Opinion ID: 15871
Heading Depth: 3
Heading Rank: 2

Heading: Profits and attorneys’ fees

Text: The district court denied the Plaintiffs’ request for an accounting of profits and reasonable attorneys’ fees. See Pebble Beach, 942 F. Supp. at 1571-72. The Plaintiffs argue that the district court abused its discretion in not awarding them profits and attorneys’ fees, pursuant to 15 U.S.C. § 1117.22 22 The Plaintiffs also argue that Pebble Beach and Pinehurst must be granted an award of treble profits and attorneys’ fees, pursuant to 15 U.S.C. § 1117(b). However, § 1117(b), which provides penalties for the intentional use of counterfeit marks, does not apply to this case because (1) this simply is not a counterfeiting case and (2) despite the fact that Tour 18 intentionally copied the Plaintiffs’ marks and trade dress, it did not intentionally infringe the Plaintiffs’ marks by the use of counterfeit marks in attempting to use them to identify the golf holes it copied. The case upon which the Plaintiffs rely does not stand for the proposition that any § 1114(1)(a) violation triggers the remedies in § 1117(b). That case is a clear case of intentional counterfeiting. See Dunkin’ Donuts Inc. v. Mercantile Ventures, No. 93-8270, slip op. at 6 (5th Cir. Mar. 7, 1994) (unpublished), on remand, 32 U.S.P.Q.2d 61
Section 1117(a) of the Lanham Act entitles a markholder to recover the defendant’s profits, subject to the principles of equity. See 15 U.S.C. § 1117(a); Maltina Corp. v. Cawy Bottling Co., 613 F.2d 582, 584 (5th Cir. 1980). An award of the defendant’s profits is not automatic, see Champion Spark Plug Co. v. Sanders, 331 U.S. 125, 131 (1947); Bandag, Inc. v. Al Bolser’s Tire Stores, Inc., 750 F.2d 903, 919 (Fed. Cir. 1984), and is committed to the discretion of the district court, whose decision we review for an abuse of discretion, see id. at 917, 919. While this court has not required a particular factor to be present, relevant factors to the court’s determination of whether an award of profits is appropriate include, but are not limited to, (1) whether the defendant had the intent to confuse or deceive, (2) whether sales have been diverted, (3) the adequacy of other remedies, (4) any unreasonable delay by the plaintiff in asserting his rights, (5) the public interest in making the misconduct unprofitable, and (6) whether it is a case of palming off. See Texas Pig Stands, Inc. v. Hard Rock Cafe Int’l, Inc., 951 F.2d 684, 695 (5th Cir.) (citing Champion Spark Plug, 331 U.S. at 130; Bandag, 750 F.2d at 919; and Maltina, 613 F.2d at 585), reh’g denied, 966 F.2d 956 (5th Cir. 1992); RESTATEMENT, supra, § 37. Once an award is found to be appropriate, a 1460 (W.D. Tex. 1994). 62 markholder is only entitled to those profits attributable to the unlawful use of its mark. See Texas Pig Stands, 951 F.2d at 696, reh’g denied, 966 F.2d at 957-58 (citing Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 206 (1942), and Meier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 124 (9th Cir. 1968)). The district court determined that an accounting of profits was inappropriate based upon (1) the lack of any evidence of lost or diverted sales, (2) the fact that the Plaintiffs only partially prevailed, and (3) the adequacy of injunctive relief. See Pebble Beach, 942 F. Supp. at 1571. The Plaintiffs argue that the district court erred in considering the fact that they only partially prevailed and in its finding that there was no loss of goodwill. The district court did err in placing weight on the fact that the Plaintiffs partially prevailed in denying an accounting of profits. The Supreme Court has held that the burden is upon the defendant to show that he made no profit from the infringing use of the mark. See Mishawaka, 316 U.S. at 206; see also 5 MCCARTHY ON TRADEMARKS, supra, § 30:65. The Court acknowledged that the plaintiff may receive a windfall, but stated that, “where it is impossible to isolate the profits” from the infringing conduct, the windfall should go to the plaintiff rather than the wrongdoer. See Mishawaka, 316 U.S. at 206-07. Therefore, the fact that the Plaintiffs only partially prevailed 63 does not weigh against an accounting of profits. Nevertheless, the other relevant factors here still support the district court’s denial of an accounting of profits. There were no diverted sales nor palming off in this case, which are both significant factors. See Texas Pig Stands, 951 F.2d at 695; see also Champion Spark Plug, 331 U.S. at 131 (affirming a denial of profits where no fraud or palming off was evident). The district court also implicitly found that Tour 18’s infringement was not willful. See Pebble Beach, 942 F. Supp. at 1571-72 (noting that a case of willful infringement is normally an appropriate case for an award of profits and not finding such infringement and indicating, in its discussion of attorneys’ fees, that Tour 18 did not intend to divert sales and had a goodfaith belief that it could copy the golf holes and use the marks to identify what it copied). Considering the lack of actual damages and the lack of an intent to confuse or deceive, injunctive relief satisfies the equities in this case. See Champion Spark Plug, 331 U.S. at 131; Bandag, 750 F.2d at 917; see also Highway Cruisers of Cal., Inc. v. Security Indus., Inc., 374 F.2d 875, 876 (9th Cir. 1967) (“One may get just enough relief to stop the evil where it is apparent no great damage was done to the complainant.”). Therefore, we do not find that the district court abused its discretion in denying the Plaintiffs an accounting of Tour 18’s profits. The Plaintiffs’ attack on the district court’s apparent reliance upon no loss of goodwill does 64 not change this outcome, especially considering that it does not appear that the district court gave that fact much weight as it was only mentioned in the summary of its discussion of an accounting of profits and not in the discussion itself. See Pebble Beach, 942 F. Supp. at 1571.
