Archive | Fee Shifting RSS feed for this section

Lanham Act attorneys’ fees: Good to know

Originally posted 2013-06-27 11:41:52. Republished by Blog Post Promoter

The situation with attorneys’ fees in “exceptional cases” under the Lanham Act is, to put it mildly, not clear.   I’ve written about it from time to time here, including, in December, in connection with the important Second Circuit decision in Louis Vuitton v. Ly USA Inc., which held that a prevailing plaintiff in a trademark counterfeiting case may collect both statutory damages and attorneys’ fees.

Well, I say “collect” — I really mean “be awarded.”  In the vast majority of “big” counterfeiting cases, of course, these awards aren’t collected, or collectible, at all (there are exceptions).  Rather, they are “symbolic” victories meant to “send a message” to counterfeiters around the world and make them repent.

Having sent one of those messages myself … back in, oh, 2002 … I must admit I am curious why it hasn’t been received yet, evidently…
Window and statue, Appellate Division First Department Courthouse

Anyway, it always comes down to this:  No one really knows what an exceptional case is, because it’s obviously an entirely subjective test pretty much left to the sound discretion of the District Court. That “standard” is amorphous enough that, outside of big counterfeiting cases, clients should not only never be told that they can get Lanham Act attorneys fees:  They should never even be left with the impression that it’s a creditable probability, and certainly not to the extent that they should include collection of those fees in their budgeting choices for infringement litigation.

All this is by way of linking to Michael Atkins’s recent post on the latest statement on the topic of that elusive “exceptional case,” this one on the other side of the continent, in a Ninth Circuit case called Haas Automation, Inc. v. Denny, No. 11-56991, 2013 WL 2303528 (9th Cir. May 28, 2013):

Courts don’t award attorney’s fees that often in trademark cases.

That’s because the statute only authorizes fees awards in “exceptional” cases.

So what’s that mean?

The Ninth Circuit recently reviewed the standard. . . .

The court didn’t offer much analysis in upholding the district court’s award to the prevailing plaintiff. It just said that “[c]onsidering all of the circumstances of this case, including the jury’s verdict, we agree with the district court that the threshold standard for awarding fees has been met, and further that the district court did not abuse its discretion in awarding attorneys’ fees.”

A little more explanation would have been nice. However, trademark owners still have an important take-away from the decision: it’s important to know the court’s standards when seeking or defending against a claim for attorney’s fees. Most claims won’t cut it, but the cases with egregious facts can.

Just to be a little clearer:  The decision doesn’t say a damned thing about what the facts were that were so egregious.  Moreover, the case is one of those “nothing to look at here, move along” specials, with a footnote that says, “This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.”

Well, I’ll tell you some facts.   Read More…

No exceptions

Originally posted 2012-01-20 09:32:46. Republished by Blog Post Promoter

Gotham: law and municipal buildingsDid I ever say blogging is dead?  If I did it must have just been a tough week.  There’s lots of great blogging out there, still, by those motivated by ideas and skilled at exposition.  The two most obvious examples of bloggers who still matter, in soft IP, are John Welch and Eric Goldman.  There are others, of course; for sure, however, these two never disappoint.

Here’s what Eric wrote yesterday, the reading of which this morning having given me this fresh, happy outlook  — about blogging, that is; not about the state of IP law:

The federal trademark statute says judges may award attorneys’ fees to the winning party in “exceptional” cases. What does it take for a case to be “exceptional”? Apparently, it has to be pretty egregious conduct, as this long-running money pit of a case illustrates.

1-800 Contacts sued Lens.com for competitive keyword advertising. Through the course of the litigation, we learn the following facts:

  • 1-800 Contacts accrued $650k in legal fees pursuing the case and capped its legal fees at $1.1M before it stiffed its law firm.
  • the defendant Lens.com made less than $21 in profits from its competitive keyword ad buys. 1-800 Contacts also tried to attribute to Lens.com keyword ad buys made by Lens.com’s affiliates, a legal argument the court ultimately rejected.
  • 1-800 Contacts had done the same thing it was suing Lens.com for doing. 1-800 bought Lens.com’s keywords and made about $220k in profit from those keyword ad buys, yet it had duplicitously tried to shut down Lens.com for making less than $21.

To me, this looks like an egregious misuse of the litigation process–exactly the kind of sanctionable behavior that should be considered “extraordinary” enough to make the plaintiff reimburse the defendant for its sizable legal fees. Indeed, the court has harsh words for 1-800 Contacts, including calling 1-800 Contacts’ behavior “troubling” and specifically referencing its hypocrisy for suing over behavior it had itself engaged in. The court also says “1-800 Contacts’ actions raise questions about vexatious suits to defeat competition.” Read More…

Best of 2008: Someone dropped in an extra zero, right? RIGHT?

