Opinion ID: 159979
Heading Depth: 2
Heading Rank: 1

Heading: Attorney Fees for Prevailing Defendants Under Section 35(a) of the Lanham Act

Text: 11 We review a district court's decision on whether to award attorney fees for abuse of discretion, but we review de novo the district court's application of the legal principles underlying that decision. See Neustrom v. Union Pacific R.R., 156 F.3d 1057, 1067 (10th Cir. 1998).
12 In assessing Very Minor Leagues' claim that the district court should have awarded it attorney fees, we are governed by the relevant provision of the Lanham Act. That provision provides that [t]he court in exceptional cases may award reasonable attorney fees to the prevailing party. See 15 U.S.C. 1117(a) (emphasis added). Thus, being the prevailing party is not, by itself, enough to justify an award of attorney fees. Moreover, even in exceptional cases, the award of attorney fees is vested in the discretion of the district court. The statute itself does not define exceptional cases, but the legislative history to the statute suggests two considerations for prevailing defendants who seek attorney fees. One, an objective consideration, is whether the suit was unfounded. See S. Rep. No. 93-1400, at 2 (1974), reprinted in 1974 U.S.C.C.A.N. 7132, 7133. The other, a subjective consideration, is whether the suit was brought by the trademark owner for harassment and the like. Id. The legislative history further advises that an award of attorney fees to a prevailing party is authorized where justified by equitable considerations. Id. at 1, reprinted in 1974 U.S.C.C.A.N. 7132. 3 13 No one factor is determinative, and an infringement suit could be exceptional for a prevailing defendant because of (1) its lack of any foundation, (2) the plaintiff's bad faith in bringing the suit, (3) the unusually vexatious and oppressive manner in which it is prosecuted, or (4) perhaps for other reasons as well. The Lanham Act largely vests in the district court the discretion to determine when a losing plaintiff's claims or conduct in the litigation are so exceptional as to warrant the assessment of attorney fees. The focus of the analysis is not only on whether the defendant prevailed, or concomitantly, whether the plaintiff lost. Not every losing suit is without foundation, and not every strategic decision by a plaintiff in bringing suit and in prosecuting it in a manner to enhance the prospects of success is done for the purpose of harassment or another improper purpose. 14 Although the circuits, in attempting to clarify the exceptional cases language in the statute, have developed a variety of criteria for analyzing the propriety of attorney fee awards for prevailing defendants under the Lanham Act, the standards used by many of them ultimately incorporate the same objective and subjective elements that we do. We are disinclined to add additional judicial gloss onto the statutory language. Rather, we think the district courts are quite able to decide which are exceptional cases, as opposed to routine cases, looking both at the objective merit or the lack thereof of the plaintiff's case and the likely subjective motivations of the plaintiff as reflected by the trial strategies utilized. 15 Thus, while we do not specifically adopt the approach of any of the other circuits, we note that many of the standards used by other circuits in analyzing the attorney fee issue for prevailing defendants are essentially consistent with our approach. The Eighth and Ninth Circuits, for example, use a standard of whether a plaintiff's claim is groundless, unreasonable, vexatious, or pursued in bad faith. See Stephen W. Boney, Inc. v. Boney Services, Inc., 127 F.3d 821, 827 (9th Cir. 1997); Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 123 (8th Cir. 1987). That standard focuses on the same objective and subjective factors we derive from the legislative history. The terms groundless and unreasonable reflect the objective merits of the case, and emphasize that it is not enough that the plaintiff does not prevail. Rather, to be an exceptional case within the meaning of the statute, the plaintiff's suit must lack any reasonable foundation. The terms vexatious and bad faith look to the subjective motivation and manner in which the case is prosecuted. 16 Similarly, the Fourth and D.C. Circuits have looked to factors such as economic coercion, groundless arguments, and failure to cite controlling law. See Ale House Management, Inc. v. Raleigh Ale House, Inc., 205 F.3d 137, 144 (4th Cir. 2000) (citing Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant, 771 F.2d 521, 526 (D.C. Cir. 1985)). Once again, those factors seem to track the objective and subjective elements in the legislative history. Some circuits point out, we think correctly, that the test should not focus solely on bad faith, but rather should incorporate a broader range of factors. See Door Systems, Inc. v. Pro-Line Door Systems, Inc., 126 F.3d 1028, 1031 (7th Cir. 1997) (stating that bad faith is not the correct standard for determining whether to award attorneys' fees to the defendant in a Lanham Act case); Noxell, 771 F.2d at 526 (stating, in the context of a claim for attorney fees by a prevailing defendant, that [s]omething less than 'bad faith,' we believe, suffices to mark a case as 'exceptional.'). But see Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 194 (2d Cir. 1996) (applying bad faith standard for prevailing defendant). 