Bad faith increases damages award for infringement

In American Rice Inc v Producers Rice Mill Inc (Case 06-20645, February 22 2008), the US Court of Appeals for the Fifth Circuit has affirmed a decision of the District Court for the Southern District of Texas in which the latter found that Producers Rice Mill Inc's design was confusingly similar to American Rice Inc's trademark. Both companies are based in the United States.

American Rice had sold rice in Saudi Arabia under the well-known Abu Bint brand name for 35 years, using a design representing a girl. American Rice had a valid trademark registration for the design. Producers Rice Mill had also sold rice in Saudi Arabia for the past 20 years, using a design representing a girl with a hat. Producers Rice Mill did not hold a trademark registration for its design. American Rice sought injunctive relief preventing Producers Rice Mill from using its design. The District Court for the Southern District of Texas granted the injunction.

On appeal, the Fifth Circuit affirmed, finding that the mark was strong and fanciful because the image of a girl being used to sell rice is not intrinsic to rice as a product. Even if not fanciful, there was strong evidence of secondary meaning based on the association of the girl icon with the Abu Bint brand. The court also found that the designs and products of both parties were similar. In addition, the court found an inference of bad faith since Producers Rice Mill knew of the Abu Bint brand at all times. Furthermore, the court found that Producers Rice Mill used the girl icon only on bags of rice sold in Saudi Arabia and not in other countries, thus further supporting Producers Rice Mill's bad-faith intent to benefit from the goodwill associated with American Rice's brand.

In response, Producers Rice Mill argued that laches prevented American Rice from pursuing this action 20 years after Producers Rice Mill started selling rice with the girl icon. The Fifth Circuit found no laches in this case: although Producers Rice Mill had sold rice in Saudi Arabia since 1985, the evidence showed that American Rice did not know about the product until 2005. The court thus affirmed the injunctive relief granted by the district court.

In calculating profits due to American Rice under the Lanham Act (15 USC§ 1117(a)), the court determined that Producers Rice Mill's bad-faith intent warranted such an award and that injunctive relief was insufficient to remedy the misuse. The court thus awarded over $1.2 million in damages to American Rice, even though Producers Rice Mill claimed that it was a cooperative whose profits, once disbursed to members, were minimal.

Jeremy T Elman, McDermott Will & Emery, Miami