Official Journal of the International Trademark Association Dedicated to the Memory of Alvin Fross The Lanham Act: Time for a Face-Lift? Jerome Gilson and Anne Gilson LaLonde Edifice Complex: Protecting Landmark Buildings as Intellectual Property— A Critique of Available Protections and a Proposal Keri Christ Functionality Challenges to Incontestable Trademark Registrations Before and After the Trademark Law Treaty Implementation Act Keith M. Stolte Interpreting the “Exceptional Cases” Provision of Section 1117(a) of the Lanham Act: When an Award of Attorney’s Fees Is Appropriate Christopher P. Bussert Victor’s Little Secret v. V Secret Catalogue, et al.: Brief of Amicus Curiae The International Trademark Association in Support of Respondents Petitioners’ Brief on the Merits Brief for Respondents Vol. 92 September-October, 2002 No. 5 ®
Transcript
Official Journal of the International Trademark Association
Dedicated to the Memory of Alvin Fross
The Lanham Act: Time for a Face-Lift? Jerome Gilson and Anne Gilson LaLonde
Edifice Complex: Protecting Landmark Buildings as Intellectual Property—
A Critique of Available Protections and a Proposal Keri Christ
Functionality Challenges to Incontestable Trademark Registrations Before and After the Trademark Law Treaty Implementation Act
Keith M. Stolte
Interpreting the “Exceptional Cases” Provision of Section 1117(a) of the Lanham Act: When an
Award of Attorney’s Fees Is Appropriate Christopher P. Bussert
Victor’s Little Secret v. V Secret Catalogue, et al.: Brief of Amicus Curiae The International Trademark
Association in Support of Respondents Petitioners’ Brief on the Merits
Brief for Respondents
Vol. 92 September-October, 2002 No. 5
®
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INTERPRETING THE “EXCEPTIONAL CASES” PROVISION OF SECTION 1117(a) OF THE
LANHAM ACT: WHEN AN AWARD OF ATTORNEY’S FEES IS APPROPRIATE
By Christopher P. Bussert*
I. INTRODUCTION
In 1975, Congress amended the Lanham Act to provide that “[t]he court in exceptional cases may award reasonable attorney’s fees to the prevailing party.”1 The Senate Report stated that attorney’s fees should be awarded where the infringing acts “can be characterized as ‘malicious,’ ‘fraudulent,’ ‘deliberate,’ or ‘willful.’”2
At the time this legislation was introduced, its sponsor, Robert M. Kastenmeier, stated that the amendment was intended to be “essentially noncontroversial.”3 This statement has proven to be optimistic, though regrettably inaccurate. Unfortunately for courts and practitioners alike, the statute does not define the term “exceptional cases,” and the legislative history is not instructive as to the meaning of the terms malicious, fraudulent, deliberate, or willful. This lack of guidance has led courts, in their analysis of the “exceptional cases” language of Section 1117(a), to develop a variety of criteria for analyzing the propriety of attorney’s fee awards for prevailing parties under the Lanham Act.
This article will examine how courts have interpreted the term “exceptional cases” under Section 1117(a) of the Lanham Act, and the differing criteria courts have developed in analyzing when an award of attorney’s fees to a prevailing party is appropriate.
* Partner in the firm of Kilpatrick Stockton, Atlanta, Georgia, Associate Member of the International Trademark Association. Member of the Editorial Board of The Trademark Reporter®. The author wishes to express his appreciation to Pilar Finkel for her invaluable assistance in the research and preparation of this article.
1. 15 U.S.C. § 1117(a) (2000).
2. S. Rep. No. 93-1400 (1974), reprinted in 1974 U.S.C.C.A.N. 7132, 7133.
3. Amendment to the Trademark Act: Hearings on H.R. 8981 before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice on the Committee on the Judiciary, 93 Cong. 1 (1973) (statement of Robert M. Kastenmeier, Chairman) [hereinafter “Hearings”].
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II. THE LEGISLATIVE HISTORY OF SECTION 1117(a)
Prior to 1967, courts often granted, in the absence of statutory authority, attorney’s fee awards to prevailing plaintiffs in trademark infringement and unfair competition cases where a defendant’s infringement was found to be deliberate or willful.4 However, the Supreme Court eliminated this practice in 1967 with its decision in Fleischmann Distilling Corp. v. Maier Brewing Co.5 There, the Supreme Court held that federal courts were without power under the Lanham Act to make such awards.6 This ruling prompted Congressman Robert Kastenmeier to introduce legislation authorizing the award of attorney’s fees to the prevailing party under the Lanham Act where justified by “equitable considerations.”7
The testimony before the House subcommittee relating to this legislation consisted of a short statement by Rene Tegtmeyer, Acting Commissioner of Patents, Department of Commerce.8 Because the effective enforcement of trademark rights is in the hands of trademark owners, Tegtmeyer reasoned, trademark owners must be encouraged to enforce their rights to prevent consumer confusion. Especially because “deliberate and flagrant infringement of trademarks” are so detrimental to the public interest, attorney’s fee awards should be available, at the court’s discretion, in “exceptional cases.”9
According to Tegtmeyer, “exceptional cases” refer to infringement that can be characterized as “malicious,” “fraudulent,” “deliberate,” or “willful.”10 Tegtmeyer’s comments were not limited to attorneys’ fees awards for prevailing plaintiffs. Indeed, as Tegtmeyer explained it, the proposed legislation should
4. See, e.g., Baker v. Simmons Co., 325 F.2d 580 (1st Cir. 1963); Wolfe v. Nat’l Lead Co., 272 F.2d 867 (9th Cir. 1959); Keller Prods., Inc. v. Rubber Linings Corp., 213 F.2d 382 (7th Cir. 1954); Century Distilling Co. v. Cont’l Distilling Corp., 205 F.2d 140 (3d Cir. 1953); Admiral Corp. v. Penco, Inc., 203 F.2d 517 (2d Cir. 1953).
5. 386 U.S. 714 (1967).
6. 386 U.S. at 721. The Supreme Court pointed to previous failed efforts to amend the Lanham Act to expressly provide for the recovery of attorney’s fees and concluded that Congress intended Section 35 of the Lanham Act to “mark the boundaries of the power to award monetary relief in cases arising under the Act.” Id.
7. H.R. 8981, 93d Cong. (1973).
8. Amendment to the Trademark Act: Hearings on H.R. 8981 before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice on the Committee on the Judiciary, 93 Cong. 1 (1973) (statement of Rene Tegtmeyer, Acting Commissioner of Patents, Department of Commerce) [hereinafter “Tegtmeyer”].
9. Tegtmeyer at 14-15.
10. Tegtmeyer at 15.
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also protect defendants from unfounded suits brought solely for purposes of harassment.11
III. INTERPRETATION OF SECTION 1117(a) BY THE COURTS
Unfortunately for courts and practitioners alike, Section 1117(a) does not define “exceptional cases,” nor does the legislative history explain what is meant by the terms “malicious, fraudulent, deliberate, or willful.” This lack of instruction and guidance has led courts to differ as to the type of conduct that is so viewed.
A. Prevailing Plaintiffs
1. Standard for Award
a. Malicious, Fraudulent, Deliberate or Willful Intent
Many circuits have endorsed Tegtmeyer’s language that, in general, a trademark case is “exceptional,” for purposes of awarding attorney’s fees to a prevailing plaintiff, where the infringement is malicious, fraudulent, deliberate, or willful.12 For example, the First,13 Fourth,14 Fifth,15 Sixth,16 Seventh,17 Ninth,18 Tenth,19 Eleventh20 and Federal21 Circuits have cited the “malicious, fraudulent, deliberate, or willful” standard in determining whether an award of attorney’s fees to a prevailing
11. S. Rep. No. 93-1400 (1974), reprinted in 1974 U.S.C.C.A.N. 7132.
12. 15 U.S.C. § 1117(a) (2000).
