This past July, the former Cleveland Indians announced that beginning in the 2022 season, the Major League Baseball (“MLB”) team would assume the name of Cleveland Guardians. While the controversy surrounding changes to the name and logo was due to racism allegations, the new name brought about a different type of issue: a lawsuit.
A roller derby team also named the Cleveland Guardians has sued the MLB team, claiming that the baseball team’s use of the name infringes on their trademark. The roller derby team has used the Guardians name since 2013, has sold team merchandise since 2014, and formally registered the name with the Ohio secretary of state in 2017. Additionally, per the lawsuit, the MLB team had reached out to the roller derby team in June and the roller derby team responded by offering to sell the rights to the name. The MLB team responded with an offer that was rejected by the roller derby team. Interestingly enough, the MLB team filed a trademark in Mauritius for the team logo, as well as two federal trademark applications for exclusive rights to the name. The lawsuit indicates that negotiations are underway.
Although it is unclear how the lawsuit will unfold, it raises some interesting issues regarding potential economic damages:
- Trademark infringement cases often do not make it to the damages phase. Most trademark owners file for a preliminary injunction. If an injunction is granted, damages may not occur because no (or very few) infringing sales are made by the defendant.
- Damages in trademark cases may be based on: (1) defendant’s profits; (2) plaintiff’s lost profits; (3) a reasonable royalty for the use of the trademark or (4) the cost of the action (which may not be insignificant).
- In the lawsuit filed by the roller derby team, they are demanding that the MLB team establish a fund equal to what the MLB team spends on advertising and promotions if it continued using the name. Per the lawsuit, this fund would be used for “corrective advertising.”
- Under the Lanham Act, the roller derby team must prove only the MLB team’s gross sales if seeking damages based on the defendant’s profits. It is then the infringer’s (MLB team) burden to prove the expenses that should be deducted and the apportionment of the profits between the trademarked and non-trademarked elements.
- The roller derby team’s damages could also be measured by its profits lost to the MLB team because of the alleged infringement. However, the MLB team could introduce evidence that any decline in sales was not due to the infringement but caused by other factors (e.g., the economy).
Do you think that the roller derby team has a fighting chance against the MLB team?
POSTSCRIPT: Shortly before “going to press,” the parties announced that the litigation has been resolved – both teams will continue to use the Guardians name. It is not known if there was a payment made to facilitate the resolution of the case.
Article written by:
Keith Hock, CPA, CFF, MAFF, CVA
Director of Forensic & Dispute Advisory Services
Senior, Forensic & Dispute Advisory Services