It has been a long and arduous journey for the “Cars for Kids” trademark infringement case spanning almost ten years and two appeals.
America Can! Cars for Kids and Kars 4 Kids are Non-Profit Organizations that sell donated vehicles to fund children’s programs. America Can! Cars for Kids began receiving donations in the late 1980s and began using the mark “Cars for Kids” in advertising campaigns in the early 1990s. Kars 4 Kids was founded in 1995, and it has used its marks in its advertising since 1997.
In 2003, Cars for Kids noticed Kars 4 Kids’ advertisements and sent a cease and desist letter, asserting Cars for Kids’ rights to the “Cars for Kids” trademark in Texas. After receiving that letter, Kars 4 Kids continued advertising in Texas unbeknownst to Cars for Kids. In 2011, Kars 4 Kids procured the URL www.carsforkids.com, which it used to solicit donations. Cars for Kids again began seeing Kars 4 Kids advertisements and, sent Kars 4 Kids another cease and desist letter in 2013, alleging that Kars 4 Kids was unlawfully using “KARS 4 KIDS” in Texas. Kars 4 Kids Inc. v. Am. Can!, No. 20-2813, 5-6 (3d Cir. Aug. 10, 2021).
In 2014, Kars 4 Kids sued Cars for Kids in District Court in New Jersey, bringing federal and state trademark infringement, unfair competition, and trademark dilution claims, and seeking equitable relief. In 2015, Cars for Kids filed suit in the Northern District of Texas, asserting the same claims and seeking cancelation of Kars 4 Kids’ trademark “1-877-KARS-4-KIDS”, financial compensation, and a nationwide injunction prohibiting Kars 4 Kids from using the mark. Id. at 6. The cases were consolidated into a single case in the District Court for the District of New Jersey and proceeded to trial.
At trial the jury then found that Cars for Kids had trademark rights and that Kars 4 Kids willfully infringed those rights in Texas. The jury also found neither party proved their trademark dilution claims and returned no verdict on any state law claim. Id. at 7. The Court then held a bench trial on the equitable claims and remedies. The District Court held that the defense of laches did not apply, finding Cars for Kids did not see Kars 4 Kids’ advertisements in Texas from 2004 to 2011 and that Kars 4 Kids seemed to have “pulled back their advertising” following Cars for Kids’ cease and desist letter. Kars 4 Kids Inc. v. America Can!,No. 3:14-cv-7770, 2020 WL 1550804, at 4 (D.N.J. Apr. 1 2020). The District Court found that this lack of advertising lulled Cars for Kids into a passive position until 2011 and precluded a finding of inexcusable delay. Id. The District Court also found that Kars 4 Kids tried to “unscrupulously apply” laches “[b]y waiting to tee-up its laches defense until the remedy stage after litigating for four years.” Id. After concluding that laches did not apply, the District Court ordered Kars 4 Kids to disgorge its profits in Texas. To arrive at the disgorgement amount, the District Court examined Kars 4 Kids’ gross and net revenues from the donations generated by the sale of vehicles originating from Texas for the years 2008-2019. Id. at 5. The District Court deducted Texas-specific advertising expenses, national advertising expenses, and expenses related to compensation and office expenses, and ultimately ordered Kars 4 Kids to disgorge $10,637,135. Id. at 7. The District Court declined to award enhanced monetary relief. The District Court enjoined Kars 4 Kids from using its mark in Texas and from using www.carsforkids.com, but declined to cancel Kars 4 Kids’ registered mark 1-877-Kars-4-Kids. At this time, Kars 4 Kids renewed its motion for judgment as a matter of law under Rule 50(b), arguing, among other things, that Cars for Kids’s trademark is invalid. The District Court held that Kars 4 Kids preserved its invalidity argument; however, the District Court ruled there was sufficient evidence from which the jury could have found the mark was either distinctive, or that it established secondary meaning and ordered Kars 4 Kids to disgorge $10,637,135. Kars 4 Kids appealed to the United States Court of Appeals for the Third Circuit and Cars for Kids counter appealed. Kars 4 Kids Inc. v. Am. Can!, No. 20-2813, 7-13 (3d Cir. Aug. 10, 2021).
The Court of Appeals for the Third Circuit reviewed the case and determined that Cars for Kids owned its unregistered trademark “Cars for Kids” and concluded that Kars 4 Kids failed to preserve its challenge to the validity of that mark. As a result, Kars 4 Kids’ effort to overturn the jury’s liability verdict failed. The Court of Appeals concluded that when the District Court declined to apply laches and ordered Kars 4 Kids to disgorge profits tied to its Texas activities it did not address all the factors necessary to evaluate whether equity supported disgorging the infringer’s profits and thus vacated the disgorgement order and remanded for the District Court to apply the remaining factors.
Upon remand, the District Court reviewed both laches and the Banjo Buddies factors to evaluate whether equity supported disgorging the infringer’s profits and how that affects the monetary judgment. The District Court concluded that the laches defense remained inapplicable, and after weighing the equitable factors from Banjo Buddies, determined that an award of profits was still appropriate. During the review, the District Court found some donation transactions of Kars 4 Kids may have occurred in Texas in a non-infringing manner and thus the monetary judgment required a revision. The District Court concluded there was evidence to support a finding of infringement from 2013 through 2019; however, there was insufficient evidence to support a finding of infringement from 2008 to 2012. The Kars 4 Kids Inc. v. Am. Can!, No. 3:14-CV-7770-PGS-LHG, 2022 WL 2106495, at 24 (D.N.J. June 10, 2022). As such, the District Court amended the monetary judgment to remove the disgorged net profits from 2008 to 2012 and ultimately ordered Kars 4 Kids to disgorge $7,852,392. Kars 4 Kids again appealed the verdict to the United States Court of Appeals for the Third Circuit.
It has been a long and arduous journey for the “Cars for Kids” trademark infringement case spanning almost ten years and two appeals. With the United States Court of Appeals for the Third Circuit scheduling oral arguments for the second week of December 2023, we are hopeful that the Court will interpret the case favorably and bring this lengthy dispute to a close.
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