Cesari S.R.L. v. Peju Province Winery L.P.

Background

Cesari sued Peju Province Winery L.P., Peju Family Operating Partnership L.P., and Peju Province Corporation in a trademark dispute involving the LIANO and LIANA marks. At this stage, Cesari was seeking disgorgement, meaning an award based on defendants’ profits. Defendants Peju Province Winery L.P. and Peju Family Operating Partnership L.P. asked for permission to serve an expert report to pursue an advice-of-counsel defense. Their proposed defense relied on legal advice they said they received from former trademark counsel Scott Gerien beginning around January 2016.

Defendants argued that the proposed expert testimony would not concern liability but would concern willfulness, which they said could help reduce the amount of profits awarded. The court asked defendants to provide legal authority explaining how the defense would affect the remaining profits issue and to make an offer of proof describing the proposed evidence. Cesari opposed the request. Defendants also requested oral argument.

Court’s Analysis

The court noted that defendants cited no authority from the Second Circuit permitting an advice-of-counsel defense to reduce profits at the disgorgement stage of a trademark case. Under 15 U.S.C. § 1117(a), a plaintiff must prove the defendant’s sales, while the defendant must prove claimed costs or deductions. The court also noted that the Supreme Court has held that willfulness is not a prerequisite to awarding profits, although a defendant’s mental state remains an important consideration in deciding whether a profits award is appropriate.

The court concluded that the relevant good-faith issue had already been resolved in its August 3, 2022 summary-judgment ruling. In that ruling, the court found that Peju did not use the LIANA mark in good faith. The cited conduct included continuing to use the mark despite knowledge of Cesari’s earlier registered trademark, Cesari’s opposition, and a Trademark Trial and Appeal Board ruling that Peju’s mark was likely to cause confusion. The court also found that Peju continued using the LIANA brand after receiving later notice of Cesari’s mark and related objections, and stopped using the brand only in July 2018.

The court rejected defendants’ assertion that the earlier finding rested on an undeveloped record. It stated that the earlier decision reflected defendants’ consultation with Gerien and was also supported by other conduct unrelated to his advice. The court further concluded that, even if expert testimony might otherwise be appropriate, defendants’ offer of proof identified no proposed testimony that could not be provided by fact witnesses or that would improperly intrude on the court’s role as the ultimate decision maker.

Disposition

The court denied defendants’ application for leave to serve an expert report to pursue an advice-of-counsel defense. The court also denied defendants’ request for oral argument because the written submissions provided sufficient information to resolve the dispute. The opinion did not state that either request was denied with or without prejudice.