(a)(2) of Title 26, beginning on the date of the service of the
claimant's pleadings setting forth the claim for such entry of judgment and ending on the date
such entry is made! or for such shorter time as the court considers appropriate.

 (c) Statutory damages for use of counterfeit marks

In a case involving the use of a counterfeit mark (as defined in section 1116(d) of this title) in
connection with the sale, offering for sale, or distribution of goods or services, the plaintiff may
elect, at any time before final judgment is rendered by the trial court, to recover! instead of
actual damages and profits under subsection (a) of this section, an award of statutory damages
for any such use in connection with the sale, offering for sale, or distribution of goods or services
in the amount of--
(1) not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or
services sold, offered for sale, or distributed, as the court considers just; or

(2) if the court finds that the use of the counterfeit mark was willful, not more than $2,000,000
per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the
court considers just.

(d) Statutory damages for violation of section 1125(d)(1)

In a case involving a violation of section 112S(d)(1) of this title, the plaintiff may elect, at any
time before final judgment is rendered by the trial court, to recover, instead of actual damages
and profits, an award of statutory damages in the amount of not less than $1,000 and not more
than $100,000 per domain name, as the court considers just.

(e) Rebuttable presumption of willful violation   L.E.!'ill
In the case of a violation referred to in this section, it shall be a rebuttable presumption that the
violation is willful for purposes of determining relief if the violator, or a person acting in concert
with the violator, knowingly provided or knowingly caused to be provided materially false contact
information to a domain name registrar, domain name registry, or other domain name
registration authority in registering, maintaining, or renewing a domain name used in connection
with the violation. Nothing in this subsection limits what may be considered a willful violation
under this section.
          15 U.S.C.A. § 1125

          United States Code Annotated Currentness
          Title 15. Commerce and Trade
          "'!ilChapter 22. Trademarks (Refs & Annos)
          "'jjSubchaRter III. General Provisions
          ..§ 1125, False designations of origin, false descriptions, and dilution forbidden


          (a) Civil action

          (1) Any person who, on or in connection with any goods or services, or any container for goods,
          uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any
          false designation of origin, false or misleading description of fact, or false or misleading
          representation of fact, which--

          (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation,
          connection, or association of such person with another person, or as to the origin, sponsorship,
          or approval of his or her goods, services, or commercial activities by another person, or

          (8) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities,
          or geographic origin of his or her or another person's goods, services, or commercial activities,

          shall be liable in a civil action by any person who believes that he or she is or is likely to be
          damaged by such act.

          (2) As used in this subsection, the term "any person" includes any State, instrumentality of a
          State or employee of a State or instrumentality of a State acting in his or her official capacity.
          Any State, and any such instrumentality, officer, or employee, shall be subject to the provisions
          of this chapter in the same manner and to the same extent as any nongovernmental entity.

          (3) In a civil action for trade dress infringement under this chapter for trade dress not registered
          on the principal register, the person who asserts trade dress protection has the burden of
          proving that the matter sought to be protected is not functional.

           (b) Importation

            Any goods marked or labeled in contravention of the provisions of this section shall not be
-----importedJnto-tbe-United-States-ocadmitted_tCLentJ:y-ClLa n~,-customho_use_oLth~United_States. _ _ _ _ __
            The owner, importer, or consignee of goods refused entry at any customhouse under this section
            may have any recourse by protest or appeal that is given under the customs revenue laws or
            may have the remedy given by this chapter in cases involving goods refused entry or seized.

           (c) Dilution by blurring; dilution by tarnishment

           (1) Injunctive relief

           Subject to the principles of equity, the owner of a famous mark that is distinctive, inherently or
           through acquired distinctiveness, shall be entitled to an injunction against another person who,
           at any time after the owner's mark has become famous, commences use of a mark or trade
           name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the
           famous mark, regardless of the presence or absence of actual or likely confusion, of competition,
           or of actual economic injury.

           (2) Definitions
(A) For purposes of paragraph (1), a mark is famous if it is widely recognized by the general
consuming public of the United States as a designation of source of the goods or services of the
mark's owner. In determining whether a mark possesses the requisite degree of recognition, the
court may consider all relevant factors, including the following:

(i) The duration, extent, and geographic reach of advertising and publicity of the mark, whether
advertised or publicized by the owner or third parties.

(ii) The amount, volume, and geographic extent of sales of goods or services offered under the
mark.

(iii) The extent of actual recognition of the mark.

(iv) Whether the mark was registered under the Act of March 3, 1881, or the Act of February 20,
1905, or on the principal register.

(8) For purposes of paragraph (1), "dilution by blurring" is association arising from the similarity
between a mark or trade name and a famous mark that impairs the distinctiveness of the famous
mark. In determining whether a mark or trade name is likely to cause dilution by blurring, the
court may consider all relevant factors, including the following:

(i) The degree of similarity between the mark or trade name and the famous mark.

(ii) The degree of inherent or acquired distinctiveness of the famous mark.

(iii) The extent to which the owner of the famous mark is engaging in substantially exclusive use
of the mark.

(iv) The degree of recognition of the famous mark.

(v) Whether the user of the mark or trade name intended to create an association with the
famous mark.

(vi) Any actual association between the mark or trade name and the famous mark.

(e) For purposes of paragraph (1), "dilution by tarnishment" is association arising from the
similarity between a mark or trade name and a famous mark that harms the reputation of the
famous mark.

(3) Exclusions

The following shall not be actionable as dilution by blurring or dilution by tarnishment under this
subsection:

(A) Any fair use, including a nominative or descriptive fair Lise, or facilitation of such fair use, of
a famous mark by another person other than as a designation of source for the person's own
goods or services, including use in connection with--

(i) advertising or promotion that permits consumers to compare goods or services; or

(ii) identifying and parodying, criticizing, or commenting upon the famous mark owner or the
goods or services of the famous mark owner.

 (8) All forms of news reporting and news commentary.

 (e) Any noncommercial use of a mark.
(4) Burden of proof

In a civil action for trade dress dilution under this chapter for trade dress not registered on the
principal register, the person who asserts trade dress protection has the burden of proving that--

(A) the claimed trade dress, taken as a whole, is not functional and is famous; and

(8) If the claimed trade dress includes any mark or marks registered on the principal register,
the unregistered matter, taken as a whole, is famous separate and apart from any fame of such
registered marks.

(5) Additional remedies

In an action brought under this subsection, the owner of the famous mark shall be entitled to
injunctive relief as set forth in section 1116 of this title. The owner of the famous mark shall also
be entitled to the remedies set forth in sections 1117(a) and 1118 of this title, subject to the
discretion of the court and the principles of equity if--

(A) the mark or trade name that is likely to cause dilution by blurring or dilution by tarnishment
was first used in commerce by the person against whom the injunction is sought after October 6,
2006; and

(B) in a claim arising under this subsection--

(i) by reason of dilution by blurring, the person against whom the injunction is sought willfully
intended to trade on the recognition of the famous mark; or

(ii) by reason of dilution by tarnishment, the person against whom the injunction Is sought
Willfully intended to harm the reputation of the famous mark.

(6) Ownership of valid registration a complete bar to action

The ownership by a person of a valid registration under the Act of March 3, 1881, or the Act of
February 20, 1905, or on the principal register under this chapter shall be a complete bar to an
action against that person, with respect to that mark, that--

(A}(i) is brought by another person under the common law or a statute of a State; and

(ii) seeks to prevent dilution by blurring or dilution by tarnishment; or

(B) asserts any claim of actual or likely damage or harm to the distinctiveness or reputation of a
mark, label, or form of advertisement.

(7) Savings clause

Nothing in this subsection shall be construed to impair, modify, or supersede the applicability of
the patent laws of the United States.

(d) Cyberpiracy prevention

(l}(A) A person shall be liable in a civil action by the owner of a mark, including a personal
name which is protected as a mark under this section, if, without regard to the goods or services
of the parties, that person
        (i) has a bad faith intent to profit from that mark, including a personal name which is protected
        as a mark under this section; and

        Oi) registers, traffics in, or uses a domain name that--

        (I) in the case of a mark that is distinctive at the time of registration of the domain name, is
        identical or confusingly similar to that mark;

        (II) in the case of a famous mark that is famous at the time of registration of the domain name,
        is identical or confusingly similar to or dilutlve of that mark; or

        (III) is a trademark, word, or name protected by reason of section 706 of Title 18 or section
        220506 of Title 36.

        (8)(i) In determining whether a person has a bad faith intent described under subparagraph
        (a), a court may consider factors such as, but not limited to

        (I) the trademark or other intellectual property rights of the person, if any, in the domain name;

        (II) the extent to which the domain name consists of the legal name of the person or a name
        that is otherwise commonly used to identify that person;

        (III) the person's prior use, if any, of the domain name in connection with the bona fide offering
        of any goods or services;

        (IV) the person's bona fide noncommercial or fair use of the mark in a site accessible under the
        domain name;

        (V) the person's intent to divert consumers from the mark owner's online location to a site
        accessible under the domain name that could harm the goodwill represented by the mark, either
        for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood
        of confusion as to the source, sponsorship, affiliation, or endorsement of the site;

