Supreme court puts bite in tradename suits

Tradename infringement is now a more costly proposition.

A unanimous Wisconsin Supreme Court held on Dec. 2 that compensatory awards are available where the damages are shown “to a reasonable certainty.” Further, the court ruled that intentional infringement invites punitive damages. The court held that a contract providing for recovery of attorney fees can extend to non-contract actions such as trademark infringement.

These rulings arose from D.L. Anderson’s Lakeside Leisure Co., Inc. v. Anderson, 2008 WI 126, in which Donald Anderson sold the marine company bearing his name to Scott and Steven Statz. The sale contract for D.L. Anderson Co. transferred the business’ goodwill and tradename for $200,000. Anderson also accepted a noncompetition clause for $400,000.

Before the expiration of the noncompetition clause, Anderson returned to the boating trade under the name of Anderson Marine, LLC and operated within geographic proximity of the Statzes. A jury awarded $15,000 in compensatory damages for the noncompetition clause breach and $75,000 for compensatory damages from the tradename infringement. Anderson and his new corporation were additionally liable for $180,000 in punitive damages. The Statzes were permitted to recover attorney fees.

The Wisconsin Court of Appeals affirmed the findings of breach and tradename infringement as well as the damages awarded for contract breach. But it reversed the award of compensatory and punitive damages for tradename infringement. Accordingly, the court remanded the case for a determination of attorney fees associated only with the breach.

In its review, the supreme court found a broader standard for recovery on the infringement claim, citing to Eden Stone Co. v. Oakfield Stone Co., 166 Wis. 2d 105, 479 N.W.2d 557 (Ct. App. 1991). The court reasoned that “‘the nature of the tort and the circumstances of the case’ make precise determinations of damages impossible.” Consequently, the court held that proof of damages “need only be proved with reasonable, not absolute, certainty.” The court affirmed the jury’s compensatory award based on the purchase price of the goodwill and the value of the noncompetition clause as well as testimony from customer and vendors frustrated by the infringement.

After reinstating the compensatory award, the court affirmed the punitive damages largely on the strength of Anderson’s testimony that he “chose to use the name Anderson Marine, LLC, because he knew it would be familiar to his potential customers.”

The supreme court rejected Anderson’s argument that the sales contract provision governing attorney fees excluded non-contract claims such as tradename infringement. The court emphasized the contract language urging an interpretation giving its terms “the broadest, lawful and enforceable scope permissible.” Moreover, the court reasoned that the infringement claim is an action concerning the contract because the contract was the instrument transferring ownership of the tradename. This rationale supported recovery of attorney fees incurred through the trial, but not to the costs of the appeals because that issue was not properly considered below.

By Alex De Grand, Legal Writer, State Bar of Wisconsin