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A New Paradigm: Awards of Attorney Fees Under the Lanham Act Post-Octane Fitness

Any trademark litigator knows that it has historically been difficult to obtain an award of attorney fees in a federal trademark case, no matter how egregious the opposing party actions Section 35(a)(3) of the Lanham Act provides, in part, The Court in exceptional cases may award reasonable attorney fees to the prevailing party. 15 U.S.C. § 1117(a)(3) In practice, federal courts rarely found cases to be exceptional.

Last year Supreme Court decision in Octane Fitness, LLC v. Icon Health and Fitness, Inc., 134 S.Ct. 1749 (2014) provided an opening for a more liberal standard for fees in trademark cases Octane Fitness was a patent case where the Supreme Court interpreted the Patent Act identical attorney fees language 35 U.S.C. ¬ß 285 also states The Court in exceptional cases may award reasonable attorney fees to the prevailing party. In the underlying case, the Federal Circuit had applied its longstanding formulation that exceptional cases involved (1) litigation that is objectively baseless and (2) brought in subjective bad faith 134 S.Ct. at 1754, citing Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005) The Federal Circuit required clear and convincing evidence of both the lack of merit and subjective bad faith.

In reversing the Federal Circuit, the Supreme Court relied on Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant, 771 F.2d 521 (D.C. Cir. 1985), a trademark case which interpreted Section 35(a)(3) of the Lanham Act to mean uncommon or not run-of-the-mill.[1] Id. at 526 Stating that the Lanham Act provision is identical to the Patent Act fee provision at issue, the Supreme Court held that an exceptional case’ is simply one that stands out from others with respect to the substantive strength of a party litigation position (considering both the governing law and facts of the case) or the unreasonable manner in which the case was litigated. Octane Fitness cautioned district courts to determine whether a case is exceptional on a case-by-case basis, evaluating the totality of the circumstances while exercising their discretion In rejecting the Federal Circuit standard, the Supreme Court held that an award of fees is justified even if the losing party conduct does not rise to the level of bad faith Moreover, the Federal Circuit insistence on clear and convincing evidence of misconduct or bad faith raised the bar too high.

While the Octane Fitness decision did not directly address the Lanham Act, logic would dictate that the same standard should apply since the attorney fees language is identical However, for now, the Supreme Court has left it to the lower courts to determine whether there are some teeth in the fee-shifting provisions of the Patent and Lanham Acts By instructing that such decisions would be reviewed only for abuse of discretion, the Supreme Court granted the lower courts great deference.

In Fair Wind Sailing, Inc. v. Dempster, 764 F. 3d 303 (3d Cir. 2014), the Third Circuit, applied Octane Fitness to a Lanham Act case recognizing that Section 35(a)(3) of the Lanham Act is identical to Patent Act § 285 and that the Supreme Court sent a clear message that it was defining exceptional’ not just for the fee provision in the Patent Act, but for the fee provision in the Lanham Act as well. 764 F.3d at 314 Fair Wind concerned a terminated employee who established a competing business that allegedly infringed the plaintiff trade dress The defendant motion to dismiss the complaint on the grounds that it failed to allege sufficient facts to establish trade dress infringement was granted, and the district court awarded fees to the defendant On the plaintiff appeal, the Third Circuit remanded the case to the district court for a determination whether the case was exceptional under Octane Fitness.

Similarly, in Renna v. County of Union N.J., 2015 WL 93800, (D.N.J. 2015), Magistrate Judge Hammer of the District of New Jersey, awarded attorney fees to a successful plaintiff under the Lanham Act Renna produced a public access television program that exposes in the inner workings of the Union County, New Jersey, government Renna regularly shows the Union County logo during the programs Union County, which had earlier tried and failed to obtain a federal registration for its seal (municipal seals are not eligible for federal trademark registration), sent multiple cease and desist letters to Renna claiming that he was infringing the defendant registered mark Renna then successfully brought a declaratory judgment action against the county for First Amendment violations, a declaration of non-infringement and a request for attorney fees Magistrate Judge Hammer found that Octane Fitness applied and that the defendant meritless and intimidating pre-litigation conduct, including actual knowledge that it had no trademark registration, was sufficient to make the case exceptional.

