A recent decision from the US District Court for the Central District of California addressed whether the results of a likelihood of confusion survey can be used to apportion profits. The court concluded that it could not.
Case Background
In Vital Pharmaceuticals d/b/a Bang Energy and JHO Intellectual Property Holdings, LLC v. PHD Marketing, Inc., plaintiffs Vital Pharmaceuticals (VPX) and JHO Intellectual Property Holdings alleged trademark infringement and unfair competition against PHD Marketing, Inc.
VPX had sold energy drinks under the “Bang” name and “b” logo since 2016. PHD operated a warehouse-style distribution business and began selling disposable vape products in 2019 under the same name and a similar logo, supplied by a Chinese manufacturer. VPX obtained evidence of actual consumer confusion and sent a cease-and-desist letter, and later filed suit, alleging that PHD had infringed on its trademarks.
Dr. Justin Anderson, Testifying Expert
VPX presented a likelihood of confusion survey conducted by Justin Anderson, PhD, Managing Director of Litigation Surveys & Consumer Science at IMS Legal Strategies. The survey found a 20.1% likelihood of confusion among consumers. Following the survey results, PHD conceded infringement, and the case proceeded to trial on the issue of damages.
VPX’s damages expert calculated PHD’s revenue from the infringing vape sales at approximately $10.77 million. PHD's expert accepted the revenue figure and estimated profits of about $1.17 million after costs.
PHD then attempted to apply the 20.1% likelihood of confusion figure from the survey as an apportionment percentage, arguing that only that portion of profits should be attributed to the infringing mark.
Dr. Anderson testified that this approach was flawed, explaining that a likelihood of confusion survey measures whether consumers believe two products are affiliated, not the role that a trademark plays in purchasing decisions. An apportionment study would instead need to evaluate how much the infringing branding actually influenced buyers of the vape products.
Court Decision
After a bench trial, the court ruled in favor of the plaintiffs and awarded $10,584,308. The court rejected most of PHD’s claimed cost deductions due to insufficient documentation. The court also ruled that a likelihood of confusion percentage is not an appropriate measure for apportioning damages, citing the reasoning discussed during expert testimony as well as prior decisions, including Globefill Inc. v. Elements Spirits, Inc. and Adidas America, Inc. v. Skechers USA, Inc.
In the Globefill matter, Dr. Bruce Isaacson, senior managing director at IMS, conducted a likelihood of confusion survey, and the court similarly rejected attempts to use that survey to allocate damages.
Damages and Likelihood of Confusion Survey Measures
Likelihood of confusion surveys are conducted to measure consumer perception in trademark cases, but they are not designed to measure damages apportionment. To determine damages, courts typically require a separate analysis addressing how much the infringing element influenced purchasing behavior. IMS Legal Strategies designs and executes defensible survey research for trademark litigation, including likelihood of confusion and damages-related studies.
