WATEC CO., LTD., a Japanese corporation, Plaintiff-counter-defendant-Appellee, v. Chia C. LIU, a resident of California esa Chia L. Liu; Watec Company America, a Nevada corporation esa Watec America Corporation, Defendants-counter-claimants-Appellants, Genwac Inc., a New York Corporation, Counter-defendant-Appellee.
Nos. 03-55823, 03-56079
United States Court of Appeals, Ninth Circuit
Filed March 30, 2005
403 F.3d 645
Before SCHROEDER, Chief Judge, GOULD, and CLIFTON, Circuit Judges.
Argued and Submitted Nov. 1, 2004.
C. “Keila” Nakasaka, Law Offices of Nakasaka, Los Angeles, CA, and Orlando F. Cabanday, Roger Furman, Hennelly & Grossfeld LLP, Pacific Palisades, CA, for the plaintiff-counterdefendant-appellee.
We must resolve issues arising from this trademark dispute between the Japanese manufacturer Watec Company Limited (“Watec Japan“) and its former distributor, Watec Company America (“Watec America“). Watec America and its president, Chia C. Liu, appeal the district court‘s denial of their motion for a new trial claiming that they are entitled to a new trial because the district court‘s denial of their mid-trial motion for judgment as a matter of law had the effect of an evidentiary ruling that barred them from presenting their defense to Watec Japan‘s trademark infringement claim. Watec America and Liu also challenge the sufficiency of the evidence supporting the jury‘s verdict that they breached an oral distribution agreement with Watec Japan and infringed on Watec Japan‘s trademarks. Additionally, Watec America and Liu argue that the excessiveness of the jury‘s original trademark infringement damages award demonstrates that the entire verdict was tainted by passion and prejudice. Finally, Watec America and Liu contend that the district court erred in determining that this was an “exceptional” case that warranted an award of attorneys’ fees under the Lanham Act. We have jurisdiction pursuant to
I
Appellee Watec Japan is a Japanese corporation that has been in the business of manufacturing and selling compact security cameras since 1987. Watec Japan has always used the WATEC and WAT marks on its products. From 1988 to March 1999, Watec Japan used an international distributor, Nippon Engineering and Trading Company (“Netco“), to assist its sale of cameras bearing the WATEC and WAT marks in markets outside of Japan.
Through early 1990, Watec Japan and Netco sent out thousands of direct mail solicitations and sample cameras bearing WATEC and WAT marks to potential American customers. They also attended national trade shows where they displayed
According to Watec Japan‘s president Shigemi Igarashi, Watec Japan decided to set up an American distributor in June 1990. Igarashi testified that Watec Japan entered into an oral agreement with Chia Liu at Netco‘s recommendation, whereby Liu would form and operate Watec America as Watec Japan‘s exclusive distributor in the United States. Watec Japan‘s distributor for Mexico and Latin America attested to the existence of this oral agreement.
Watec Japan gave initial capital funding and a credit line, and supplied cameras to Watec America and Liu. Fifty-one percent of the shares in Watec America was received by Watec Japan in exchange for its capital contribution. Igarashi also told the jury that one of the terms of the agreement was that Watec America and Liu would receive a license to use the WATEC and WAT marks for the purpose of selling Watec Japan‘s cameras.
During the course of the parties’ relationship, Watec America and Liu held themselves out as representatives of Watec Japan, and identified Watec Japan as the holder of the WATEC and WAT trademarks in marketing materials. Watec America registered the WATEC and WAT marks with the United States Patent and Trademark Office in 1992 and 1993 respectively, and the marks have since become “incontestable” under
In 1995, Liu entered a written agreement with Watec Japan to purchase all of Watec Japan‘s shares in Watec America. Liu drafted the Stock Purchase Agreement which neither mentioned the trademarks, nor purported to transfer anything other than shares in Watec America to Liu.
In 1998, Watec America and Liu began selling cameras made by manufacturers other than Watec Japan, but still sold them under the WATEC and WAT marks. Watec Japan responded by asserting that these sales of non-Watec Japan cameras violated the parties’ exclusive distributorship and licensing agreements. Watec America and Liu refused to heed Watec Japan‘s request that they stop using the WATEC and WAT marks on non-Watec Japan products. Consequently, Watec Japan began to phase out sales of its cameras to Watec America, and formed another company named Genwac to act as its United States distributor. Finally Watec Japan stopped supplying cameras to Watec America and Liu in March 2000, and this litigation commenced when Watec Japan sued Watec America and Liu in October 2000, inter alia, for breach of contract and trademark infringement. Watec America and Liu responded with counterclaims, including one for trademark infringement.