Posted on October 16, 2008.

It’s a month-old story, and how it got past us here notwithstanding, it’s not getting past us now.  Per the ABA Journal, remember the Bratz litigation?  Well, you haven’t read half of it yet:

Two toy companies battling for rights to the Bratz dolls-with-attitude have racked up legal fees of at least $93 million in the case.

MGA Entertainment has spent $63 million in fees since 2004 defending a lawsuit by Mattel Inc. that contended the doll’s designer conceived of the idea before leaping from Mattel to MGA, the Daily Journal reports (sub. req.). Plaintiff Mattel has spent $30 million in just the first half of the year, the story says.

Mattel was awarded $100 million in the case, far short of the more than $2 billion in damages it had sought.

The Daily Journal got MGA’s figures in a lawsuit it filed against its insurers seeking full payment of the Bratz fees, while the publication got the Mattel figure from a stock analyst.

10 Years of LIKELIHOOD OF CONFUSION®

10 Years of LIKELIHOOD OF CONFUSION®

The ABA item quotes a Jones Day litigation partner who is flummoxed at the idea that there is any conceivable way to get to $93 million for a trademark case, even over the course of four years.  We sure are, too.  And re-read this ‘graph: Read More…

Seventh Circuit: I Hate Illinois Nazis.

I Hate Illinois NazisMcDermott Will & Emery has published an article on the Mondaq website (registration required) about a Seventh Circuit decision in which a losing party was required to pay the plaintiff’s attorneys’ fees because of gross misbehavior during the litigation. According to the piece, and confirmed by this item, the sanctioned party surprisingly chose to litigate by rules other than those of the Marquess of Queensbury (or perhaps not?):

The plaintiff, Te-Ta-Ma Truth Foundation (Foundation), the owner of a federally registered trademark for the mark “Church of the Creator,” filed a trademark infringement action against the defendant, World Church of the Creator (World Church), a white supremacist group, for use of the “Church of Creator” mark. World Church’s use of the mark resulted in actual confusion as Foundation, a religious charity that promoted universal love and respect, began to receive complaints and condemnations from third parties after World Church members appeared on the Jerry Springer show and proclaimed hatred for Jews and non-whites.

Throughout the litigation, World Church encouraged its members to send offensive and threatening e-mails and voicemails to the Foundation and the Foundation’s attorneys. In addition, World Church posted press releases on its website flouting its use of the mark even after the issuance of a permanent injunction. Moreover, a member of the World Church was tried and convicted of soliciting the murder of the district court judge and attempting to influence her through corruption and force.

And I thought New York practice was rough.

Just for background: The Lanham Act provides for an award of attorneys’ fees in “exceptional cases.” Different circuits have different standards for what constitutes “exceptional cases.” Cooper & Dunham in New York has an excellent summary on this topic here. The novelty of the Seventh Circuit case, however, was that an exceptional case may not only be determined from the merits of the claims and defenses, but the way the game is played as well.

What is the likelihood judges will apply this standard to parties who don’t have swastikas burned into their foreheads? Don’t hold your breath. Judges really hate to use sanctions (except in family court, it seems, from the calls I get). Then again, even my most lunatic adversary in a trademark litigation (in a case I managed to squeeze myself out of last year, thank God) never put out a contract on federal judge.

Frivolous copyright claims don’t automatically merit fee awards

The New York Law Journal reports that my old friend Southern District Judge Denise Cote has turned down Fox Entertainment Group’s attempt to recoup almost $280,000 in attorney’s fees (pursuant to the copyright statute) it spent staving off a copyright suit that Fox had demonstrated was frivolous (it involved an allegation that a Fox TV program was a “ripoff” of another program). Judge Cote has an interesting take on the issue:

Although both sides agreed that the U.S. action should be dismissed with prejudice, Fox moved for an award of attorney’s fees, arguing that Ninox sued even though it knew that “The Complex: Malibu” was not substantially similar to “Dream House.”

“A compensatory fee award in these circumstances also encourages the defense of future meritless actions,” attorneys for Fox wrote in a letter to Judge Cote. “Like the gambler who raises the stakes in poker while holding no face cards, a litigant who loses this type of bet should bear the expenses incurred by the adversary in calling the bluff.”

Most IP litigators, especially those of us, ahem, “involved” in the defense side, recognize those cases that, once their merits, or outcome, are resolved, still chug along, powered solely by the gleam in someone’s eyes (woe to the ‘s attorney who puts it there!) that there could be an attorney’s fee award at the end of the rainbow. Judge Cote isn’t going to encourage that.