13. See, e.g., Schroeder v. Lotito, 747 F.2d 801 (1st Cir. 1984).
14. See, e.g., Scotch Whisky Ass’n v. Majestic Distilling Co., 958 F.2d 594 (4th Cir. 1992).
15. See, e.g., Rolex Watch USA, Inc. v. Meece, 158 F.3d 816 (5th Cir. 1998).
16. See, e.g., Sovereign Order of Saint John of Jerusalem, Inc. v. Grady, 119 F.3d 1236 (6th Cir. 1997).
17. See, e.g., Badger Meter, Inc. v. Grinnell Corp., 13 F.3d 1145 (7th Cir. 1994); Hairline Creations, Inc. v. Kefalas, 664 F.2d 652 (7th Cir. 1981).
18. See, e.g., Gracie v. Gracie, 217 F.3d 1060 (9th Cir. 2000); Interstellar Starship Sevs., Ltd. v. Epix Inc., 184 F.3d 1107 (9th Cir. 1999), cert. denied, 528 U.S. 1155 (2000).
19. See, e.g., United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219 (10th Cir. 2000).
20. Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188 (11th Cir. 2001).
21. See, e.g., Bandag, Inc. v. Al Bolser’s Tire Stores, Inc., 750 F.2d 903 (Fed. Cir. 1984).
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plaintiff is warranted. The Second22 and Third23 Circuits have established similar standards that also incorporate “bad faith” as a consideration in the exceptional case determination.24
b. Requirement of Conduct Beyond Bad Faith or Willful Infringement
Other courts have indicated that a holding of bad faith or willfulness alone is insufficient to support a finding that a case is exceptional. For example, in Gidatex, S.r.L. v. Campaniello Imports, Ltd.,25 the court held that a jury’s finding of bad faith was insufficient to support an award of attorney’s fees against the defendant. In so holding, the court considered a number of factors including the history of the litigation, which had raged between the parties for five years on two continents, and plaintiff’s unrealistic expectations as to damages. As to the latter, the court observed plaintiff’s unrealistic demands “provided ample motivation for [defendant] to continue this litigation.”26
In Chronicle Publishing Co. v. Legrand,27 the court found the evidence clearly supported the jury’s finding that the defendant deliberately acted willfully without regard for plaintiff’s rights when he used the terms “Chronicle” and “Chronicle Publishing” for book publishing. The court held, however, that something more than “reckless or intentional infringement” is necessary to support a finding that a case is exceptional.28 Here, the court concluded that an attorney’s fees award was not appropriate because there was no evidence that defendant attempted to pass off its books as those of plaintiff.29 22. See, e.g., Sterling Drug, Inc. v. Bayer AG, 14 F.3d 733, 751 (2d Cir. 1994) (attorney’s fees only awarded upon finding of bad faith); Motown Prods., Inc. v. Cacomm, Inc., 849 F.2d 781, 787 (2d Cir. 1988) (per curiam). But see Gidatex, S.r.L. v. Campaniello Imports, Ltd., 82 F. Supp. 2d 136 (S.D.N.Y. 2000), discussed infra at Part III.A.1.b.
23. See, e.g., Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44 (3d Cir. 1991) (a case qualifies as exceptional where defendant has engaged in bad faith, fraud, malice, or knowing infringement).
24. But see Tamko Roofing Prods. v. Ideal Roofing Co., 282 F.3d 23 (1st Cir. 2002) (a finding of fraud or bad faith is not a necessary precondition to finding a case exceptional because to do so would strip the terms “deliberate” and “willful” of meaning).
25. 82 F. Supp. 2d 136 (S.D.N.Y. 2000).
26. Id. at 149.
27. 24 U.S.P.Q.2d 1881 (N.D. Cal. 1992).
28. Id. at 1888.
29. Id. at 1889. See also U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185 (6th Cir. 1997) (it does not follow that a case will always be exceptional for purposes of awarding attorney’s fees where the relevant conduct is found to be willful, fraudulent and deliberate); Lurzer Gmbh v. Am. Showcase, Inc., 75 F. Supp. 2d 98, 102 (S.D.N.Y. 1998) (“Even in a case where, as here, the defendant engaged in willful deception, a court may decline to award [attorney’s] fees if there are other, mitigating factors”), clarified, 77 F. Supp. 2d 370 (S.D.N.Y. 1999), aff’d, No. 99-7318, 1999 WL 1295917 (2d Cir. Dec. 2, 1999); Simon & Schuster, Inc. v. Dove Audio, Inc., 970 F. Supp. 279, 302 (S.D.N.Y. 1997)
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c. Other Culpable Conduct
Still other courts have held that something other than malicious, fraudulent, deliberate, willful or bad faith infringement may warrant an award of attorney’s fees. In SecuraComm Consulting, Inc. v. Securacom, Inc.,30 the Third Circuit held certain “culpable conduct” by a defendant could render a case exceptional as well. According to the court, such culpable conduct comes in a “variety of forms and may vary depending on the circumstances of a particular case.”31 Among the culpable conduct the court specifically identified as supporting a finding of an exceptional case was litigation misconduct, and vexatious and unjustified litigation.32
2. Mitigating or Supporting Factors
a. Defendant’s Good Faith
As a mitigating factor against a finding that a case is exceptional, courts have recognized the fact that the case presented novel, unique or close questions of law or that defendant presented a legitimate or good faith defense to the infringement claim or mistakenly believed that its conduct was not infringing. In Hindu Incense v. Meadows,33 the owner of the mark GENIE for use on a product containing incense and an incense burner alleged trademark infringement based on defendant’s use of the marks GENIE and GENIE LUCKY PRODUCTS in connection with a business that sold incense, candles and assorted items. At trial, the district court found that, although defendant refused to stop using the mark at plaintiff’s request, defendant’s adoption of the mark was “not fraudulent, albeit not wholly innocent” and, accordingly, held that the case was not exceptional within the meaning of Section 1117. The Sixth Circuit affirmed, finding that the record and the lower court’s opinion indicated that defendant was under the belief, although mistaken, that plaintiff had ceased use of the GENIE mark.34
(“Although we find that Dove willfully infringed . . . we do not believe the case qualifies as ‘exceptional’ in order to justify an award of fees”); Nikon, Inc. v. Ikon Corp., 803 F. Supp. 910 (S.D.N.Y. 1992) (while bad faith is undoubtedly essential to a finding of exceptional circumstances, a finding of bad faith does not in itself call for the award of attorney’s fees).
30. 224 F.3d 273 (3d Cir. 2000).
31. Id. at 280.
32. Id. at 281-82. Guess?, Inc. v. Gold Ctr. Jewelry, 997 F. Supp. 409 (S.D.N.Y. 1998) (awarding attorneys’ fees where defendant’s conduct with respect to the litigation caused needless expense for the plaintiff and unnecessarily consumed a great deal of the Court’s time); accord Sara Lee Corp. v. Bags of N.Y., Inc., 36 F. Supp. 2d 161 (S.D.N.Y. 1999).
33. 692 F.2d 1048 (6th. Cir. 1982).
34. Id. at 1052.
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In Pebble Beach Co. v. Tour 18 I Ltd.,35 plaintiffs, operators of several famous golf courses, sought attorney’s fees for infringement of their service marks by defendant operator of a golf course that contained replica holes from plaintiffs’ courses. The court reasoned that a good faith effort to create elements of dissimilarity may render a case unexceptional, and “[a] district court normally should not find a case exceptional where the party presents what it in good faith believes may be a legitimate defense.”36 The court found that defendant’s good faith, as evidenced by its use of disclaimers, though inadequate to avoid infringement, rendered this case unexceptional.37
A defendant’s assertion of one or more “good faith” defenses to infringement will not necessarily insulate it from a finding that a case is exceptional. Indeed, courts routinely scrutinize any such defense to ensure its legitimacy and may reject it in the event it finds a defendant’s efforts to be insufficient or that the defendant’s actions were instead premised on more sinister motives.38 35. 155 F.3d 526 (5th Cir. 1998).
36. 155 F.3d at 556 (quoting CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60, 66 (5th Cir. 1992)).