        (VI) the person's offer to transfer, sell, or otherwise assign the domain name to the mark owner
        or any third party for financial gain without having used, or having an intent to use, the domain
        name in the bona fide offering of any goods or services, or the person's prior conduct indicating
        a pattern of such conduct;

~~~_---,(VII)  the person's provision of material and misleading false contact information when ap!2lying._ _ _ _ __
        for the registration of the domain name, the person's intentional failure to maintain accurate
        contact information, or the person's prior conduct indicating a pattern of such conduct;

         (VIII) the person's registration or acquisition of multiple domain names which the person knows
         are identical or confusingly similar to marks of others that are distinctive at the time of
         registration of such domain names, or dilutive of famous marks of others that are famous at the
         time of registration of such domain names, without regard to the goods or services of the
         parties; and

         (IX) the extent to which the mark incorporated in the person's domain name registration is or is
         not distinctive and famous within the meaning of subsection (c) of this section.

         (ii) Bad faith intent described under subparagraph (A) shall not be found in any case in which
         the court determines that the person believed and had reasonable grounds to believe that the
         use of the domain name was a fair use or otherwise lawful.
          (e) In any civil action involving the registration, trafficking, or use of a domain name under this
          paragraph, a court may order the forfeiture or cancellation of the domain name or the transfer of
          the domain name to the owner of the mark.

          (D) A person shall be liable for using a domain name under subparagraph (A) only if that person
          is the domain name registrant or that registrant's authorized licensee.

          (E) As used in this paragraph, the term "traffics in" refers to transactions that include, but are
          not limited to, sales, purchases, loans, pledges, licenses, exchanges of currency, and any other
          transfer for consideration or receipt in exchange for consideration.

          (2)(A) The owner of a mark may file an in rem civil action against a domain name in the judicial
          district in which the domain name registrar, domain name registry, or other domain name
          authority that registered or assigned the domain name is located if

          (i) the domain name violates any right of the owner of a mark registered in the Patent and
          Trademark Office, or protected under subsection (a) or (c) of this section; and

          (ii) the court finds that the owner--

          (I) is not able to obtain in personam jurisdiction over a person who would have been a
          defendant in a civil action under paragraph (1); or

          (II) through due diligence was not able to find a person who would have been a defendant in a
          civil action under paragraph (1) by--

          (aa) sending a notice of the alleged violation and intent to proceed under this paragraph to the
          registrant of the domain name at the postal and e-mail address provided by the registrant to the
          registrar; and

          (bb) publishing notice of the action as the court may direct promptly after filing the action.

           (8) The actions under subparagraph (A)(ii) shall constitute service of process.

           (e) In an in rem action under this paragraph, a domain name shall be deemed to have its situs
           in the judicial district in which

           (i) the domain name registrar, registry, or other domain name authority that registered or
                                                             _
_ _ _ _-----"'-a=ss=-igned the domain name is located;-'o"'-'r _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

           (ii) documents sufficient to establish control and authority regarding the disposition of the
           registration and use of the domain name are deposited with the court.

           (O)(i) The remedies in an in rem action under this paragraph shall be limited to a court order
           for the forfeiture or cancellation of the domain name or the transfer of the domain name to the
           owner of the mark. upon receipt of written notification of a filed, stamped copy of a complaint
           filed by the owner of a mark in a United States district court under this paragraph, the domain
           name registrar, domain name registry, or other domain name authority shall

           (I) expeditiously deposit with the court documents sufficient to establish the court's control and
           authority regarding the disposition of the registration and use of the domain name to the court;
           and

           (II) not transfer, suspend, or otherwise modify the domain name during the pendency of the
           action, except upon order of the court.
(ii) The domain name registrar or registry or other domain name authority shall not be liable for
injunctive or monetary relief under this paragraph except in the case of bad faith or reckless
disregard, which includes a willful failure to comply with any such court order.

(3) The civil action established under paragraph (1) and the in rem action established under
paragraph (2), and any remedy available under either such action, shall be in addition to any
other civil action or remedy otherwise applicable.

(4) The in rem jurisdiction established under paragraph (2) shall be in addition to any other
jurisdiction that otherwise exists, whether in rem or in personam.
TABS
"                                ('''IJ
                                 ..
                                 , •
                                      '




                                    UNITED STATES DISTRICT COURT
                                    EASTElm DISTRICT OF' MrCIDGAN
                                         SOUTHERN DMSION


     BALANCE DYNAMXCS CO:RPoitATION J

                   . Plamtiff.
     v.                                    • ..   ,,'   J,



                                                                                                      c;
     SCHM01' INDUsrlUBS f :INC., a
                                                                                                      ~          Eg
                                                                                          ."\1,. 1..':::1        ~
     foreign corporation.'                                                                ;~:I~ ~;;              -...J       ""If'U
                                                                                          ~,,~ r ... ~                       ~c.~J~
                                                                                        :1,••••~o
                                                                                                                (.0       ~    ::,,,,,,,
                     Defenaant.                                                       .: .. '( -;-.:.;
                                                                                      •     ~.01
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                                                                                                   :!lCJ
                                                                                                   -j


                                   M!WOMN~UM QpmJON AND, ORDER. QN
                                rt.:AI~lTj'f!t1· s MOTION IN LXMlNE R.EGARDING
                              f'qN'ITtyE DAMAG:a.9 AND D:E'fRNpANT'S ShLE.S~,

            This aotion' is brollght undr:i,r theLan:patfi       Act~   15 U, S. C. §         1l~5,            for   falB~     and

     dispatag~g dissemination' ofad-Vertiatng 8.iid proniotionaI iriaterial by defendant.



     1. B.ACKGROUijO FACTS

             Plain.ttfrand-defendant-are-direct-cOITlpetitors in the sales of balanoin.g machinery for



          l:Plaintiff has captioned this motion as a ,"Motion in LiInine related to proofs. and argument at
                                                                         tl


     uial. The Court rafe;rred the matter for hearing and d~tenni.nation under 28 U.S.C. § 636(b)(1)(A).
     :aecatlSe 1hls opilrlon determmes that. p:(oof of pWliti've d;amages and defendant's sales are not
     appropriate on the facts of this case, it could be considered a partial SlJlDllliU'Y judgment on these
     isslles that shQrUd be ha:04led Dll Report and lteconunendation 'Qnder 28 U.S.C. § 6~6(b){1)(a). If
     the Court so deTermines, it can treat this as a Report and R£cammendation. Because this opirlion
     involves qu.estlo'Q.& of law or niixecf questions' of' equity and 'fact. the standard of review wlll be tlIe
     samt tegatdless of the order of refeJ'ence Of title of this document. The district judge will review
     any.objettiollS.to this opinion de 710YO as consistent With' or contrary to law tmdlor prilicipl~s of                                 a.
     ~                                                                                                                                     ~\

    ~ l~a-l
                                                                                                                               ,?
                                                                                (I,'.......•,r
                                                                                      .. ...   ~
                                                                                 •    I




:lndustry. On or about M$rch 16, 1993. Schmitt lndustries i13sued a letter to different entities

in the indu.stry regar4ing the use of ozone depleting substances in balancing $ystems.

Schmitt"s letter provides, in pertinent part, that as or May 15. 1993. "all products which

contain or have been processed with ozone depleting s'Q.bsmnces (ODS) must have warning

labels affixed tl and that "subsequently, thef;1e substances will be ban:ned from general use."
                                    R
                  •       •       •   'or   ,' ',.   " , ' " I'.   '

n warns that the       "end us,er" will be financially respo:tlSible "for environmentally sound

disposal of products col).taini.ng ODS. II The letter then st4tes that Sclunitt does not use any

ozone 4epleting $ubstances in its balancer.

          According to the letter. it was sent to assure Schmitt's customers and potential

customers that Schmitt do(:$ not use ODS's, The letter was also an effort by Schmitt to

distinguish its product. which does not use halon, from a proollct whic.h does use halon. The

letter continues:' "Perhaps because one manufactt).rer of a.utomatic grinding Wheel balancers

llSel3   halon. this type of device hM, Cpmt'1 lU14er, close scrutiny. It Balanoe Dynamics Corp.

cane) does Use halon although the lQtter did not specifically identify Balance Dynamics.
Those in the market. however. are likely to jd~:ntify plaintiff 313 the I'one xnanufacrurer" using

halon. Furthermore? the letter provide/;!: "Should your cc;nnpany operate any halon balancers

and wish to dispose of them prior to May-15~Schlnitt-lndustries-ean-&upply-;r-.-._an-eaay_ _ _ __

replacement. "

           In response to Schmitt~s letter, BDC issued                 a letter informing c'Ustomers that no
material. used in their halon balancer is regulated or slared to be banned. As noted in an

earlier R.eport and Recommendation/of JulylS't 199J."Schmitt's Jetter cO"Qld be found by a



                                                          2
                           ."""')
                               ,
                           /- .' 'J




JUIY to give the false inference that plamtiff s balanoer uses a banned ODS. requites labeling

and possible diSllse by May 15, 1993, and costly disposal by the buyer.

       Schmitt responded to plaihtiff's letter to the industry by hiring an envitoI\.lllental

consultant, Lome MacGregor. purport.edly to rebut BDC's COllnter';.co:ptentions.                                The

consultant's memorandum critioized the environmental safety of halon and suggested that it

woUld be regulated. MaeGregor stated that Halon 1202 had not been banned even though

it had an ozone depletion potential (ODP) of fI.bout 1.25, or i5 % greater than CFC (Freon)

11, and more than. six times tbe 0.2 limit set fot a Class I subSTance by the U.S. Clean Air

Act. Under the Clean Air Ach he continued. the EPA was to list all substances with                                all

ODP of 0.2 as Class I substances and phase t)'Ut their production over a period of not mor~

thail seven ye~ts. The report addecl that Halon 1301 and 1211 were no longer proc}qced as

of December It 1993. and that Halon 1202 Was used primarily as a fir~ e.xtinguishant in

some older military alrCrB.ft.             'l13ion '1202. McGregor eXplained. was produced primarily as
a bi-proouct of the production of Halon 1SO 1~ although it can apparently be produced

independent of Halon 1301. MacGregor speculated tlmt because Halon 1301 WOIUd no

longer be produced. after December 31, 1993, Halon 1202 ".qould also disappear from

production. He speculate4 further                        thl:lt if1t--continued-to-be-produeed.-the-EM--would~_ _ __

regulate it or that pdvate persons could bring a court action                     s~eking its   regq)alion as a Class

I substance. As a resuitr Halon 1202 would lilcely beCQme difficult to obtain in the near

future. Finally. MacGregor noted that Halon 1202 Was also an agent with significant global
                                      ,.     ' ••   _ •• J •   •   "   "   ••••


wanning potential (GWP) , and that while items with a high GWP were not presently

reguIated   in   the United States, there were efforts mlder the Montreal Protocol to irUWtI:e

international    r~gulation of        such items. Finally; he wamecl of potential adverse physical

                                                                           3
                               I~,                                                                                      .... '.
                               \" .'/                                                                                   f, ", )
                                                                                                                           ..


consequences of exposure to Halon 1202.                                                           Loroe MacGregor does not rtatne Balance

Dynamios ot its balancer in bis meroor~um.

          Plaintiff filed this action OIl Fe.bmaty 19.                                              1994~       alleging that defendants creation and

disseminatioli of the March               16~               1993; letter and the                                McOr~gor          memorandum. constituted
      .                   .~    .   ..    .       -     "?, • . I           "',"',                      I        •



deceptiV'e trade prac1icel3, product disparagement. and false advertising in violation of the

Lanham Act. 15 U.S.C. § 1125. state common law. and the Michigan COD$1./.mer Protection

Act. M.C.L. §§ 445, 906 et seq. While BDC initially sought injunctive relief a$ well as

damages in its February 1994 complaint. the request for injunctive relief was later withdrawn

because defendant intended no further publication of ita a.ssertions regarding halon.

          On April 4, 1994. plaintiff filed its First Amended Complaint. wbi¢h contained

additional claims based on the defendant's creation. and dissemination at a September 1993
                                                       ,
trade show? of a cartoon that C\epicted oertain types of balancers as junk. Again neither
                                              ~        •- "       .. I .        .         "    '.   •


Balance Dynamics nor halon balancers were expro$sly identified.

          Plaintiffs amencled complaint of April 1994 asserts that the implication of these

publications is to P1.lt the plaintiffs halon balancer in a derogatory light. The March 16,

1993. letter. in particular. plaintiff assem. created "misrepresentations? innuendo                                                                  ~d

deceptions in regard to plaintiffs product, n Plaiilttffasserted-that-its-pl"oduet-did-not-requhe _ _ __
                                                                                                _

a warning label, that Halon 1202 was not going to be" banned, that the plaintiff's balancer

diet not have a halon disposal problem because it was within a sealed unitt and that the

plaintiff's halon balan.cer had not tamed it to be placed under close scrutiny by the EllA or
                                         '.           ..,    ••    , I     ."       '.'       ".'           ,




others. Reg~ding the Lome MacGregor report. plamtiff notes that EPA has no plans to ban

Halon 1202 or to regqlate its                 ~llfacturc                             or use. BPe notes fu,ttber. With regard to third

persons who MacGregor $peculated might bring court actions, that there is far too little

                                                                                              4
 ·'                               ('7i'\
                                    \,~J




Halon 1202 in the marketplace to cause any concern. Willi reSpect to McGregor's c:1aim that

it would be difficult        to    obtahl in the future, plaintiff asserts that this was not a problem

because its      ba~ancer    was designed so that the Halon 1202 would not escape into the

atmosphere and thus its future availability for' maintenance was not an issue. It further noted

that there Was no eff~rt            to ban .~~ r~guiate plaintiffs 'pr04't.lct as hllving global warruing
potential because of the sm,!lll amoIDlt of halon used in its product and. further. that the

product is designed to retain the halon within the product and not allow it to e~cape into the

atmosphere. It further felt that it was only spee'Qlation that the Montreal Protocol, or any

entity, would attempt to regulate halon internationally.

          Concerning The statement in McGregor lnemo that exposure to Halon 1202. could lead

to dizzip.ess~   lack of coon:1ination                    ~d              possible liver                        damage~   plaintiff noted that halon was

sealed in its product1 Which was designed to contain the halon completely Md permanently.
                                    •      '"    .-       ~.        . I   .,   .    ."       • •   r        •



Thus users would not come into contac;t with it. Because there is no exposure to it in use
      j




of BDC's machines. its toxicity wr,)uld not be relevant.                                                              Plaintiff initially asserted that

defendant's two doouments were deliberately, falsely, and maliciO'llsly placed into the stream

of c;o.tnmerc¢ to put plaintiff' 8 product in a bad light. In doing so. defendant camed plaintiff

loss of sales and hru:m to its reputation,                                                   and-irroteased-th~sales--of-1hC-defenda:nt"-,'s,,,--_ _ __

corporation. Plaintiff further asserted that the "innuendo and general tenor of the cartoon"

that defendant put in the stream of commerce deliblilrately. falsely. and maliciously placed

plaintiffs product in. a bad light and Schmitt's product in a good light, ~d that i~ also
                        ~.         '"           • .,... ' i •   •   J          •••• '    "         '.   •



violated the Lanham Act•. 15 U.S.C. § 1125(a)(1).

          On January 6, 1995. during a hearing on plaintiffs motion to quash defendant's

subpoena of financial information from plaintiffs bank and other financial companies,

                                                                                             5
plaintiff stated that no evidence of lm~t sales or lost profits would be introduced at trial.

Plaintiff subseqtlently stipulated to this rep:(,esentation, while reserving its rightll under 15

u.s.c.    § l117 to ~eek damages relating to: (1) defendant's profits, (2) 4atnage conlI'ol, or

,jloss control, ,I incurred by plaintiffs, and (3) iujury to reputa,tion and goodwill.                                                                The
                                            ,.     '''' ' f   ~   •   I   "    •   ..'       "       l'       ,

~tipulation also provided tha~ plaintiff                                      would reserve the                           righ~   to seek costs as well as

punitive and tr('lble damag~s. Plaintiff has also abandoned efforts to prove directly barm to

it$ reputation-



H.,PROCEDURAL      BACIWROYND

         The COllrt has earlier r;tistoissed various CQ1J:Ots under Michigan law, including claims

for deceptive trade practice, trade slander; and claims under the Michigan Consumer

Protection Act. Z Thi~ Gantt granted partial sutntnarY judgment on plaintiff s Lanham Act
                                   •   '"        ....   ,.            J."     "'.'       •   ~   ,   f,   .       •   •




claim with regard to pla.intiffs lost profits and related costs_ It nonetheless denied Bunmlary

judgment to the defendant on plaintiffs Lanham Act claim for damage control activities

(Dooket #160 aocepting Report and Recommendation, Docket #150).



m. PLAJNT1FF'S MotloN
    •                     "1'1"'




         Plaintiff has filed a motion in limine to allow a JUIy award of punitive damages under


    'iplaintiff's state law trad~ slander/disparagement claim (Count VI) Was dismissed under Fed. R.
Civ- P. 9(g) for fa.ilure to ·plead specifically. special .4amages. Plaintiff's theory of dimlages fu\s
evolved through tlle course of this litigation as it becat/le apparent that plaintiff eould not ptove a:p.y
lost sa.les~ or reducea. profits. or quantifiable damage to it:; reputation caused by defendant~$ ;Uleged
wrongdoing. Plaintiff is currently seekiDg loss control darnages-expeuses that were mCUl'red to
cowner the potential adVerse effect of the 4efendant's idleged wrongdoing. Plaintiff nas chosen :not
to amend its common law trade I:llandcr daim to plelld these damage$ specifically t but is ratber-
~g theae d.anlages solely under § 3S{a) of the Lanham Act, 15 U.S.C. § 1111 COoc'ket #159
¥Xepting Report anc1 Reoommendation. Docket # 1~9}-
