A district court acted within its discretion by awarding treble damages under the Lanham Act in the amount of $117,864 to a hotel franchisor for a franchisee's willful and unauthorized use of the franchisor's intellectual property following the termination of its franchise, the U.S. Court of Appeals in Cincinnati has determined. The treble damages award was not an impermissible penalty.

There was no question that the franchisor acted in deliberate defiance of the license agreement between the parties, according to the court. Despite express language in the license agreement that prohibited the use of the franchisor's marks after termination, and notification to this effect in the franchisor's notice of termination, the franchisee continued to use and display the marks in advertising and on its website until the end of April 2006 --one year after termination and two months after a district court had entered a preliminary injunction ordering it to cease use of the marks.

An award of the royalties the franchisor would have received from the franchisee during the period at issue would be insufficient, by itself, to compensate the franchisor for the true extent of its injuries, including the loss of its ability to control its brand image and reputation, in the court's view. Although the franchisor argued that it was entitled to revenues the franchisee received from its water park and restaurant, the parties' agreement addressed only amounts payable for rentals of guest and meeting rooms at the facility, so the district court correctly denied the franchisor's request for a larger amount.

The fact that the franchisor was also awarded liquidated damages for breach of contract did not make the Lanham Act damages duplicative or punitive. The contract claims and trademark infringement claims were distinct actions, based on separate conduct and addressing disparate harms, the court said.

La Quinta Corp., 6th Cir., ¶61,609.