37. 155 F.3d at 556; see also People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 369 (4th Cir. 2001) (attorney’s fees not awarded because defendant thought he had “a legitimate First Amendment right to express himself this way” and “to create a parody of the plaintiff’s organization”); Sovereign Order of Saint John of Jerusalem, Inc. v. Grady, 119 F.3d 1236 (6th Cir. 1997) (attorney’s fees not awarded because defendant believed he was entitled to use plaintiff’s mark for historical and religious reasons); Martin’s Herend Imports, Inc. v. Diamond & Gem Trading USA, Co. 112 F.3d 1296 (5th Cir. 1997) (plaintiff not entitled to attorney’s fees in part because of the difficulty of the law involving gray market goods); Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44 (3d Cir. 1991) (attorney’s fees award not appropriate in part because liability issue was a close one); Roulo v. Russ Berrie & Co., 886 F.2d 931, 942 (7th Cir. 1989) (affirming a denial of fees where defendant attempted to create a similar product and made conscious efforts to create dissimilarities, which were inadequate); McGraw-Hill Cos. v. Vanguard Index Trust, 139 F. Supp. 2d 544 (S.D.N.Y. 2001), aff’d, No. 01-7551, 2001 U.S. App. LEXIS 24271 (2d Cir. Nov. 1, 2001) (dispute over reach of ambiguous trademark license agreement was not exceptional); Yurman Design, Inc. v. PAJ, Inc., 93 F. Supp. 2d 449 (S.D.N.Y. 2000), aff’d in part, 262 F.3d 101 (2d Cir. 2001) (denying award of attorney’s fees in part because of reasonable disputes about the scope of plaintiff’s trade dress protection); Schieffelin & Co. v. Jack Co., 850 F. Supp. 232 (S.D.N.Y. 1994) (attorney’s fees award denied despite evidence of defendant’s attempt to copy plaintiff’s trade dress because object of enterprise was a legitimate parody); Buca di Bacco, Inc. v. Buca di Bacc’, Inc., 828 F. Supp. 31 (S.D. Tex. 1993) (defendant’s defenses to infringement, although legally flawed, were asserted in good faith); Bass Buster, Inc. v. Gapen Mfg. Co., 420 F. Supp. 144 (W.D. Mo. 1976) (holding that attorney’s fees would not be awarded where defendant acted in good faith, albeit legally incorrect, belief).
38. See, e.g., Bishop v. Equinox Int’l Corp., 154 F.3d 1220 (10th Cir. 1998), cert. denied, 122 S. Ct. 1069 (2002) (attorney’s fees awarded in view of court’s conclusion that defendant’s decision to continue use of its infringing mark was not based on a reasonable belief that plaintiff had abandoned the mark, but was instead premised on the relative economic weakness of plaintiff’s operation); E. & J. Gallo Winery v. Consorzio Del Gallo Nero, 782 F. Supp. 472 (N.D. Cal. 1992) (attorney’s fees awarded in part because defendant’s “in house” investigation and attempts to distinguish its products were insufficient to support a good faith belief that defendant’s conduct would not constitute infringement).
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b. Intent to Pass Off
A finding that a defendant intended to pass off its goods as those of the plaintiff has been held to support a conclusion that a case is exceptional. In Savin Corp. v. National Toner Warehouse, Inc.,39 the court found the case to be exceptional and awarded attorney’s fees in part because: (1) the defendants used a colorable imitation of plaintiff’s registered trademark on their packaging; and (2) the evidence showed that defendant’s sales presentation made to customers created the impression that plaintiff or its products were involved or that they were SAVIN suppliers with which the customer had previously done business.40
c. Harm to or Intent to Harm Plaintiff
Several courts have considered harm to a plaintiff by a defendant who has infringed the plaintiff’s trademark or a defendant’s expressed intent to harm the plaintiff to be a factor in determining whether a case is “exceptional.” In SecuraComm Consulting, Inc. v. Securacom Inc.,41 the court held that defendant’s vexatious litigation tactics, consisting of deliberate efforts to “bury” plaintiff financially and “take everything he had” by filing multiple suits and complaints against plaintiff’s principal and his attorneys in a variety of legal forums rendered the case sufficiently exceptional to support an award of fees, even if the infringement was not willful. Similarly, the court in Hain Pure Food Co. v. Sona Food Products Co.,42 awarded fees to plaintiff, finding that defendant’s profit in excess of $50,000 from sales of infringing products, its continued sale of infringing products following the entrance of an injunction, and its refusal to pay court-ordered accounting costs had damaged plaintiff.43 39. 528 F. Supp 636 (N.D. Ga. 1981).
40. See also Spring Mills, Inc. v. Ultracashmere House, Ltd., 724 F.2d 352 (2d Cir. 1983) (defendant’s blatant copying of plaintiff’s label justified finding that case was exceptional); Johnson v. Jones, 921 F. Supp. 1573 (E.D. Mich. 1996), aff’d in part, 149 F.3d 494 (6th Cir. 1998) (defendant’s replacement of plaintiff’s name and seal with defendant’s name and seal on drawings justified attorney’s fees award); Hallmark Cards, Inc. v. Hallmark Dodge, Inc., 634 F. Supp. 990 (W.D. Mo. 1986) (attorney’s fees awarded in part because evidence showed defendant adopted plaintiff’s mark, script logo and slogans with clear intent of riding the coattails of an existing reputable company); Quabaug Rubber Co. v. Fabiano Shoe Co., 195 U.S.P.Q. 165 (D. Mass. 1976), aff’d in part, 567 F.2d 154 (1st Cir. 1977) (court found the case exceptional in part because defendant intentionally engaged in a pattern of conduct which enabled it to falsely pass off its boots as those manufactured by plaintiff). But see Jellibeans, Inc. v. Skating Clubs of Ga., Inc., 212 U.S.P.Q. 170 (N.D. Ga. 1981), aff’d, 716 F.2d 833 (11th Cir. 1983) (intent to copy does not necessarily equate to an intent to pass off).
41. 224 F.3d 273 (3d Cir. 2000).
42. 491 F. Supp. 39 (C.D. Cal 1980).
43. See also Comm. for Idaho’s High Desert, Inc. v. Yost, 92 F.3d 814, 825 (9th Cir. 1996) (finding “exceptional” case where appellants “knowingly, intentionally and deliberately adopted and used [the CIHD name] in order to cause confusion [and] obstruct
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In Cardservice International, Inc. v. McGee,44 the court held defendant’s conduct after being notified of his infringement of plaintiff’s trademark warranted a finding that the case was exceptional and that attorney’s fees should be awarded. Rather than determining whether he was violating plaintiff’s rights at that time, the defendant posted statements at its website accusing plaintiff of trying to steal his domain name. He also threatened to use the internet to “‘bad mouth’ the heck out of [the plaintiff]” and to divert some of plaintiff’s potential business elsewhere.45
d. Continued Infringement After Notice
Some courts have found a case to be “exceptional” where a defendant continued to make use of a mark after being notified that such use constitutes an infringement of plaintiff’s mark. In Nutrivida, Inc. v. Inmuno Vital, Inc.,46 despite being warned several times through cease and desist letters to stop using the name of plaintiff’s sponsor on its product, defendant continued to do so for one and a half years until enjoined by the court. The court found that such “deliberate, knowing and intentional infringement” warranted an award of fees to plaintiff.47
In Bambu Sales, Inc. v. Ozak Trading Inc.,48 an importer of cigarette rolling paper bearing the BAMBU mark brought an infringement action against defendant based on its distribution of “light-weight” cigarette papers bearing the BAMBU mark. The record showed that defendant admitted it took no steps to verify the authenticity of the paper distributed by way of a third party, never asked if the company from which it acquired the paper was authorized to distribute it, and never checked if the paper was genuine.49 Defendant continued to sell the paper even after plaintiff filed suit, and moreover, had previously been sued in a similar trademark infringement case.50 Based on these facts, the court had no problem finding that the case was exceptional and warranted an attorney’s fees award.51
[CIHD’s] pursuit of its environmental agenda”); Manildra Milling Corp. v. Ogilvie Mills Corp., 797 F. Supp. 874 (D. Kan. 1992) (attorney’s fee award appropriate because defendant intentionally interfered with plaintiff’s prospective economic advantage).
