Sanctions Ordered in Wine Trademark Spat

(CN) - A winemaker that intentionally spoiled evidence in a trademark infringement lawsuit, and then tried to hide its actions, owes monetary sanctions, a federal judge ruled.

The 2011 complaint takes aim at the Crème de Lys brand of wine selected by Diageo Chateau & Estate Wines, the entity responsible for wine "innovations."

Jackson Family Wines claimed in a 2011 complaint that the wine infringes its La Crema brand.

It said Jennifer Josephson was the "conduit" between Diageo's marketing team and Northstar Research Partners LLC, a third-party market research company that was conducting focus groups for the selection of the Crème de Lys brand.

Though some focus group participants had apparently voiced confusion about potential confusion with La Crema, Northstar never included this confusion in its report, and Josephson why.

Citing this communication, Jackson's attorneys at Cooley LLP believed that Diageo might have more relevant documents.

Though Diageo had copied the hard drive of Josephson's work-provided laptop in 2011, Diageo deleted the laptop image in August 2012 and did not tell anyone.

Josephson was identified as a "person with knowledge of defendants' adoption of the Crème de Lys mark" in January 2013, but Jackson said Josephson was absent from Diageo's April 2013 "list of document custodians whose documents defendants had searched, gathered and reviewed."

After Jackson deposed Northstar Executive Vice President Jeffrey Histed, Josephson's contact for the focus group study, Diageo claimed to have discovered a "gap" in its effort to gather documents.

Jackson told the court in San Francisco its suspicions "that defendants' discovery efforts are deficient because defendants failed to produce highly relevant documents that were subsequently produced by third parties," according to the ruling.

Diageo insisted, however, that it "simply cannot be more plain than what Diageo counsel has already told Jackson on several occasions, namely, that Diageo counsel collected every single document that Diageo had in its custodial files for Ms. Josephson," the ruling continues.

Deposition led Jackson to more deficiencies in Diageo's document collection, and it filed a letter for sanctions on Jan. 23, 2014.

U.S. Magistrate Judge Jacqueline Scott Corley found on Feb. 14 that Diageo clearly destroyed the copy of Josephson's hard drive, knowing full well that the information contained on it could potentially be relevant to the case.

"It is undisputed that defendants never issued a litigation hold on Josephson's documents and never spoke to Josephson about preserving her documents even after she returned to the company in October 2011," Corley wrote. "The court concludes that defendants' destruction of Josephson's files was willful and in conscious disregard of their duty to preserve her documents."

In addition to as-yet unspecified monetary sanctions, Diageo NA must face an adverse inference instruction. This tells the jury that they may conclude the destroyed evidence would have been adverse to Diageo while adopting the Jackson Family Wines' interpretation of what the documents would have said.

"Defendants consistently maintained in communications with plaintiffs, in filings with this court, and at oral arguments from June through November that there was no issue with the production and preservation of Josephson's documents," Corley wrote. "Defendants' apparent efforts to conceal the spoliation plainly delayed and disrupted the litigation and therefore a finding of bad faith supporting monetary sanctions is appropriate."

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