Thus issue was joined in this commercial battle, and after discovery and other proceedings the case went to trial before a jury in February 2003. Pursuant to
Subsequently, in a conference held outside of the jury‘s presence, both sides summarized their remaining evidence for the district court so that the court could estimate the amount of time needed to conclude the trial. After the parties finished presenting their evidence to the jury, the district court asked each side if there was any additional evidence that they wanted to present to the jury. At this point, Watec America and Liu decided that they wanted to call one more witness, which the court permitted them to do. After this additional witness concluded his testimony, the district court again asked Watec America and Liu if they had further evidence to offer. They responded “no”1 and both sides rested.
The jury rejected Watec America and Liu‘s trademark claim against Watec Japan, and instead returned a $5.9 million verdict in favor of Watec Japan on its breach of contract and trademark infringement claims against Watec America and Liu. The jury also found that Watec America‘s infringement was intentional, and therefore that Watec Japan was entitled to attorneys’ fees. The district court entered judgment based on the jury verdict.
After the verdict, Watec America and Liu filed motions for a new trial, renewed JMOL motions, and a motion to amend the judgment or for judgment notwithstanding the verdict. The district court denied the renewed JMOL motions, but ruled that Watec America and Liu would be entitled to a new trial on the ground that the $5 million trademark infringement damages award was excessive as a matter of law unless Watec Japan agreed to a remittitur of damages. Watec Japan accepted a remittitur reducing the $5 million trademark infringement award to $2,156,590, and the district court then entered an Amended Judgment reflecting the reduced award. The district court later entered a separate order awarding Watec Japan $289,612 in attorneys’ fees pursuant to
II
We first address Watec America and Liu‘s argument relating to the merits of the district court‘s denial of their first JMOL motion. Watec America and Liu waived their right to seek review of this denial by failing properly to argue it as a specific assignment of error in their opening brief.
III
We now consider whether the district court erred in denying Watec America and Liu‘s motion for a new trial3 that was based on their assertion that the district court‘s denial of their first JMOL motion had the effect of an evidentiary ruling that barred them from presenting their defense to Watec Japan‘s trademark infringement claim.4
Although Watec America and Liu press this argument about exclusion of evidence, the record does not permit us to view the issues in the light they have presented. We are firmly of the view that in the circumstances of this case, Watec America and Liu cannot claim evidentiary error on appeal because they did not offer evidence that the district court excluded. More generally, it would be odd to think that a party could claim evidentiary error on appeal if the district court faced no tender of evidence that required an evidentiary ruling.
In Callan v. Great Northern Railway Co., 299 F.2d 908, 911 (9th Cir. 1961), we saw “no merit in appellant‘s contention that the trial court erroneously refused to” admit certain evidence where the appellant “voluntarily abandoned his offer of proof” despite the trial judge‘s clear indication that “he had not yet made his mind up on the question of the admissibility of” the evidence.
To similar effect is our decision in Swinton v. Potomac Corp., 270 F.3d 794, 809 (9th Cir. 2001), where we rejected a challenge to a district court‘s alleged “exclusion” of evidence, because the record demonstrated that the evidence “was never excluded by the court.” Instead, the record in that case showed that the appellant‘s counsel voluntarily abandoned all attempts to admit the evidence in the face of objections by opposing counsel even though the district court expressly reserved ruling on the objections and told appellant‘s counsel to “[g]o ahead” and to “continue with th[e] witness.” Id.
As in Callan and Swinton, Watec America and Liu here cannot challenge the district court‘s reversal of its grant of their first JMOL motion as if it were a ruling excluding their evidence on trademark infringement. To the contrary the district
The district court‘s reversal of its position on the JMOL did nothing more than to reinstate Watec Japan‘s trademark infringement claim, after which both sides had the same burdens of proof as at the trial‘s start.
IV
We next address Watec America and Liu‘s challenge to the sufficiency of the evidence supporting the jury‘s determinations and special verdict that an oral distributorship agreement existed between the parties and that Liu was personally liable on the contract.5
On the issue whether an oral agreement to distribute cameras existed, the trial boiled down to a contest of credibility between Watec Japan‘s witnesses and Liu, and the jury‘s verdict represents a finding of fact that cannot be altered by an appellate court if sufficient evidence was presented on Watec Japan‘s victorious side. Such a situation is not uncommon in contract disputes, and similar cases can be found in the precedents.6 The sole question before us on the existence of an oral contract is whether Watec Japan‘s evidence was sufficient to sustain the jury‘s verdict, that is, whether reasonable minds might accept the evidence as adequate for the jury‘s conclusion.