17 Here, Professional Baseball Leagues argues that the strict bad faith standard should apply, and thus Very Minor Leagues, the prevailing defendant, should only be eligible for attorney fees if Professional Baseball Leagues acted in bad faith in bringing its suit. Professional Baseball Leagues' argument is as follows: (1) when the plaintiff is the prevailing party, he or she can only get attorney fees when it is proven that the defendant has engaged in acts of infringement in bad faith, see Takecare Corp. v. Takecare of Oklahoma, Inc., 889 F.2d 955, 957 (10th Cir. 1989) (stating, in the context of a prevailing plaintiff's claim for attorney fees, that [r]unning through the case law, which has developed around a 1117(a) award of attorney fees, is the implicit recognition that some degree of bad faith fuels the infringement at issue); (2) the standard for awarding attorney fees should be the same for a prevailing defendant, see Fogerty v. Fantasy, Inc., 510 U.S. 517, 534, 114 S.Ct. 1023, 1033, 127 L.Ed.2d 455 (1994) (holding that prevailing plaintiffs and prevailing defendants seeking attorney fees are to be treated alike). 18 We agree with Professional Baseball Leagues' first proposition that plaintiffs only get attorney fees when defendant's acts of infringement are in bad faith; however, we disagree that there should be, or even could be, perfect harmony between the standard for awarding attorney fees to a prevailing plaintiff and a prevailing defendant. The underlying conduct under scrutiny is different. When attorney fees are awarded against a defendant, the court looks to whether the defendant's acts of infringement were pursued in bad faith. When attorney fees are awarded against a plaintiff, the court looks to the plaintiff's conduct in bringing the lawsuit and the manner in which it is prosecuted. 4 19 We recognize that in Fogerty, the Supreme Court, considering the issue of attorney fees under the Copyright Act, held that prevailing plaintiffs and prevailing defendants should be treated alike. See Fogerty, 510 U.S. at 533. Fogerty, however, was a Copyright Act case, not a Lanham Act case, and the Copyright Act gives discretion to the district court to award attorney fees to the prevailing party without the further significant limitation found in the Lanham Act that the award be limited to exceptional cases. Compare 17 U.S.C. 505, with 15 U.S.C. 1117(a). In any event, in Fogerty, the Court was concerned with, and disapproved of, a great dichotomy between the standards being used for prevailing defendants and prevailing plaintiffs. Under the Ninth Circuit's dual standard under review in Fogerty, prevailing plaintiffs [were] generally awarded attorney's fees as a matter of course, while prevailing defendants [had to] show that the original suit was frivolous or brought in bad faith. Fogerty, 510 U.S. at 520-21. In rejecting the dual standard, Fogerty did not specify that the standard for prevailing plaintiffs and prevailing defendants had to be identical; rather it stated that the parties should be treated alike. The standards to which we subscribe for prevailing plaintiffs and prevailing defendants under the Lanham Act are not identical because we are looking to different kinds of conduct for each party; however, we believe our approach is even-handed and treats plaintiffs and defendants essentially alike for the respective conduct that is at issue. In both cases, the party seeking attorney fees will have to show that the other party acted in an exceptional manner, rather than merely in a wrong manner, before attorney fees can be awarded. 20 The district court here specifically found that Professional Baseball Leagues' claims were not unfounded and we agree. In support of its claims, Professional Baseball Leagues provided some evidence of similarity between its mark and Very Minor Leagues' mark, as well as some evidence of consumer confusion from independent experts, including one expert who testified that he believed it was deceptive to use the words minor league in connection with fictional baseball teams. Another expert testified that Very Minor Leagues' use of minor leagues inferred an association or affiliation with Professional Baseball Leagues, and that he was confused about whether Very Minor Leagues' products were licensed by Professional Baseball Leagues. That evidence indicates that Professional Baseball Leagues' suit was not unfounded. 21 Admittedly, a suit may have some underlying merit and yet be pursued in such a meritless and improper manner that it becomes unfounded, or that subjective considerations of harassment and the like may justify an award of attorney fees. That is what Very Minor Leagues argues occurred here. However, Professional Baseball Leagues' filing of the federal lawsuit while the TTAB proceeding was nearing completion does not demonstrate that the judicial suit was unfounded or, as Very Minor Leagues argues, that it was brought only to avoid an unfavorable ruling at the TTAB. There was nothing inappropriate about Professional Baseball Leagues seeking a judicial, rather than administrative, determination of its rights. 5 Similarly, the fact that Professional Baseball Leagues originally filed the suit in the Middle District of Florida does not indicate that the suit was brought in an unreasonable manner or to harass Very Minor Leagues. Professional Baseball Leagues' allegation of jurisdiction in Florida was based on the fact that Very Minor Leagues marketed its products in Florida and took and filled orders for its products from customers in Florida. Although the case was ultimately transferred to the Western District of Oklahoma, we cannot say that the initiation of the action in the Middle District of Florida was without jurisdictional basis. 6 22 We find that Professional Baseball Leagues' suit was not unfounded or brought for harassment and the like, and therefore we hold that the district court did not abuse its discretion in denying attorney fees to Very Minor Leagues. 7 23