Opinion ID: 2800504
Heading Depth: 1
Heading Rank: 2

Heading: Lanham Act Attorney Fees

Text: Burford also argues that the district court abused its dis‐ cretion by failing to award him attorney fees under the Lan‐ ham Act after APS dismissed its claim with prejudice. Dis‐ trict courts may award attorney fees to those prevailing un‐ der the Act in “exceptional cases.” 15 U.S.C. § 1117(a)(3). When the party bringing the claim—here APS—does not prevail, it is an “exceptional case” within the meaning of the Act if the decision to bring the claim can be called an abuse of process. Nightingale Home Healthcare, Inc. v. Anodyne Thera‐ py, LLC, 626 F.3d 958, 963–64 (7th Cir. 2010) (explaining when prevailing defendants and plaintiffs can obtain attorney fees under the Act). It is enough for there to be an abuse of pro‐ cess when the claim was objectively unreasonable because it is one “a rational litigant would pursue only because it would impose disproportionate costs on his opponent.” Id. at 965. It could also be enough to show an abuse of process if there were direct evidence that APS sought to “bring a frivo‐ lous claim in order to obtain an advantage unrelated to ob‐ taining a favorable judgment,” though such evidence is not required for a litigant to be entitled to fees. See id. at 965–66 1 This appeal has not required us to consider Burford’s attempt to pierce APS’s corporate veil to hold Holmes liable for a breach. Nor have we needed to determine whether the oral agreements are subject to the same terms as the written agreement. Those may be questions for the district court in due course. 10 No. 14‐2692 (finding that plaintiff had made Lanham Act claim solely to coerce a price reduction out of defendant). Applying the Nightingale standard here, the district court concluded that APS’s decision to bring the claim did not amount to an abuse of process. Burford failed to persuade the district court that pursuit of the claim was objectively unreasonable or was in‐ tended to harass or to obtain an advantage unrelated to win‐ ning a favorable judgment. The decision whether to award Lanham Act attorney fees is left to the district court’s sound discretion. BASF Corp. v. Old World Trading Co., 41 F.3d 1081, 1099 (7th Cir. 1994). Bur‐ ford argues that the district court abused its discretion be‐ cause APS’s Lanham Act claim was nothing more than an attempt to impose costs on him solely to gain a competitive advantage and to push him out of the market. See Nightin‐ gale, 626 F.3d at 962. In Burford’s view, APS’s actions were objectively unreasonable because it chose to pursue the claim for as long as it possibly could—so as to impose more costs—before voluntarily dismissing, even though it knew it had no evidence supporting its claim. Two reasons, taken together, show that the district court did not abuse its discretion by rejecting this argument. First, APS’s voluntary dismissal of its claim right before trial says nothing definitive about its view of the merits or about its reasons for filing the counterclaim in the first place. APS sought dismissal of its claim immediately after it won sum‐ mary judgment on Burford’s contract claim, so dismissal of the counterclaim would allow APS simply to walk away from the case without further expense or effort. Absent that grant of summary judgment, though, APS told the district court, it would have pursued its Lanham Act claim through No. 14‐2692 11 trial if necessary. All the voluntary dismissal shows, then, is that APS believed the economic benefits it might have ob‐ tained from bringing the Lanham Act claim—whether in the form of damages or the monetary value of forcing Burford to stop using “American Accounting Practice Sales” in the mar‐ ketplace—did not outweigh the costs of going to trial once Burford’s contract claim was out of the suit. It can be perfectly rational to pursue a counterclaim when you already have to spend time and money defending other claims in a case, yet to think the counterclaim is not worth the effort after your opponent’s claims drop out. As far as we can tell from this record, APS had little interest in pursuing a stand‐alone Lanham Act claim, let alone for ex‐ tortionate reasons, even though it might reasonably have thought the counterclaim worth pursuing if it had to be in court anyway. If the motive behind APS’s suit had been only to impose litigation costs on a new entrant in the market, it