The jury was instructed that to find a contract it needed to determine that there was evidence of (1) legal capacity to contract; (2) mutual consent; (3) a lawful objective; and (4) sufficient consideration. We now consider the sufficiency of evidence in light of the applicable law as outlined in the jury instructions on contract law.7
With respect to the existence of the distributorship contract, Watec Japan offered testimony of party witnesses confirming both the formation of an oral agreement and its material terms. Igarashi, president of Watec Japan, testified that he entered into a distributorship agreement with Liu, and outlined the agreement‘s “key terms.” Igarashi also testified as to conduct of the parties consistent with the existence of such an agreement; he testified that Watec Japan provided Watec America and Liu with initial capital funding and a line of credit, in addition to supplying them with cameras. Watec Japan‘s distributor for Mexico and Latin America at the trial told the jury
This testimony was corroborated by non-party witnesses who attested that they had interacted with Watec America in its capacity as a distributor for Watec Japan. For example, a former customer of Watec America, testified that “it was [his] understanding that [Watec America was] the official distributor” for Watec Japan in the United States, based on Watec America‘s representations. Another Watec America customer testified that it was his understanding that Watec America was the sole distributor for Watec Japan in the United States, and that Watec America‘s sales representative had led him to believe that this was the case. Watec Japan also introduced in evidence for the jury Watec America‘s business cards, advertisements, product brochures, and trade show banners, all of which identified it “as a Division of Watec Co. Ltd.” and Watec Japan as the holder of the WATEC and WAT trademarks. With respect to Liu‘s personal liability on the distributorship contract, Watec Japan offered Igarashi‘s testimony that he had contracted with Liu personally.
We hold that there is substantial evidence to support the jury‘s findings that an oral agreement existed between the parties and that Liu entered into the agreement in his personal capacity. The existence of some contradictory evidence in the record does not alter our conclusion. Roy v. Volkswagen of Am., Inc., 896 F.2d 1174, 1179 (9th Cir. 1990) (affirming jury verdict despite “weighty evidence” to the contrary because there was also evidence supporting the jury‘s verdict and “[i]t is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences, and determine the credibility of witnesses“); Landes Constr. Co., 833 F.2d at 1371 (affirming jury verdict even though the record could arguably support different inferences because the jury‘s inference was a “reasonable” one). We affirm the jury‘s verdict on breach of contract.
V
Watec America and Liu also challenge the jury‘s verdict on trademark infringement, arguing that they are not liable to Watec Japan for infringement because Watec Japan did not make the requisite showing to overcome Watec America‘s incontestable federal trademark rights to the WATEC and WAT marks. Under
In Casual Corner we held that a litigant claiming
A
Watec America and Liu urge us to overturn the jury‘s trademark verdict on the basis that there was insufficient evidence of market penetration in any state to support the jury‘s finding that Watec Japan acquired nationwide rights in the WATEC and WAT marks under state common law10 before they were registered by Watec America. The jury was instructed that:
A party claiming common law senior rights must demonstrate that it has sufficient market penetration in a specific locality or localities. Market penetration must consider such factors as the total dollar value of sales, the proportion or percentage of the common-law claimants’ sales of trademarked products in relation to the market place in the locality in question. The actual
doing of business rather than the mere use of a flyer or advertisement is required [f]or the establishment of common-law rights in any locality. Even if Watec Japan were to show common-law senior rights, any such senior rights constitute an exception to incontestability only in the proven market locale. Therefore, you must determine, if common-law senior rights are found, what market locale or locales, if any, Watec Japan has proven it penetrated prior to the date of registration.
We now consider the sufficiency of the evidence in light of the applicable law as outlined in these jury instructions.11 The dispositive question is whether reasonable minds might accept the evidence as adequate for the jury‘s conclusion. Three Boys Music Corp., 212 F.3d at 482.
