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Max Rack, Inc. v. Core Health & Fitness, LLC

Trademarks allow consumers to distinguish one product from another quickly and cheaply. But they could not perform this signaling function if a trademark owner’s competitors could freely use the owner’s mark to sell their (potentially inferior) goods. So the Lanham Act has long prohibited trademark infringement and given trademark owners a variety of remedies to combat it. See 15 U.S.C. §§ 1114(1), 1117(a), 1125(a)(1)(A). This case raises several challenging questions under the Lanham Act.

Steve Skilken, the owner of Max Rack, Inc., invented a piece of gym equipment that he named the “Max Rack.” For years, his company sold Max Racks through a licensing agreement with Core Health & Fitness, LLC. When Max Rack’s last patent expired, however, Core Health decided to compete against Max Rack by selling an identical machine under a new name—the “Freedom Rack.” Max Rack alleged that Core Health committed two types of infringement during its transition to the Freedom Rack: it continued to sell “Max Racks” without authorization, and it attempted to sell Freedom Racks by free riding off the “Max Rack” name. A jury agreed, awarding Max Rack $1 million in damages and $250,000 in Core Health’s profits. The district court upheld the jury’s liability finding, doubled its profits award to $500,000, and granted attorney’s fees to Max Rack. But the court overturned Max Rack’s damages award. Both sides have appealed, and we must address several liability and remedy issues. All told, we affirm in part and reverse in part.

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