Under the Lanham Act, a court may award reasonable attorneys’ fees to the prevailing party in “exceptional cases.” 15 U.S.C. § 1117(a). “An exceptional case is one where the violative acts can be characterized as malicious, fraudulent, deliberate, or willful.” Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1390 (5th Cir. 1996) (internal quotation marks omitted) (citing Moore Bus. Forms, Inc. v. Ryu, 960 F.2d 486, 491 (5th Cir. 1992)). A district court should consider all the facts and circumstances in determining whether a case is exceptional. See CJC Holdings Inc. v. Wright & Lato, Inc., 979 F.2d 60, 65 & n.2 (5th Cir. 1992) (looking to patent case law for guidance on what constitutes an exceptional case). The prevailing party must demonstrate the exceptional nature of a case by clear and convincing evidence. See CJC Holdings, 979 F.2d at 65 (citing Machinery Corp. of Am. v. Gullfiber AB, 774 F.2d 467, 471 (Fed. Cir. 1985)). Once this showing has been made, the district court may award attorneys’ fees at its discretion. See id. (citing Texas Pig Stands, 951 F.2d at 684). We review the district 65 court’s findings as to whether a case is exceptional for clear error and its decision on whether to award attorneys’ fees for an abuse of discretion. See id. An award of attorneys’ fees under § 1117(a) generally “require[s] a showing of a high degree of culpability on the part of the infringer, for example, bad faith or fraud.” Texas Pig Stands, 951 F.2d at 697. Deliberate copying does not make a case per se exceptional. See CJC Holdings, 979 F.2d at 65-66 (noting that an unpatented and uncopyrighted product can normally be copied). A good-faith effort to create elements of dissimilarity may render a case unexceptional, see Taco Cabana, 932 F.2d at 1128 (citing with approval Roulo v. Russ Berrie & Co., 886 F.2d 931, 942 (7th Cir. 1989)), 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,” CJC Holdings, 979 F.2d at 66 (citing Gustafson, Inc. v. Intersystems Indus. Prods., 897 F.2d 508, 511 (Fed. Cir. 1990)). Additionally, lack of damages is an important factor in determining whether a case is exceptional. See Texas Pig Stands, 951 F.2d at 697 n.23. Relying upon (1) Tour 18’s lack of intent to divert sales, (2) the lack of evidence of actual damages, (3) Tour 18’s goodfaith belief that it could copy the Plaintiffs’ golf holes and use their marks to identify the golf holes it copied without causing confusion, and (4) the closeness of the case and the 66 mixed results achieved by both sides, the district court found that this case was not an exceptional case allowing for an award of attorneys’ fees. See Pebble Beach, 942 F. Supp. at 1571-72. The Plaintiffs argue that Tour 18 acted in bad faith with the requisite level of culpability, intentionally trading on the Plaintiffs’ fame and reputations and that the district court erred in relying upon a lack of intent to divert sales and upon the mixed results of the case in determining that the case was not exceptional. While a prevailing party’s mixed results can be handled by apportioning the attorneys’ fees among the claims, see 5 MCCARTHY ON TRADEMARKS, supra, § 30:103, the district court considered the mixed results as a makeweight indicating (1) that Tour 18’s conduct was not so egregious that it had no defense and (2) that it had not taken an unreasonable position. See Pebble Beach, 942 F. Supp. at 1572. The fact that the outcome was mixed is relevant to whether a case is exceptional, but it should not be accorded great weight in the court’s analysis. As a makeweight, the district court did not weigh this fact too heavily in its determination of whether the case was exceptional. As to the other circumstances of the case, the district court did not clearly err in finding a lack of the requisite level of culpability because there was no intent on Tour 18’s part to divert sales, there were no actual damages proven, there 67 was no lack of good faith (as evidenced by Tour 18’s use of disclaimers, though inadequate), and there were available legitimate uses of the Plaintiffs’ marks to identify the Plaintiffs’ products. See Roulo, 886 F.2d at 942-43 (affirming a denial of attorneys’ fees where the defendant attempted to create a similar product and made conscious efforts to create dissimilarities, which in the end were inadequate); cf. Texas Pig Stands, 951 F.2d at 697 n.23 (noting the significance of a lack of actual damages); Taco Cabana, 932 F.2d at 1127-28 (affirming an award of attorneys’ fees where the defendant acted with the intent to reduce the plaintiff’s sales); Springs Mills, Inc. v. Ultracashmere House, Ltd., 724 F.2d 352, 356 (2d Cir. 1983) (holding attorneys’ fees appropriate where the defendant “adopted [the plaintiff’s] mark and trade dress for no other purpose than to obtain a free ride” on the plaintiff’s reputation (emphasis added)). This case is unexceptional, and the district court therefore did not abuse its discretion in denying an award of attorneys’ fees to the Plaintiffs.