USDC IN/ND case 2:23-cv-00039-JD-JPK document 26 filed 06/02/23 page 1 of 7

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION

ALBERT S DIAMOND JEWELERS, INC. )

)
Plaintiff, )
)
vs. ) CASE NO.: 2:23-CV-39
)
AALAND DIAMOND JEWELERS, LLC )
)
Defendant. )

DEFE DA S MEMORANDUM OF LAW IN SUPPORT

OF MOTION TO BIFURCATE DAMAGES FROM LIABILITY

Defendant, AaLand Diamond Jewelers, LLC, by counsel, David E. Woodward of

Woodward Law Offices, LLP, respectfully submits this Brief in Support of its Motion to Bifurcate

the issue of damages from liability. Both parties and the Court will be saved a great deal of time

if the determination of liability streamlines, or avoids altogether, the need to delve into the complex

damages calculations. Specifically, Defendant moves, pursuant to Rule 42(b) of the Federal Rules

of Civil Procedure, for the Court to exercise its discretion and order separate trials as necessary to

promote convenience, expedition, judicial economy and to prevent juror confusion and avoid

prejudice.

A. The Court has Broad Discretion to Bifurcate Damages from Liability

Federal Rule of Civil Procedure 42(b) provides:

(b) Separate Trials. For convenience, to avoid prejudice, or to expedite

and economize, the court may order a separate trial of one or more separate
issues, claims, crossclaims, counterclaims, or third-party claims. When
ordering a separate trial, the court must preserve any federal right to a jury
trial.
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Fed. R. Civ. P. 42(b). T d c d aa a a c d a

discretion of the trial court. Eaton Corp v. Auburn Gear Inc., No. F 88-80, 1988 WL 273448, at

*1 (N.D. Ind. July 18, 1988) (citations omitted). While separate trials are ordered only in

extenuating circumstances, the bifurcation between liability and damages is not uncommon.

Smith-Walker v. Zielinski, No. IP-01-0343-C-T/K, 2003 WL 21254221 (S.D. Ind. April 29, 2003).

Logically, the existence of liability must be resolved before damages are considered. 9A Fed.

Prac. & Proc. Civ. § 2390 (3d d.). Moreover, the evidence pertinent to the two issues is often

wholly unrelated, and there is no efficiency in trying them together. Id.

In this case, the extenuating circumstances necessitating separate trials are present,

specifically: (1) a need for voluminous documents to resolve damages issues exists; (2) complex

infringement cases exist; and (3) there is a probability defendant will prevail on infringement

issues, thereby eliminating the need to address the issue of damages. Eaton Corp, 1988 WL

273448, (N.D. Ind. July 18, 1988) (bifurcation ordered in patent infringement case); Dart

Industries, Inc v. Complas Industries, Inc., No. IP 75-458-C, 1977 WL 22801, (S.D. Ind. May 13,

1977) (ordering separate damages trial because of complexity of damage issues in a case involving

five counts, including unfair competition; and infringement).

As examined in detail below, the Court should exercise its discretion and separate the

multi-count, multi-party infringement liability issues before addressing the separate and complex

theories of damages for only those claims and parties that survive, if any.

B. Bifurcation is Warranted in this Case

In the present case, Plaintiff filed a three (3) Count Complaint alleging Trademark

Infringement, False Designation of Origin, and Unfair Competition (15 U.S.C. §1125(a)),

Trademark Infringement (Indiana Common Law; Ind. Code §24-2-1-13.5), and Common Law

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Unfair Competition. It is important to note, Plaintiff does not have a federal or state registration

for its mark. To further highlight the necessity of bifurcation, the Plaintiff claims this mark has

b d a a (See Complaint, ¶13), P a a b b

115+ a d (See Complaint, ¶12); a d A b c a a b a current

version of this mark in 2002 (See Complaint, ¶13). Based upon these allegations, the parties will

d Ab a c a 21 a ,b a b a a

as 115+ years.

In the present action, Plaintiff has alleged a violation of an infringing mark under the

Lanham Act (15 U.S.C. §1125) and state law. But the Plaintiff has not applied for, even though in

business for 115+ years, any federal trademark. Requiring the parties to go through extensive

damage discovery and calculations which always requires an expert, is not efficient use of the

a a dC . The determination of liability will turn on fact witnesses and supporting

documents that support or refute P a s claims of trademark infringement (despite neither party

having federal registrations in their respective marks) and proving the elements of the other Counts

alleged.

1. Awards of Monetary Damages for Trademark are Rare, Separate and Complex

The typical relief sought and awarded under the Lanham Act is injunctive relief; the award

of monetary damages is rare. Kenneth L. Port, Trademark Extortion: The End of Trademark Law,

65 Wash. & Lee L. Rev. 585, 622 (2008) (noting that o 5.5% of all Lanham Act cases decided

between 1947 and 2005 obtained any monetary damages). In contrast to the determination of

liability, the task of establishing monetary damages requires separate evidence and the likely the

involvement of expert . P a s request for monetary relief is all-encompassing, reflecting all

the different theories that might be applicable depending on what, if any, liability is established.

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Specifically, P a s seek at least three theories of monetary relief to be fixed in the Cour

discretion for: (i) the D da s gains and profits from infringement; (ii) all damages to

Pa s that have resulted from Defendant s alleged infringement; and (iii) a finding of facts

that deem the case exceptional under the Lanham Act for recovery of attorney fees and costs.