I’m not sure I get the next part, however. Judge Cote also writes,

“[A]lthough Ninox’s copyright claim is frivolous under the prevailing law, because this litigation would have applied copyright principles to a relatively new field of intellectual property, format licensing, as a matter of discretion, the Court will refrain from awarding attorney’s fees.”

Which is odd, because that sounds like whatever finding of frivolousness was made — the Court calls the claims “frivolous and objectively unreasonable” — is pretty much being taken back and defrivolized by that last quoted bit. What is it, exactly, that judges want?

UPDATE: The decision is here. A chilling excerpt from the lawyering point of view: Read More…

Best of 2013: Lanham Act attorneys’ fees: Good to know

First published on June 27, 2013.

The situation with attorneys’ fees in “exceptional cases” under the Lanham Act is, to put it mildly, not clear.   I’ve written about it from time to time here, including, in December, in connection with the important Second Circuit decision in Louis Vuitton v. Ly USA Inc., which held that a prevailing plaintiff in a trademark counterfeiting case may collect both statutory damages and attorneys’ fees.

Well, I say “collect” — I really mean “be awarded.”  In the vast majority of “big” counterfeiting cases, of course, these awards aren’t collected, or collectible, at all (there are exceptions).  Rather, they are “symbolic” victories meant to “send a message” to counterfeiters around the world and make them repent.

Having sent one of those messages myself … back in, oh, 2002 … I must admit I am curious why it hasn’t been received yet, evidently…
Window and statue, Appellate Division First Department Courthouse
Anyway, it always comes down to this:  No one really knows what an exceptional case is, because it’s obviously an entirely subjective test pretty much left to the sound discretion of the District Court. That “standard” is amorphous enough that, outside of big counterfeiting cases, clients should not only never be told that they can get Lanham Act attorneys fees:  They should never even be left with the impression that it’s a creditable probability, and certainly not to the extent that they should include collection of those fees in their budgeting choices for infringement litigation.

All this is by way of linking to Michael Atkins’s recent post on the latest statement on the topic of that elusive “exceptional case,” this one on the other side of the continent, in a Ninth Circuit case called Haas Automation, Inc. v. Denny, No. 11-56991, 2013 WL 2303528 (9th Cir. May 28, 2013):

Courts don’t award attorney’s fees that often in trademark cases.

That’s because the statute only authorizes fees awards in “exceptional” cases.

So what’s that mean?

The Ninth Circuit recently reviewed the standard. . . .

The court didn’t offer much analysis in upholding the district court’s award to the prevailing plaintiff. It just said that “[c]onsidering all of the circumstances of this case, including the jury’s verdict, we agree with the district court that the threshold standard for awarding fees has been met, and further that the district court did not abuse its discretion in awarding attorneys’ fees.”

A little more explanation would have been nice. However, trademark owners still have an important take-away from the decision: it’s important to know the court’s standards when seeking or defending against a claim for attorney’s fees. Most claims won’t cut it, but the cases with egregious facts can.

Just to be a little clearer:  The decision doesn’t say a damned thing about what the facts were that were so egregious.  Moreover, the case is one of those “nothing to look at here, move along” specials, with a footnote that says, “This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.”

Well, I’ll tell you some facts.   Read More…

Show me the money

Copyright is happening all over the place!

Now, a slight digression from the stemwinder I’m about to release here on fee shifting in copyright cases.  I’m going to “hook it up,” Your Honor, don’t worry.  See, Ray Dowd reports that the Supreme Court is going to hear the Costco-Swatch copyright case, which involves the question of the applicability of the first sale doctrine to copyright where the item in question was first “sold” abroad.  That’s an issue I’ve recently gotten very involved in, too–very involved.  But that’s not what I’m writing about right now. Maybe we’ll talk about that some time as well.  But this is another copyright issue, and I just need to get my two cents in, and the Ray Dowd-Eric Goldman juxtaposition here (trust me on this) reminded me…

I had dropped a link to this update by Eric Goldmanon developments concerning the topic of fee shifting in copyright in favor of successful defendants, and more particularly relating to the Offer of Judgment Rule (see below) in my missive of last Friday (just scroll down if you dare).  In that purple thicket it’s almost a throwaway, and the issue of fee-shifting could well get lost in the sauce–but that issue really deserves consideration, and thanks to SCOTUS (and Ray) I am now compelled to raise it here on its own.  Here are excerpts from Goldman, discussing the recent decision in UMG Recordings, Inc. v. Veoh Networks Inc.:

Copyright law contains a statutory fee-shifting/”loser pays” provision (17 USC 505) that, in specified circumstances, gives the judge discretion to award attorneys’ fees to a copyright lawsuit winner. Veoh decisively won a 512(c) defense against UMG’s copyright infringement claim, so Veoh applied for its attorneys’ fees under 505. The court, exercising its discretion, declined to award them. . . .