                                                                                         6
                           "')
                          l' ....0'
                           "II   I




the Lanham Act as well as an awat4 of defendant Schinitt Jndustr~es' profits on its sales,

Plaintiff argues fuat Congress intetlded the Lanham Act as punishment                                    to   wrongdoers, and

that (Jisrrict courts have wide lau'tUde to fashion appropriaf.e remedies under Section 3S{a) of

the Lanham Act, 15 U.S,C. ·§.1117(a)}. In·addition. counsel argue~ that plaintiff is entitled

to defendant's profits under 15 U.S.C. § 1l17(a)(1), citing BAS'F Corp.                                         'V.   014 World

Trading Ca., Inc., 41 F.3d. 1081.               10~5     (7th Clr, 1994), which notes that 'Jdisgorgetnent [of

profits] is most appropriate when damages are nominal."                                          Plaintiff suggests that their

proV'able daro.ages under its loss control theory                              ~e      nominal. and accordingly disgorgement

of profits should be allowed.

       In response? defense counsel argues that in granting sUllllilatY judgpient on plaintiff fi
claims fo!' lost profits and. costs) the Collrt limited plaintiffs theory of damages to 4amage

control activities.
                                 .    ...   ..... -
                                            .         ~...   ..... .   ~   .   .
                                                                               -   .




        A.. Punitive Prunage§;

        Plaintiff cites Manildra Mill Corp. v. Ogilvie Mill$. Inc. ~ 797 F. SuPt>. 874 (D.Kan.

1992), for the proposition. that punitive damages i'nay be                                   awarded-1inder-the---banham-Act.,~_ _ __



    j15 U.S.C. § 1117(a) provides in part:

        In assessing damag~s the ~Qu,rt..QlB.Y ..et;tre~:jQ~gment. aecor4ing to the circumstances
        of the case;      fOI any sum above the amount found. as actual damages. not exceed.ing
        rh:ree times such ;unount. If the court shall fUld mat !be am6l.Uit of the reoovery
        based on profits is either inadeq~te or excessive the court may in its discretion enter
        judgment for such $\lm as the court $hall find to be j~st. accotding to the
        cirC1J.:lnst.aIice:; of the case. SUch SUin in ~irher of the above eirCUtI'lStances shall
        constitute compep.sation and not a penall¥. The coun in exceptional cases may a.ward
        teasonable attotUey fees to the prevailing party.

                                                                  7
It is clear from a close reading of Manildra Mill Corp. that the case involved not only

Lanham Act claims but also        non~federal    common law claims. The defendant" s behavior

involved unfair competition in the form or injurious falsehoods as well as intentional

interference with the plaintiff's prospe'Ctiveeconomic adv~tage. See 797 F. Supp. at 889.

The court did not specifically address the issue of            whe~r     punitive damages could be
awarded under the      J..annam Act. Rather. it lloted that the ju.ry had awarded $2.2S0~OOO :in
compensatory damages and $2,500,000 in punitive damages. The defendant was seeking a

remittirur from the district judge of what they asserted were excessive compensatory and

pWl.itive Ql:lWages,    Having reviewed the evidence. the court found defendant hac:J not

established su.fficient grounds for a remittiW and that the punitive damag¢$ Were reasonable

in view of the actual dam.a.ges that were sustained, Yet. an analysis of the opinion make$
it clear that the   punitive damages'were' awarded under the' state common law and not the
Lanham Act. 4 OtbAr cases .also have distinguished Lanham Act statutory damages" and the


    "'While defendant was seeking a reduction. plaintiff was seeking an incTeas~ in the awatd by the
defendant's profits' from its sales, tteble damages. JUlel attofxmy fees.. In analyzing a request for
treble c1m1agell and attorn~y fees under the :r....anham Act. 15 U.S.C. § 1117(a), the district cOtil't
twice notes the well established principle specified in the Lanham Act itself that "any award :must
constitute compensa.tiOn aMTorselVQ1O-pena}ize--the-loBing-p2.Ii1~."--A"Id=t--"~,,,--l=8:::::88::..:._ _ _ _ _ _ _ _ _ _~

      In reje.:;:ti+lg the plaintift's claim that the defendant's profits should be disgorged or the
damages enhl3l1.ced by trebling. the Court ~tated that

        the award of actual damages made by the jury is an adequate and just amount. Thus.
        the court will not increase ·-Manildra·'" '[plaintiff 8J damages, nor will it accept an.
        accounting of Ogilvie~s [defendant's] profits. The court fUrther finds that any
        increased or enbanced damages would serve to penalize Ogilvie which. is an
        :im.permissible :reason to enb.ance the c:Ulm.ages aW(u'd unctf,'lt the Lanham. Act. See 15
        'O.S.C. § 1117(a).

Id. at 888. Again, me reaaon that the court did not award the plaintiff th~ £tefendant's profits or
treble the cl.a.tttages \ws b'ecause it founc:\ tha.t Iljuty~S award of acmal damages" ($2.25 million) was
adequaJe and jUGt (emphasis supplied). The court 4id not tefer ~ the additional. 2.5 ntiUio:a. dolhl'r$
                                                    8
specified damage enhancelllents, from state law punitive damages.

        The Ninth Circuit in U-Haul/litem, Inc. v. Jartrans Inc" 793 F.2cll034, 1037 (9th

Cit'. 1986), upheld the lQwer comt decision in which a $20 million damage award was

doubled under § 35 of the' Lrrifuani ACt,' 15 U:S: c', § 1117(a). Apparently the lower court

had awarded this additional $20 million under an alternative legal theory of punitive WlllUlges

"on the common law count" which had been brought under Arizona state law. The a.ppellate

court noted that because it upheld the award of the $20 million enhancement under § 35 of

the Lanham. Act (doubling the CQ+D.pensafOry awm;d). it did not need to address the alternative

theory of damages for the original $20 million of revenue shortfiill. Nor did it need to

address the award of punitive damages on the state claim. Thus" it appears that the Ninth

Circuit determined ~t the .specific statutory erihancQltlent provisions of § SS of the Lanham
                                   . ,.   , .• ' • • . " .   ,   •   ','   ".l   f       ,



Act are adequate surrogates for common law punitive clam.ages.

        In Electronics Corp. of America v.                                 Hanuywell. Inc. ~ 358 F. Supp. 1230. 1234-35
(D,Mass. 1973), affd 481 F.2d 513 (1st Cir.) (per curiaro)1 cert. ikhied. 414 U.S. 1114

(1973») the court specifically held that punitive damages are not availablo lInder the Lanham



in punitive ilamages the jury had alSo awarded. This sl.lggests this puninve awarli-wlfs-7Jotpart-or-----
the L~ Act 4amage award. Had this $2.5 million in punitive damages been awatdetl under the
Lanham Ac~. it seems clear the Court woUld have mentioned them as a further justification why
additional dam.ages by way Qf disgotgement of profits or trebling of damage$ would not be
tJecess<ltY •
                           .   "     ~    ...... - , ,   "       . ..'     " . '.    ,

        Indisc\lssing the award of attorney fees un4er lS U.S.C. § lU7(a). the court went on to note
that this is  do~ only when the ease is lIexceptional." .and that the term was detinet$. as involving
cases "whwe the wrongful conduct may be characterized as 'wil1fil1~ ~ -malicious.' 'fraudulent,' or
~deliberate. '11 Id. a.t 888. . 89 (citation omitt.e4). The court found that the defendanes acts were
intentional and malicious~ thus wananting om award of attorney fees lJJlder 1he I..anham Act. Ye'4
in awarding these attorney fees. the Conn stressed that this was to cover reasonable COSts of the
plaintiff in Q.sserting its right, This justification is consistent with the La.nbam Act's :policy of
pro'riding compensatory damages and not punitive damages                                     I




                                                                            9
      Act. Congress amended the Lanham Act in 1975 to provide for attorney fees because an

      earlier version of the Act did not JIlention attorney fees as being available. s Yet, Congress

      has not amended the $1:#tute to specify that punitive damages are available other than the
                                   ••   '"         .. ,       ,.'   • J,           '"         ",        '



      e~resB    1J}tatutory ePhancements of § 35(a) that are t\llowed in order to aBsure adequate

      compensation. In Honeywell t as in the present case, the plaintiff had given up any attempt

      to shoW' aema} harm "jn t:enns of lost sales." 358 F. Supp. at 1233. The court note41ater

      in analyzing other damages available under the Lanham Act. 15 U.S.C. § 1111;

              Unless there is at least sOlt,l.e evid¢llCe of MOD arising from defendant's
              '9iolation. a court may not award a money judgment based on profits or
              daJru!.ges. Were the sQction to be read differently there would be a great
              danger that money judgml'.'nts woulil be. in essence, punislu.Qems; but it is
              apparent frolD the section"s conclqsioD that money judgments "shall constitute
              (:01D.pensatlOil and DOl a penalty."

      ld. at 1234- The court went on 'to note 'thai oeca1.jse § 1117 says that damages shall be

      "subject to the principles of equity, It the I'fnat\.lre of defendant's conduct" should be

      considered in awarding damages. It reasoned that in cases "where damage is slight and the

      aefenilant's conduct is not fif.lgrant, an iIlJunction satisfies the equities of the case t and

      damages are inappropriate," 358 F. Supp. Ilt 1234 (citing Champion. Spark 'plug Co.                             )I.


-~-~SandeH.      331 U,S. 125. 131~32 (1947). The Court concluded that U[u]Dless the CQun is able

      to find that actual harm occurred. the exetcise of discretion··in which equitable factors would

      be   con8iclered~is   sinlply not authorized." 358 F. Supp. at 1234.
                                             ...          ~     .   ~   . .,   '   '.'   ..        '.       .
              Because the Lanham. Act allows a court to enhance a damage award in appropriate

          $1loneywell WIlS decided in 197). The Supreme Court in 'Pleischmtm iJistilling Cotp. lI. Maier
      lJrewblg Co., 386 U,S. 714 (1967), fO\.UI.d that in the absence of express sta~tory language no
      attomey fees were avai1~ble ul'l4er ilie Lanham Act. In 1915. Congress correcte4 tbis omission by
      specific:ally allowing an award of attQrney fees in cetlain cases. Xt   not. however. allow for           mel
      punitive &mages notWithstanding the fact tbat the Honeywell cue decided two years earlier whil::h
       held lhat punitive damages were not available 'Under the La:Mam Act.

                                                                                         10
                              /'''\
                              t..., .... /
                               ~.: ~"




circumstance, as well as awardfug attorney fe~s when the wrongful act. Was "willful. n

nillalicious." "fraudulent. It or IIdeIiberate." I believe that Congress did not intend that

punitive damages should be awarded in addition to these specified enhancements. Because
      •                  .~           • • .,   ,,~   •• •   • J .,   •   ,'"   I




it is clear that the punitive damages upheld in the Manildra case related to the state claims

and not the Lanham Act claims, plaintiff has cited no CaB~ ~utbority in any federal

jUrisdiction authorizing an award of punitive damages und~r the Lanham Act.



          B. Defendant's profi1!:
          Before analyzing ca.aes on disgorgement of profits whicb come primarily from other

federal circuits, a SiXth Circuit case needs to be analyzed and distinguished. The Sixth

Cittllit in \lYnn Oil Co. v.A~ri~(l/1:                      0/0)'. S~'Y.i~,! t;orp.~ 9~3 F.2i1 595 (6th Cil'.   1991)~   held
                                                                                                       •
that proof of actual confusion in the marketplace in. a trademark infringe:ment matter was not

necessary to justify a monetary award, includ.ing an award of the defendant"s profits.                               ~nn

Oil was brought unc:ler both 15 U.S, C. § 1114 (intentional trademark infringement) ~d §

112S(a) (unfair competition in 'Using plaintiffs registered mark).                                 ~nn     Oil relies on

M~hQWaka       Rubber &: Woolen Mfg. Co. v. S.S. Kresge                            Co.~   316 U.S, 203 (1942). for the

holding that a plaintiff in a trademark. ease Wl'l,S entitlfiho-teco'Y'er-prof1ts-~v4!n-though~there_ _ _ _~

was no evidence that particular p1.ltchasers Were actually deceived into believing tbat the

[goodsJ sold b:y the [infringer) were, manufactured Py the [mark's owner]." 316 U.S. at 204.

The Sixth Circuit also cites RoiJ.l() v. Russ Bertie & Ca .• 886 F.2d 931. 941 (7th Cit.                            1989)~

cert. denied, 493 U.S. 1075 (1990). in holding that with respect to § 35(a) damages;

          The Lanham Act specifically provides for the awarding of profits in the
          discretion of the judge subject only to the principles of equity.... liThe trial
          court"s priinUY fUnction i$ to make violations of the Lanhan1 Act unprofitable

                                                                          11
                        II....)                                  '-
                                                                 (
                                                                 "
                                                                         .'.
                        I ..                                     f,.,.



       to the infringing party. n N"Other than general equilBble consiclerations~ thete
       is no express requirement that the parties be in direct competition or that the::
       jnfrl~er wilfully inftmge the trade dress to justify an award of profits, •.•
       Profits are award.ed und~r different rationales including unjust em:ichment,
     . detenenceJ, and cotrlP~at:!q:Q. •. , ........ .

943 F.2d at 606-607 (citations omitted).

       In Mishawaka Mfg. CO. r Justice Frankfurter was dealing with a clear trademark
infringOnlent, foi' which the Trademark Act entitled the complainant "to recover. in addition

to the profits to be accounted fol' by the defendant. the damages the complainant has

sustained. thereby. , ." [d. at 205. The Court noted th.at:

       Infringement and damage having been found, the Act requires the trad.t~maxk
       owner to prove only the sales of articles bearing the infringing mark.
       Although the award of profits is designed to make the plalntiff whole for l(lsses
       whi~ the infringer has caused by taking what did not belong to him. Congress
       did not put upon the· despoiled the burden-as o~I1 as not impossible to
       susrain~~Qf showing that but for the defendant~& llnlawful use of the mark,
       particular customers would have purchased the plaintiffs goods.
Id. at 206.

       Similar to the c\Jttent Act. the statute in 1942 provided 1I[i]n a assessing profits, the

plaintiff shall be required tQ prove the defendant's sales only: defend.ant must prove all

elements of costs which are claimed. II     [The cllrrent Act states "elem<mts of costs or



       In a footnote; the Supreme Court deserves1hat Congress changed the b'Utdens of proof

when it enacted the"   damages provision' of ·section 19    in the 1905 Act that dealt with

"proceedings in equity ngain~t the infringer of .a registered trade-mark." It notes that~

       II N" Under existing rules it is necessary for the complainant to prove sales and
       costs with entire and absolllte accuracy" The only persoDs having knowledge
       of the cost of tnaldng dle sales are t::lle 4efendant or SOUle one in bis employ.
       It has s~emed, therefore. only fair and ju~t that if the complainant proves the
       sales) the defendant should be requited to produoe evidence of the expenses

                                              12
       be was put to in making such sales as an offset against the sa.les proven by the
       complainant. ff

316 U.S. at 206 n.1 (quoting Sen. Rep. No. 3278, 58th Cong.~ 3d Sess., p. 10; fl. Rep.
                                        ,         .   ~    . -         I..   •   "".   t
                                                                                                          NQ.
3145, 58th Cong., 3d Ses~ .• p.9). If the defendant "poacher" of the mark could prove that

the $~les made by defendant's company were based on factors other than the "good$ bearing

the infringing ma.rk," the Sllpreme Court continued                                        j




       The plaintiff of course is not entitled to profits demonstrably not attributable
       to the unlawful use of his mark. . , . The 'burden is the infringer's to prove
       that hi~ infringement had no cash value in sales made hy him. If he does not
       do SO~ the profits made on sales of goods bearing the infringing mark prope:dy
       belong to 1be owner of the U'lark .... There may well be a windfall to tb.e trade-
       mark owner where it is illlPossible b) isolate lhe profits which are attributable
       t(J the U$e of t:b.¢ infringing mark. But to holt! otherwise would give the
       windfall to the 'Wl'ong4oer. In the absence of his pro'Ving the conrrary 1 it
       promotes honesty and. comports with .experience ro assume that the wrongd.oer
       who makes profits from the sales of goods bearing a mark belonging to
       another was enabled to do so because he: was dra.wing upon the good will
       generated by that .mark.

316 U.S. at 206-207 (citations omitted). The purpose of tbi$ damage provision of the

Trademark Act of 1905 was "to recover profits that came to the respondent through its

infringement and that in good conscience belong to the petitioner." Id, at 207.

       ThlJS. it is clear mat the Supreme Court in thif; case interprets the T:rademark Act as

awarding profits only In equitable COnlpensation for-lnst-sales-whel'e-illfcingement-and _ _ _ __
                                                                                       .....

damage have alreadY been found. In cases involving m]srepresentations instead of ttadelIlal'k
                            •   "   ~       • I       .,   •   •   ,




infringements ~ it is often less clear that the defendlll\t misappropriated something rightfully

belonging   to the plaintiff. It is fot this reason that the cutrent Lf.Ulham Act requires the
plaintiff to prove ~ctual   d~:trulges                before an award of profits can be made under § 3S(a) for

unfair competition caused by misrepresentation. The type of damages that equitY anticipates

ate loss of sales to the defeMant or sales made by plaintiff' at a lower price due to the

                                                                                  13
                            1'"--:)                                                                 ","""1 \
                           I "~                                                                     \.
                                                                                                         ,'I


misrepresentations of the defendant. Where plaintiff can prove no such lost sales or lO!1t

profits~   there is no ba.sis in eql.'dty for awarding ptain'dff the defendant's profits .
                                 •    '.    ,,, .... , J             """        t   •




           The core principles of eq~ity are to right wrongs for which the law does not have an

adequ!\te remedy. The use of a defendant)s profits as a sutrogate for proving plaintiffs

actual damages due to lost sales is a remedy grounded in thj,,; principle of equity. Yet. there

is no equitable principle that would warrant an award of profits Where the plaintiff calUlot

shoW: (1) that defendant gained any adcUtional sales due to iTS mi.steptesentatiollS~ or (2) that

plaintiff lost any saleji;, or (3) that plaintiff was forced to ~ell its prOduct at a lower ptice. 6

WYnn Oil, like Mishawaka. involved intentional infringement of a ptotected mark. and was
not a misrepresentation case. It was in the context of a clear trademark Violation that the
                                      '.   •. . . . "   I.       •   "   •••   '.




Sixth Circuit held that an ~ward of profits could be appropriate eVen where proof was lacking

that the defendant~s acts caused actual confusion in the marketplace. The Lanham Act still

is stricter in cases involving intentional infringement of register~d trademarks than it is in

commercial misrepresentation cases.7

           COllgl'ess in § 35(a) of the           Act~           15 U.S.C, § 1117(a). makes clear that an award of

damages for any violation of 1125(a) shall be "subject to the principles of equity. II Later.

When allOWing the conrCto provide-enbancements-for-a,Gtual-aa:rnageS-OI'-prDfits,_Congre=ss'--_ _ __

_ _ _       ~   _ _ _ _ _ _ ._             " ••••••          ,   ,.,'    •••   0.




      liThe only area of law in which equity allocates profits from a defendant to a plaintiff in the
absence of a shOWing of acillal ham to the plaintiff is where there is a special relationship, such as
a fiduciary relationship. In the present case. 'We are qeqlmg with competitors who have no special
l'elation&hip and thlls no .sneb. special prot.!!cticms for the plaintiff operating in a competitive market.
    7W1ille § 35(a) allows discretionary enhancetnent up to thre~ times "actual damages" for
misreprest;m.ation cas~s. these t'iamages must "constitute compensation and not a penalty. 11 Yet. §
3S(b) :manda~s three times "prof.us or drunages- pl'llS attorney's fees for intentional registe::red
1rad~k        inftiilgements unless the defendant can show                              bextenu~f;ing cir~'Q.:(llBtances."   15 U.S.C. §
11l7(b). Section 35(b) also allows for prejudgment iu~rest from filing of the suit and makes no
discla.iIoer Qf -penalty," as does § 3S(a).
                                                                          14
 dh'ects the district court to keep in mind that the aware! is to liconsdtute compensation and

, not a penalt,sr. ~ This again    s.ugge~ts   I   a, Oo,~g~e~sjonal   int~I).t   for SQme nexus between the
