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Choice Hotels International, Inc. v. A Royal Touch Hospitality, LLC (NC)

United States District Court, W.D. Virginia, Roanoke Division

September 30, 2019

CHOICE HOTELS INTERNATIONAL, INC., Plaintiff,
v.
A ROYAL TOUCH HOSPITALITY, LLC (NC), A ROYAL TOUCH HOSPITALITY, LLC (VA), UJAS B. PATEL and KETKI PATEL, Defendants.

          MEMORANDUM OPINION

          Elizabeth K. Dillon, United States District Judge.

         This matter is before the court for a determination of damages to be awarded Choice Hotels International, Inc. (Choice Hotels or Choice) in this trademark infringement action. For the reasons stated below, the court will award $2, 426, 936.96 in lost profits, $618, 868.32 in actual damages, and $575.00 in costs. The court will also award $47, 687.57 in attorneys’ fees.

         I. BACKGROUND

         Choice alleges that A Royal Touch Hospitality, LLC (NC) (A Royal Touch (NC)), Ujas B. Patel, and Ketki Patel (the Franchisee Defendants) continued using Choice’s trademarks after their franchise agreement with Choice was terminated. Choice also alleges that A Royal Touch Hospitality, LLC (VA) (A Royal Touch (VA)), a related non-franchisee, made unauthorized use of Choice’s marks. Choice moved for summary judgment. (Pl.’s Mot. for Summ. J., Dkt. No. 36.) This motion was unopposed.

         On August 26, 2019, the court issued a Memorandum Opinion and an Order granting in part and taking under advisement in part Choice’s motion for summary judgment. (See 8/26/19 Mem. Op., Dkt. No. 41; 8/26/19 Order, Dkt. No. 42.) The court determined that Choice was entitled to judgment as a matter of law on its claims for federal trademark infringement, federal unfair competition, and common law trademark infringement. See 2019 WL 4017247, at **3–6 (W.D. Va. Aug. 26, 2019). The court also issued a permanent injunction prohibiting defendants from further use of the QUALITY® marks. (8/26/19 Order.) Regarding damages, the court requested further briefing from Choice on the Synergistic factors, “six nonexclusive factors that should be considered when awarding damages or a defendant’s profits.” 2019 WL 4017247, at *7. The court also found that Choice was entitled to an award of attorneys’ fees, and invited Choice to submit an appropriate lodestar petition together with its supplemental briefing on damages. Id. at *8. Choice submitted its supplemental brief on damages on September 25, 2019, and its lodestar petition on September 26, 2019, both of which are now before the court for its consideration.

         II. DISCUSSION

         A. Synergistic Factors

         The Fourth Circuit has identified six nonexclusive factors that should be considered when awarding damages under the Lanham Act:

(1) whether the defendant had the intent to confuse or deceive, (2) whether sales have been diverted, (3) the adequacy of other remedies, (4) any unreasonable delay by the plaintiff in asserting his rights, (5) the public interest in making the misconduct unprofitable, and (6) whether it is a case of palming off.

Synergistic Int’l, LLC v. Korman, 470 F.3d 162, 175 (4th Cir. 2006). The court addresses each factor in turn.

         1. Intent to confuse or deceive

         The first Synergistic factor “addresses whether there has been a willful infringement on the trademark rights of the plaintiff, or whether the defendant has acted in bad faith.” Id. As the court stated in its analysis of the likelihood of confusion factors,

A Royal Touch (VA) used Choice’s marks despite never being a party to a franchise. This is clear evidence of intent to adopt Choice’s marks. The other three defendants (the Franchisee Defendants) continued using Choice’s marks after the Franchise Agreement/Reinstatement Agreement was terminated. This is also clear evidence of intent to adopt the marks.

2019 WL 4017247, at *5. This factor therefore weighs in favor of a damages award.

         2. Diversion of sales

         This factor “involves the issue of whether the plaintiff lost sales as a result of the defendant’s trademark infringement activities, and the extent to which the plaintiff had entered the market area where the infringement occurred.” Synergistic, 470 F.3d at 175. Defendants were franchisees of Choice Hotels, and their continued unauthorized use of Choice’s marks after the Franchise Agreement was terminated occurred in the same market area––indeed the same exact location. Also, under the Franchise Agreement, defendants were required to pay monthly fees in the amount of 8.5% of the preceding month’s gross room revenues. (See Dkt. No. 1-15, ¶ 4(b).) Therefore, this factor also weighs in favor of an award of damages.

         3. Adequacy of other remedies

          This factor “addresses whether another remedy, such as an injunction, might more appropriately correct any injury the plaintiff suffered from the defendant’s infringement activities.” Synergistic, 470 F.3d at 176. The court has issued a permanent injunction in this case, but injunctive relief does not compensate Choice for more than two years of unauthorized use of its marks. The court also notes that it ordered defendants to submit a sworn statement of compliance with the injunction order within thirty days, but no compliance statement has been filed, further demonstrating the inadequacy of the injunction remedy. This factor weighs in favor of a damages award.

         4. Unreasonable delay

         This factor looks to whether there was “any unreasonable delay by the plaintiff in asserting his rights.” Id. The record reflects that Choice acted promptly in asserting its trademark rights, for example, by terminating the Reinstatement Agreement in 2015, issuing a Notice of Service Mark Infringement in 2016, conducting a site inspection of the subject property in 2017, and ultimately, bringing this lawsuit in 2017. See Choice Hotels, 2019 WL 4017247, at *2. The court does not consider this to be a ‚Äúsubstantial delay between the commencement of ...


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