Seattle Trademark Lawyer

On June 25, the U.S. Supreme Court found in Exxon Shipping Co. v. Baker that punitive damages under maritime common law cannot exceed the amount of compensatory damages when such awards are “substantial.”

Will this decision affect punitive damages awards in trademark cases?

It shouldn’t under federal law — even by analogy — because the Lanham Act does not provide for punitive damages. Section 35(a) (15 U.S.C. § 1117(a)) authorizes courts to enhance damages, but only to the extent the award constitutes compensation and “not a penalty.”

However, Section 35(a) does not extend to supplemental state law claims. As the Supreme Court recognized, ”[s]tate regulation of punitive damages varies.” It noted that Washington and three other states only permit punitive damages when authorized by statute. Other states limit punitive damages in other ways, though the court stated that “punitive damages overall are higher and more frequent in the United States than they are anywhere else.”

Indeed, many states allow punitive damages in state-law trademark claims. For example, the District of Oregon jury’s recent award of $305 million in Adidas America, Inc. v. Payless Shoesource, Inc., included $137 million in punitive damages. (STL post here; jury verdict form here.)

While Exxon Shipping’s limit of punitive damages to the amount of compensatory damages in some cases does not appear to apply literally to punitive damages awards under state law, it’s obviously an influential yardstick.

Payless Shoesource thinks so. On June 26 it filed the opinion as supplemental authority in support of its motion for a new trial on the issue of damages.

The case cite is Exxon Shipping Co. v. Baker, 554 U.S. __ (2008), No. 07-219.

Further discussion on the case’s implications beyond maritime law here (via the SCOTUS Blog).