PODS wins largest corrective advertising damages ever against U-Haul, settles for $41.4 million

On Tuesday, October 11th, Clearwater, FL-based storage company PODS and Phoenix, AZ-based moving company U-Haul entered a settlement which ended a trademark infringement suit first filed in 2012. The $41.4 million settlement ends a legal clash that had previously led to the largest damages award for corrective advertising ever. The jury verdict was entered in the U.S. District Court for the Middle District of Florida (M.D. Fla.) and the settlement ends an appeal filed by U-Haul in the U.S. Court of Appeals for the Eleventh Circuit (11th Cir.).

PODS first brought suit against U-Haul over the use of the word “pod” and “pods” in content advertising U-Haul’s products and services. U-Haul’s use of those words are related to the company’s U-Box container division of products. Initially, U-Haul marketed U-Boxes as containers, but PODS alleged that U-Haul started to market the containers as “U-Box pods” after its website was revamped in 2012. By the time of the trial, PODS was able to identify more than 600,000 uses of “pod” and “pods” on U-Haul’s website.

The $60.7 million jury verdict handed down in the case during 2014 included a $15.7 million award for disgorged profits. According to a client release from Stroock & Stroock & Lavan, PODS’ counsel in this case, U-Haul had initially claimed that it had made no money on its U-Box container business and had no profits to disgorge, but PODS’ counsel was able to argue otherwise. A Florida federal judge tacked on an additional $4.9 million to the jury verdict last August, an award granted to PODS for prejudgment and postjudgment interest costs.

The major part of the jury verdict award, however, was for corrective advertising, and it’s here where this trademark infringement case stands apart from the rest of the legal landscape. $45 million of the $60.7 million verdict was awarded for corrective advertising, a type of damage awarded in trademark infringement cases which represents the amount of money it would take to run an advertising campaign which would correct a misimpression made in the consumer’s mind because of false advertising.

“I am not aware of any award for corrective advertising that comes anywhere close to the award by this jury,” said Charles Cantine, a partner at the Stroock firm. “Most trademark cases are aimed at getting an injunction to get a defendant to stop doing what they’re doing. Any damages in a trademark case are a little out of the norm.” Cantine added that of the handful of trademark infringement cases that resulted in awards for corrective advertising of which he was aware, damages for corrective advertising were typically in the hundreds of thousands to low millions in terms of dollar amounts. “It’s probably an order of magnitude larger than any previous trademark action in which corrective advertising damages were awarded,” Cantine said.

In this case, PODS’ counsel had to develop a method for determining an appropriate amount for corrective advertising based on the search-engine marketing environment in which the misleading advertising took place. Stroock’s client release notes that, up to this case, there was no clear established methodology for determining corrective advertising campaigns involving search engines. “Generally, the methodology for corrective advertising is to identify the universe of people who have received a misimpression, which is essentially the infringing act,” Cantine said. “Our task was to find out how many unique visitors there were to that website at the start of the infringement up to the time of trial.”

Working with a search engine marketing expert and relying on data from third-party sources, PODS’ counsel was able to determine that 113 million unique visitors had received a misimpression over U-Haul’s use of the word “pod.” According to Cantine, U-Haul’s expert witness agreed with this estimate on the number of people who visited U-Haul’s website and saw the improper use of PODS’ trademark.

“The next aspect of corrective marketing campaign is, once you know the universe, you have to figure out a marketing plan of how you’re going to reach those people with some sort of marketing unit,” Cantine said. “You need to figure out what type of advertising you want to reach out to those people to re-educate them and how much that is going to cost.” Stroock was able to develop such a marketing plan, with the help of a marketing expert from New York University’s marketing department, which PODS presented at trial as an adequate plan for correcting the misimpressions caused by U-Haul’s trademark infringement online. U-Haul agreed with the methodology but argued against the amount of the corrective advertising damages, yet the jury returned the largest corrective advertising award in history.

Part of the corrective advertising campaign developed by PODS’ counsel and the marketing expert relied on the costs of running a Google AdWords campaign, which Stroock found to be a viable avenue for corrective advertising based upon how the misimpressions were formed in the minds of consumers. “In this particular case, a lot of the misimpressions were formed by people searching for ‘pods’ in the Google search engine, by way of example, and were misdirected to U-Haul’s website,” Cantine said.

Although the corrective advertising damages award is derived from an accounting of the costs that would be required to hold an effective re-education marketing campaign, there is no requirement in the law that PODS must use that money on such a campaign. “If PODS decides that the best way to spend this money is to implement a corrective advertising campaign, there’s no doubt they’ll do that,” Cantine said. “There’s nothing in the jury verdict or the final judgment that mandates how PODS must spend the money.”

One important aspect of the jury verdict which is upheld in the recent settlement is the broad permanent injunction preventing U-Haul from the use of the word “pod” or “pods.” U-Haul also agreed not to directly or indirectly challenge the validity of PODS’ trademarks related to the use of these words. Cantine certainly didn’t mince words when considering what the settlement means for PODS. “In the end, I don’t think that there’s any way to look at the outcome as anything other than a complete victory for PODS.”