51. See also United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219 (10th Cir. 2000) (attorney’s fees awarded in part because defendant’s continued infringement after repeated warnings and after agreeing to stop doing so in a settlement agreement);
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However, in Moore Business Forms, Inc. v. Ryu,52 the Fifth Circuit found that defendant’s continued use of the mark after notification by plaintiff was not, without more, “exceptional.” The court held that it must analyze all defendant’s actions after receiving notice of infringement from plaintiff to determine whether defendant’s continuing actions amounted to bad faith. Reasoning that the continued use after notice is not the equivalent of adoption of a mark with notice, the court found that plaintiff was not entitled to its attorney’s fees.53
Similarly, in WSM, Inc. v. Wheeler Media Services, Inc.,54 defendant innocently adopted plaintiff’s trademark but became aware of plaintiff’s prior ownership claim and assertion of likelihood of confusion but continued to litigate for close to two years, at which time the trial court ruled in plaintiff’s favor. Plaintiff requested fees dating back to the date defendant learned of plaintiff’s claim. The court held that these circumstances were not “exceptional” because defendant was justified in continuing the litigation since ownership of the mark was in question.
e. Advice of Counsel
In determining whether an award of fees is appropriate, some courts look to whether a defendant accused of trademark
Gorenstein Enters., Inc. v. Quality Care-USA, Inc., 874 F.2d 431 (7th Cir. 1989) (awarding attorney’s fees where defendant continued to use mark after franchise terminated, reasoning that the presence of bad faith endows defendant’s conduct with not only the knowledge that the act is wrongful but also the commitment to proceed anyway); Choice Hotels Int’l, Inc. v. Pennave Assocs., 159 F. Supp. 2d 780 (E.D. Pa. 2001) (awarding fees where defendant franchisee continued to make use of the mark after plaintiff sent several cease and desist letters and issued a notice of termination of the franchise agreement); Am. Farm Bureau Fed’n v. Ala. Farmers Fed’n, 935 F. Supp. 1533 (M.D. Ala. 1996), aff’d, 121 F.3d 723 (11th Cir. 1997) (attorney’s fees award upheld as a result of defendant’s repeated breaches of settlement agreement which prohibited use of mark at issue); KFC Corp. v. Lilleoren, 821 F. Supp. 1191 (W.D. Ky. 1993) (attorney’s fees awarded in part because defendant continued to operate under plaintiff’s mark for a substantial period after notice of termination had been received and after action had been instituted); Neva, Inc. v. Christian Duplications Int’l, Inc., 743 F. Supp. 1533 (M.D. Fla. 1990) (attorney’s fees awarded in part because defendant’s infringement continued after permission was refused); Knorr-Nahrmittel A.G. v. Reese Finer Foods, Inc., 695 F. Supp. 787 (D.N.J. 1988) (holding that defendant’s deliberate attempt to copy plaintiff’s packaging design in order to promote defendant’s sales of its own soup mix and sale at discount of all of defendant’s inventory during the week the decision on preliminary injunction was under advisement constituted an “exceptional case”); Bowmar Instrument Corp. v. Cont’l Microsystem, Inc., 497 F. Supp. 947 (S.D.N.Y. 1980) (awarding fees where defendant deliberately used plaintiff’s trademark in the face of numerous complaints); O’Brien Int’l, Inc. v. Mitch, 209 U.S.P.Q. 212, 217 (N.D. Cal. 1980) (holding that the continuation of use of the mark after receiving “clear notice” of infringement constituted an “exceptional case”); Amana Soc’y v. Gemeinde Brau, Inc., 417 F. Supp. 310 (N.D. Iowa 1976), aff’d, 557 F.2d 638 (8th Cir. 1977) (holding case “exceptional” in which defendants continued to use plaintiff’s mark after being denied permission).
52. 960 F.2d 486 (5th Cir. 1992).
53. Id. at 492.
54. 810 F.2d 113 (6th Cir. 1987).
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infringement sought and/or followed the advice of counsel regarding the availability or continued use of the mark in question. A defendant’s failure to obtain the advice of counsel has been cited in support of an award of attorney’s fees. Awarding attorney’s fees to the plaintiff, the court in Sands, Taylor & Wood Co. v. Quaker Oats Co.55 placed weight on the fact that the defendant never sought a legal opinion regarding the possibility of trademark infringement prior to producing the infringing goods.56 In International Star Class Yacht Racing Ass’n v. Tommy Hilfiger, U.S.A., Inc.,57 defendant Tommy Hilfiger conducted a trademark search limited solely to registered or applied-for federal marks prior to its use of plaintiff ISCYRA’s STAR CLASS mark, despite its attorneys’ advice to conduct a wider search. The Second Circuit remanded the case, cautioning that defendant’s failure to follow the advice of counsel should have been considered in determining the existence of bad faith.58
Relying on the advice of counsel will not necessarily insulate a defendant from an award of attorney’s fees, however. In TakeCare Corp. v. Takecare of Oklahoma, Inc.,59 defendant claimed that his reliance on the advice of counsel in adopting the “TakeCare” mark in connection with a health maintenance organization removed his conduct from the reach of Section 1117(a). While agreeing that, under certain circumstances, a party’s reasonable reliance on the advice of counsel may defuse otherwise willful conduct,60 the court
55. 978 F.2d 947 (7th Cir. 1992).
56. See also Coach, Inc. v. We Care Trading Co., No. 99 Civ. 11672, 2001 U.S. Dist. LEXIS 9879 (S.D.N.Y. July 18, 2001) (testimony from one of defendant’s representatives that she never sought an opinion of counsel reinforces the conclusion of bad faith); N.Y. State Soc’y of Certified Pub. Accountants v. Eric Louis Assocs., Inc., 79 F. Supp. 2d 331 (S.D.N.Y. 1999) (the failure to consult trademark counsel prior to engaging in infringing conduct, where such consultation would be reasonable, supports a finding of willful infringement); E. & J. Gallo Winery v. Consorzio Del Gallo Nero, 782 F. Supp. 472 (N.D. Cal. 1992).
57. 80 F.3d 749 (2d Cir. 1996).
58. Id. at 753-54; see also, A.C. Legg Packing Co., Inc. v. Olde Plantation Spice Co., 61 F. Supp. 2d 426 (D. Md 1999) (defendant’s failure to follow attorney’s advice to conduct full-scale trademark search or to obtain any infringement opinion supported a finding of bad faith).
59. 889 F.2d 955 (10th Cir. 1989).
60. Id. at 958. In Cuisinarts, Inc. v. Robot-Coupe International Corp., 580 F. Supp. 634, 638 (S.D.N.Y. 1984), the district court held that “if a client seeks qualified counsel’s advice in a timely manner, makes adequate disclosure to counsel, receives counsel’s opinion and then acts upon it, surely the Chancellor must pause before branding the client as a wilful, deliberate, fraudulent, commercial thief. . . .” Absent this showing, counsel’s advice alone will not “shield the actor from the consequences of his act”; see also Acxiom Corp. v. Axiom, Inc., 27 F. Supp. 2d 478 (D. Del. 1998) (case held not to be exceptional in part because defendant relied on the opinion of an experienced counsel from an established law firm); Aero-Motive Co. v. U.S. Aeromotive, Inc., 922 F. Supp. 29 (W.D. Mich. 1996) (court ruled case was not exceptional in part due to defendant’s reasonable reliance on the advice of counsel).