 damage awarQ. and actUal 4emonstrated harm to the plaintiff. Once the actual damage by lost

 profits or sales has been ~ccomplished.~ rl'le courts may relax. the standard somewhat as to

 precise measurement of the compensation to be paid,

        Most of the profit disgorgement cases where qamages are based on defendants' sales

 or profit are infringement cases, like W,ynn Oil and Mishawaka Rubber, where defendant

 benefits directly from its wrongful conduct. See, e.g.• Sun Products Group. Inc. v. B .& E

 Sales Co., 700 F. Snpp, 366 (B.D. Mich. 1988): wYnn Oil v. American Way, 943 F,2d 595
 (6th Cit. 1991); Roulo      'V.   Russ Be/fee .. &' .co .• 886 F.2d 43 (7th CiT. 1989); Playboy

 EnterpTise~,   Inc. 'v. Baccarat Clothing Co" Inc. 692 F.2d 1272 (9th Cir. 1982).
                                                              t
                                                                                          ,   .
         George Basch Co., Inc:. v. Blue Coral, Inc .•                 ~68   F.2d 1532 (2nd Cit. 1992).    a
 Lanham Act trade dress case1 shows that various factors and equ.itable principles must be

 consid<:1:'ed before aWarding defendanfs profits. In addition to willful deception. 1htJ):re

 gem~:rally   must be a showing that defend.ant b~nefited from its unlawful conduct. In George

 B(lJch. the Second Circuit noted that when a disgorgement of profits is appropriate, Congress

 shiftecl the burden to defenrlant to show its         expenses-orthaHts-profits~did-noE-result.-fromit,o;Ls_ _ __

 wrongdoing. and added an' Import.ant llri1itatiori:              '
         Of course. this "does not stand for the proposition that an ftccounting will be
         ordered merely because there has been an infringement" [Champion Spark
         Plug Co. v. Stm(iers. '331 U.S. 125. 131, 67 S.Ct. U36 t 1139 (1947)].
         Ra1:her~  in order to awa:rd profits there must first be w" basis for 'finding
         damage." Id.~· [Mishaw(Jko.llubber &: Woolen Mfg. Co. v. B.S. Kresge Co.,
         316 U.S. 203, 206 (1942)]. While a plaintiff who se~ the 4efendant"s profits
         lilay be relieved of certain evIdentiary requirementa otherwise catried by those
         trying to prove damages. a plaintiff mUlJt nevettheless establish its general
         right to damages before defendant's profits are reco'llerdble.

                                                         15
968 F .2d at 1539. The Court eJaborated further that generally disgorgement of profits is Dot

apprQpriate if there is no proof of some diversion of sales from the plaintiff to the
                               -   "",' 'I   . • ,'   •• , ' ,   •



wrongdoer.

      Having stated that a finding of willful 4eceptiveness is necessar.y in order to
      warrant an accounting for profits. we note that it may not be· sufficient....
      While under oertain oircumstances., the egregiousness of the fraud. may, of its
      own, justify an accounting. . . . generally w there are other factor~ to be
      considered. Among these are flt).ch fantiliar concems as: (1) the degree of
      certainty that the ilefendant benefited from the unlawful conduct; (2)
      availability and adequacy of other. remedies; (3) the role of a particular
      defendant ~ effec1llating the infringement; (4) plaintiff's laches: and (5)
      plaintiffs unclean hands. See genetal1:y Restatement. § 37(2) at cmt. f & cases
      cited in the reporter's nOtes. The distrlct court's discretion lies in assessing
      the relative importance of these factors and determining whether. on the
      wbole, the equities Weigh in favor of an accounting. As the Lanham Act
      d:ictat~~ every award is "subject to equitable principles" and sho"ijld be
      determined "according u;)ilie circUmstances· ofth~ case," 15 U.S.C. § 1117.

              In light of thQ foregoing legal analysis. the distriot court'8 error
       becomes apparent. To begin With, the district juclge concluded that an
       accounting was warranr.ed in order to prevent Blue Coral's unjust enrichment.
       However7 as stated earlier. Basch. produced no evidence to suggest that the
       infringement caused any sale$ dlveraion, As a result. there is nothi.n.g to
       sugge$t that Blue Coral's EVER BRITE sales were at Basch's expense. It
       follows th.at "an accounting based on u:qjust emlchment i~ precluded." Burndy
       Corp .• 748 F.2d at 77'3.

96811.24, at 154041 (various citations omitted).

       The case cited in George Basch, Bui1ldj Corp. v. Teledyne-Jndustries,-mt;-;-748-F!Jd.-----

767 (2d Cir. 1984), is also ins1luc.t.i'V~. In Qumdy, whi~Jnvolved a false adVertising/unfair

competition case }lndor the Lanham Act. the Second Circuit stAted that

       the decision as to whether a defendant will be ordered to account for its profits
       under § 1117 rests in the broad discretion of the district court, guided by
       prit'tciples of equitY ..•. Nonnally ail accounting will be ordered only if the
       "defenclant is utijustly enriched, if the plaintiff $ustained damages from the
       infringement, or if an accounting is necessary to deter a willful infringer from
       doibg so again." ... None of these conditions exist here. Unj~st enrichment
       warranting an accounting exists When the defendant"s sales "were attributable

                                                      16
                                                                                r'
                                                                               (.




          to its infringing use" ofplaintlfr~ trademark. id.; [W.E.Bossett Co, v. Re'Vlotl,
          Inc.) 435 P,2d 656~ 664 (2nd Cir. 1970)]. and the bUfclen of proving this
        . connection i$ qn the. plai.J;1~ff'J' . 8.ee. r;u~$ifl(J,rtsl 1f!C. Y. RobotwCoupe Int't.
          Corp .• 580 F.Supp. 6341 640 (S.D.N.Y.1984); ....

748 F.2d at 772 (various citations omitted).

         The Second Circuit then outlines the disgorgement standards traditionally used by "a

coUX't of equit:}'. 11

         The standards for orderlng an accounting. howevef1 would not thereby be
         relaxed. Such relief is rarely granted and appears to have been lin'lited to
         situations in which the defendanfs profits rep,resent uqjust emichment derived,
         from diversion of business that clearly would otherwise have gone to the
         plaintiff. such as in instances where the defendant palmed off its goods as
         made by the plaintiff Dr othetwise infringed the plaintiff Ii rights ..••

Ibid,                                    -..   .'   t,   •   "   • .   ~   .




         As noted in subsection lV.A, p.10, above in the di$Cussion of punitive damages, the

lower court in Honeywell held that in the absence of

         a.t least some evidence of harm arising from defondantt s violation, a court may
         not award a money judgment based on profits or damages. Were the seetion
         to be read differently there WOUld' be a great qlUlger that money judgments
         would be, in essence, punishments; but it iii apparent frorn. the section"s
         conclusion that money judgments "shall cOMtitute compensatio:/l and not a
         penalty _" . . . Unless the C()urt is able to find that aetnal hann occlll'red~ the
         exercise of discretion--in which eq'1dtable factors would be considered~-is
         simply not auiliol'iZed.

Honeywell. supra, 358 P. Supp. at 1234.

          In a case similar   to. the   present one. Cuisi11lJ11S, Inc. v. Rebot-Coupe Intern, Ct>rp.•

580 F. Supp. 634, 641 (S.D.N.Y. 1984). the court nonetheless did allow compensation for

tlreparativ~    advertising" a$ Ilrecoverable as Qamages under the federal and pendent state law

claims." The court went on to note:

          By "teparative e.dv~Uising" I mean Cwsmarti ads whicli were ptompted by
          and specificaUy aqdressecl the t\(i'o misleading llC~I ads. The cost of s'Qch ads,

                                                                 17
                         f.:'\
                         L· ·1
                            ' I U ."




       if any, must be relatively small. It would not justify a full accounting of 'RC-
       1'13 profits.
                                       •   '0", • -   ~   .     •, ,   J'       _.   _    r




Id. at 640.

       In the fulse advertising cases where disgorgement of defendant's profits was

considered, the facts showed that defendant benefited from the false claims at plaintiff's

expense. While disgorgement waS not always allowed. there was at least an argument in

equity that disgorgement should be considered.

       In U~Haul Imemntional v. Jartran. lnc' t 793 F.2d 1034 (9th Cir. 1986), the Ninth

Circuit upheld a $40 million award based on a § 35(a) lloubling of the 4amage,g awarded.

These damages were based on U-Haurs cost of cOlTective advertisement and Jartran's

"profitsll measured by the $6 million it spent on the lnisleaoing advertisements. 793 F.2d

at 1037 and 1042. lartran claimed that it faDed to "tum Ii profit d,uring the period Qf the

a4vertising. Ibid, liThe district court assumed that the financial benefit was at least equal

to the [4efenaant's] advertising e~lJenditure." Ibid. This approach                               was upheld on appeal.
       While    U~Haul   is a false advertising claim ~nder the Lanham Act and does                               aw~d

pla.intiffth~ defendant's    impul:¢d "profits, II the case is clearly distinguishable from the present

case. During the period of Jartran's intense advertising campaign that Was found to violate

the Lanham Act, its" "revenu.es .in..rm;a~e4 fr9m..$7 :tnlllioJJ. in 1979 to $80 million in 1980.

[Whill;3) revenues from the l1pHaul System d~cllned for the first time in its history from $395

million to $378 miUion." /d. at 1036. Balance Dynamics in the present case can show no

such decline in sales or relative shift in revenues to Schmitt Industries.

        AL'i'O Pet Foods, Inc. v. Raliton Purina CD" 913 F.2d 958 (D,C. Cir, 1990). was
also a false advertising case 'Under the Lanham Act. After upholding the fintling of liability


                                                                                18

                                                          ,.   "'.          .
                                                                            ~   ,    '.       '
of Ralst(m. the D.C. Circ.uit reversed the § 35(a) award. to ALPO of $10.4 damages. The

D.C. Circuit reversed the ~w~d ~f 4~fenda~;~'profits for a failure to show '\villfo.lness" or

"bad faith. 11    The D.C. Circuit also qnestioned the U-Ilaul case's llse of                                    d~fendant's

advertising bl.ldget as a meaSllte of its "profits" upon which the D.C, disll'ict court had based

its award of damages. ld. at 968 n 9. While the circuit court suggests that an award of

profits in ~ false advertising Lanham Act case might be appropriate if "willfulness 11 or "bad

faith" were shown. the facts of MPO again invQlved equitable principles justifying an award

of profits. The district court had found specifically that the RaIston·s fabe advertising

res'lllted in "ALPO Puppy Food lost sales to [Ralston"s] Puppy Chow." 913 F.2d at 963.

Again. in the present case there is no showing that Balance Dynamics lost $ales to defendant

Schmitt Industries. Thus. there is nQ equitable basis for an award of Schmitt's ptofits.

         The D.C. Circuit in ALPO held also that in the ab~ence of tWowing willfulness or bad

faith,   me Jllere pUIpCses of deterrence to prevent an unjust enricbinent could not alone justify
such an award of defendant's profits. 'the appellate court remanded the case                                    [0   the district

court to determine what !tactual damages ALFO has proved," "bearing in mind the

requitement that any amount aw(.U'ded have suppor~ m the record . • . ." Id. at 969. After

setting out the factors that cotdd be cOliSidere/l in mea$urlng-gamages;-the-Geurt-eGJlsluded---__
                        ••   ' .        w    ...   '..       •       •   ~      " ' "      •        I       •




that:

          At the same time. the court IU'List ensure that the record adequately supports
          all item~ of damages claimed and establishes a causal link between the
          damages and the defendant's conduot, lest the award become specUlative or
          violate section 35(a)'s prohibition against punishment.

Id. at 969 (footnote omitwd).




                                                                                           19
                               •   .,   ~   ..... .,     •       .       ,I..   ', •• '   ".   .I       ,
                                                                                                ,"
                                                                                              (.,t.,'.
                                                                                               ....,'..".




       BASF Corp. v. Old World Trading Co .• Inc•• 41 F.3d 1081 (7th Cit. 1994). was

another false advertising Lanham. Act, case in, .which the district coun"s finding of liability

was upheld.     The circuit court alao upheld. the lower coun's denial of an aw.ard of

defenL'lant's profits or an enhancement of plaintiffs dam.ages because it fou.nd the $4.2

million ltL compensatory damages awarded was significant and. s'Ufficient to make a

Qisgorgement of defendant's profits unneces/ltlI)'. 41 F.3d at 1096. Again~ in BASF the

circuit court upheld the Q.istrict eourt·s "finding that BASF would have made some. but not

all, of Old World"s salel!l but for Old Wor1ers misrepresentations, II 41 F.3d at 1092. Rete

there are no similar proofs that Balance Dynamics would have made some of the Schmitt

sales of bala1lcers.           "        '"   • ~   ••   ~.   -'    ,-   ••       # •




       The facts of the present case do not involve an intentional appropriation of the

plaintiffs trademark. It is based upon                       misrepresen~tions             and certain half-truths that could

have harmful implications for the plaintiff. In the ~bsence of some showing by the plaintiff

of lost sales Of profits? ot of additional sales by tilt; defendant because of these

misreprescnt.atlons t I find no principles of eqmty that would warrant an a.ward. of the

defenclant's profits. In the present case, pl~tiff's sales inoreased during the relevant period.

rome aosence orpr-Cforof-lost-sales-o:t-lost-prQfits.Ba1anGe--Pyna:tnics~compensation_sh....,o"'-!!ul".,d"'--_ _ __
be liUrlted to tile cost of loss   "control activities.' "

y.   CONCJ,.USION

        For the above-stated reasons. plak!tiff's lIlbtion in limine for pu.pitive damages and




                                                                        20

                               ...    ..,. " I '    ~.       •    ••••       •         •
                                     ,."."
                                     t       ..}
...   .
          disgorgeIl1ent of defendant's profits is DENIED.

                   SO ORDERSD ....                 ..      • ... ~.    I·,      ..• ,. ."   . '.




          Dated:
          Ann Atbor, MichigaIl.




                                                       .   .- .. .
                                                               ~      '}.   .   ,   ......... .




                                                                                            21

                                                   "       ........   -I        •••••    ,'Al',    .
TAB 6
                             012408.txt
                                                                             1

1                               REPORTER'S RECORD
2                         VOLUME 8 OF 15 VOLUMES
3                   TRIAL COURT CAUSE NO. 017-205066-04
4                COURT OF APPEALS CAUSE NO. 02-08-00144-CV
 5   BRAND FX BODY COMPANY                )IN THE 17TH JUDICIAL
          plaintiff(s),                   )
6                                         )
     VS.                                  ) DISTRICT COURT OF
 7                                        )
     ASTORIA INDUSTRIES OF IOWA,          )
 8   INC.,                                )
           Defendant(s).                  ) TARRANT COUNTY, TEXAS
 9
10
11
12
13         *******************************************************
14            MOTION FOR JUDGEMENT NOTWITHSTANDING THE VERDICT,
15                  MOTION TO DISREGARD THE JURY VERDICT
16         *******************************************************
17
18
19
20         BE IT REMEMBERED, that on the 24th day of January, 2008, the
21   above-entitled and numbered cause came on to be heard for hearing
22   in the said court, HONORABLE FRED W. DAVIS, Judge presiding, of
23   the 17th Judicial District Court of Tarrant county, Texas, at
24   which time the following proceedings were had.       proceedings
25   reported by machine shorthand.       Transcript produced by computer.
                                                                             2

 1                                 APPEARANCES
 2                               VOLUME 8 OF 15
 3   MR. DAVID E. KELTNER - SBOT NO. 11249500
     -AND-
                            Page 1
                               012408.txt
    4    MR. HUGH G~ CONNOR, II - SBOT NO. 00787272
         -AND-
     5   MR. MICHAEL D. ANDERSON - SBOT NO. 24031699
         -AND-
    6    MR. BRIAN ADAM SHEGUIT - SBOT NO. 24060598
         KELLY HART & HALLMAN, L.L.P.
     7   201 Main street, suite 2500
         Fort worth, Texas 76102
     8   Telephone: (817) 332-2500
               Attorney for the plaintiff(s),
     9
         MR. MALCOLM G. RENWICK - SBOT NO. 08649200
    10   RENWICK & ASSOCIATES
         4100 International parkway, Suite 1155
    11   carrollton, Texas 75007
         Telephone: (972) 820-9595
    12   -AND-
         MR. MICHAEL W. MINTON - SBOT NO. 14194550
    13   THE LAW OFFICES OF MICHAEL W.MINTON, P.L.L.C.
         4425 West Airport Freeway, Suite 300
    14   Irving, Texas 75062
         Telephone: (972) 659-0025
    15         Attorney for the Defendant(s)
    16
    17
    18
    19
    20
    21
    22
    23
    24
    25
?
                                                                      3


     1                      CHRONOLOGICAL INDEX, VOLUME 8
     2                               VOLUME 8 OF 15
     3            MOTION FOR JUDGEMENT NOTWITHSTANDING THE VERDICT,
                        MOTION TO DISREGARD THE JURY VERDICT
     4
         JANUARY 24, 2008                             page    vol.
     5   capt; on ............................ .       1       8
         Appearances ........................ .        2       8
     6   chronological Index ................ .        3       8
         Argument by Mr. Keltner ............ .        4       8
     7   Argument by Mr. Minton ............. .       17       8
         Further argument by Mr. Keltner .... .       23       8
     8   Further argument by Mr. Minton ...... .      25       8
         Cou rt' s Rul i ng ..................... .   32       8
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               9    End of Proceedings for the day ..... .             32         8
                    The Reporter's certificate ......... .             33         8
              10
              11
              12
              13
               14
               15
               16
               17
               18
               19
               20
               21
               22
               23
               24
               25
                                                                                              4

                1                                PRO C E E DIN G S
                2                            Thursday, January 24, 2008
                3                      *   * ********** *** ***
--------------~4~---------------------------I~EAR~~G_ON-----------------------------------

                5               MOTION FOR JUDGEMENT NOTWITHSTANDING THE VERDICT,
                6                      MOTION TO DISREGARD THE JURY VERDICT
                7                       THE COURT:        This is cause No. 17-205066-04, Brand
                8    FX versus Astoria, and we're here on a Motion for Judgment
                9    Notwithstanding the verdict and a Motion to Disregard the Jury
               10    verdict.
               11                          wayne, give this to the plaintiff.
               12                          THE BAILIFF:     TO who?
               13                          THE COURT:     To Hugh.
                                                  Page 3
                                               012408.txt
                 14                       MR. CONNOR: Thank you.
                  15                      THE COURT:     who is here representing the
                  16    plaintiff, FX?
                  17                      MR. KELTNER:      Your Honor, David Keltner, and we
                  18    also have Hugh Connor and Michael Anderson and Brian sheguit.
                  19                      THE COURT:     And who is here representing Astoria?
                  20                      MR. RENWICK:      Your Honor, Malcolm Renwick and
                  21    Michael Minton on behalf of the defendant.
                  22                      THE COURT:     shoot.
                  23                      MR. KELTNER:      Thank you, Your Honor.
                  24                      Your Honor, first off, one housekeeping chore, we
                  25    are not quite ready for the Motion of Entry of Judgement, because
                                                                                                  5

                   1     I understand there is an attorneys' fees issue that will be
                   2     subsequently submitted to you.       What we're talking about today is
                   3     the court's formulation of the judgment from the jury's verdict.
                   4                      THE COURT:     Yeah, I see that.   I apologize.
                   5                      MR. KELTNER:      What is misleading was the name of
                   6     our document.   It's our fault, not yours.      The issue of what
                   7    we're about to ask you to do today is unique and couldn't be done
                   8     in some cases, but because of the uniqueness of the Lanham Act,
~~~~~~~-9--w9-b€--l-=i-@-v-e-i-t-Gan-b9-don@....-w.e-a-f"'.9-go~-ng---tQ-a-s-k-Y-O.u--.:tQ-dis-~e.ga-~d~~~~~-

