By Joshua Gelman, Esq.
The pressure and stress for a business involved in a “Bet the Company” litigation can be palpable. When the result of a litigation can determine a business’s life or death, desperation can lead to poor judgment. In one recent case, the poor judgment of a company’s founder outside of the courtroom led to the company’s undoing in the courtroom.
In Globefill Incorporated v. Elements Spirits, Inc. et al, United States District Court for the Central District of California, Case No. 2:10-cv-02034-CBM-PLA, a trade dress infringement dispute endangered the continued existence of a product line. In that case, a vodka company founded by famous actor/comedian Dan Aykroyd which itself gained notoriety for its Crystal Head Vodka that was bottled in a distinctive clear skull-shaped bottle, sued KAH, a tequila company that bottled its product in a skull-shaped bottle decorated in the in the fashion of the colorful sugar skull associated with the Mexican Day of the Dead holiday. The Globefill commercial litigation has gone on for years and went to trial twice. In sum, Crystal Head claimed that KAH infringed on its distinctive bottle in a manner that was likely to confuse consumers. KAH defended the allegation by stating that it independently created its bottle design and its founder testified that she had not seen the Crystal Head bottle prior to the creation of the KAH bottle. Towards the end of second trial, the boutique law firm representing Crystal Head called to the stand a tattoo artist and sculptor that designed the KAH bottle. The witness testified that after he provided KAH with a prototype bottle, KAH rejected it and then provided him with a Crystal Head bottle to use a starting point with instruction to modify the bottle for KAH’s use.
KAH’s founder’s testimony that she had not seen the Crystal Head prior to the creation of the KAH bottle was further discredited by the witness’s testimony that he had not had any communication with KAH’s founder in almost a decade until she contacted him during the trial and requested they meet so she could pay him $10,000 to make up for non-payment of royalties he had been promised for his design. At that meeting, she discussed her concerns about the trial and asked him to help her identify differences between the KAH and Crystal Head bottles. The witness testified that he was told, “I lied under oath and said that I had never seen the crystal skull bottle, but I handed it to you, the *******, the ***** bottle.”
Litigations sometimes force businesses to have to face bad facts. When involved in a “Bet the Company” litigation, as much as one might wish to turn back time to change things, it is imperative to disclose them to your commercial litigation lawyers. Only then can a strategy be developed to best deal with unfavorable facts. Disclosing those bad facts to a witness while offering money to help get around them is not the best way to bet the company.