Not surprising.  Just as bad cops don’t typically serve time, plaintiffs don’t often get sanctioned with fees for filing cases that turn out to be meritless, even when the statute permits it:

I think the judge’s decision is a fair application of the statute, but consider its consequences. UMG helped drain Veoh’s coffers through the litigation, yet the court does not impose any disincentives for plaintiffs to bring such a lawsuit. As a result, UMG walks away from the lawsuit while Veoh goes belly-up.

Well, that’s why it’s maybe not such a fair application–“exercise of discretion,” that is.  But here’s the thing:

The next part of the ruling confused me, and maybe my litigator friends can help me understand it. As a fallback position, Veoh asked for its attorneys’ fees under FRCP Rule 68. Rule 68 tries to encourage litigants to settle their disputes by providing a penalty for refusing a reasonable settlement offer. If Party A proposes settlement terms and Party B declines (because it expects to do better in court), but the ultimate judgment is less favorable to Party B than the proposed settlement, Party B has to pay Party A’s costs that accrue post-settlement offer. Rule 68 makes a lot of sense from a game theory standpoint, but I’ve been told by litigators that it doesn’t mean much in practice, and this case might illustrate why.

I’m not sure it actually does.  The main reason it doesn’t mean much in practice is not the interesting legal twists–see below–but rather the fact that very, very few cases actually get to a final judgment.  Well, one of the twists is kind of a stinker, too:

The court doesn’t provide the terms of Veoh’s Rule 68 settlement offer, but because Veoh won the case, any settlement offer Veoh made by definition was better for UMG than the actual results UMG got. Therefore, on its face, Rule 68 seems to say that, at minimum, UMG should pay Veoh’s costs post-settlement offer.

But not.  Yeah, what kills you here is that if you win, Rule 68 doesn’t do anything for you at all.  You have to lose! Just not so much.  As one treatise describes it, it’s meant to prevent a defendant that recognizes that it is liable from having to watch chargeable “costs” run up while litigation keeps going and going.  Thus it’s not available as a hedge to the “maybe not so liable” defendant–which certainly sounds like a very questionable policy.

Here’s the interesting part.  Are attorneys’ fees ever a “cost”?  Usually not.  Oh sure–attorneys’ fees might sound like “costs” to a mere person, but the law in this area distinguishes between “fees” and “costs”–which is why you often see the presumptively non-redundant phrase, “fees and costs.”  So while we all want fees, if we’re lucky what we get is “costs”–pretty modest gruel.

There is an exception, however, under the cases.  That is where a statute defines them as a “taxable” cost to the losing side.  Does copyright do that?  Yes, and no.  Eric continues, regarding the Veoh case–I’ll repeat the last sentence where I broke off, to reestablish the flow:

Therefore, on its face, Rule 68 seems to say that, at minimum, UMG should pay Veoh’s costs post-settlement offer.  However, the court looks at the interaction of copyright law’s 505 fee-shifting provision and Rule 68 and, in effect, concludes that 505 moots Rule 68. The court says it couldn’t find any on-point precedent (I haven’t double-checked, but this was the first time I recall seeing any discussion of this interaction), so it cites an analogous case for the proposition that Rule 68 was not designed to expand the bases of fee awards. Thus, because the court had already concluded that Veoh wasn’t entitled to a fee award under the Copyright Act, that eliminated any Rule 68 cost award.

Right.  We faced this in the Arizona suntan lotion case:  The Ninth Circuit says there’s pretty much never any way for a copyright defendant to benefit from Rule 68.  In another link to Ray also cited on Eric Goldman’s site (begrudgingly, by the way–I don’t think fairly), the former wrestles with the problem, which I think is also put very well by David Gingras, who writes as follows:

[In] Champion Produce, Inc. v. Ruby Robinson Co., 342 F.3d 1016 (9th Cir. 2003) . . . [t]he court tried to outsmart everyone else by saying that . . . [attorneys’] fees can only be awarded as costs under 17 USC § 505 to the “prevailing party”, and they felt that a defendant who made a $20k or whatever offer of judgment under Rule 68 but then lost at trial in which the plaintiff received a judgment of only $19,999 could not be considered as the “prevailing party” and thus could not recover fees as part of the mandatory costs award under Rule 68. Of course, this completely ignores the purposes of Rule 68 and it rewards plaintiffs who reject settlement offers and seek to roll the dice at trial.

Yep–which makes it hardly a roll of the dice at all for the plaintiff in a situation such as this, which is nearly always more financially able to play at the $1000 table anyway.

In the Designer Skin case in Phoenix, we thought we had a reasonable way around this–at least at the 17 USC § 505 level, if not regarding Rule 68–by the way.   Read More…