A jury verdict of $2.4 million in favor of a well-known researcher and author in the field of human sexuality, on claims of service mark infringement and breach of contract by an owner and operator of psychiatric hospitals and mental health facilities, had sufficient evidentiary support, according to the U.S. Court of Appeals in St. Louis. The jury determined that the operator willfully exceeded the scope of a license agreement granting the operator the right to use the author's MASTERS AND JOHNSON mark for limited purposes.

Willful Breach of License Agreement

The license agreement granted the hospital operator use of the unregistered service mark MASTERS AND JOHNSON in connection with inpatient programs for the treatment of sexual dysfunction and sexual trauma in accordance with the methodology of the author and her late husband. After the license agreement expired and the relationship between the author and the hospital operator terminated, the author filed suit against the operator, asserting that the operator had exceeded the scope of the license agreement by using the mark to promote treatment programs unrelated to sexual dysfunction and sexual trauma and to promote treatment methods unrelated to the established MASTERS AND JOHNSON methodology.

The author presented evidence at trial that the mark had been used to promote treatment programs for eating disorders, chemical dependency, and other addiction disorders. The operator also used the mark to promote various treatment methods, including yoga, expressive dance, and t'ai chi, that departed from the distinctive methodology represented by the mark. The operator's use of the mark in advertising materials and promotions for seminars constituted use in commerce under the Lanham Act. There was sufficient evidence for the jury to reasonably decide that the operator willfully breached the agreement by using the mark for these purposes, the court stated.

Profits Award

The jury determined that disgorgement of the operator's profits was appropriate as a remedy for this willful infringement. Injunctive relief alone was not a sufficient remedy because the infringing activity was unlikely to occur again. The evidence was sufficient to support the jury's finding that the operator willfully infringed the mark. Testimony from employees of the hospital operator and images from various websites supported a finding that the operator knowingly exceeded the terms of the license. The author was not required to prove actual confusion to establish a compensable claim for disgorgement of profits, in light of the licensor-licensee relationship of the parties.

The award was not excessive or internally inconsistent, the court said. The jury answered "none" to a specific interrogatory asking it to fix the author's damages, but a finding of damages was not a precondition for an award of disgorgement of profits. A profits award was an equitable remedy intended to deter willful infringement or prevent unjust enrichment.

The case presented by the author to the jury was based on the ways the operator used the author's MASTERS AND JOHNSON mark to its advantage in marketing treatment programs and methods at its facilities. Any profits from unauthorized use of the mark exceeded the benefit for which the operator bargained as a licensee, the court explained.

The author's expert estimated that the hospital operator's gross revenues during the relevant period were more than $300 million, and the operator's own expert testified that its net profits from the treatment programs exceeded $6 million.

Masters, 8th Cir., ¶61,745.