certainly could have imposed more costs on Burford by forc‐ ing him to continue defending the Lanham Act claim until the case reached its bitter end. It did not do so. Second, Burford’s suggestion that APS has not supported its claim with evidence—and thus must have pursued for extortionate reasons a claim it knew it would lose—also is not supported by the record. To have any chance of prevail‐ ing on its claim, APS would need to offer evidence that its mark was protectable and that APS’s customers would likely confuse Burford’s services with its own because of their simi‐ lar names. See Door Systems, Inc. v. Pro‐Line Door Sys., Inc., 83 F.3d 169, 173 (7th Cir. 1996). Burford points out that APS’s initial Rule 26 disclosures contained no information about APS’s counterclaim. That’s not surprising since APS pre‐ 12 No. 14‐2692 pared those disclosures before it filed the counterclaim. APS’s later interrogatory answers and its summary judg‐ ment filings show, however, that APS was prepared to offer evidence in support of its trademark claim. Given APS’s readiness to offer evidence on its claim, the district court did not abuse its discretion in finding that APS’s claim was not frivolous. As to the first element—whether the mark was protecta‐ ble—APS offered evidence in the form of dictionary defini‐ tions and advertisements by others in the business of broker‐ ing accounting practices that “Accounting Practice Sales” is descriptive rather than generic. See id. at 171–72 (explaining that dictionaries and advertisements can be consulted to de‐ termine whether mark was generic). APS also suggests it would have been able to establish that its mark had taken on secondary meaning for customers as a result of its extensive dealings in the accounting practice brokerage market. See Packman v. Chicago Tribune Co., 267 F.3d 628, 641 (7th Cir. 2001); G. Heileman Brewing Co. v. Anheuser‐Busch, Inc., 873 F.2d 985, 998 n.12 (7th Cir. 1989). APS also would have ar‐ gued that Burford’s intentional copying of the phrase showed that it had secondary meaning in the marketplace. See Packman, 267 F.3d at 641. We are skeptical about whether APS’s mark is protecta‐ ble. “Accounting Practice Sales, Inc.” seems closer to an un‐ protected description of the business than a designation of origin based on secondary meaning that would prevent Bur‐ ford from using the name “American Accounting Practice Sales.” (Consider the difference between “Widgets, Inc.” and “American Widgets, Inc.”) And as Burford notes, APS did not have the most helpful type of evidence of secondary No. 14‐2692 13 meaning—market studies and consumer testimony—though it is also true that such evidence is not strictly required to establish secondary meaning. See Platinum Home Mortgage Corp. v. Platinum Financial Group, 149 F.3d 722, 728 (7th Cir. 1998). Despite our skepticism, though, we do not believe the district court abused its discretion by seeing at least a good‐ faith basis for APS’s argument that its mark was protected. On the likelihood‐of‐confusion issue, the district court could similarly find at least a good‐faith basis for APS to ar‐ gue that consumers would be confused. APS would have provided evidence about how the two businesses’ markets overlap, the similarity of the two names and business mod‐ els, and Burford’s attempts to pass off his services as those of APS. See Forum Corp. of N.A. v. Forum, Ltd., 903 F.2d 434, 439 (7th Cir. 1990). Without deciding the ultimate merits of APS’s Lanham Act claim, we find no abuse of discretion by the district court in finding that it was not objectively unreasonable for APS to have brought the claim in the first place. That is, a rational litigant might bring this claim at least in substantial part to protect its trademark. Thus, we cannot presume that the on‐ ly reason APS pursued this claim was to impose costs on Burford. Nor is there direct evidence that APS brought suit solely to obtain an economic benefit for itself unrelated to winning the suit. Cf. Nightingale, 626 F.3d at 965–66 (finding that plaintiff had made Lanham Act claim solely to coerce a price reduction out of defendant). Accordingly, we REVERSE the grant of summary judg‐ ment to defendants on the contract claim and REMAND for further proceedings consistent with this opinion. We 14 No. 14‐2692 AFFIRM the district court’s denial of Burford’s request for attorney fees on the Lanham Act counterclaim.