Allowing discovery on all these theories would increase the discovery production for both parties

exponentially, before the required liability/willfulness is established, and with very little likelihood

that any monetary damages would be shown or awarded.

To support an award of monetary damages under the numerous theories pled, Plaintiff will

have the burden of showing customer confusion at D da s store, diverted sales from

Pa s stores, and willfulness. Moreover, the Defendant will have defenses that its profits are

not attributable to the alleged infringement and/or that there are appropriate deductions. Setting a

reasonable lost profits will require expert testimony. The Northern District of Indiana has held

that when complex damages issues involve royalties or lost profits, bifurcation expedites the case

b ca [ ] a b c a ab a b d da ' ac s

a d a a a d a c a da a a d b d ba a c .

Eaton Corp., 1988 WL 27344 at *2.

Given the complexity of establishing liability in this multi-count case, the separate issues

and witnesses required between liability phase and damages stage, and the prerequisite of a specific

liability finding to focus the damages inquiry, bifurcation of the liability trial from the damages

trial will focus, if not eliminate, much of the damage evidence and witnesses in this case where

monetary damages are unlikely.

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2. Bifurcation will Promote Convenience, Expedition and Economy

The interest of efficient judicial administration controls the court's exercise of discretion

on whether to bifurcate, rather than the wishes of one or more of the parties. Eaton Corp., 1988

WL 273448, at *3. Here, bifurcation will promote efficient judicial administration in the form of

judicial convenience, expedition, and economy. Unless liability is established first, the

computation of damages under all these separate and alternative theories, with each theory alleged

against the Defendant, increases the issues to be addressed simultaneously and will inevitably and

unnecessarily lengthen and complicate both discovery and disposition of this case. In fact,

discovery on damages at this juncture would only serve to delay the resolution of the liability

claims.

In addition to the obvious logistical problems involved with producing and managing the

liability claims and damages evidence simultaneously, consideration should also be given to near-

certain jury confusion that will result from this deluge of information. Even if half of P a s

claims survive against the Defendant to trial, the jurors will still have days of testimony regarding

liability for each surviving claim against the Defendant. To add days of complicated testimony on

financial computations, that the jurors likely will never use, would be patently unfair and lead to a

confused verdict. A determination of liability will confirm the evidence needed and efficiently

address the remaining damages issues after the prerequisite liability, if any, is determined.

Finally, in the unlikely event some liability is determined, the parties will be much more

likely to reach a settlement, assessing for themselves the relief that is likely to be awarded based

on the facts thus negating the need for a damages trial at all.

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C. Bifurcation Would Guard Against Undue Prejudice to Both Litigants

Bifurcating liability from damages in this case will not prejudice the Plaintiff. Franklin

Music Co. v. Am. Broad. Companies, Inc., 616 F.2d 528, 538 (3d Cir. 1979) (holding that the

d c c b ca d c a not an abuse of discretion where the case was complex,

involving separate counts alleging state and federal law grounds for recovery, particularly in light

of the absence of demonstrable prejudice). Rather, bifurcation will speed the determination of any

liability, and thereby speed the imposition of the primary relief - injunctive relief without vastly

increasing discovery costs, expert costs, and complexity for the jurors with complicated and

unnecessary evidence. Bifurcation also protects Plaintiff from the risk of jury confusion, by

keeping the focus on the determination of the all-important liability and avoiding needless

testimony.

Conversely, a single trial would greatly and unfairly prejudice the jurors (as discussed

above) and Defendant who would be delayed in contentious discovery and motion practice before

the Court that are unrelated to liability, resulting in the delay of D da s ability to resolve may

of the allegations through dispositive motions and eliminating those issues asserted against the

Defendant for which there is no genuine issue as to any material fact. These dispositive motions

would also reduce, if not eliminate altogether, the issues to be presented to the jury. When a

determination of infringement (or non-infringement) is dispositive, the Court should limit

discovery to those issues. Eaton at *3.

Finally, where the discovery on damages involves the disclosure of confidential financial

information between competitors, even with a protective order, there is a substantial risk of

irreparable harm if disclosed prior to a finding of liability. That serious risk needs to be weighed

against the need to conduct discovery on damages before liability confirms the need or the

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appropriate theory. When weighing the factors of convenience, expedition, and economy, and

considering juror confusion and prejudice, a separate trial to establish liability prior to a trial on

damages, if needed at all, bifurcation is the most equitable and efficient way to administer this

case.

Conclusion

For all the reasons set forth above, the Defendant respectfully requests this Court exercise

its broad discretion and order bifurcation and separate discovery and trial on the issue of liability,

before addressing the separate and complex issues of damages.

Respectfully submitted,

/s/ David E. Woodward

David E. Woodward
Attorney No. 15299-45
200 East 90th Drive
Merrillville, Indiana 46410
Tel. (219) 736-9990
dwoodward@wbbklaw.com
Woodward Law Offices, LLP
Attorneys for Defendant

CERTIFICATE OF SERVICE

THIS IS TO CERTIFY that the undersigned did, this day, electronically filed the foregoing
instrument with the Clerk of the Court using the CM/ECF system which sent notification of such
filing to all parties of record herein.

Dated this 2nd day of June, 2023.

/s/ David E. Woodward

David E. Woodward