Case 3:08-cv-00776-G Document 118 Filed 09/29/09 Page 1 of 25 PageID 4509 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION MARY KAY, INC., ) ) Plaintiff, ) ) CIVIL ACTION NO. VS. ) ) 3:08-CV-0776-G AMY L. WEBER, ET AL., ) ) ECF Defendants. ) MEMORANDUM OPINION AND ORDER Before the court is the motion of the plaintiff, Mary Kay, Inc. (“Mary Kay”), for entry of judgment and for a permanent injunction. For the reasons discussed below, the motion for judgment is granted. The motion for permanent injunction is granted in part and denied in part. I. BACKGROUND The court has laid out the facts of this case in several previous opinions. The following is an excerpt of the facts as discussed in the court’s memorandum opinion and order on the defendants’ motion for summary judgment. Case 3:08-cv-00776-G Document 118 Filed 09/29/09 Page 2 of 25 PageID 4510 The plaintiff, Mary Kay, is a manufacturer and wholesale distributor of cosmetics, toiletries, and skin care products. Defendants’ Motion for Summary Judgment and Brief in Support (“Motion for Summary Judgment”) at 2. On January 27, 2000, Amy Weber, one of the defendants, became an Independent Beauty Consultant (“IBC”) for Mary Kay. Id. An IBC is an independent sales representative who sells Mary Kay products to consumers at whatever price she chooses. Id. In September of 2004, Amy Weber placed the last order that qualified her as an IBC. Although she was no longer purchasing new Mary Kay products, Amy still had a large inventory of products she had been unable to sell as an active IBC. To dispose of her “leftovers,” the Webers began selling the products via eBay, Inc. (“eBay”) in early 2005. Id. After the couple sold all their inventory, they purchased more Mary Kay products through eBay at a low price, and later re-sold those products at higher prices. As business grew, the Webers began to receive inquiries from individuals who wished to sell them Mary Kay products. Id. The Webers decided to set up an eBay store called “marykay1stop” to sell all the Mary Kay products they were amassing. Id. at 3. On approximately June 16, 2005, Mary Kay received an e-mail informing it of the presence of marykay1stop. Id. As a result, Mary Kay sent Amy Weber a letter which said that by offering Mary Kay products on eBay, she was in violation of her - 2 - Case 3:08-cv-00776-G Document 118 Filed 09/29/09 Page 3 of 25 PageID 4511 IBC agreement. Id. After receiving no response, Mary Kay sent a second letter on July 29, 2005. Id. Again, Mary Kay received no response. On August 19, 2005, Mary Kay terminated the IBC agreement between Amy Weber and Mary Kay. Id. On November 3, 2005, Mary Kay contacted eBay and complained of the Webers’ use of the Mary Kay name in marykay1stop. Id. Mary Kay sent a letter to Scott Weber demanding that he stop using Mary Kay’s name in the marykay1stop store. Id. at 3- 4. In response to this letter, Scott Weber contacted Nancy Pike (“Pike”), a paralegal in the Mary Kay legal department. Id. at 4. The Webers claim Pike told Scott that he could continue running the online store so long as he changed the name of the store so as to not include Mary Kay trademarks and removed all photographs copyrighted by Mary Kay. Id. As a result of the conversation with Pike, the Webers changed the name of the store to Touch of Pink and created touchofpinkcosmetics.com, independent of the eBay store. Id. The couple also removed all copyrighted Mary Kay images from their websites. Id. By doing so, the Webers complied with all of Mary Kay’s requests. Id. Today, the website touchofpinkcosmetics.com, and the Touch of Pink eBay store continue to sell Mary Kay products. The websites use the Mary Kay name. All the products sold by the defendants were purchased from current or former Mary Kay IBCs. The defendants do not alter the products they sell in any way. Id. - 3 - Case 3:08-cv-00776-G Document 118 Filed 09/29/09 Page 4 of 25 PageID 4512 The court granted summary judgment in favor of the defendants on several of Mary Kay’s claims. The court denied summary judgment, however, on the claims of (1) unfair competition under the Lanham Act, (2) passing off under the Lanham Act, (3) trademark infringement under the Lanham Act, (4) unfair competition under Texas common law, and (5) trademark infringement under Texas common law. These five claims were submitted to a jury. The jury found in favor of Mary Kay on all claims. The jury also found that the Webers had not demonstrated that they were protected from liability by the affirmative defenses of