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found an absence of any showing of what counsel advised defendant, and, thus, defendant failed to prove reasonable reliance.61
Finally, as the Seventh Circuit observed in Gorenstein Enters., Inc. v. Quality Care-USA, Inc., a defendant’s reliance on the advice of counsel will be given little weight where it is evident that counsel’s advice was based on false or misleading statements of the facts provided by the defendant.62
f. Absence of Damages
The absence of proof of damages should not make a case per se “unexceptional.”63 However, some courts have considered it a factor weighing against an award of attorney’s fees. In Hindu Incense v. Meadows,64 the Sixth Circuit considered plaintiff’s admission that no loss of sales had occurred due to defendant’s infringement as a factor in its refusal to award attorney’s fees.65 Likewise, in VIP Foods, Inc. v. Vulcan Pet, Inc,66 the court held that a lack of evidence showing that the plaintiff suffered monetary damages made the case “unexceptional.”67
61. Id. The court found that defendant never explained during trial or in its post-trial brief what counsel’s advice was to explain how its assurance that the “TakeCare” name was available in Oklahoma would satisfy plaintiff’s demand to cease using the mark nationally. Id. In Universal City Studios, Inc. v. Nintendo Co., 797 F.2d 70 (2d Cir. 1986), the court rejected Universal’s argument that it relied on the advice of outside counsel in bringing an action for trademark infringement, not only because it failed to call outside counsel to testify, but because outside counsel had already given testimony in a related case which was contrary to Universal’s position. See also Johnson v. Jones, 149 F.3d 494 (6th Cir. 1998) (defendant could not reasonably rely on advice from lawyer with no experience in the relevant substantive area); Universal Motor Oils Co. v. Amoco Oil Co., 809 F. Supp. 816 (D. Kan. 1992) (defendant could not reasonably rely on advice of counsel which was given “tongue in cheek” and accepted by defendant’s manager “with a wink”).
62. 874 F.2d 431, 436 (7th Cir. 1989); see also Mktg. Displays, Inc. v. TrafFix Devices, Inc., 200 F.3d 929 (6th Cir. 1999), aff’d on other grounds, 532 U.S. 23 (2001) (evidence of record suggested that defendant misled its attorney with respect to some relevant facts in rending his opinion).
63. See Centaur Communications, Ltd. v. A/S/M Communications, Inc., 830 F.2d 1217 (2d Cir. 1987) (a showing of loss of sales is not required to obtain an attorney’s fees award); Discovery Communications, Inc. v. Animal Planet, Inc., 172 F. Supp. 2d 1282 (C.D. Cal. 2001) (attorney’s fees awarded despite the fact that plaintiff did not seek monetary damages from defendant); Coach, Inc. v. We Care Trading Co., No. 99 Civ. 11672, 2001 U.S. Dist. LEXIS 9879 (S.D.N.Y. July 18, 2001) (the failure to win an award of damages shall be considered by the court in deciding whether the case is exceptional but a failure to prove actual damages does not preclude an award of attorney’s fees); A.C. Legg Packing Co. v. Olde Plantation Spice Co., 61 F. Supp. 2d 426 (D. Md. 1999) (the unavailability of actual damages as a remedy does not preclude a trademark owner from recovering attorney’s fees).
64. 692 F.2d 1048 (6th Cir. 1982).
65. Id. at 1052.
66. 675 F.2d 1106, 1107 (10th Cir. 1982).
67. Id. at 1107. Noting that the plaintiff was likely to suffer damage from loss of sales in the future if defendant continued to use the mark, the court affirmed an injunction against defendant’s use of the mark, but determined that the district court had incorrectly
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g. Substitute for Damages
While courts have differed in their rulings on the significance of an absence of damages in determining whether a case is exceptional, they do appear to agree that attorney’s fees should not be awarded as a replacement or alternative to an award of damages. In Wynn Oil Co. v. American Way Service Corp.,68 plaintiff, a manufacturer of car care products, brought trademark infringement and unfair competition claims based on defendant’s use of plaintiff’s registered mark X-TEND. On appeal to the Sixth Circuit, defendant argued that the district court incorrectly awarded attorney’s fees pursuant to Section 1117(a), based upon the contention that the court erred in finding intentional infringement. However, the Sixth Circuit found a “more fundamental flaw” in the lower court’s award of fees. As it explained, the lower court had held that “‘[b]ecause on the evidence presented the court cannot gauge Plaintiff’s damages resulting from Defendant’s infringement, the Court will, for the following reasons, award Plaintiff attorneys fees and costs.’”69 The Sixth Circuit held that it was an abuse of the district court’s discretion to award fees “in lieu of damages” that were impossible to ascertain.70
h. Plaintiff’s Settlement Efforts
Some courts have considered a defendant’s refusal of a plaintiff’s reasonable settlement overtures as a factor supporting the award of attorney’s fees. In O’Brien International, Inc. v. Mitch,71 plaintiff brought an action against defendant for infringement of plaintiff’s WORLD TEAM mark and globe and waterski logo. After plaintiff discovered defendant’s infringement, it made two offers of settlement to defendant in which it proposed to waive its damages claim in exchange for defendant’s immediate awarded attorney’s fees to plaintiff. See also Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526 (5th Cir. 1998) (holding that lack of damages is an important factor in determining whether a case is exceptional); Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44 (3d Cir. 1991) (finding that case was not exceptional because there was an absence of pecuniary loss on the part of the plaintiff); Texas Pig Stands, Inc. v. Hard Rock Café Int’l, Inc., 951 F.2d 684, 697 n.23 (5th Cir. 1992) (reasoning that while lack of damages does not prohibit a court from finding a case exceptional, “such a finding is an important circumstance to consider”); Simon Prop. Group, L.P. v. MySimon, Inc., No. IP 99-1195-C, 2001 WL 66408 (S.D. Ind. Jan. 24, 2001) (lack of any evidence plaintiff suffered any substantial harm justified denial of an award of attorney’s fees); Universal Motor Oils, Co. v. Amoco Oil Co., 809 F. Supp. 816, 823 (D. Kan. 1992) (“A plaintiff can be a prevailing party without collecting a damage[s] award, although a lack of damages is a factor for determining whether the case is exceptional”).
68. 943 F.2d 595 (6th Cir. 1991).
69. Id. at 607 (quoting 736 F. Supp. 746, 757 (E.D. Mich. 1990)).
70. Id. at 607.
71. 209 U.S.P.Q. 212 (N.D. Cal. 1980).
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cessation of its infringing activity. The defendant refused. The court held that under the circumstances the defendant should bear the burden of the expense of litigation because plaintiff had made a serious effort to settle the case without litigation.72
i. Defendant’s Failure to Investigate
Another court based an exceptional finding principally on evidence showing that a defendant failed to make a reasonable investigation before adopting and using a mark later found to be confusingly similar to another’s mark. In American United Life Ins. Co. v. American United Insurance Co.,73 defendant was found to have infringed plaintiff’s AMERICAN UNITED LIFE INSURANCE mark by adopting and using AMERICAN UNITED INSURANCE COMPANY. In finding the case exceptional, the court observed that the entire controversy could have been avoided had defendant made the slightest inquiry.74
j. Fraud
Another factor that has been held to support a conclusion that a case is exceptional is where the defendant is found to have committed fraud during the course of the proceedings in the litigation. In Patsy’s Brand, Inc. v. I.O.B. Realty, Inc.75 the court found that defendants had submitted a fabricated document, made false assertions through counsel and its principal swore falsely on more than one occasion. These findings, according to the court, were more than sufficient to establish the bad faith necessary to justify an award of attorney’s fees.76
72. See also Bowmar Instrument Corp. v. Continental Microsystems, Inc., 497 F. Supp. 947 (S.D.N.Y. 1980) (attorney’s fees award appropriate in part because plaintiff was forced to pursue the litigation because protracted settlement discussions fell through). But see Simon Prop. Group, L.P. v. MySimon, Inc., No. IP 99-1195-C, 2001 W.L. 66408 (S.D. Ind. Jan. 24, 2001) (attorney’s fees award not appropriate in part because plaintiff’s own neglect and delay played a central part in causing the case to become necessary).
73. 731 F. Supp. 480 (S.D. Fla. 1990).
