By Robert Freeman, of Proskauer
Dr. Thomas House (“House”) – ex-Major League Baseball pitcher, coach, and sports psychology Ph.D. – dealt a strikeout to Player’s Dugout, Inc. (“PDI”) after the Sixth Circuit affirmed most of his $450,000 award for PDI’s trademark infringement in favor of House’s pitching training company, National Pitching Association, Inc. (“NPA”). House v. Player’s Dugout, Inc., No. 22-5843 (6th Cir. Feb. 8, 2024) (unpublished)).
House created the NPA in 2002, offering both training for young athletes and baseball coach certification clinics. Drawing on his pitching background, coaching experience, and research on biomechanics, House developed an arm care program for baseball players called the Personally Adaptive Joint Threshold Training Program (“PAJJT Program”), which included a personalized weighted-ball program. In 2003, PDI founder Joe Newton met House and Jamie Evans, a part owner of NPA, and learned about the PAJJT program. Fast forward to 2010, when Newton began implementing a weighted-ball program at PDI with Evans’ help under the name “Velocity Plus Arm Care Program” (“Velocity Plus program”). Concerned that his idea was being picked off, House entered into a License Agreement with PDI to use and commercialize the PAJTT program (under the Velocity Plus name) on an exclusive basis in exchange for per-participant royalties. House also agreed to notify PDI if he became aware of any unlicensed use of the Velocity Plus program and to take steps to prevent such use.
PDI began advertising its association with NPA and House, using the NPA trademark, the phrase “Powered by Tom House,” and a picture of Newton and House together on the PDI website. House also began promoting his association with PDI to all coaches in the NPA network, which spurred more coaches to sign up for the Velocity Plus program.
Unfortunately, the relationship that looked like a home run soon faded at the warning track. PDI believed that House was ineffective at blocking pirated third-party pitching programs and House thought PDI was not following proper PAJTT protocol in its programming. PDI then stopped making royalty payments to House in September 2015, prompting NPA to send a letter to PDI requesting the parties terminate the License Agreement. NPA also sent a letter to its network of certified coaches notifying them of such termination on the grounds that PDI was not following certain program protocols. Finally, House officially notified PDI in February 2016 that it was in breach of contract for failing to pay royalties. Thereafter, in June 2016, House terminated the contract and demanded that PDI cease and desist from using House’s name and NPA’s marks.
In September 2016, House took the mound against PDI in Kentucky federal district court, showcasing a repertoire of pitches, including breach of contract, federal trademark infringement and federal unfair competition claims, and seeking compensatory and punitive damages. PDI sought to foul off House’s claims and counterclaimed alleging breach of contract, defamation, and unfair competition claims of its own. In November 2021, the matter went to trial and the jury reached a split verdict awarding $450,000 in damages in favor of NPA for breach of contract and trademark infringement (which included $67,649.82 in punitive damages), and an award to PDI of $200,000 for defamation and tortious interference.
The trial court rejected the defendant’s post-trial motion for a renewed judgment as a matter of law and awarded attorney’s fees to both parties (House was awarded fees as the “prevailing party” on his Lanham Act claims; PDI was awarded partial fees for prevailing on its unfair competition counterclaim). The Sixth Circuit affirmed most of the award, but ruled, among other things, that NPA’s punitive damage award must be reconsidered under the correct legal standard of “clear and convincing evidence.” The court’s decision in this case may help future judges determine the strike zone for damage instructions in trademark cases.
The Sixth Circuit considered a number of arguments on appeal, but the two main issues were: 1) whether the jury’s award of $340,000 in lost profits under the Lanham Act was excessive because the damages were not attributable to the use of NPA’s trademark and House’s name; and 2) whether the district court erred in citing a “preponderance of the evidence” standard for punitive damages in its jury instruction, instead of the “clear and convincing evidence standard.”
As the Sixth Circuit stated, a plaintiff seeking lost profit damages under the Lanham Act must “show some connection between the identified ‘sales’ and the alleged infringement.” To successfully recover, the plaintiff must generally prove how much of the defendant’s sales (not profit) were earned from using the trademark during the alleged infringing period and show that there is some causal connection between the identified sales and the alleged infringement. Then, the burden shifts to the defendant to establish their actual profit (noting costs and deductions). Essentially, this approach assumes that the defendant’s profits equal his gross sales unless he presents evidence otherwise.
The appeals court affirmed that NPA established a sufficient connection between the Velocity Plus program and NPA’s marks, because “PDI used the NPA and House’s name and experience to promote the Velocity Plus program…[and] display[ed] the NPA mark and House’s photo and information on its website…[and] each sale of the Velocity Plus program included a kit containing various weighted balls, each of which bore the NPA trademark.” Thus, after considering PDI’s costs, the court affirmed the award of $340,000 in lost profits for House.
While PDI’s lost profits argument was left on base, it did score when arguing against the $67,649.82 state law punitive damages award for unfair competition. Specifically, the Court found that Kentucky law clearly establishes a “clear and convincing evidence” standard for an award of punitive damages, yet the district court instructed the jury to grant punitive damages under a “preponderance of the evidence” standard. This mistake amounted to “plain error” by the district court and impacted PDI’s substantial rights and the jury’s consideration of damage.
Given the split jury verdict, the Sixth Circuit’s mixed ruling was not surprising, giving PDI one more chance to scrape out a hit while down in the count. In the meantime, on March 4, 2024, PDI requested replay review of the Sixth Circuit’s decision, seeking a panel rehearing, which was denied on April 2, 2024, thus sending the case back to the district court to sort out the remaining issues.