                  10     the jury's answer of zero to Question 7 and put in the answer
                  11     that the undisputed evidence demonstrates.       And we're going to go
                  12     over that with you in good detail, but we can tell you that we
                  13     can do that where we couldn't do that in a car wreck case maybe.
                  14     In this case, I think, actually, we could given the evidence, but
                  15     in the Lanham Act with the unique burdens of proof, some of which
                  16     are on the defendant, we think it is appropriate to do.        It's on
                  17     that basis that we are going to ask you to look at this.        I have
                  18     a slide presentation to run through for you, but in the end, it
                                                   page 4
                                            012408.txt
                 19    comes down to this basis.
                 20                      The defendant -- we have the burden to prove
                 21     gross sales under the act, and then they have a burden to prove
                 22     deductions of any sort that the competition didn't affect one
                 23     particular sale or group of sales, and also to prove any costs.
                 24    That's clear under the act, as I'll show you.
                 25                      We believe that we put on evidence of sales.
                                                                                             6

                  1     They did not put on any evidence of deductions and, as a result,
                  2     the jury could reach only one answer.
                  3                      Additionally, as you're going to see under the
                  4     Lanham Act, Your Honor, the jury's decision is advisory and the
                  5     courts have routinely held that and said that it's something that
                  6     the court can look at in help formulating an answer, but it's the
                  7     court's job to do that, as well, because it's an equitable
                  8     remedy.   And, again, that's not usual.    That's not the way we
                  9     generally do things, but the Lanham Act is a unique situation.
                 10                      If you will, I'm going to run through a little
                 11     bit of what we think forms the basis of the tools you need to
                 12     enter the judgment.    The first, Your Honor, is Question 6, which
                 13     is the -- oops, wrong one, I'm sorry.     Question 6, which is the
~------~14--l.:i-ab.:i-l-i-t-y-i-£-Sue~-::r:he..t:'-e-i--S-I1o-complail'lt----S0-f-a-r'-f~om-tbe----------