74. Id. at 488. But see Tamko Roofing Prods. Inc . v. Ideal Roofing Co., 282 F.3d 23 (1st Cir. 2002) (mere failure to conduct a trademark search before using a mark may evidence nothing more than carelessness and so may not warrant an award of fees).
75. 60 U.S.P.Q.2d 1925 (S.D.N.Y. 2001).
76. See also Coach, Inc. v. We Care Trading Co., No. 99 Civ. 11672, 2001 U.S. Dist. LEXIS 9879 (S.D.N.Y. July 18, 2001) (attorney’s fees awarded in part because two representatives of defendant gave false testimony at trial).
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k. Defendant’s Failure to Defend
A number of courts have held that a defendant’s failure to defend an infringement action, resulting in a default judgment, can support a finding that a case is exceptional.77
B. Prevailing Defendants
1. Standard for Award
As indicated above, the legislative history of the 1975 amendment to Section 1117(a) of the Lanham Act clearly states that attorney’s fees awards are not intended to protect and serve only prevailing plaintiffs. Rather, the amended section also endeavors to “provide protection against unfounded suits brought by trademark owners for harassment and the like.”78 In attempting to clarify the “exceptional cases” language of Section 1117(a), courts have developed a variety of standards for determining when an award of attorney’s fees for prevailing defendants is appropriate under the Lanham Act.
One issue that a number of courts have grappled with is whether the standard for the award of attorney’s fees to a prevailing defendant is the same as to a prevailing plaintiff. Courts in the Second, Ninth, and Eleventh Circuits have expressly held that the same standard should apply regardless of which party is seeking an award of fees. For example, in Conopco, Inc. v. Campbell Soup Co.,79 the Second Circuit reasoned that “Nothing . . . indicates that a different standard should apply for prevailing plaintiffs and prevailing defendants.”80
77. Rio Props., Inc. v. Rio Int’l Interlink, 284 F.3d 1007 (9th Cir. 2002) (by entry of default judgment, the district court determined, as alleged in plaintiff’s complaint, that defendant’s acts were committed knowingly, maliciously and oppressively and with an intent to injure plaintiff); Christian Dior Couture, S.A. v. Fred’s Int’l Handbags, Jolie Mode In., No. 98 Civ. 6265, 2002 U.S. Dist. LEXIS 778 (S.D.N.Y. Jan. 17, 2002) (as a result of defendant’s failure to appear and defend this action a finding of willfulness by the court is permitted); Baylor Univ. v. Int’l Star, Inc., No. W00 CA 231, 2001 U.S. Dist. LEXIS 23678 (W.D. Tex. Nov. 6, 2001) (attorney’s fees awarded in part because defendant filed no responsive pleadings in this matter). But see Deluxe Corp. v. MIPS Dateline Am., Inc., No. Civ. 99-1975, 2001 WL 476584 (D. Minn. May 4, 2001) (default judgment insufficient basis to support a holding that a case is exceptional; however, attorney’s fees awarded under less strict state deceptive trade practices statute).
78. S. Rep. No. 93-1400, 93d Cong. (1974), reprinted in 1974 U.S.C.C.A.N. 7132, 7136. See also Noxell Corp. v. Firehouse No. 1 Bar-B-Que Rest., 771 F.2d 521, 524 (D.C. Cir. 1985); WSM, Inc. v. Wheeler Media Servs., Inc., 810 F.2d 113, 116 (6th Cir. 1987).
79. 95 F.3d 187 (2d Cir. 1996).
80. Id. at 194-95; see also Gracie v. Gracie, 217 F.3d 1060, 1071 (9th Cir. 2000) (reasoning that the “groundless, unreasonable, vexatious, or pursued in bad faith” standard for “exceptional” applies to prevailing defendants as well as prevailing plaintiffs); Cardinal Freight Carriers, Inc. v. Cardinal Logistics, Inc., 155 F. Supp. 2d 1352, 1354 (S.D. Fla. 2001) (“[t]he Eleventh Circuit has never had a dual standard”).
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a. Bad Faith
Several courts have awarded attorney’s fees to a prevailing defendant where the defendant demonstrated that a plaintiff’s actions were undertaken or continued in bad faith. Courts in the Second81 and Eleventh82 Circuits have construed the Lanham Act to allow recovery of attorney’s fees only on evidence of “fraud or bad faith.”
b. Something Less than Bad Faith
Other courts have taken a more liberal view, holding that a prevailing defendant need not show bad faith on the plaintiff’s part to prove that a case is “exceptional” under the Lanham Act. For example, the D.C. Circuit in Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant83 held that “[s]omething less than ‘bad faith’ . . . suffices to mark a case as ‘exceptional.’”84 “Exceptional,” the court stated, means “uncommon, not run of the mill.”85 In so finding, the court relied on the legislative history of Section 1117(a), quoting a statement in the Senate report that the attorney’s fee provision “would make a trademark owner’s remedy complete in enforcing his mark against willful infringers, and would give defendants a remedy against unfounded suits.”86
In National Association of Professional Baseball Leagues, Inc. v. Very Minor Leagues, Inc.,87 the Tenth Circuit noted that a determination of whether a case is exceptional should not focus solely on bad faith but rather should incorporate a broader range of factors including (1) whether plaintiffs’ suit lacks foundation, (2) the plaintiff’s “bad faith” in bringing the suit, (3) the “unusually
81. Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187 (2d Cir. 1996); see also N.Y. Racing Ass’n, Inc. v. Perlmutter Publ’g, Inc., 959 F. Supp. 578 (N.D.N.Y. 1997); IMAF, S.p.A. v. J.C. Penney Co., 810 F. Supp. 96 (S.D.N.Y. 1992); Banff Ltd. v. Colberts, 810 F. Supp. 79 (S.D.N.Y. 1992), aff’d, 996 F.3d 33 (2d Cir. 1993).
82. Lipscher v. LRP Publ’g, Inc., 266 F.3d 1305 (11th Cir. 2001); Cardinal Freight Carriers, Inc. v. Cardinal Logistics, Inc., 155 F. Supp. 2d, 1352 (S.D. Fla. 2001).
83. 771 F.2d 521 (D.C. Cir. 1985).
84. Id. at 526.
85. Id.
86. S. Rep. No. 94-1400, 93rd Cong., 2d sess. (1974), reprinted in 1974 U.S.C.C.A.N. 7132, 7137. See also Ale House Mgmt., Inc. v. Raleigh Ale House, Inc., 205 F.3d 137 (4th Cir. 2000) (quoting Scotch Whisky Ass’n v. Majestic Distilling Co., 958 F.2d 594, 599 (4th Cir. 1992)); Stephen W. Boney, Inc. v. Boney Servs., Inc., 127 F.3d 821 (9th Cir. 1997) (bad faith is sufficient, but is not always necessary); Hartman v. Hallmark Cards, Inc., 833 F.2d 117 (8th Cir. 1987) (bad faith is not a prerequisite to a Lanham Act fee award); Yankee Candle Co. v. Bridgewater Candle Co., 140 F. Supp. 2d 111 (D. Mass. 2001) (a showing of bad faith satisfies the exceptional standard but is not necessary); La Amiga del Pueblo, Inc. v. Robles, 748 F. Supp. 61 (D.P.R. 1990), aff’d, 937 F.2d 689 (1st Cir. 1991) (exceptional refers to uncommon, not run of the mill, and suits designed to harass, whether descending to the rock bottom rung of bad faith or not, may warrant an award of attorney’s fees).
87. 223 F.3d 1143 (10th Cir. 2000).
