Facts

Falcon Stainless Inc. sued Rino Companies, Inc., John Novello, Harry Rieger, and South Sea Metals Inc. alleging trademark infringement, Lanham Act violations, product disparagement and unfair competition in regards to the alleged copying of Falcon's stainless steel flexible water connectors.

PLAINTIFF'S CONTENTIONS:
Plaintiff contended that, operating as Rino Companies Inc., two former sales representatives for plaintiff Falcon Stainless Inc., John Novello and Harry Rieger, took Falcon's sample stainless steel flexible water connectors and had them copied in China to sell in the United States in direct competition with Falcon.

Plaintiff contended that Rino enlisted South Sea Metals Inc. to copy Falcon's connector, beating Falcon's prices by using thinner, non-compliant steel. Although Rino made its connectors out of thinner steel that did not meet the applicable ASME standards for plumbing products, Rino falsely advertised the connectors as compliant with the ASME standards. Rino also copied Falcon's parts stamp--Falcon's was a diamond with an "F" in the middle and Rino's was a diamond with an "S" in the middle--and parts mark--Falcon's parts mark started with "SWC" whereas Rino's started with an "SWF"--to create customer confusion at every point of sale, including but not limited to product listings, invoicing systems and on the connectors themselves. Rino also falsely advertised that its connectors flowed water faster when they, in fact, did not.

Plaintiff contended that as a result of defendants' trademark infringement, Lanham Act violations, product disparagement and unfair competition, defendants caused Falcon $1.1 million in lost profits.

DEFENDANTS' CONTENTIONS:
Defendants contended at trial that the connectors imported by South Sea for Rino met all applicable ASME standards, that any copying was perfectly legal since Falcon had no patent for the product, that there were no valid and enforceable trademarks infringed, that no false advertising occurred, and that Falcon was itself guilty of unclean hands based because of its own sale of connectors made from thinner steel and its own false advertising.

Settlement Discussions

Plaintiff initially demanded $3.5 million to settle; defendants jointly offered $100,000, and there was no counter. Plaintiff later reduced its demand to a "policy limits" demand of $1 million to Rino, Rieger and Novello, and a "policy limits" demand of $800,000 to South Sea. There was no counter.

Result

On the verdict form, the jury fixed the amount of money damages owed plaintiff as $1.1 million, and allocated that damage award 50 percent to Rino ($550,000), 10% to South Sea ($110,000), 20 percent to John Novello ($220,000) and 20 percent to Harry Rieger ($220,000). The jury found that Rino's conduct was willful, but that the conduct of South Sea, Novello and Rieger was not willful. In a handwritten note on the verdict form, the jury also urged that Rino be prevented from using the infringing stamp and parts marks.

Other Information

The court will hear Falcon's motion for Enhancement of Damages, Prejudgment Interest and Permanent Injunction and South Sea's Renewed Motion for Judgment as a Matter of Law on May 20, 2011.

Deliberation

five days

Length

four weeks