Orthopedic Systems, Inc. v. Schlein
202 Cal. App. 4th 529
| Cal. Ct. App. | 2011Background
- OSI and Dr. Schlein entered into a royalty arrangement for the Schlein Shoulder Positioner; OSI stopped paying royalties but continued selling products bearing Schlein’s name.
- A 1992 written agreement documented the royalty arrangement and stated royalties for as long as OSI sold the product; Schlein signed but did not draft the agreement.
- OSI later sold OSI and incorporated the 1992 agreement into sale documents; Schlein’s name was used on subsequent product iterations.
- In 2005 OSI stopped royalties and continued marketing under Schlein’s name through mid-2005, generating substantial revenues and profits.
- Schlein sued for contract, misappropriation, and related relief; the jury awarded damages and profits (including $1.22 million in profits) but the trial court later excluded the profits from the judgment; appellate court modified the judgment to include profits.
- The appellate court held that Section 3344(a) permits recovery of profits attributable to the unauthorized use of a plaintiff’s name, even when actual damages are not awarded, and remanded/modified the judgment to reflect the $1.22 million profits finding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether profits awarded under §3344(a) can be recovered with or without proving actual damages. | Schlein: profits are recoverable under §3344(a) and should be included. | OSI: profits are not recoverable when actual damages are not awarded or should be limited by statutory language. | Profits may be recovered under §3344(a) in addition to statutory or actual damages. |
| Whether the 1992 Agreement language extends royalties beyond the Schlein Shoulder Positioner. | Schlein: the 1992 agreement obligated royalties for as long as OSI sold the positioner. | OSI: the contract terms and modifications limit royalties to the positioner and related kits; no broader extension. | The 1992 Agreement language supports ongoing royalties for the listed products as long as OSI sells them. |
| Whether the trial court erred in excluding the jury's $1.22 million profits award from the final judgment. | Schlein: profits were part of the verdict and should be included in the final judgment. | OSI: the profits were misinterpreted or duplicative and should be excluded. | The judgment was modified to include the $1.22 million profits. |
Key Cases Cited
- Miller v. Collectors Universe, Inc., 159 Cal.App.4th 988 (Cal. Ct. App. 2008) (legislative history of §3344(a) and minimum damages purpose)
- Gionfriddo v. Major League Baseball, 94 Cal.App.4th 400 (Cal. Ct. App. 2001) (right to profit from name as part of right of publicity)
- Woodcock v. Fontana Scaffolding & Equip. Co., 69 Cal.2d 452 (Cal. 1968) (special verdict interpretation standard on ambiguities)