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vexatious and oppressive manner” in which the suit is prosecuted, or (4) other reasons as well.88
c. “Oppressive” Conduct
Courts in the Seventh Circuit have held that the standard for determining whether to award attorney’s fees to a prevailing defendant is whether a plaintiff’s conduct can be characterized as oppressive. In Door Systems, Inc. v. Pro-Line Door Systems, Inc.,89 the Seventh Circuit stated that “bad faith is not the correct standard for determining whether to award attorneys’ fees to the defendant in a Lanham Act case.” The court pointed out that it had previously rejected the equation of “deliberate” and “in bad faith,” reasoning that a party’s acts could be “deliberate” without being in bad faith.90 The court further explained:
One firm might copy another’s trademark believing in good faith that it was privileged to do so; it would be acting deliberately, and so could be ordered, in the discretion of the district court, to pay the other party’s attorneys’ fees, but it would not be acting in bad faith. But where it is the alleged victim of the infringement that is being asked to pay the other side’s attorneys’ fees, it is difficult to understand how “deliberateness” would pick out a class of “exceptional cases” (the statutory language glossed by the “malicious, fraudulent, deliberate, or willful” formula). Bringing a suit, as the plaintiff did here, is a deliberate act, always; if this is enough to make the suit an “exceptional case,” then all cases in which the winning party is the defendant could be thought deliberate. Yet it is not difficult to imagine how a suit brought in good faith and lost could be thought so “exceptional” as to warrant the award of attorneys’ fees to the defendant. . . . [A] suit can be oppressive because of lack of merit and cost of defending even though the plaintiff honestly though mistakenly believes that he has a good case and is not trying merely to extract a settlement based on the suit’s nuisance value.91
The court explained that somewhere between “good faith” as a safe harbor and “deliberateness” as an automatic basis for awarding attorney’s fees is the category of “oppressive” suits, in which an award of fees to the defendant is justified.92 In another recent 88. Id. at 1147. See also Procter & Gamble Co. v. Amway Corp., 280 F.3d 519 (5th Cir. 2002) (court should consider the objective merits of the suit when determining whether plaintiff acted in good faith).
89. 126 F.3d 1028 (7th Cir. 1997).
90. Id. at 1031 (citing BASF Corp. v. Old World Trading Co., 41 F.3d 1081, 1099 (7th Cir. 1994)).
91. 126 F.3d at 1031-32.
92. Id. at 1032.
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Seventh Circuit case, S Indus., Inc. v. Centra 2000, Inc.,93 the court expanded on the meaning of “oppressive,” holding that a suit could be so characterized where it was found to have “lacked merit, had elements of an abuse of process claim, and plaintiff’s conduct unreasonably increased the cost of defending against the suit.”94
2. Mitigating or Supporting Factors
a. Frivolous or Meritless Claims or Dilatory Tactics
In S Indus., Inc. v. Diamond Multimedia Systems, Inc.,95 the court held that a case could be deemed exceptional because of “lack of merit and cost of defending even though the plaintiff honestly though mistakenly believes that he has a good case and is not trying to merely extract a settlement based on the suits nuisance value.”96 The court found that defendants were entitled to attorney’s fees because plaintiff filed and actively pursued frivolous claims, and refused to assist with, and actively obstructed, defendants’ attempt to serve plaintiff’s key witness.97
The Seventh Circuit followed this reasoning in S Indus., Inc. v. Centra 2000, Inc.,98 holding that the award of attorney’s fees to the prevailing defendant was appropriate because the plaintiff’s claims were meritless, and because plaintiff had engaged in “dilatory tactics.”99 The court found that the plaintiff not only pursued “indefensible claims, but it added to the cost and aggravation of this meritless litigation by not responding to discovery requests, repeatedly failing to properly serve or sign motions filed with the court, and failing to satisfy the requirements of the local rules of the district court.”100 In addition, the court looked to plaintiff’s “pattern of abusive and improper litigation” in finding the appeal to be frivolous.101
In Viola Sportswear v. Mimun,102 the court held plaintiff’s case to be without merit, in which defendants were charged with a nationwide trademark infringement conspiracy based solely on the sale of a single pair of jeans for $10. In so holding, the court
93. 249 F.3d 625 (7th Cir. 2001).
94. Id. at 627.
95. 17 F. Supp. 2d 775 (N.D. Ill. 1998).
96. Id. at 777 (quoting Door Sys., Inc. v. Pro-Line Sys., Inc., 126 F.3d 1028, 1032 (7th Cir. 1997)).
97. 17 F. Supp. 2d at 778.
98. 249 F.3d 625 (7th Cir. 2001).
99. Id. at 627.
100. Id.
101. Id. at 628. The court noted that the plaintiff filed at least 33 trademark infringement lawsuits between 1995 and 1997.
102. 574 F. Supp. 619 (E.D.N.Y. 1983).
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observed that plaintiff made no effort to investigate the facts prior to filing the complaint or to inquire of the defendants as to the validity of the charges. The court also found that none of the defendants had manufactured, sold or offered for sale plaintiff’s jeans after plaintiff obtained an exclusive license to manufacture and sell the jeans in question. The court noted the extensive litigation which followed, including discovery that revealed that plaintiff’s claim was baseless. In awarding fees to the defendant, the court held that the phrase “exceptional” would “surely be construed to encompass a case such as this which was without merit. One can only speculate about the motives which prompted this suit and in doing so none that are laudable come readily to mind.”103
In Ale House Management, Inc. v. Raleigh Ale House, Inc.,104 the Fourth Circuit, in affirming an award of attorney’s fees to the prevailing defendant, held that the lower court had properly relied on the following factors: (1) plaintiff’s allegation of erroneous facts due to its reliance on a form complaint; (2) plaintiff’s failure to tailor its factual allegations to fit the case; (3) plaintiff’s withdrawal of its federal anti-dilution claim after the defendant pointed out its inapplicability; and (4) the fact that plaintiff is a “successful company that used its resources to hinder . . . [defendant’s] business venture.”105
b. Plaintiff’s Good Faith
Courts have also recognized plaintiff’s good faith belief in the merits of its case as a factor mitigating against an award of attorneys’ fees. In National Association of Professional Baseball Leagues, Inc.,106 the court found that plaintiff, owner of the mark “Professional Baseball The Minor Leagues,” was not liable for attorney’s fees even though it did not prevail on its trademark infringement claim. The court reasoned that there was some evidence of similarity between the plaintiff’s mark and defendant’s “Very Minor Leagues” mark, the plaintiff introduced expert testimony of the possibility of confusion, and there was nothing inappropriate about filing suit even though a dispute regarding the mark was pending before the Trademark Trial and Appeal
103. Id. at 620-21.
104. 205 F.3d 137 (4th Cir. 2000).
105. Id. at 144; see also Yankee Candle Co. v. Bridgewater Candle Co., 140 F. Supp. 2d 111 (D. Mass. 2001) (case ruled exceptional in view of plaintiff’s aggressive pursuit of unfounded claims and use of predatory litigation strategies); Cairns v. Franklin Mint Co., 115 F. Supp. 2d 1185 (C.D. Cal. 2000) (case ruled exceptional because plaintiff’s claims for dilution and false advertising were “groundless and unreasonable”); IMAF, S.p.A. v. J.C. Penney Co., 810 F. Supp. 96 (S.D.N.Y. 1992) (case ruled exceptional because plaintiff failed to establish consumer confusion).
106. 223 F.3d 1143 (10th Cir. 2000).
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Board.107 The court held that although “a suit may have some underlying merit and yet be pursued in such a meritless and improper manner that it becomes unfounded,” such was not the case here.108
Similarly, in Stephen W. Boney, Inc. v. Boney Services, Inc.,109 plaintiff operator of a grocery store brought a trademark infringement claim against family members using the same trade name for their grocery stores. Affirming the trial court’s denial of fees to defendants, the court reasoned that the action was not frivolous and raised debatable issues of law and fact.110
c. Harassment
A case may be found to be exceptional where the defendant demonstrates that the plaintiff harbored a harassing purpose in instituting the action. In Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant,111 improper venue sufficed to make a case “excep-tional” for purposes of awarding attorney’s fees, where the court was convinced that defendants, hauled before a court 3,000 miles
107. Id. at 1149.
108. Id.
109. 127 F.3d 821 (9th Cir. 1997).
