Following the lead of the Third and Sixth Circuits, and several U.S. District Courts, the Fourth Circuit imported the standard articulated by the U.S. Supreme Court in the patent litigation case of Octane Fitness, LLC v. Icon Health and Fitness, Inc., 134 S.Ct. 1749 (2014) into the Trademark Infringement arena. Georgia-Pac. Consumer Products LP v. von Drehle Corp., 781 F.3d 710 (4th Cir. 2015), as amended (Apr. 15, 2015). The District of Maryland and the Eastern District of Virginia had both previously applied the Octane Fitness, LLC standard for shifting fees in Patent Act claims to the Lanham Act’s identical fee-shifting provision. See Teal Bay Alliances, LLC v. Southbound One, Inc., No. CIV.A. MJG-13-2180, 2015 WL 357064 (D. Md. Jan. 26, 2015); Reynolds Consumer Prods. V. Handi-Foil Corp., No. 1:13-CV-214, 2014 WL 3615853 (E.D. Va. July 18, 2014).
In general, under the Octane Fitness, LLC standard, an “exceptional” case meriting a shifting of fees is one that “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated,” not, as the Federal Circuit had interpreted, only those cases that either involve “material inappropriate conduct” or are “both ‘objectively baseless’ and ‘brought in subjective bad faith’.” 134 S.Ct. at 1754-56. Additionally, entitlement to fees need only be proven by a preponderance of the evidence, as opposed to clear and convincing evidence. Id. at 1758.
In Georgia-Pac. Consumer Prods. LP, the Fourth Circuit vacated the Eastern District of North Carolina’s award of $2,225,782.35 in attorney’s fees to the Plaintiff, even though the District Court had, in the Fourth Circuit’s view, “erroneously relied on the [Defendant’s] purposeful conduct,” as the basis for finding the case “exceptional,” because so doing “conflate[ed] willful and intentional conduct with willful and intentional infringement.” Georgia-Pac. Consumer Prods. LP, No. CIV.A. MJG-13-2180, 2015 WL 357064 at *719 (emphasis in original). This was error, “especially since [Defendant] reasonably believed that its conduct was lawful.” Id. Defendant had distributed its own paper towels for use in Plaintiff’s paper towel dispenser, in contravention of Plaintiff’s trademark rights. Id.
The District Court’s decision was, however, predicated on pre-Octane Fitness, LLC law. The Fourth Circuit held that an attorney’s fee award did not have to rely on a finding of willful and intentional infringement, but, instead, that the District Court could, under the Octane Fitness, LLC standard, “award attorneys fees to the prevailing party under [the Lanham Act] when it determines, in light of the totality of the circumstances, that (1) there is an unusual discrepancy in the merits of the positions taken by the parties, based on the non-prevailing party’s position as either frivolous or objectively unreasonable; (2) the non-prevailing party has litigated the case in an unreasonable manner; or (3) there is otherwise the need in particular circumstances to advance considerations of compensation and deterrence.” Id. at *721 (internal citations and quotation marks omitted).
Accordingly, to give the District Court an opportunity to consider the award in light of this new standard, the Fourth Circuit vacated the award and remanded the case. Id.
In Teal Bay Alliances, a case in which the authors’ firm represented defendant Southbound One, the U.S. District Court for the District of Maryland awarded attorneys’ fees to defendant Southbound One after finding that the material false representation plaintiff used to obtain registration of its “Shorebilly” trademark, together with plaintiff’s non-use of the mark in commerce prior to defendant’s first use in commerce and the lack of similarity between the parties’ marks were sufficient to make the case “exceptional.” Teal Bay Alliances, LLC, 2015 WL 357064 at *2. In his Bench Trial Decision, Judge Marvin J. Garbis described the plaintiff’s claims as “specious” and “utterly meritless.” Id. at *2-3.
The Court, however, declined to award all fees requested by defendant due to motions and arguments raised earlier in the case by defendant that the Court believed were unreasonable and unnecessarily increased the cost of litigation. But one of these key arguments was a Motion to Dismiss by defendant early in the case on the basis that plaintiff had not used its purported mark as a trademark, but rather used such designation in an ornamental fashion that is not subject to trademark protection. These arguments were raised early in the case in an effort to eliminate plaintiff’s suit, which defendant perceived as baseless and frivolous. While defendant was unable to tender sufficient evidence to establish its ornamentation argument early in the case (thereby resulting in the denial of its Motion to Dismiss), defendant was successful in establishing this argument at trial based on additional facts and evidence garnered in discovery. So the Court’s decision to reduce defendant’s fee award presents difficult questions for attorneys in strategizing how to defend a frivolous case, in terms of the nature and timing of the defenses to raise and the amount and sufficiency of the evidentiary support for such defenses.
As these cases demonstrate, the trend in the Federal Courts is toward applying Octane Fitness, LLC to trademark infringement matters.
Donna Thomas is managing partner of, and Bryan Utter an associate of, Astrachan Gunst Thomas, P.C. in Baltimore, MD (www.agtlawyers.com), where they handle business, intellectual property and advertising law matters. Donna Thomas can be reached at email@example.com, (410) 783-3522 and Bryan Utter can be reached at firstname.lastname@example.org, (410) 783-3537.