laches, the first sale doctrine, and the fair use doctrine. II. ANALYSIS Based on the jury’s verdict, the plaintiff now seeks an entry of judgment for the amount of $1,139,962.00, plus post-judgment interest. Mary Kay Inc.’s Motion for Entry of Judgment and for Permanent Injunction (“Motion”) at 1. In addition, Mary Kay asks that the court enter a permanent injunction. Id. The court will discuss these two requests separately. A. Motion for Judgment Mary Kay seeks entry of judgment for the amount of $1,139,962.00, plus post-judgment interest. Id. Both parties agree that this amount represents the defendants’ pre-tax net profit for the years 2005 through 2008. Defendants’ Response to Plaintiff’s Motion for Judgment and for Permanent Injunction - 4 - Case 3:08-cv-00776-G Document 118 Filed 09/29/09 Page 5 of 25 PageID 4513 (“Response”) at 21 (noting that the parties had stipulated to this amount). The defendants, however, argue that the law does not entitle Mary Kay to this amount. Id. at 19. According to 15 U.S.C. § 1117(a), a successful plaintiff in a trademark infringement case such as this one is entitled to the defendant’s profits, “subject to the principles of equity.” The defendants contend that here, “[e]quity weighs in favor of no profits being awarded.” Response at 19. The Fifth Circuit has outlined six factors for courts or juries to take into account when deciding whether equity weighs in favor of awarding the profits to the plaintiff. Quick Technologies, Inc. v. Sage Group PLC, 313 F.3d 338, 349 (5th Cir. 2002). This court instructed the jury to take these factors into account when deciding whether to award Mary Kay the defendants’ profits. Court’s Instructions to the Jury at 21-22. The Webers now urge the court to reconsider the jury’s evaluation of these factors, arguing that “no reasonable jury, under the facts presented, could find that an accounting was appropriate.” Response at 19. The defendants asserted an identical argument in their renewed motion for judgment as a matter of law. The court has already considered this argument in ruling on that motion and concluded that there was sufficient evidence presented at trial to support the jury’s award of the defendants’ profits to Mary Kay. Memorandum Opinion and Order 12-15. The court is not persuaded to reconsider that ruling on this motion. - 5 - Case 3:08-cv-00776-G Document 118 Filed 09/29/09 Page 6 of 25 PageID 4514 The defendants also imply that even if there were sufficient evidence to support the jury’s award of profits, the court should nonetheless reconsider this issue because “the ultimate decision of how much, if any, award is ultimately left to the discretion of the Court.” Response at 19. The Webers assert that the jury’s award of an accounting of the profits “is guidance only.” Id. In essence, the defendants urge the court to ignore the jury’s verdict on the question of profits and apply the six Quick Technologies factors anew. The court cannot do so. In Quick Technologies, the Fifth Circuit made clear that where the jury is the fact-finder, it should be the one to consider the six factors in determining whether a plaintiff is entitled to a defendant’s profits. 313 F.3d at 349-50 (“In order to determine whether an accounting is appropriate, the court, or the jury in this case, considers the [six] factors.”) (emphasis added). Here, the jury has done so and found in favor of awarding Mary Kay the defendants’ profits. Thus, the principles of equity do not weigh against Mary Kay receiving the defendants’ profits. Mary Kay is therefore entitled to an accounting of the defendants’ profits under 15 U.S.C. § 1117(a). The only remaining issue is whether Mary Kay is entitled to the pre-tax amount of the defendants’ profits. In L.P. Larson, Jr., Company v. Wm. Wrigley, Jr., Company, 277 U.S. 97, 99-100 (1928), the Supreme Court held that where a trademark infringer engaged in “conscious and deliberate wrongdoing,” the infringer may not deduct its federal income taxes from the profits made in calculating the - 6 - Case 3:08-cv-00776-G Document 118 Filed 09/29/09 Page 7 of 25 PageID 4515 amount to which the plaintiff is entitled. Here, the jury held that the defendants had acted willfully and intentionally. Court’s Instructions to the Jury at 24, 26, 28. The defendants do not contest that L.P. Larson applies here. Instead, they contend only that “a showing of willful infringement does not necessarily justify an award of profits if the defendant is adequately deterred from future infringement.” Response at 21.