Watec Japan presented many examples of direct mail advertisements and brochures that it sent to potential customers across the United States in 1989, before Watec America was formed, along with testimony from Watec Japan‘s president Igarashi that thousands of such letters were sent out at that time. There was also testimony from Igarashi that Watec Japan attended national trade shows where it displayed sample cameras bearing the disputed marks, and that Watec Japan sent a few thousand sample cameras bear
Watec Japan further submitted in evidence pre-1992 letters from customers in Florida, New York, and Pennsylvania, placing orders, requesting price quotes, and mentioning sample cameras that they had received or had seen at trade shows, as well as prior purchases that they had made. Finally, the president and owner of a company that resells Watec cameras to local, state, and federal law enforcement agencies throughout the United States testified that he began purchasing cameras bearing the WATEC and WAT marks before June 1990. Viewing this record in the light most favorable to Watec Japan which won the favor of the jury‘s verdict, we hold that there is substantial evidence from which a jury could have found that Watec Japan had acquired nationwide senior common law rights in the WATEC and WAT marks by marketing cameras bearing the marks on a national scale, before Watec America registered the marks in 1992 and 1993.
B
A person claiming senior rights in a trademark must establish not only that he or she used the mark before the mark was registered, but also that such use has continued to the present. Casual Corner, 493 F.2d at 712. Watec Japan argues that it can establish continuous use during the time between Watec America‘s formation and Genwac‘s formation based on Watec America and Liu‘s use because Watec America and Liu were using the marks as Watec Japan‘s licensees during that time period.
In cases involving a manufacturer and distributor in an exclusive distributorship arrangement, courts typically look first to any agreement between the parties regarding trademark rights. Sengoku Works Ltd. v. RMC Int‘l, Ltd., 96 F.3d 1217, 1220 (9th Cir. 1996). Here, Watec Japan contended and the jury found that Watec Japan licensed Watec America and Liu to use the WATEC and WAT marks, and that Watec Japan did not transfer any rights in the marks to Liu when it sold its shares of Watec America in 1995. Substantial evidence supports the jury‘s findings.
Igarashi testified that Watec Japan orally granted Watec America a license to use the WATEC and WAT marks in its capacity as Watec Japan‘s exclusive distributor. Watec Japan also offered various of Watec America and Liu‘s own advertisements stating that “WATEC, and WAT, are registered trademarks for Watec Co., Ltd. (Tokyo, Japan),” and that “Watec is a registered trademark of Watec Company, Limited (Tokyo, Japan),” in support of its argument that Watec America and Liu were merely holding the United States trademark registrations on behalf of Watec Japan. There is substantial evidence to support the jury finding that the parties entered into a licensing agreement.
There is also substantial evidence that Watec Japan did not relinquish its rights in the disputed marks when it sold all its shares in Watec America to Liu. Igarashi testified that the terms of the parties’ original distributorship agreement were to remain unchanged even following the sale. The Stock Purchase Agreement drafted by Liu is consistent with this testimony because it neither mentions the trademarks, nor purports to transfer anything other than shares in Watec America to Liu. We affirm the jury‘s finding that the stock sale did not affect the parties’ licensing arrangement, and affirm the jury‘s verdict on trademark infringement.
VI
We turn to Watec America and Liu‘s arguments seeking a new trial because of
A
Watec America and Liu argue that the Supreme Court‘s decision in Minneapolis, St. Paul & Sault Ste. Marie Ry. Co. v. Moquin, 283 U.S. 520, 51 S.Ct. 501, 75 L.Ed. 1243 (1931), mandates a new trial because the jury‘s excessive trademark infringement damages award demonstrates that the jury was acting under the influence of passion and prejudice. It is well established that “no verdict can be permitted to stand which is found to be in any degree the result of appeals to passion and prejudice.” Id. at 521; see also Pershing Park Villas Homeowners Ass‘n v. United Pac. Ins. Co., 219 F.3d 895, 905 (9th Cir. 2000) (“A new trial is necessary where it is found that passion and prejudice tainted the jury‘s verdict.“).
But it is equally clear that a new trial is not required even where there is an excessive damages award resulting from passion and prejudice, unless there is also evidence “that passion and prejudice affected the liability finding.” Pershing Park Villas, 219 F.3d at 905. “Where there is no evidence that passion and prejudice affected the liability finding, remittitur is an appropriate method of reducing an excessive verdict,” although the district court still retains the option of vacating the judgment and ordering a new trial. Seymour v. Summa Vista Cinema, Inc., 809 F.2d 1385, 1387 (9th Cir. 1987).