                  15    defendants on this issue whatsoever.      This sets up what the
                  16    liability under the Lanham Act is.     The jury answered yes to
                  17    this, and they don't complain about that at this point, nor do we
                  18    think there is any basis with which they could.      This is the
                  19    submission, Your Honor, that is typically used in these kinds of
                  20    cases.
                  21                      Now, the next one we have is the Lanham Act and,
                  22    again, this is what gives rise to the liability and that's what
                  23    Question 6 submitted and fairly submitted right up front under
                                                 page 5
                                        012408.txt
        24       Item B.    This is where -- this is something that's important to
        25       know.     If you look at our charge, and our charge is appended
                                                                                              7

         1       to -- to what we submitted to you in a motion.           The truth of the
         2       matter is, all of those damages are cumulative.            It's important
         3       to notice that because in Question 8, we did get some other
         4       damages, 52,000-some-odd, but these are cumulative damages as the
         5       Lanham Act says.     Again, defendant's don't disagree with this,
         6       nor can they under the language of the act.
         7                          The issue where we have problems with is
         8       Question 7, and this is what we're asking you to address.
         9       Question 7, let me tell you, the defendant's do have trouble with
        10       and I'm going to address it and tell you why I think they are
        11       wrong and then also why it wouldn't make any difference anyway.
        12                          This is the submission of lost profits, damages,
        13       which the Lanham Act calls for.        And as you can see, we
        14       instructed the jury that the plaintiff had the burden to prove,
        15       in the third paragraph, the preponderance of evidence of gross
        16       sales of utility bodies, which were at issue.           And in the fourth
        17       paragraph, place the burden on Astoria, the defendant, to prove
        18       any deductions.
--------19                          Al1d-t-he-i-mpO-r:'-t-a-llt-t-bir:lg-,-L-t-b-it:1k,-i-s-this-.-w.e-------
         20      define costs or elements of deductions as the amounts Astoria
         21      proves contributed to Astoria's revenues, which are not
         22      attributable to the false advertising and any costs, as well.
         23      And that's what the cases say you do.          Again, as you just saw,
         24      that's what the Lanham Act says you do, and let's look at the
         25      act.
                                                                                              8

          1                         NOW,   this is not me.     This;s the act, and this
             2   is a direct quote from 117. In assessing profits, the plaintiff
                                        page 6
                                                012408.txt
                   3    shall be required to prove defendant's sales only.         And that's,
                   4    of course, what Question 7 did.       And interestingly, not like
                   5     anything we have from the Texas Legislature, it says the
                   6     defendant must prove all elements of costs or deductions claimed.
                   7     Now, that's unique, and it's a burden-shifting issue.
                   8                       Now, that's where we think we're going to be able
                   9     to demonstrate to you that we put on evidence of profits, it came
                  10     from them, it's $4.2 million.       The burden shifts to them to prove
                  11     any deductions for things they don't think were caused by false
                  12     advertising.    After we got the findings in 6 that there was, and
                  13     any cost of those goods to be able to calculate profits.          They
                  14     don't dispute the 4.2 million in their pleadings to you.          They
                  15     also don't dispute that they didn't put on any evidence of that.
                  16     They have another type of argument, and we're going to go over in
                  17     detail about that, which they say is in Question 7, that the jury
                  18     should have been instructed that on a sale-by-sale basis, that
                  19     the plaintiff had to prove that that sale would not have
                  20     occurred, but for the false advertising.
                  21                       And I'm going to demonstrate to you that the
                  22     cases in this area say that's wrong, and I'm going to use the
                  23     very cases that Mr. Minton has cited to you in his          and
--------~2-4--appal1dad----t.Q-h-i-s-~espol1se-al1d---Some-O-tbel"-Cases_,-i-I'-1cludil1g-a----Ul'-1i:ted----~

                  25     States supreme court case interpreting this -- these lines of
                                                                                                  9

                    1    statutes.
                    2                       But nonetheless, that's what their argument is.
                    3    They say    you've got to prove that the plaintiff's initial burden
                    4    is to prove that the sale would -- each sale, sale by sale, would
                    5    not have occurred, but for the false advertising.        Does 117 say
                    6    that?   Does 1117 say that?     It doesn't.   It doesn't come close to
                    7    saying anything like that, and I think that is an important
                                                page 7
                             012408.txt
8    issue.
9                    The other interesting thing is, unlike most
10   statutes this has, 1117 has directions to the Court about how to
11   calculate the damage.     And, again, they're unique.   They are not
12   like much we have in Texas, it was once -- it was sort of like
13   when once the DTPA was, but is no longer.
14                   The first one is:     The Court shall assess such
15   profits or damages or cause the same to be assessed under its
16   directions.   Courts say, as you can imagine, this means either
17   the court can do it, or you can submit it to a jury to do it.
18                   The second issue -- and, again, this is all
19   direct from the statute -- if the court should find the amount of
20   recovery based on profits is either inadequate or excessive
21   and by the way, Your Honor, this had been even submitted to the
22   jury and the jury comes back and you think they are inadequate or
23   you think they are too much, the court may, in its discretion,
24   enter judgment for such sum as the courts would find to be just.
25   In other words, it's an equitable remedy, and you're going to see
                                                                         10

 1   that the courts say that and say that the jury's opinion or the
 2   jury's decision is advisory.
 3                    Also -- and, again, a quote from the statute,
 4   "You may enter judgment according to the circumstances of the
 5   case on any sum above the amount found as actual damages not
 6   exceeding three times such amount".     NOW,   what Mr. Minton says in
 7   his response -- and he's right in one respect -- is this can't be
 8   a punitive amount, and that's right, it cannot.       It has to be an
 9   actual damage of some sort.     But as we saw under 1117 what the
10   actual damage is these sales manage the deductions that the
11   defendant proves.
12                    NOW,   let's see how this works in progress.    This
                               Page 8
                             012408.txt
13   is a case that was over in Dallas in Judge solis' court applying
14   this law in a Texas context.        The first thing that he holds --
15   and by the way, this case is held up and is cited frequently.               An
16   accounting of profits is historically an equitable remedy.            The
17   Lanham Act provides an accounting of the infringer's profits as a
18   remedy, subject to the principles of equity.
19                      And, finally, what they don't really take on, but
20   they seem to -- at the basis of their argument, they don't say it
21   directly, but they seem to say, well, no, the jury's opinion is
22   the jury's opinion.     Not true.     In federal court and in courts
23   around the country that applied the Lanham Act, it is clear that
24   the court treats the jury verdict as advisory, and then does an
25   equitable adjustment.
                                                                                  11

 1                      One other thing, and it is the insidious part of
 2   their response, Judge.     The other thing they say is, leave it
 3   alone, let the court of Appeals do it.         The last line they say,
 4   If you want this to happen -- as you can see, Mr. Minton nods and
 5   agrees -- let the court of Appeals do it.         what he didn't tell
 6   you is the court of Appeals can't do it, because the court of
 7   Appeals is not a court of equity that can balance those factors.
 8   only a fact finder like you can do that.         So his idea of passing
 9   it to the court of Appeals means we lose, because we have no
10   chance to get that done in the court of Appeals.           We only have a
11   chance to get that done at the trial court and the cases are
12   clear on that.
13                      I'd be interested, if he's going to say that's
14   not true, how the court of Appeals might do it, but          I   will tell
15   you when   I   look -- and just think, it's not in my best interest
16   to tell you this.      But it really --   I   don't think that the court
17   of Appeals can help us on that issue at all.          I   think the only
                            Page 9
                             012408.txt
18   help we get is with the trial court here.       That's certainly what
19   the act says.
20                      Now, that's what Ironclad says.    Ironclad is in
21   line with all of the cases nationwide on this.       Those are not the
22   cases they cite to you.     They cite some others, and I'm going to
23   go over those with you, so we can see what they say, because I
24   think they support us.     I'm sorry, here we go.    They cite Logan
25   versus Burgers Ozark country cured Hams.        This is a
                                                                             12

 1   honey-spiraled -- a honey-baked spiraled ham deal, where one guy
 2   said -- I think it was Logan, that says, I got the process,
 3   honey-baked, you stole it, and you can't advertise.         They reach a
 4   settlement, and things break out on their Lanham Act claims.
 5                      Now, the first issue is do you have to
 6   demonstrate a specific injury on a sale-by-sale basis?         And here
 7   is what that court says:     They say, No.    If you establish that
 8   there were literally false statements, as we believe we did, the
 9   idea that it did not affect their purchasing decision is
10   inconsequential.     rill admit to you that this is an issue on
11   liability, not so much on damages, but that's the way this act is
12   interpreted.    In other words -- and the way the act handles it
13   remember is we prove the gross sales, they have to go back and
14   prove, no, this wasn't a result of false advertising.         They've
15   not attempted to do that.     They claim that's our burden.      That's
16   where we disagree.     That's the big disagreement in the case.
17                      Logan goes on to say this:     unless there is some
18   proof that the plaintiff lost sales and profits or the that the
19   defendant gained them, the principles of equity do not warrant an
20   award of defendant's profits.        That's what Mike cites this for,
21   and he's correct to do that.     There has to be that showing, but
22   it's not on a sale-by-sale basis.        What the court is saying is
                            page 10
                            012408.txt
23   you've got to prove that there is some of that, some benefit to
24   the plaintiff or some detriment to the defendant, and that we've
25   proven.
                                                                           13

 1                      I've got to go through and look at his next case,
 2   as well, and then I'll tell you how I think we've proved those
 3   things.    Next case is Balance Dynamics corp that they cite, as
 4   well.     In that case, what they don't tell you is there was a
 5   stipulation in the record from the plaintiff that they didn't
 6   have any lost sales or lost profits.      We don't have that here.
 7   It was very difficult for them to say, Judge, y'all can go ahead
 8   and enter judgment for us for lost profits when we don't have
 9   any, but that's the basis of the court's opinion and that's what
10   it is based on.     And then what they say is they take on directly
11   what the defendant's point is in this case.        They say, Do you
12   have to show for every sale that it wouldn't have happened, but
13   for the false advertising?     NO, you show at least some damage in
14   the marketplace.     You don't have to do it on a sale-by-sale
15   basis, that's what this court holds.      That's what they hold, as
16   well.     I mean, it is -- this is absolutely clear.     These -- their
17   cases       this is as good as it gets for them.     This is what
18   they've cited you.     And we don't think it gets anywhere close to
19   where they need to be in that regard, and that's what the rule
20   is.
21                      The united States supreme court looked at this
22   and these lines of cases and Mishawaka         I think Mishawaka
23   Rubber Manufacturing company.       In that case -- this is not Lanham
24   Act, this is a pre curser to the Lanham Act case, but it's based
25   on the same theory.     And what they say is the burden is the
                                                                           14

                               page 11
                              012408.txt
    1    infringer's to prove that his infringement had no cash value of
    2    sales made by him.
    3                    And what it says is if you're trying to say that
    4    not all of the sales were impacted by the false advertising,
     5   defendant, that's your burden to show, because you're uniquely in
    6    the position to be able to do that.       And I can show you in a
     7   second that the facts in this case back that up.
    8                    And then the court said -- it addressed the very
    9    argument that the defendants make here.          And they say, well, no,
    10   it's the plaintiff's burden; otherwise, they'll be a windfall.
    11   Look what the supreme court says.       There may well be a windfall
    12   to the trademark owner in these situations, because it's
    13   impossible to isolate profits that are attributable to the
    14   infringing mark or in our case, false advertising.          But we do it
    15   anyway, because to hold otherwise would give the infringer or the
    16   false advertiser the benefit.       That's why the court does what
    17   they do in this case.
    18                    Now, other courts have addressed the issue the
    19   defendants raised to you.     Here is the argument:       Not all of our
    20   sales were related to Lanham Act violations, so not all of our
    21   profits ought to go to the plaintiff.        That's exactly what he
    22   argues here, exactly.     Now, that's the argument.       Here is the
    23   answer:   We reject it.    The burden of showing that not all of the
    24   profits should be awarded is more akin to the burden of showing
    25   the amount of costs to be deducted from the profits.
~
                                                                                 15

