The U.S. Court of Appeals for the Eighth Circuit rejected the notion that proof of actual confusion is a requisite to licensors recovering profits from licensees who exceed the scope of a trademark license. Masters v. UHS of Delaware, Inc., Case No. 09-3543 (8th Cir., Jan. 6, 2022) (Wollman, J.).
Mary Virginia Masters and UHS of Delaware (UHS) entered into a license agreement granting UHS use of the unregistered MASTERS AND JOHNSON service mark in connection with inpatient treatment programs conducted at its facilities. Under the license agreement, UHS was authorized to use the mark only in connection with its treatment programs relating to sexual dysfunction and sexual trauma. However, the district court found that UHS had breached its license agreement and infringed the MASTERS AND JOHNSON trademark by using the name to market treatments for depression, eating disorders and drug and alcohol addiction. The district court also held that UHS willfully infringed the mark and breached the license agreement; it awarded Masters $2.4 million of disgorged profits. UHS appealed.
On appeal, UHS argued, among other things, that the claim was not compensable because Masters failed to prove actual confusion between the parties or their business activities. UHS contended that the relevant case law precludes the award of monetary relief absent proof of actual confusion. Masters argued that such proof is unnecessary in light of the licensor-licensee relationship of the parties, the nature of the infringement alleged and the remedy of disgorged profits.
The 8th Circuit agreed, explaining that the relevant statutory provisions of the Lanham Act did not expressly require proof of actual confusion and that certain case law cited by UHS to the effect that proof of confusion was required was only dicta. The court noted that in a typical trademark case (i.e., not involving a licensee), the plaintiff would allege that the defendant’s mark is confusingly similar to its own. Here, the Court said that “this case involves a different kind of comparison, i.e. between the use of the mark the licensing agreement grants and UHS’s actual use of the mark.”
The court explained that because UHS and Masters were not competitors in the marketplace, there are no objective confusion characteristics by which to compare UHS and Masters. Therefore, the relevant criterion is the degree to which each party remained faithful to the terms of the license agreement, rather than the degree of similarity of the marks or services. By branding treatment offerings that did not fall within the terms of the agreement with the MASTERS AND JOHNSON service mark, UHS acted in a way likely to cause confusion, to cause mistake and to deceive others as to Masters approval of those unauthorized programs. Even with no showing of actual confusion, these factors the court found were sufficient to entitle Masters to a disgorgement of UHS’s profits.