In Seymour, we declined to order a new trial, notwithstanding the district court‘s acknowledgment that the jury‘s damages award “far exceeded the amount proved at trial” and might “have resulted from passion and prejudice,” because the district court did not find, and the record did not show, that there was any impermissible conduct at trial which might have tainted the rest of the verdict. Id. We explained that while the defendant was relying “entirely on the excessive jury award to prove passion and prejudice,” the mere “fact that a jury may have been outraged by the defendant‘s conduct to the point of awarding excessive damages does not prove that its decision on liability was flawed.” Id.
The present case is strikingly similar to Seymour. In ordering a remittitur, the district court recognized that the jury‘s original $5 million trademark infringement damages award was “not supported by, and in fact completely ignores and rejects, the evidence,” since the figure calculated by the damage experts was only $2,156,590. However, the district court pointed out that a possible “explanation for the jury‘s $5 million award is that it awarded the entire gross sales figure to plaintiff.”12 We find this explanation persuasive. There is no evidence indicating that there was impermissible conduct by Watec Japan or any other unusual circumstance that might have caused the jury‘s findings of contract and trademark infringement liability to become infected with passion and prejudice. The district court‘s use of remittitur was appropriate.
B
Watec America and Liu also attack the jury‘s breach of contract damages award on the ground that the jury considered an overly long time period in making its determination; Watec America and Liu argue that the jury based its award on the testimony of Watec Japan‘s expert who made his calculations on an allegedly im
However, we rejected a similar argument in Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d 1422, 1435 (9th Cir. 1996), which was an inverse condemnation action where the jury awarded damages to compensate the plaintiffs for the delay the defendant-city caused in the plaintiffs’ efforts to develop their property. The defendant in Del Monte Dunes attacked the jury‘s damages award as excessive and alleged that the jury was permitted to consider an overly long time period in calculating the amount. In spite of the defendant‘s arguments, we upheld the jury award because the district court had left the issue of the relevant length of time to the jury, and the defendant had “no factual basis upon which to argue what length of the time the jury found relevant” in making its determination. Id.
Here, as in Del Monte Dunes, Watec America and Liu have no factual basis for arguing about the length of time the jury actually used in assessing contract damages. Although Watec Japan‘s expert testified as to the time period he used in calculating Watec Japan‘s lost profits, Watec America and Liu were free to counter his estimation of the relevant time period with their own evidence, and the district court left the ultimate decision on the relevant time period for damages to the jury. There was substantial evidence supporting the jury‘s contract damages award.
VII
Finally we turn to the issue of whether the district court erred in award
“Generally, a district court‘s order on attorney‘s fees may be set aside if the court fails to state reasons for its decision....” Mattel Inc. v. Walking Mountain Prods., 353 F.3d 792, 815 (9th Cir. 2003). Here the district court explained that it had awarded fees to Watec Japan because “[t]he jury expressly found that defendant, Watec America, intentionally infringed on plaintiff‘s trademarks, and recommended an award of fees.” This approach to awarding fees is problematic because a determination that a trademark case is exceptional is a question of law for the district court, not the jury, and because the jury‘s finding that Watec America “intentionally infringed” does not necessarily equate with the malicious, fraudulent, deliberate or willful conduct that we usually require before deeming a case exceptional. See Earthquake Sound Corp., 352 F.3d at 1216-17.
Although we can affirm a fee award notwithstanding the district court‘s failure to explain the reasons for its award if the record supports the district court‘s decision, id., we conclude that the issue of the appropriateness of fees in this case is best addressed under the proper legal standard by the district court in the first instance. Accordingly, we vacate and remand this issue to the district court to permit it to determine whether this is a sufficiently “exceptional” trademark case to warrant the award of attorneys’ fees under
VIII
We hold that the district court properly denied Watec America and Liu‘s motion for a new trial because Watec America and Liu were not deprived of the opportunity to present their trademark infringement defense. The district court also committed no error in remitting the jury‘s excessive trademark damages award instead of granting a new trial because there was no evidence that the jury‘s finding of liability was tainted by passion and prejudice. However, because the district court did not make the requisite finding that this case is “exceptional” within the meaning of
We also hold that the jury‘s verdict on breach of contract and trademark infringement must stand because it is supported by substantial evidence. Likewise, the jury‘s contract damages award must stand because Watec America and Liu lack a factual basis for challenging the time frame that the jury used in its calculations.
AFFIRMED IN PART; VACATED IN PART and REMANDED.