Plaintiff’s Mistake in Naming Subsidiary Companies as Additional Defendants Costs it Millions in Judgment

A small producer of musical instruments sued Guitar Center, alleging that Guitar Center violated its trademark on the name for a line of woodwind instruments. The plaintiff made a mistake in its suit, however, and named several subsidiary corporations of Guitar Center as additional defendants. After a trial, a jury was asked to determine whether each of the organizations were liable for infringing conduct. The jury, however, found that only the sales that occurred at Guitar Center branded stores were infringing, which amounted to a tiny fraction of the total sales across Guitar Center and all of its subsidiary brands. A district court found that the judgment could not be amended, and the appellate court agreed. The appellate court stated that the judgment was rationally supported by the evidence at trial and the plaintiff gave it no reason to think that the verdict would have been different if it had correctly identified the other stores as subsidiaries of Guitar Center.

Guitar Center makes and sells musical instruments. In 2010, it created a new brand of woodwind and brass instruments produced by Eastman, “Ventus.” Barrington Music Products owns the trademark “Vento,” which it uses in relation to the instruments it sells. Barrington began using the mark in commerce in May of 2009 and achieved gross sales just shy of $700,000. Barrington filed for registration of its “Vento” trademark in January 2010. In March 2011, Guitar Center began selling flutes, trumpets, alto saxophones, tenor saxophones, and clarinets using the “Ventus” mark, with gross sales totaling about $5 million.

Barrington eventually sued Music & Arts Centers, Guitar Center Stores, Inc., Woodwind & Brasswind Inc., and Eastman Music Company for trademark infringement. Evidence at trial demonstrated that the bulk of sales occurred at Music & Arts Centers, totaling $4.9 million, with only $3,228 in sales coming from Guitar Center. The jury found that only the sales made by Guitar Center stores were infringing and awarded Barrington the total amount of those sales — $3,228. After the judgment was entered, Barrington filed a motion pursuant to Rule 59(e) asking the district court to amend the damages award. Barrington had discovered that the only distinct corporate entity was Guitar Centers, Inc., while Music & Arts and Woodwind were each divisions of Guitar Center. Barrington moved to amend the judgment to include the total volume of all sales. The district court denied the motion, and Barrington appealed.

The appellate panel began by stating that a jury verdict will not be set aside if a reasonable basis exists in the record to support the verdict. The panel noted that Barrington named each division of Guitar Center as a separate defendant rather than naming only Guitar Center. The panel stated that the error persisted throughout the trial and that the verdict form listed each defendant separately. The panel noted that the jury was instructed to determine whether each defendant violated Barrington’s trademark, to list the amount of damages, and to determine whether the infringement was willful.

The panel found that the error was not cause to amend the judgment under Rule 59(e). The panel stated that the judgment was rationally supported by the evidence, the amount of Guitar Center’s sales. The panel stated that the jury found that the infringing sales totaled only $3,228, not $4,947,200, and the damages were based only on the amount of sales the jury found to be infringing, and not the total gross sales of “Ventus” instruments. The panel concluded by stating that Barrington gave it no reason to conclude that the jury’s verdict would be different if it were aware Music & Arts and Woodwind were merely divisions of Guitar Center rather than distinct corporations. The panel, therefore, affirmed the decision of the district court.

You can view the full decision here.

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