Orange Bang Inc and Monster Energy v Vital Pharmaceuticals Inc, VPX Sports - American Arbitration Association, Commercial Arbitration Tribunal - AAA Case No. 01-20-0005-6081 Final Arbitration Award, Phase 1 and Phase 2 (Redacted) - 4 April 2022
Although a complicated, contentious and extremely well-litigated case by highly-skilled. courteous and professional attorneys, in many ways the case turns on some fundamental, yet crucial, questions:
- What were the objective intentions of the parties, Orange Bang. Inc. ("Orange Bang") and Vital Pharmaceuticals, Inc. dba VPX Sports, now known as Bang Energy ("VPX"), when they entered into the 2010 Settlement Agreement?
- Was the 2010 Settlement Agreement, in essence, a "you-stay-in-your-lane and I'll-stay- in-my-lane" trademark co-existence agreement?
- What exactly did the panics intend to mean by the terms "creatine-based" and "nutritionally fortified in paragraph 7 of the 2010 Settlement Agreement?
- Is VPX's Bang ready-to-drink energy drink (the "BANG Energy RTD"), which accounts for almost all of VPX's approximately [...] of sales through. September 19, 2021, of which were sold at convenience stores. a paragraph 7 C product or a paragraph 7 D product?
- Did VPX abide by the 2010 Settlement Agreement, did VPX breach it, did VPX forget about it, fail to appreciate its terms or just chose to ignore it because the opportunity to generate astronomical revenues and profits was just too tempting?
- Did Monster Energy Company ("Monster"), by entering into the September 23, 2019 Assignment Agreement with Orange Bang (the "Assignment Agreement"), unlawfully "weaponize" the 2010 Settlement Agreement?
- Who is responsible. Orange Bang or VPX, for disclosing the key provisions alio: 2010 Settlement Agreement which arguably violated the confidentiality provision of paragraph 12 of the 2010 Settlement Agreement and what are the ramifications of such disclosure?
- Did Orange Bang improperly disclose to Monster a potential business vulnerability VPX, VPX's "Achille's beer so to speak, ie, the "creatine-based" requirement and the marketing and sales restrictions of paragraph 7 previously negotiated by Orange Bang in the 2010 Settlement Agreement to which VPX was required to adhere in certain circumstances, allegedly causing damages to VPX?
- Did VPX breach the 2010 Settlement Agreement and/or infringe the BANG mark (defined below) and, if so, what monetary and non-monetary relief is available to Monster and Orange Bang, if any?
IV. SUMMARY OF FINDINGS OF THE FINAL ARBITRATION AWARD - PHASE 1 AND PHASE 2
A. Material Findings Regarding Liability and the Award of Monetary Relief
The Arbitrator hereby summarizes his key findings and award as follows:
- VPX breached paragraph 7 of the 2010 Settlement Agreement.
- VPX is currently in breach of paragraph 7 of the 2010 Settlement Agreement.
- With respect to VPX's past breach of the 2010 Settlement Agreement, Monster is entitled to recover damages from VPX and JHO through September 19, 2021 as follows:
- a reasonable royalty in the amount of 5% of net sales of BANG branded products in the amount of $101,525,000; or
- a disgorgement of profits attributable to the breach of paragraph 7 in the amount of $157.5 million.
- VPX is liable for trademark infringement by virtue of Orange Bang's and Monster's proving the elements necessary to demonstrate a likelihood of confusion in the relevant market with a sufficient amount of consumers with respect to the use of the BANG mark.
- There is no indication that VPX will stop its infringing activity, or abide by the VPX Marketing and Sales Restrictions set forth in paragraph 7 D of the 2010 Settlement Agreement, in the future.
- As an alternative to their breach of contract damages, and with respect to VPX's trademark infringement, Orange Bang is entitled to recover past damages from VPX and JHO through September 19, 2021 as follows:
- a reasonable royalty in the amount of 5% of net sales of BANG branded products in the amount of $112,314,490.75; or
- a disgorgement of profits attributable to the infringement of the BANG mark in the amount of $175 million.
- Of the four calculations of the monetary recovery referred to above, and in order to avoid double recovery for compensatory damages as to the Past Period of Time, only one of the calculations is recoverable as the monetary award, at the election of Monster and Orange Bang57, and it is recoverable from and against VPX and JHO, jointly and severally.
B. The Equitable Remedies of the Permanent Injunction and Specific Performance and the Election of the 5% Continuing Royalty in Lieu of the Permanent Injunction as to the Time Period Following the Arbitration
The Arbitrator hereby finds and awards as follows:
- Because of the likelihood of a continuing breach of paragraph 7 of the 2010 Settlement Agreement and the continuing infringement of Orange Bang's BANG mark and because Orange Bang has proven the elements necessary for the issuance of the Permanent Injunction, and because the elements for specific performance have been satisfied, permanent injunctive relief is appropriate to ensure compliance with the 2010 Settlement Agreement, to prevent future violations of the 2010 Settlement Agreement and to prevent future trademark infringements of the Bang mark.
- VPX and JHO are hereby permanently enjoined as set forth in Section III, M. above. The Permanent Injunction is hereby issued, but stayed until April 29, 2022.
- In lieu of the issuance of the above Permanent Injunction, and based upon the VPX 5% Continuing Royalty Election, VPX and JHO shall pay Orange Bang and Monster a royalty at the rate of 5% of VPX's Net Sales (as defined above) derived from the sale of Bang branded products, including BANG Energy RTD, on an ongoing, continuing basis in the future as set forth above and for so long as VPX or JHO make any use of the BANG mark.
C. The Award of Costs and Attorney's Fees
In addition to the award of compensatory damages and the award of the equitable remedies as set forth above, VPX and JHO are each jointly and severally liable to pay Monster and Orange $2,018,658.90 for the Award of Costs and $7,279,785 for the Award of Attorney's Fees, for a total award for costs and attorney's fees in the amount of $9,298,443.90 (collectively, the "Award of Costs and Attorney's Fees").