MGA v. OMG Girlz: Will Fourth Jury Trial Raise Stakes Over Punitive Damages?

Finnegan attorneys  Mark Sommers and  Patrick Rodgers  provided commentary to  World Intellectual Property Review on MGA Entertainment Inc. vs OMG Girlz LLC, a high-profile dispute in which Clifford ‘TI’ Harris and Tameka ‘Tiny’ Harris initially sued MGA, alleging the company copied the likeness and image of Harris’ girl group, the OMG Girls, for their popular line of dolls. A fourth jury trial is scheduled.

MGA Entertainment has filed an interlocutory appeal of Judge James Selna’s recent order for yet another jury trial, after the said judge slashed a previous $53.6 million punitive damages award to just $1. More on the background of this complex case can be found here and here.

This appeal—limited to the issue of punitive damages—raises at least two interesting questions. These are (1) the availability of punitive damages as a remedy for trademark infringement and (2) who decides those damages, i.e., a judge or a jury. Mark and Patrick’s comments are featured below.

Are punitive damages actually available?

As for the first issue, punitive damages have historically been viewed as unavailable under the Lanham Act claims but have been available under analogous state-law statutes, such as state-law unfair competition, deceptive trade practice, and misappropriation.

For that reason, Lanham Act claims are routinely paired with analogous state-law claims, which open the door for punitive damages. In the MGA case, the Harris entities brought both Lanham Act claims and claims under California Civil Code §3344 for misappropriation, which permits punitive damages claims and served as the basis for the original award of such damages by the trial court.

Prevailing wisdom is that, under the right circumstances, an award of any damages—be they equitable or legal—gives rise to an opportunity to seek punitive damages under an appropriate state statute.

That is significant, as proving actual compensatory monetary harm in trademark infringement and unfair competition cases is notoriously difficult.

For that reason, equitable monetary relief targeting the disgorgement of the defendant’s profits is often the go-to ‘money’ claim.

In many infringement and unfair competition cases, a plaintiff ends up seeking only equitable monetary relief under the Lanham Act, ie, disgorgement of a defendant’s profits, and seeks additional monetary relief under the analogous state-law statutes, such as punitive damages.

If Judge Selna certifies this issue for appeal, the Ninth Circuit will have the opportunity to consider whether an award of punitive damages is precluded if no actual harm is shown.

Should the Ninth Circuit so decide, restricting awards to profits disgorgement will undercut any additional state-law-based awards seeking punitive damages. Limiting punitive damages to only those few cases where actual damages are shown will limit a defendant’s punitive monetary exposure.

Who should decide on punitive damages?

The second issue regarding who decides the issue of punitive damages highlights the importance of bench trials versus jury trials. In any given case, both parties will have opinions on how their cases play before a judge or a jury.

Sometimes the parties agree (both want a jury or a judge), while most times they disagree (one prefers a jury while the other prefers a judge).

Despite the parties’ preferences, there is only so much a party can do to force a bench trial, as there is a constitutional right to a jury trial. If either party demands a jury, then that party is entitled to a jury trial, whether or not the other party prefers one.

The federal right to a jury trial arises either under the Seventh Amendment or a federal statute. The Lanham Act is silent on the issue of jury trial and does not confer such a right, meaning that any right to a jury trial in most trademark or unfair competition cases must arise from the Seventh Amendment of the US Constitution.

Under the Seventh Amendment, a party is only entitled to a jury where the case involves legal claims and relief. In cases involving only equitable relief, there is no per se right to a jury, meaning that neither party is entitled to a jury—even if one or both parties ask for a jury trial.

As there are strategic benefits to bench trials over jury trials, this issue is important to litigants. In a case that involves only equitable claims, the party that believes it is better off before a judge can move to strike the jury as a matter of law.

Historically, punitive damages have been treated as a legal remedy, requiring a jury. As such, a plaintiff wanting a jury trial could, for example, seek punitive damages under an appropriate state-law statute and the defendant is stuck with a jury.

If punitive damages are reclassified as ‘equitable’ relief and decided without a jury, the plaintiff loses the ability to have its case heard by a jury even if it also seeks equitable monetary relief, like a disgorgement of a defendant’s profits.

Which, of course, would hamper a plaintiff’s ability to control who gets to decide its case.

Read “MGA v. OMG Girlz: Will Fourth Jury Trial Raise Stakes Over Punitive Damages?”