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$100M grill judgment against Walmart wasn’t well done

Nearly three years after a federal jury found that Walmart had infringed a competitor’s trademark in marketing its line of barbecue grills, a federal appeals court has determined that the trial didn’t cut the mustard.

The 4th U.S. Circuit Court of Appeals vacated a nearly $100 million judgment against the mega-retailer, saying that the jury had received inadequate instructions.

Variety, a retail chain, owns the trademark “The Backyard,” which it initially used to market lawn and garden equipment but later began applying to grills and grilling supplies. In 2010 Walmart began cooking up names for its own planned private line of grilling supplies, which it labeled “Backyard Grill.” Variety cried fowl and sued in federal court, arguing that lost profits were at steak.

The case went to trial before U.S. District Judge Terrence Boyle in Raleigh in 2018, and was conducted in a manner that was quite rare. The jury was asked whether Walmart had infringed Variety’s trademark. If so, it would then be asked—on an advisory basis, meaning that the jury was asked to give Boyle an opinion that he could then choose to either accept or ignore—whether that infringement was willful. Boyle also promised Walmart that it could appeal, if necessary, from the liability trial before a damages trial was held.

Both sides served up proposed jury instructions on the question of whether any infringement by Walmart was willful, but Boyle passed on both, and declined to define the term “willful” in the trademark context at all. The jury found that Walmart had infringed the mark, and done so willfully, at which point Boyle dismissed the jurors without giving them any further instructions.

Boyle later recalled the same jury for a trial on damages, before giving Walmart a chance to appeal as had been promised. Both sides expressed discomfort with holding a second trial several months later with the same set of jurors, but Boyle had a beef with their concerns, saying that the attorneys were “trying to make a mess out of something I’m trying to make simple.” The jury ultimately awarded Variety $50 million in disgorged profits and $45.5 million in royalties, and Boyle accepted all of the jury’s findings and adopted them in the final award.

Walmart appealed, arguing, among other things, that the jury was improperly instructed on the issue of willfulness. In a unanimous March 29 opinion, Variety Stores Inc. v. Wal-Mart Inc. (VLW 021-2-122), the Fourth Circuit agreed and vacated the jury’s verdict and remanded the case.

Because two of the three judges on the panel found that Walmart had failed to preserve its objection to the instruction—or lack of one, in this case—the appeals court reviewed the instruction only for plain error. But Judge Henry Franklin Floyd, writing for the court, found that Walmart was able to meet even this heavy burden.

Floyd said that “willful” has a particular meeting in the trademark law context distinct from its ordinary meaning. To show that a defendant’s infringement of a mark was willful, the plaintiff must show not just that the infringement was “volitional”—that the defendant willfully affixed the word “Backyard” to a barbecue grill, for instance—but that the defendant acted specifically with the intent to infringe the plaintiff’s trademark.

Without this proper understanding of the crucial term, the jury acted in complete ignorance of fundamentally controlling legal principles, Floyd said, and “the jury’s unmoored finding necessarily prejudiced Walmart and seriously affected the fairness of the subsequent remedies trial.” As such, the Fourth Circuit vacated the jury’s finding that Walmart had acted willfully. It also vacated all findings predicated on it, including the damages award, since willfulness is a potential driver of damages. (Boyle also failed to tell the jurors how willfulness should factor into their damages award, if at all.)

Walmart also argued that the question of willfulness shouldn’t have gone to the jury at all, and it was entitled to a judgment in its favor as a matter of law on that issue. The appeals court disagreed, saying that a reasonable juror, properly instructed, might or might not have found that any infringement was willful. The judges likewise disagreed that Walmart was entitled to summary judgment on the infringement claim, again finding that a reasonable juror could go either way.

This was the Fourth Circuit’s second helping of the infringement issue. Boyle had originally granted Variety summary judgment on infringement, a ruling that the appeals court overturned in 2018. Unlike the ruling three years ago, this most recent ruling is unpublished, meaning that it is not binding precedent in the Fourth Circuit.