The Sixth Circuit has also incorporated the Octane Fitness standard into a review of an attorney fees award in Premium Balloon Accessories, Inc. v. Creative Balloons Mfg., Inc. 573 Fed. Appx. 547 (6th Cir. 2014) In Premium Balloon, the district court granted summary judgment for the plaintiff on its trade dress infringement claim In a prior action, defendant Creative Balloons had settled by agreeing to pay Premium Balloon a license fee for the subject trade dress Creative then infringed another trade dress and counterclaimed against Premium for patent infringement, a counterclaim it voluntarily dismissed The district court found that Creative claims were exceptional in their groundlessness. On appeal, the Sixth Circuit reversed the award of fees, finding that there was no evidence Creative was aware that its claim was meritless, and cited its good faith in immediately withdrawing that claim upon notification of its defects Premium Balloon appears to hold that Octane Fitness will apply to Lanham Act cases in the Sixth Circuit.

In another decision in the long-running intellectual property feud between Apple and Samsung, Judge Koh in the Northern District of California applied Octane Fitness to Ninth Circuit precedent on Lanham Act attorney fees claims In Apple Inc. v. Samsung Electronics Co., 2014 WL 4145499 (N.D. Cal. Aug. 20, 2014), the court first overruled the jury finding that Samsung had willfully infringed Apple trade dress, finding that Samsung had asserted reasonable defenses of non-infringement Because Judge Koh found that Samsung defenses showed that Samsung might have reasonably thought that Samsung actions were not barred by statute and that, therefore, Apple is not entitled to attorneys’ fees under Section 35(a)(3) of the Lanham Act.

Two other post-Octane Fitness district court decisions have incorporated that decision into evaluations of attorney fee claims under the Lanham Act Although both courts used their discretion to deny fee award, the opinions in Reynolds Consumer Products, Inc. v. Handi-Foil Corp., 2014 WL 3615853 (E.D. Va. July 18, 2014) and BMW of North America, LLC v. Cuhadar, 2014 WL 5420133 (M.D. Fl. July 10, 2014) demonstrated that federal judges in Virginia and Florida also held that the new interpretation of exceptional applied in their districts.

In the only outlier decision to date, a Connecticut court refused to apply the Octane Fitness standard In Romag Fasteners, Inc. v. Fossil, Inc., 2014 WL 4073204, at *5 (D. Conn. Aug. 14, 2014), Judge Arterton refused to award the plaintiff attorney fees after a finding of non-willful trademark infringement under the Lanham Act, relying on Second Circuit precedent that Section 35(a)(3) allows recovery of a reasonable attorney fee only on evidence of fraud or bad faith quoting Louis Vuitton Matteltier S.A. v. LY USA, Inc. 676 F.3d 83, 111 (2d Cir. 2012) Addressing the application of the Supreme Court decision, the court found that the Supreme Court was interpreting only the Patent Act and not the Lanham Act in Octane Fitness. As such, the Second Circuit cases interpreting the fee provision of the Lanham Act remain good law and represent binding precedent on this Court Since there was no evidence of fraud or bad faith, or willful infringement, the court then rejected the plaintiff fee application.

Because of differences among the circuits, including differences as courts attempt to reconcile Octane Fitness with their own precedents on Lanham Act fee awards, as the circuits sort out the repercussions of the Supreme Court decision on trademark, trade dress and unfair competition litigation, parties may push for the Supreme Court to clarify the standard for attorney fees under Section 35(a)(3) once and for all.

[1] The opinion in Noxell was written by then-Judge Ruth Bader Ginsburg, joined by Judge Scalia.

 


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