Why courts should be measuring brand equity lost, not just infringer profits made.
Hermès went to trial and won on every count: trademark infringement, dilution, and cybersquatting. The jury agreed that a digital artist had deliberately exploited one of the most valuable brand marks in history. The total damages awarded: $133,000. For context, a standard Birkin bag retails for $10,000 to $40,000. The award barely covered the cost of a handful.
Jack Daniel’s fought all the way to the Supreme Court and won 9-0. Their remedy: an injunction telling a dog toy company to stop selling a squeaky parody bottle. Monetary damages? Zero. After nearly a decade of litigation, the most recognized whiskey brand in America walked away with a court order to stop the bleeding. Nothing for the blood already lost.
These aren’t anomalies. They’re symptoms of a damages framework that consistently measures the wrong thing.
The Framework Is Looking at the Infringer. It Should Be Looking at the Brand.
Under the Lanham Act, trademark damages typically flow from one of two sources: the infringer’s profits or the plaintiff’s lost sales. Both anchor the analysis to what the infringer captured, a figure that almost always understates the actual harm, often dramatically.
The more useful question is one the law rarely asks: how much of the infringer’s revenue was made possible by the brand they didn’t build? That’s not a philosophical question. In the business world, it has a straightforward answer. It starts with commodity pricing.
The Commodity Gap: What the Brand Actually Contributed
The most basic measure of brand value is the premium it generates above the commodity price point. Strip away the brand and ask: what would this product sell for?
A generic rubber squeeze toy with no brand name, no trade dress, competing on a shelf with a hundred others, might fetch $3. The Bad Spaniels toy, built to look unmistakably like a Jack Daniel’s bottle, sold for $13 to $20, part of a Silly Squeakers product line that moved over a million units across its parody range. Call that $10 to $17 difference what it is: Brand Rent. The infringer collected it on every unit sold. The landlord, Jack Daniel’s, never saw a dollar of it. That gap is not VIP Products’ innovation. It is Jack Daniel’s brand equity, appropriated without a licensing agreement, without a royalty, without a negotiation of any kind.
The same logic applies to Hermès. A digital image of a generic fur handbag is worth almost nothing. A digital image explicitly designed to invoke the Birkin carried all the mythology with it: the waitlist culture, the decades of carefully managed scarcity that Hermès built. Those images sold initially for around $450 each, with some reselling for multiples of that. Tiffany, a comparable luxury brand, launched 250 NFTs and generated more than $12 million in primary sales in roughly 20 minutes. The brand did that, not the technology.
In each case, the infringer’s profits significantly undercount the brand premium they extracted. The court measured what Rothschild pocketed. Nobody measured what the Birkin brand contributed to every dollar he made.
Reasonable Royalty: A Framework Already in the Law
Patent law has long recognized that disgorgement of profits is an incomplete remedy. When a patent is infringed, courts routinely calculate what a reasonable royalty would have been: what a willing licensor and willing licensee would have negotiated in an arm’s-length transaction. The logic is simple: the infringer used something they didn’t own. The question isn’t just what they made; it’s what they should have paid.
That framework maps cleanly onto trademark, and particularly onto cases where the brand owner has an established licensing market. Jack Daniel’s licenses its brand extensively: barware, merchandise, lifestyle products. There are real, comparable deals that reflect what the trade dress commands in the market. A reasonable royalty calculation applied to the Bad Spaniels revenue, using the commodity gap as the royalty base, would produce a number that actually reflects what was taken.
Hermès presents the harder version of the same problem. Hermès has never licensed the Birkin to a third party, by design, because ubiquity destroys the premium. There is no comparable deal to point to. But the absence of a licensing market doesn’t mean the brand premium is unquantifiable; it means the methodology has to be built rather than borrowed. Brand Finance and Interbrand publish rigorous annual valuations. Investment banks use brand equity models to justify acquisition premiums. The business world quantifies this routinely. The courtroom rarely imports those tools.
Hermès won. Jack Daniel’s won. Both walked away with remedies calibrated to what the infringer made, not what the brand was worth. The reasonable royalty framework, already embedded in IP law, offers a path toward damages that actually reflect the harm. Applying it systematically to trademark requires someone who can bridge the commodity price and the brand premium: not just what the infringer sold, but what the brand made it possible to sell, and at what price.
That’s a brand strategy question, not an accounting one. Until the law stops measuring the infringer’s hustle and starts measuring the brand’s equity, the world’s most valuable marks will keep “winning” their way to a lower valuation.
