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News / Jan 13, 2019

Ninth Circuit Orders Payment of Nearly $2.5 Million in Post-License Damages

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Ninth Circuit Orders Payment of Nearly $2.5 Million in Post-License Damages

By Clyde Shuman 

The U.S. Court of Appeals for the Ninth Circuit ordered a coffee company to pay $2.4 million in damages to companies connected to the late reggae artist Bob Marley for continuing to sell Marley-branded coffee after a trademark license agreement between the companies had been terminated. In Hope Road Merchandising LLC et al. v. Jammin Java Corp., case number 17-56245, in an unpublished opinion, the Ninth Circuit affirmed an earlier district court ruling that defendant Jammin Java Corp. must pay $2,458,835 in damages to plaintiffs Fifty-Six Hope Road Music Ltd. and Hope Road Merchandising LLC. The appeals court agreed that the written terms of the license agreement precluded Jammin Java's defenses that the companies had orally modified and waived the royalty payment schedule under the agreement.

By way of background, the Marley family companies sued Jammin Java after it failed to pay royalties on a long-term license for Marley-branded coffee and then continued to use Marley trademarks after a separate, short-term license ended. Following a grant of partial summary judgment by the district court, finding that defendant Jammin Java was liable for trademark infringement, the plaintiff Marley family companies asked for an award of damages in the amount of $2,458,835, representing Jammin Java's gross revenue since July 2016, when the short-term license agreement was terminated. The district court ordered defendant Jammin Java to pay the requested amount in damages, finding that defendant could not prove that its operating expenses offset profits from unauthorized sales of the Marley-branded coffee. The district court also awarded $371,000 in unpaid royalties, to the Marley companies.

On appeal, the Ninth Circuit found that the evidence showed that Jammin Java had failed to provide quarterly and annual statements under the agreement despite written notice from Fifty-Six Hope Road. As a result, per the court, the plaintiff companies had satisfied the procedural requirement for terminating the agreement. Since defendant’s breach of the agreement was “unaffected” (i.e., not cured) by its claims of waiver and other defenses, the appellate court found that the district court properly granted summary judgment to the plaintiff companies on their breach of contract claim.

The Ninth Circuit rejected Jammin Java’s argument that the license agreement’s requirement of written notice of breach should not have been enforced, as (per Jammin Java), the provision amounted to a “disfavored forfeiture clause” under California law. The court noted that even forfeiture clauses are upheld where, as here, the terms are “unambiguous and the intent is clear.” The court found that the written notice provision “unambiguously sets out the procedure through which Jammin Java could terminate the Agreement.” Moreover, the court said, “the intent of the provision is clear: to give the party allegedly in breach notice and an opportunity to cure the breach without terminating the agreement.” Accordingly, the district court properly enforced the provision.

The court also rejected Jammin Java's argument that the district court should not have awarded its profits absent a finding of willful trademark infringement, saying that such a finding was not necessary where a “plaintiff seeks the defendant's profits as a measure of [its] own damage[s].” Per the court, the record demonstrated that Jammin Java’s unauthorized use of the Marley Coffee trademarks precluded Hope Road’s use of the same marks during the infringing period. The court concluded, “Because Jammin Java’s profits during the infringing period were a reasonable measure of Hope Road’s damages, the district court did not err in awarding damages in the amount of $2,458,835.20 to Hope Road.”

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