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And the Award for Most Unusual Trademark Lawsuit Goes to.....

With the arrival of the Academy Awards, many in Hollywood have been obsessing about final preparations for what they're going to wear as they step out of their limousines and walk up the iconic "red carpet" or, better yet, what they're going to say in accepting an award (before being escorted off stage for being too longwinded). Others, namely highly-paid Los Angeles trademark attorneys, are filing infringement lawsuits.

Recently, the Academy of Motion Picture Arts and Sciences filed a lawsuit alleging trademark infringement against Distinctive Assets, a marketing business that specializes in placing goods and services in the hands of celebrities just long enough for their owners to derive a moment of fame by association. Distinctive Assets accomplishes this feat by arranging for celebrities who attend events such as the Academy Awards to receive gift bags containing allegedly valuable, often bizarre "gifts" as a consequence of being nominated for a major award such as an OscarĀ®.

In years past, the Academy has authorized (or impliedly assented to such gifts for nominees as an added bonus for those in attendance), but in the case of Distinctive Assets, no such license or other authority has ever been granted (at least according to the complaint on file in Los Angeles County). The current iteration of the gift bag purportedly contains high-end items and has been promoted as "Everyone Wins Nominee Gift Bags in Honor of the OscarsĀ®". Further, the complaint alleges that Distinctive Assets has even used the hashtag "#OscarGiftBag" to promote the gift bags and as a means of drawing attention to the contents and encouraging companies to contribute items for inclusion in the bags. Such usage may also constitute "false association" and is another allegation made by the Academy.

In an effort to trigger punitive damages, the complaint also willful infringement by Distinctive Assets and makes reference to a February 2015 "cease and desist" letter issued by the Academy to Distinctive Assets in which the Academy warned Distinctive Assets about the infringement and requesting the use of express disclaimers disavowing any affiliation between the gift bags and the Academy. Apparently, Distinctive Assets chose to ignore the demand.

Instead, as set forth in the federal court complaint,

"Distinctive Assets' continued use of the Academy's trademarks not only infringes the Academy's trademarks, but it is also likely to dilute the distinctiveness of the Academy's famous trademarks and tarnish their goodwill...Press about the 2016 gift bags has focused on both the less-than-wholesome nature of some of the products contained in the bags, which purportedly include a $250 marijuana vaporizer, a $1,900 "vampire breast lift," skin treatments by Park Avenue plastic surgeons valued at more than $5,500, a $250 sex toy, and $275 Swiss-made toilet paper, and the unseemliness of giving such high value gifts, including trips costing tens of thousands of dollars, to an elite group of celebrities."

The total value of this year's gift bags is pegged at about $200,000.

Why It Matters. If the Academy is able to prove willful trademark infringement, it may be able to recover monetary damages meant to punish Distinctive Assets. Under federal law, namely the Lanham Act, punitive damages are not available as a remedy for infringement of federally registered marks. Section 35(a) of the Act expressly states that damages "shall constitute compensation and not a penalty." Federal courts have uniformly interpreted this provision to mean that punitive damages are unavailable under the Act. However, Section 35(a) of the Act allows courts to enter a judgment for amounts above actual damages and above actual profits. The increased damages provision, although deemed compensatory, enables the court to punish a wrongdoer for its willful misconduct. As well, punitive damages may be available for willful trademark infringement under California (and, possibly, other state) trademark law.

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