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Walmart Pushes Back Against $95 Million Trademark Verdict

Dec. 9, 2020, 10:09 PM

A Fourth Circuit panel of judges hearing Walmart Inc’s appeal of a $95 million trademark infringement verdict focused on what would happen if they found fault in parts of the case, and whether a re-do would be necessary.

At issue is whether Walmart infringed Variety Stores’ “The Backyard” trademarks. The case already has had three trials and two appeals.

WalMart argued Wednesday that insufficient evidence, faulty jury instructions, and a large gap between liability and remedy trials—with the same jury—justified reversal of the infringement finding and a reduction of the award size.

The same three U.S. Court of Appeals for the Fourth Circuit judges who sent back an earlier win for Variety will again decide the fate of the unusually large trademark award. They could set or clarify broader guidance for applying trademark damages, as well as for writing jury instructions and managing split trials.

Walmart applied for its trademark “Backyard Grill” to cover grills in 2011, and Variety objected at the Trademark Trial and Appeal Board the next year based on its “The Backyard” registered mark and related common law marks including “Backyard BBQ.” It sued in 2014 while the TTAB case was under way.

A U.S. District Court for the Eastern District of North Carolina judge awarded summary judgment on infringement. After a jury awarded Variety $32.5 million, the the Fourth Circuit reversed because the district court judge had decided issues that should have gone to trial.

The resulting liability and damages trials netted Variety $45 million in alleged loss royalties and $40 million of Walmart profits from the mark.

On appeal, Walmart argued that no Fourth Circuit plaintiff had ever won based on trademarks that shared only a word common to the goods in question with no cases of actual confusion or evidence of bad faith.

It also said 5% of Walmart’s total “Backyard Grills” sales used to calculate royalties was unprecedented for such a relatively small brand, adding that Variety didn’t even argue that it lost any sales.

Reversal Grounds

The judges probed a number of possible grounds to reverse the infringement ruling, but also indicated some reluctance to overturn resolution of the six-year case.

Circuit Judge Stephanie D. Thacker asked Walmart attorney Mark Puzella of Orrick Herrington & Sutcliffe LLP of his main arguments: “Didn’t the jury hear all this? Don’t we owe some deference to the jury?”

Puzella said yes, but said based on the record no reasonable jury could rule as it did.

Variety said the courts acted appropriately. It rejected Walmart’s allegation that there was no evidence of bad faith, and that Walmart couldn’t have appropriated goodwill because Variety’s mark “has no goodwill to appropriate.”

Split Trials, Same Jury

Among the issues contested was the propriety of calling back the same jury for the damages trial 110 days after the liability trial without first interviewing them to learn of potential prejudices from outside sources since the first trial.

Thacker expressed concern about the handling of jurors between trials, and whether there should have been interviews to address potential prejudices.

Variety counsel W. Thad Adams III of Shumaker Loop & Kendrick LLP said Walmart showed no evidence of any prejudice or even media coverage in Elizabeth City, N.C., where the trial was held.

“But how could they when there was no voir dire? That’s what the voir dire would be for,” Thacker said.

Adams said the court was concerned Walmart was just trying to set the stage for a mistrial, saying courts have said sometimes the voir dire process just invites jurors to go look for things they wouldn’t otherwise. He also said cases Walmart cited didn’t address bifurcated trials.

Do-Over?

WalMart also said the jury wasn’t properly instructed on the definition of “willful.” Circuit Judge Henry F. Floyd agreed that the plain meaning isn’t insufficient and the legal definition is “intended to infringe.”

Adams said the jury in the case knew what intent meant, and it didn’t matter because willfulness wasn’t needed to award damages or royalties.

Thacker asked whether, if the court agreed to a new trial, the panel needed to address the award. Puzella said no, but the court could state damages would be unwarranted as a matter of law. But Circuit Judge Henry F. Floyd said it could only be an advisory opinion after ordering a retrial on jury reassembly or instruction.

“Looks to me like that would end the discussion. Just like if we reversed on the first issue, if we were to agree on the willfulness instruction, that would end the issues” the appeals court would have to address, Floyd said.

Circuit Judge Robert Bruce King also sat on the panel.

The case is Variety Stores Inc. v. Walmart Inc., 4th Cir., No. 19-1631, Oral Arguments 12/9/20.

To contact the reporter on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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