     1                    THE REPORTER:      slow down for me.
     2                    MR. KELTNER:       I'm sorry.    I'm terribly sorry.
     3                    The burden of showing that now all profits should
     4   be awarded is more akin to the burden of showing the amount of
     5   costs to be deducted from the profits, which the act places on
                                   Page 12
                                              012408.txt
                  6    the defendant.    It also says that that test proposed in that
                  7    case, which is what might Mike proposes here, violates the three
                  8    purposes of the Lanham Act.         And it forgets that the court has
                  9    the equitable power to issue the remedy.
                 10                      Here is what else they say -- and it's our case.
                 11    Here the plaintiff proved the amount of the defendant's sales.
                 12    We consider the defense of only a partial direct competition --
                 13    and what they were saying in that case, Your Honor, was this:
                 14    That all not all of the sales in the gross sales were related to
                 15    false advertising.         Same argument made here.   And what they say
                 16     is no    the defendant has the burden to demonstrate that and the
                 17     rational is clear on why.        You can't place that on the plaintiff,
                 18     because we have no way in which to do -- or meet that.
                 19                        NOW,    there are other cases, as well.   The burden
                 20     of proof is on the infringer, this is the Nutravida case out of
                 21     the southern District of Florida.        And by the way, if you'd run
                 22     Mike's cases in westlaw and shepardize them, you'd hit these
                 23     cases, that's where I found them.
                 24                        The Lanham Act squarely places the burden of
                 25     proof on the infringer to establish any deductions from gross
                                                                                                 16

---------l--sa~-€l_5-,-nO-t-j_u-st-GQ-s"t--S_,____deduG-t~-On-s-o-f-tJd-ng-s-nQt-l"e-1-a-ted~I-t~)-------

                  2     the infringer's burden to prove any proportion of its total
                   3    profits which may not have been due to the infringement.            Again,
                   4    it directly addresses the issue that they raised, and that is
                   5    what our case is.
                   6                       Your Honor, remember the evidence here.      I    wasn't
                   7    here and Hugh or Mike can talk more about it, but here is what I
                   8    understand the evidence is:        objective evidence of the amount of
                   9    gross sales on utility bodies was admitted, which is what our
                  10    burden is to do.     Their employees never testified to anything
                                                     page 13
                                              012408.txt
                  11     that should be a deduction from that.       Either saying that part
                  12     really wasn't related to the false advertising or here are costs
                  13     for the reduction of those goods, none of that testimony came in.
                  14     And under the act, as you can see, that was their burden to do.
                  15                        Now, Your Honor, this is an equitable issue.
                  16     This is not an all or nothing deal.       It doesn't have to be just
                  17     42 million [sic].     Mr. Minton in his paper says that we're asking
                  18     for strict liability for that.      We are not.    You don't have to
                  19     enter it for 4.2 million.      You can enter it for any item in
                  20     equity you think is fair.      You could look at other evidence, if
                  21     you wish, but you can do that.       It's not an all or nothing issue,
                  22     and these cases interestingly, mostly are not that issue.          So
                  23     he's wrong about that.
                  24                        The other thing that I think he's very wrong
                  25     about and I touched on this earlier, but it's the insidious part
                                                                                                  17

                   1     of the argument.     And, that is, let the court of Appeals ferret
                    2    this out.    The court of Appeals doesn't have any fact-finding
                    3    capabilities, doesn't have any way to do that.         If they look at
                    4    it, they are just looking at a record in which there were two
                    5    separate burdens of proof.      The only court with equitable power
-----------'6--alld-t-h-e-la-st.-j-udg€!-we-!-1-1-----Se€!-w.:i-t-h-t-ha-t-i-n-t-his-case-i-s-you-.---So'-------
                    7    it either happens here, or it doesn't happen at all.          And that's
                    8    why he's asking you to pass it to the court of Appeals, because
                    9     he knows that the court of Appeals can't do anything about it.
                   10    And, again, that's not right, and that's not how the cases have
                   11     interpreted this as you've seen.
                   12                       So in the end and in conclusion, Your Honor, our
                   13     position is simple.     under the act there was shifting burdens,
                   14     not like a normal car wreck case at all.       There was a shifting
                   15     burden.    We fulfilled our burden of putting on the gross sales.
                                                   Page 14
                                           012408.txt
                16    They do not dispute that. They put on no evidence of any
                17     deduction, and they put on no evidence of any -- or any cost or
                18     anything else.   Therefore, the jury didn't have -- an under a
                19     regular JNOV situation, we would be right to ask for a verdict,
                20     but this is especially true in a Lanham Act case where the jury's
                21     decision on damages is advisory and always has been since the
                22     passing of the act.      And that's why we're asking for this unique
                23     relief.
                 24                     Thank you, Your Honor.
                 25                       MR. MINTON:    Your Honor, I don't have a
                                                                                                  18

                  1    Powerpoint presentation.       I'll be real brief.     I'm sorry.      I'm a
                  2    dinosaur.
                  3                       I   mean, this is really a very, very simple issue.
                  4    These attorneys wanted a jury trial.          They had 12 people in this
                  5    case deliberated long and hard over the evidence, which consisted
                  6    of expert testimony that the jury rejected.          This is akin to a
                  7    case where you have reasonable and necessary medical affidavits
                  8    that don't get controverted.          There is no question that -- you
                  9    know, there is no question that the plaintiff incurred medical
                 10    services, but were those medical services related to the injury?
--------1-1--I-mean-,--case-a-rt. et:'---Cas-e-get-s-td-ed-wber:e-tb.e-j-u.r:y-sa¥-s-,---oka¥-,-------
                 12    yeah, you've got medical expenses.          Were they related?   No.     And
                 13    they award zero.       This is exactly the same thing.
                 14                       The statute says that the sum awarded shall serve
                 15    as compensation and not as a penalty.          NOW, after the jury says
                 16    we don't believe your expert, which they're perfectly free to do.
                 17    And keep in mind, Judge, the jury also had -- they put our
                 18    financial records into evidence.          The jury looked at those and
                 19    made a determination that -- of zero.          The problem here is they
                 20    have -- they have the burden of proof to establish causation.
                                                   page 15
                                            012408.txt
                21     The cases that I cite are correct for that proposition.      In the
                22     Burger case -- the Logan case, the first one we cite, the court
                23     of Appeals Fifth circuit says you don't get an award of profits.
                24     The Balance Dynamics case, the court of Appeals said you don't
                25     get any profits.
                                                                                             19