110. Id. at 825-27; see also Procter & Gamble Co. v. Amway Corp. 280 F.3d 519 (5th Cir. 2002) (a party that predicates its legal claim on a controversial and unsettled legal theory should not face sanctions under Section 1117(a) when the court ultimately rejects the claim); Lipscher v. LRP Publ’ns, Inc., 266 F.3d 1305 (11th Cir. 2001) (affirming denial of fees in view of lower court’s finding that plaintiff’s suit did not completely lack substance and was not part of a “competitive ploy”); Am. Council of Certified Podiatric Physicians and Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 185 F.3d 606 (6th Cir. 1999) (holding that where plaintiff sues under a colorable yet ultimately losing argument, an award of attorney’s fees is inappropriate); Blau Plumbing, Inc. v. S.O.S. Fix-It, Inc., 781 F.2d 604, 612 (7th Cir. 1986) (denying attorney’s fees where opposing party’s action was not frivolous and raised debatable issues); Cardinal Freight Carriers, Inc. v. Cardinal Logistics, Inc., 155 F. Supp. 2d 1352 (S.D. Fla. 2001) (denying attorney’s fees where evidence showed claim was bought by plaintiff in good faith); Transclean Corp. v. Bridgewood Servs., Inc., 134 F. Supp. 2d 1049 (D. Minn. 2001), aff’d, No. 01-1268, 2002 U.S. App. LEXIS 9609 (Fed. Cir. May 21, 2002) (because there was some evidence in the record to support plaintiff’s claims, the court held the case not to be exceptional); Five Star Mfg, Inc. v. Ramp Lite Mfg., Inc., No. 97-2430-GTV, 2002 U.S. Dist. LEXIS 6640 (D. Kan. Mar. 28, 2002) (plaintiff’s voluntary dismissal of trade dress claim before trial does not mandate an award of attorney’s fees); Gillette Co. v. Norelco Consumer Prods. Co., 69 F. Supp. 2d 246 (D. Mass. 1999) (declining to award fees because plaintiff not motivated by bad faith and achieved some success on the merits); N.Y. Racing Ass’n, Inc. v. Perlmutter Publ’ns, Inc., 959 F. Supp. 578 (N.D.N.Y. 1997) (denying attorney’s fees award in part because the legal concepts and factual circumstances of this case are both unique and complex); La Amiga del Pueblo, Inc. v. Robles, 748 F. Supp. 61 (D.P.R. 1990), aff’d, 937 F.2d 869 (1st Cir. 1991) (plaintiff’s claim for infringement was not successful, but neither was it frivolous, accordingly case ruled not to be exceptional); Olsonite Corp. v. Bemis Mfg. Co., 610 F. Supp. 1011 (E.D. Wis. 1985) (case not exceptional because it was not so one-sided that the court could conclude plaintiff acted frivolously or in bad faith in bringing the action).
111. 771 F.2d 521 (D.C. Cir. 1985).
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from their place of activity, had encountered the kind of harass-ment Congress meant to deter in enacting Section 1117(a).112
d. Fraud
Where plaintiff has engaged in fraudulent or other questionable conduct, a finding that a case is exceptional is also appropriate. In Aromatique, Inc. v. Gold Seal, Inc.,113 defendant Gold Seal alleged that plaintiff’s conduct was exceptional because plaintiff falsely asserted that its trade dress was federally registered and made false statements to the United States Patent and Trademark Office in its applications for registration of the marks in question.114 Reasoning that “[t]here can be no doubt that Aromatique’s counsel knew that the claim that the [trade] dress was federally registered was false,”115 the court observed that “[t]he actions Aromatique took to acquire and enforce rights in the trade dress at issue here are indeed beyond the pale of acceptable behavior.”116
e. Plaintiff’s Delay in Initiating Action
On occasion a successful defendant has pursued an award of attorney’s fees on the grounds that the unsuccessful plaintiff inexcusably delayed in instituting the action. Courts have been reluctant to accept this as a basis for a finding that a case is exceptional, particularly where the plaintiff offers evidence to explain the delay, even if such evidence was ultimately insufficient to avoid a laches defense.117 112. See also Universal City Studios, Inc. v. Nintendo Co., 797 F.2d 70 (2d Cir. 1986) (awarding attorney’s fees in part because plaintiff brought suit for coercive purposes); Diamond Supply Co. v. Prudential Paper Prods. Co., 589 F. Supp. 470 (S.D.N.Y. 1984) (attorney’s fees awarded to a defendant because plaintiff’s action was “patently baseless” and constituted “bad faith harassment”); Mennen Co. v. Gillette Co., 565 F. Supp. 648 (S.D.N.Y. 1983), aff’d, 742 F.2d 1437 (2d Cir. 1984) (awarding attorney’s fees because suit was brought as a “competitive ploy”). But see John R. Thompson Co. v. Holloway, 366 F.2d 108 (5th Cir. 1966) (finding that recovery by defendants of attorney’s fees from plaintiff, on theory that suit was brought without probable cause and with intent to harass defendants, was not justified by record).
113. 28 F.3d 863 (8th Cir. 1994).
114. Id. at 877.
115. Id. at 878. The court also found that plaintiff’s allegation of secondary meaning was based in part on its fraudulent assertion to defendant that its trade dress was federally registered. Id.
116. Id; see also Finance Inv. Co. (Bermuda) Ltd. v. Geberit, 165 F.3d 526 (7th Cir. 1998) (court affirmed an award of fees where plaintiffs had filed a Lanham Act case despite the fact they did not have a protectible interest in the trademark at issue and knew, based upon defendant’s statements and the outcome of a previous lawsuit, that defendants had nothing to do with alleged improper use of the mark).
117. Peyser v. Searle Blatt & Co., No. 99 Civ. 10785, 2001 U.S. Dist. LEXIS (S.D.N.Y. Dec. 13, 2001); accord Hermes Int’l v. Lederer de Paris Fifth Avenue, Inc., 50 F. Supp. 2d 212 (S.D.N.Y. 1999), rev’d on other grounds, 219 F. 3d 104 (2d Cir. 2000).
1138 Vol. 92 TMR
IV. CONCLUSION
From the case authority discussed above, it is easy to see that the application of Section 1117(a) of the Lanham Act by courts has been far from “essentially noncontroversial.” The lack of legislative guidance as to what is meant by the “exceptional cases” language of the Lanham Act has led courts to create their own standards, with some circuits going so far as to craft different standards depending on whether the prevailing party is the plaintiff or defendant.
While the lack of guidance has clearly resulted in difficulties for courts in ruling on attorney’s fees requests and practitioners in advising their clients as to what conduct will lead to an exceptional case finding, several trends appear to be emerging in recent decisions that should, at a minimum, aid practitioners in advising their clients. First, while courts in early decisions following the 1975 amendment to Section 1117(a) appeared to rule mechanically on attorney’s fees claims based solely on a finding that the losing party’s (and particularly a losing defendant’s) conduct was “malicious, fraudulent, deliberate or willful,” recent courts have adopted a more dynamic and flexible analysis, which this author endorses. This analysis begins with an assessment of whether the losing party’s conduct meets the threshold of malicious, fraudulent, deliberate or willful conduct. In the event that it does, the court will then examine other factors, such as the presence or absence of supporting or mitigating factors, as well as whether the prevailing party’s conduct may have contributed to the fees that were incurred. Only after the “totality of the circumstances”118 are assessed will the court reach a conclusion on the propriety of an award of attorney’s fees.
Second, courts are increasingly recognizing the appro-priateness of attorney’s fees awards to prevailing defendants. While courts continue to struggle with the issue of whether attorney’s fees awards to prevailing plaintiffs and defendants should be assessed under the same or different standards, this distinction in practice appears to be of little significance. Rather, irrespective of their characterization of the standard of review, courts in recent decisions appear to be analyzing the “exceptional” nature of such cases in the same manner, i.e., a conclusion regarding the propriety of such an award, whether to a prevailing plaintiff or defendant, is made only after weighing the totality of the circumstances.
118. See Tamko Roofing Prods., Inc. v. Ideal Roofing Co., 282 F.3d 23, 33 (1st Cir. 2002) (“[i]t is the totality of the circumstances, rather than a particular item alone, that suffices for an award of attorneys’ fees”).