                 1                        TO say that, well, they stipulated they didn't
                 2     lose any profits in that case, you know, they're basing their
                 3     claim for these -- this disgorgement on uncontroverted evidence.
                 4     Well, there is another side to that coin.      The uncontroverted
                  5    evidence of the president and vice president of this company that
                 6     says, We don't know of a single sale that we lost because of the
                 7     ad.   And the testimony from my client who said, Nobody ever told
                 8     us they bought because of the ad.      Mr. Finley, himself, sat up
                  9    there on the stand and said, well, my lawyers told me I didn't
                10     have to do this       I didn't have to prove this.
                11                        well, I don't dispute that their lawyers may have
                12     told them that, but the lawyers were wrong.      Lanham Act cases
                13     generally don't involve products of this nature, they involve
                14     soap, razors, household goods and things like that, and what do
                 15    you do to try to determine purchasing choices?       well, you pay a
~~~~~~~~16~-lGt-Gf-mol16-y-tG-ha-v~up-v@-y-s-dGn@,---anc;l-tha-t---'-s--the--b@s-~v-i-d@llG-@~~~~~-

                 17    you can get.   They didn't do anything.     They didn't put on a
                 18    single witness in the trial of this case that said any of those
                 19    sales were attributable to the ad.      And I'm not saying you have
                 20    to prove it on a case-by-case, sale-by-sale basis.       What I'm
                 21.   saying is you've got to have something, and what they've got is
                 22    nothing, nothing.     They are just asking the Court to pull this
                 23    pull a number out of the air.       Now, they don't say anything
                 24    about, Hey, we just want an equitable award in their motion.
                 25    They want it all.     Don't make any mistake about that, they want
                                                 page 16
                                            012408.txt
                                                                                             20

                 1    $4.2 million.
                 2                    NOw, as far as the insidious argument that I'm
                 3    making about the court of Appeals, whether you make the
                 4    determination or the jury makes the determination, the
                 5    determination has to be based on more than a scintilla of
                 6    evidence.   Findings of fact in a bench trial can get vacated for
                 7    want of evidence just as easily as a jury verdict.       If there is
                 8    no evidence to support an award of profits, if there is no
                 9    evidence of causation, if there is no link between the profits
                10    and the ad, whether you make the decision or I make the decision
                11    or the jury makes the decision, the court of Appeals will vacate
                12    that award, because it's not supported by the evidence.       It has
                13    nothing to do with whether it's a court of equity and that's kind
                14    of a new argument to me, but as    I   was sitting here thinking, you
                15    know, the court of Appeals dissolves injunctions all the time.
                16    That's an equitable remedy.
                17                     If the argument that Mr. Keltner is making is
                18    correct, then the court of Appeals has no jurisdiction over
                19    injunctions, which quite clearly they do.       The issue is not
                20    whether the court of Appeals can fashion a remedy.       The issue is
_______---L.21---.Wb.e'the~ih~l"_emed~Lthe~c.e--asJdng-fur:'--.i5-supp.(ll"-ted-h-y-tbJ::e---------
                22    evidence and clearly the court of Appeals has the ability and the
                23    authority to make a determination of evidence.
                24                     so, yeah, if they want $4.2 million        because,
                25     yeah, it is an all or nothing proposition for them, at least
                                                                                             21

                  1    until about seven minutes ago, then let them get it from the
                  2    Court of Appeals.   But the jury deliberated long and hard, they
                  3    had all of this evidence, they didn't believe the expert.
                  4    Basically the jury said this is not a $4.2 million case and;
                                              Page 17
                                                                                  012408.txt
                                 5        therefore, there is no evidence                                   there is not one single shred
                                 6        of evidence of causation that says that any of the sales, any of
                                 7        it, is attributable to the ad.                                 Either it didn't exist or they
                                 8        didn't do the groundwork necessary to prove it.                                             But in either
                                 9        case, it didn't come up in this courtroom and that's basically
                               10         our position, Judge.
                               11                                       THE COURT:             Mike, are you -- let me ask this
                               12         question to them.                   I   don't care which answers it, but help me
                               13         what do you recall the evidence you presented was on these lost
                               14         -- on these -- on this income by the defendant?                                             I   remember the
                               15         expert's testimony, but what other evidence did you have along
                               16         those lines?
                               17                                       MR. ANDERSON:               The evidence came straight from
                               18         Astoria's historical financials, which he said that they are in
                               19          evidence.           And it literally came straight from their own
                               20          financial documents, $4.2 million in utility body sales.
                               21                                       THE COURT:             okay.        NOW, the second -- I'm going
                               22          to let you talk here in a second.                                The second question:                     In the
                               23          discovery, did you have any discovery -- as David was arguing
                               24          about that awhile ago, first of all, I was concerned whenever
                               25          this No.7 was answered zero.                              I    thought that was a little bit
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2 2__- - - - - - - -


                                 1         strange.          And No.1 and No.2,                      I    thought it was even stranger
                                  2        that they didn't put on any evidence, but in the discovery that
                                  3        y'all got from them, was there any evidence in there about what
                                  4        their costs were?
                                  5                                      MR. ANDERSON:               NO, there weren't.                   That was the
                                  6        very specific point we asked them -- Requests 50 through 54 to
                                  7        prove, and we track the statute:                                All elements of costs or
                                  8        deduction related to their sales of utility bodies.                                                And their
                                  9        response was:               Responsive information is being withheld.                                       And
                                                                               Page 18
                            012408.txt
10   that they would only produce their overall just profit-and-loss
11   statements.
12                     THE COURT:     All right.    And what did the -- stand
13   up.   I'm not through with you yet.       What did the profit-and-loss
14   thing show, as far as expenses are concerned?
15                     MR. ANDERSON:     well, that was where Mr. Jackson
16   testified that unlike Brand FX'S, Astoria did not segregate its
17   costs or expenses per product.       They have multiple product lines,
18   and they just had an overall, broad-based cost of goods sold, but
19   nothing tying any of those to the utility bodies.
20                     THE COURT:     All right.    Was there any testimony
21   about -- from any -- in the discovery, was there anything in the
22   discovery about what their normal percentile was of profit?
23                     MR. ANDERSON:      NO, there was not.
24                     THE COURT:      All right.   David, do you want to
25   rebut?
                                                                              23

 1                     MR. KELTNER:      Yes, very briefly.    There is
 2   additional evidence, as well, that I'm going to get to, but
 3   before I do, Mike keeps on talking about causation, and I want to
 4   make sure that you understand in our causation issue where it is.
 5   The causation element is not in Question 7 that we're talking
 6   about, it's in Question 6, and that's what the Lanham Act
 7   requires.     That's what the federal charges show, and it's in
 8   Item 3 down there as you can see, it's injury.
 9                      And if you'll look at Question 7 -- I'm sorry,
10   can you get it back for me?
11                      (complies.)
12                      MR. KELTNER:     There isn't a causation issue, and
13   there's not supposed to be.        So the idea that somehow the jury
14   answered causation is not right.        And two, that we had a burden
                            page 19
                          012408.txt
15   to specifically demonstrate each sale isn't right.     And, in fact,
16   if you go look at the cases he cites, especially the --
17                   And I'm going to go through the Logan v. Burgers
18   case--
19                   Jennifer, which is -- well --
20                   (complies.)
21                   MR. KELTNER:      well, let me just tell you, so you
22   don't have to look at it again.     The court address precisely some
23   of the points Mike is making.     And they say, Look, if it's false
24   advertising, literally false, which we've proved here, proving
25   that the advertising did not affect the purchasing decision is
                                                                        24

 1   inconsequential, that's his case.
 2                   Also, the other cases speak of it in exactly the
 3   same way, so the issue about being causative doesn't work.     As to
 4   the court of Appeals and the injunction issues, the court of
 5   Appeals does consider    and, you know, everybody knows that
 6   temporary injunctions go up that way, as well.     But the court
 7   can't make an equitable decision, that's not what they look at.
 8   They look at as a matter of law things.     He knows that.   In doing
 9   equity and determining from what equity could be done, the court
10   can review that issue, but it can't review -- it can't make an
11   equitable decision, it's prohibited under our constitution from
12   doing that.   He knows that, and that's what the law truly is.
13                   There is other evidence, too.     Remember their
14   cases--
15                   And, in fact, I'm going to --
16                   Again, Jennifer, ask you to turn to one other --
17   it is the second Balance Dynamics' slide.
18                    (Complies.)
19                    MR. KELTNER: This is what his cases say you've
                             page 20
                            012408.txt
20   got to prove, at least damage in the marketplace.     NOW, here is
21   what we have.    we have evidence from our people that during the
22   time this false ad ran, our sales dropped 21 percent.     When they
23   stopped, the sales went up 54 percent.     That's damage in the
24   marketplace.    we also note there were sales from that
25   advertisement, remember, because they had ad ID numbers when the
                                                                          25

 1   responses came in with order forms.     So we know they sold
 2   despite they said.    well, we can't tell that they decided based
 3   on the false ad, but we know that the ad determined to be false
 4   generated sales.     under their case, we're there.
 5                      Now, Michael says, well, they really want it all.
 6   well, I guess, plaintiffs always want the most they can get, but
 7   this is equitable and we've cited cases to you that says it's
 8   equitable.     The issue is their burden here, and the Court has to
 9   deal with the evidence that's in the record in one way or the
10   other.   We are not saying that it's 4.2 million or nothing, nor
11   do I think that you can fairly read the cases that we've cited to
12   you in the papers as saying that at all or the Lanham Act as
13   saying that.     And, in fact, our whole purpose to you in these
14   papers is to say this is an equitable decision, and the jury's
15   decision is advisable.
16                      Your Honor, I'll admit that this is a unique
17   statute, but we're in a really interesting thing.     The evidence
18   that he said was not believed by the jury was undisputed and was
19   an historic objective look back of what profits were, not
20   somebody's opinion about what they were.      And based on that, I
21   think his arguments are misplaced.
22                      MR. MINTON:   Your Honor, I don't really want to
23   turn this into a tennis match and 1"1 be happy to respond to any
24   specific questions that you have, but I think that warrants a
                            page 21
                                 012408.txt
25       brief response.   And that response is this:          If the evidence
                                                                                   26

 1       wasn't there for the jury to make this determination, how are you
 2       going to do it?   How would you do it?          I think that's an
 3       important question here.        What evidence is there in the record
 4       that you heard, along with the jury, that says that any of ihese
 5       profits were the result of the advertisement?           A decline in
 6       sales -- declines in sales happen all the time.           And the court of
 7       Appeals and the supreme court have said coincidence is not
 8       evidence of causation.     There is nothing here to warrant the
 9       imposition of any disgorgement of profits, and that's what every
10       one of those cases say.
11                         How much in profits was disgorged as a result of
12       the Logan decision?     Zero.     Balance Dynamics, how many -- how
13       much in profits were awarded by the Sixth circuit Court of
14       Appeals?    Again, zero, for the same reasons.         There is no
15       evidence to show that any of those sales were lost as a result of
16       the ad.    The magazine article, those were sales leads.            There is
17       no evidence, absolutely no evidence, that one single sale, any
18       sale or that any of those leads resulted in a sale or that any of
19       the sales were because of the ad.
20                         If the jury doesn't have the evidence -- and I'm
21       not talking about insufficient evidence, I'm talking about no
22       evidence -- if the jury has no evidence to make that
23       determination, what evidence have you?
24                         THE COURT:      All ri ght.    Let me ask you those same
25       questions I asked them awhile ago.
                                                                                    27

 1                         MR. MINTON:      Sure.
     2                     THE   COURT:    What evidence is there in the
                                   page 22
                          012408.txt
3    discovery about your cost of production?
4                     MR. MINTON:    we produced -- we produced our
 5   income statements, which show the expenses of production, but
 6   they are correct, they are not specified by product line.        There
 7   is a percentage as to how much of the product constituted their
 8   sales.   There is a    for instance, it will say, Large utility
 9   bodies -- and I'm going by memory here -- they'll say, Large
10   utility bodies $200,000, and then there is a percentage figure on
11   the side.   I suppose if you -- if you sat down with the
12   financials, yeah, maybe you could put it 37 percent of           you
13   know, use that number somehow to come up with it.      But I don't
14   even think you get there, because, again, where is the evidence?
15                    THE COURT:    I understand.   I'm just asking you to
16   answer these questions now.
17                    MR. MINTON:     okay.
18                    THE COURT:    All right.   The next question:     IS
19   there anything in your discovery, because I don't remember
20   anything in the trial, that indicates what your -- what your
21   average percentage of profits are?
22                    MR. MINTON:     There is a -- there is a margin
23   figure when you subtract the cost of goods sold, I believe, in
24   the financial statements.      And, again, I'm not -- if I'm not
25   100 percent correct on this, I'm not trying to misrepresent it,
                                                                             28

 1   I'm just trying to remember what was on the financials.      But I
 2   believe there is a figure, I think, for cost of goods sold and
 3   then, again, you have that percentage figure that's next to the
 4   sales figures.
 5                    THE COURT:     Mike, do you disagree with that?
 6                    MR. ANDERSON:     Yeah, there was just no break out,
 7   you can never look at it and determine any sort of percentage
                             page 23
                                                012408.txt
                     8     breakdown of the costs or deductions 1n the documents.
                     9                            THE COURT:    Was there any evidence from your
                    10     client on what his percentage of profit was?
                    11                            MR. ANDERSON:    Yes.    Yes, there was.       He broke it
                    12     down, and as it related to the toppers it was 38.5 percent.
                    13                            MR. MINTON:     we're not talking about the toppers.
                    14                            THE COURT:     I understand.   Y'all tell me I've got
                    15     all of this equitable power up here, and I'm asking equitable
                    16     questions, okay?
                    17                            MR. MINTON:     I hope you're getting equitable
                    18     answers.
                    19                            THE COURT:     Anything else from anybody?
                    20                            MR. MINTON:     Your Honor, that's -- I mean, that's
                    21      basically our argument in a nutshell.            The Mishawaka case that he
                    22      referred to -- Mishawaka is a trademark infringement case, and                I

                    23      thi nk     I   hate to argue what other people are going to argue
                    24      about or what they think, but I think even Mr. Keltner would
                    25      agree with me there is a big difference between a trademark
                                                                                                          29

                      1     infringement and when you have a registered trademark and false
                      2     advertising.      I   know the federal courts --     I   can't give you a
- - - - - - - - - 3 - - - 5 p-ed-f-i-C-C-ix€-.-----L-tbj-nk-tb-e-f...edel".aJ.--eour'-ts-tr---eaLiL-d.i££ecen:tJ-¥______

                      4     than they do -- it's basically --          I   think in a trademark
                      5     infringement case, as opposed to a false advertising case, it's
                      6     easier to award profits, because you've got that infringed
                      7     trademark out there floating around, but that's all              I   have,
                      8     Your Honor.
                      9                           MR. KELTNER:     Just very briefly.
                     10                           THE COURT:     The guy with ants in his pants, go
                     11     ahead.
                     12                           MR. KELTNER:     I always have, and it has caused
                                                         page 24
                                            012408.txt
                13     problems over my entire life.
                14                        Your Honor, as you know, on Mishawaka, the remedy
                15     is exactly the same under the Lanham Act and Trademark Act.
                16     That's why the Lanham Act cases refer to Mishawaka, so we stand
                17     by that.
                18                        The second issue is this:   Mike keeps talking
                19     about the jury and the evidence in front of the jury and the zero
                20     answer,     I addressed that with you up front and told you that I
                21     know the issues with -- when you get a zero answer and how you
                 22    deal with those, but this is a unique statute.      Additionally, as
                 23    you know, the jury was somewhat confused on this and sent out a
                 24    note about what the profits were.
                 25                       And I can't get into our discussions with the
                                                                                              30

                  1    jurors, under Rule 327 and what we learned in that regard, but
                  2    that's one of the reasons for us filing this motion.
                  3                       In -- I guess, to make a long story short, I
                  4    think, again, the uniqueness of this statute is what makes this
                  5    case different.     And we do think there is evidence in the record
                  6    of what the burden of proof was.      And we think we met the burden
                  7    of proof under Question 7, by showing an historically objective
________----U8_---'ljlQJLbadLaLWba:Lih£dx_gJ~O's5__salEs_w~re.,-therLtbe~hLU~den~sbj_f...t_e.d,_____
                  9    to them, and they're telling you there is nothing in the record
                 10    that demonstrates that.
                 11                        NoW, there may be by analogy some issues of
                 12    profit margin, those types of things that the court might look
                 13    at, but we don't see it in their records.       We looked at that in
                 14    discovery before we came, and I won't say anything else.
                 15                        THE COURT:   I'll now you ask you this question:
                 16    If   I   were to go along with you on this thing, you have to admit
                 17    that I don't have anything to base my numbers on.
                                                  page 25
                                     012408.txt
        18                      MR. KELTNER: NO, sir, we think you do.        We think
        19    you have the 4.2 million, which is the historic look back.              You
        20    can reduce that
        21                      THE COURT:     I'm not going to give you that.         NoW,
        22    that's my question:     If I pluck something out of the sky, which
        23    is, to me, the only thing that I'm doing, how are you going to be
        24    able to sustain that on appeal?
        25                      MR. KELTNER:      Because the issue would be, I
                                                                                            31

         1    couldn't sustain anything up to 4.2 million, and that would be
         2    what our position is.     We believe that you'll probably do
         3    something like, take a percentage of that figure, based on some
         4    of the evidence you held, and say that you've done that under
         5    your equitable grounds.     I'm asking you to do that.     I   can't very
         6    well complain that you did it on appeal.
         7                      What they'll raise on appeal, playing this out in
         8    a chess match is, you shouldn't have done anything in any event.
         9    The jury answered No.1; No.2, they'll make it a causation
        10    argument, you know, we don't agree with that, but that will be a
        11    legal argument they'll make to the Court.        So I really don't
        12    think the issue of a specific number is going to be the issue,
________13    Your_HDnot'-,_antidpates_i-t~s_gojJ:)g_to_b€-on_appeal ~-----------

         14                     THE COURT:     Anything further?
         15                     MR. MINTON:     Just one point I neglected to make,
         16   Your Honor, and that was this:        They were talking about how the
         17   issues were submitted, I submitted -- I objected to their Issue
         18   7.   What their Issue 7 should have said, and it was in -- I know
         19   it's not part of the record, but it was in the charge that          I    gave
         20   you, that I prepared.     It should have said, What profits, if any,
         21   attributable to the ad were received by Astoria?        They
         22   specifically didn't want that issue in there.        So I think this
                                        page 26
                                   012408.txt
     23       whole problem, this whole issue stems from the fact -- you know,
     24       for whatever reason, they gave you a bum issue, because if the
     25       jury had been asked that question and that zero got put in that
                                                                                   32

      1       blank, that would have stood up on appeal all day long, because
      2       the jury -- because there was no evidence of causation.     I just
      3       think they missubmitted the issue, and that's what has brought us
      4       here.
      5                       THE COURT:     well, here is what I'm going to do.
      6       I'm going to grant the motion, and I'm going to calculate your
      7       their profit margin to be 15 percent, which will give you a
      8       number for that answer of $630,000.
      9                       MR. KELTNER:     Thank you, Your Honor.
     10                       THE COURT:     Good luck to both of you.
     11                       MR. KELTNER:     I appreciate it.
     12                       THE COURT:     Go make a good fee upstairs now.
     13                       (End of proceedings.)
     14
     15
     16
     17
     18
     19
     20
     21
     22

     23
     24
     25
!f
                                                                                   33

          1                              CERTIFICATE
                                     page 27
                           012408.txt
2    STATE OF TEXAS    )
3    COUNTY OF TARRANT )
4               I, shelley S. curtis, Deputy official court Reporter
     in and for the 17th Judicial District court of Tarrant county,
 5   State of Texas, do hereby certify that the above and foregoing
     contains a true and correct transcription of all portions of
6    evidence and other proceedings requested in writing by counsel
     for the parties to be included in this volume of the Reporter's
 7   Record, in the above-styled and numbered cause, all of which
     occurred in open court or in chambers and were reported by me.
8               I further certify that this Reporter's Record of the
     proceedings truly and correctly reflects the exhibits, if any,
 9   admitted by the respective parties.
                I further certify that the total cost for the
10   preparation of this Reporter's Record is $         and was
     paid/will be paid by MR. MICHAEL W. MINTON.
11              WITNESS MY OFFICIAL HAND this the      day of
                 , 2008.
12
13
14
     shelley s. curtis, CSR 4557
15   Expiration Date: 12/31/08
     official Court Reporter
16   17th Judicial District Court
     401 West Belknap Street, 8th Floor
17   Fort Worth, Tarrant county, Texas 76196
     (817) 884-1459
18
19
20
21
22
23
24
25




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