Opinion ID: 199861
Heading Depth: 2
Heading Rank: 1

Heading: Ideal's Challenges to the Award of Attorneys' Fees to Tamko

Text: 20 The district court awarded over $500,000 in attorneys' fees and expenses to Tamko. Ideal protests that no fees at all should have been awarded since this was not an exceptional case, a requirement under section 35 of the Lanham Act, 15 U.S.C. § 1117(a) (2000), for an attorneys' fees award. The district court erred, Ideal says, by using an incorrect legal standard to determine exceptional circumstances and by concluding that the evidence supported such an award. The court's error of law, Ideal argues, is that fees may only be awarded in circumstances where the defendant acted deceitfully or with a degree of culpability; it claims the court's error of fact is that there was no such deceit or culpability here. Finally, Ideal argues that even if some award of attorneys' fees was justified, the sum awarded is too high. 21 We review de novo the legal question of the meaning of exceptional cases in the context of section 35 of the Lanham Act. See Atl. Fish Spotters Ass'n v. Daley, 205 F.3d 488, 490 (1st Cir.2000) (A legal ruling ... as to the meaning of the statute is almost always an issue of law reviewed de novo. ). We review the district court's award of attorneys' fees under section 35 of the Lanham Act for abuse of discretion. 4 To the extent that the district court's award rests on factual determinations, however, we review those for clear error. See Pierce v. Underwood, 487 U.S. 552, 557-58, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988); De Allende v. Baker, 891 F.2d 7, 11 (1st Cir.1989); see also People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359, 370 (4th Cir.2001). As noted in Atlantic Fish Spotters, 22 [m]any courts, including the Supreme Court, sum up the standard in ... attorney's fee cases by referring to abuse of discretion. But since they then treat errors of law as an example of such an abuse, it seems more informative to recognize that the effective standard of review depends upon the precise claim of error being asserted and not the nature of the case. 23 205 F.3d at 491 n. 2 (citations omitted).
24 The Lanham Act provides: The court in exceptional cases may award reasonable attorneys fees to the prevailing party. 15 U.S.C. § 1117(a). Ideal asserts that the district court erred by essentially converting the jury finding of willful infringement, without more, into a court finding of exceptional circumstances justifying a fee award. In truth, the district court referred to both the jury finding of willfulness and to other record evidence before it, so there was no automatic conversion of a jury willfulness finding into a finding of exceptional circumstances. 5 The district court said nothing one way or the other as to whether there was bad faith or fraud on Ideal's part. 25 Under the statute, the decision to award fees is committed to the district court, not the jury. 5 J.T. McCarthy, McCarthy on Trademarks and Unfair Competition § 30:99, at 30-184 (4th ed.2001). Ideal says that the trial court failed to make the necessary findings. 6 Where the facts of record amply explain the decision, we will not find that the mere failure of the trial judge to be more explicit amounts to an abuse of discretion. See L.E.A. Dynatech, Inc. v. Allina, 49 F.3d 1527, 1531 (Fed.Cir.1995) (Although the district court did not state the specific basis for its fee award, sufficient record evidence supports the award.). 26 Because the Lanham Act does not further explain the term exceptional cases, this court and others have turned to the legislative history for a working definition. See Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 821 (1st Cir.1987); see also Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44, 47 (3d Cir.1991); VIP Foods, Inc. v. Vulcan Pet, Inc., 675 F.2d 1106, 1107 (10th Cir.1982). In exceptional cases, attorneys' fees may be appropriate in circumstances where the acts of infringement were `malicious,' `fraudulent,' `deliberate,' or `willful.' S. Rep. 93-1400, at 5 (1974), reprinted in 1974 U.S.C.C.A.N. 7132, 7133. The legislative history also explains that attorneys' fees may be awarded when equitable considerations justify such awards, id. at 6, reprinted in 1974 U.S.C.C.A.N. at 7137, and so the list of four (for example, malicious) may not be exclusive. 27 Ideal urges this court to adopt the bad faith standard utilized by some circuits. See Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 194 (2d Cir.1996) (reciting Second Circuit rule requiring a showing of fraud or bad faith on the part of the infringer); Texas Pig Stands, Inc. v. Hard Rock Cafe Int'l, Inc., 951 F.2d 684, 697 (5th Cir.1992) (requir[ing] a showing of a high degree of culpability on the part of the infringer, for example, bad faith or fraud); Scotch Whisky Ass'n v. Majestic Distilling Co., 958 F.2d 594, 599 (4th Cir. 1992) (It is clear ... that for a prevailing plaintiff to succeed in a request for attorney fees, she must show that the defendant acted in bad faith.). Other circuits hold that willfulness alone is an adequate basis for the award of attorneys' fees. Bishop v. Equinox Int'l Corp., 154 F.3d 1220, 1224 (10th Cir.1998) (deliberate or willful conduct on part of defendant in fail[ing] to cease and desist from use of [the trademark] despite its written commitment to do so was enough to warrant award of attorneys' fees); Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 123 (8th Cir.1987) (Bad faith is not a prerequisite to a Lanham Act fee award.). While conceding that an award may be made if the acts of infringement are willful, Ideal argues that willful must mean more than just voluntary and intentional. Ideal grafts on another requirement that the infringing act must be fraudulent or malicious; for example, the act must be done with an intent to deceive or confuse the public, by palming off inferior goods as though they were trademark holder's goods, or through deliberate pirating. 28 Ideal's argument confuses sufficient conditions for an attorneys' fees award with necessary conditions for such an award. Fraud or bad faith may justify an attorneys' fees award in some cases, 7 but a finding of bad faith or fraud is not a necessary precondition. Willfulness short of bad faith or fraud will suffice when equitable considerations justify an award and the district court supportably finds the case exceptional. There are two reasons we reject a bad faith or fraud requirement as a precondition to an award of attorneys' fees. First, the legislative history of section 35 links such exceptional cases to situations where the acts are malicious or fraudulent or deliberate or willful, and where equity justifies the award. Congress's list does not stop with malicious or fraudulent, and we are loath to strip deliberate and willful of meaning. Second, the purpose of the attorneys' fees amendment to the Lanham Act was to provide for an award in exceptional cases in which equity called for an award in the sound discretion of the district judge. We would be hard pressed to say that such a case can never arise unless there is fraud or bad faith. As an example, one circuit has approved an award of fees in a case where there was no bad faith in the infringement but the subsequent litigation was oppressive and meant to delay. See Securacomm Consulting, Inc. v. Securacom Inc., 224 F.3d 273, 279-83 (3d Cir. 2000). 8 29 Still, awards may be made only in exceptional cases. In Volkswagenwerk, this court reversed an award where the plaintiff did not plead attorneys' fees in its complaint, defendant had no statutory constructive notice of plaintiff's claim of ownership of the marks because neither the trade name nor design mark were registered, and it would have been inequitable to visit an award on the defendant's small local automobile shop. 814 F.2d at 821. Other circuits have identified as counseling against an award the following factors: the area of law is unclear and defendants might reasonably think they did not infringe, Ferrero U.S.A., 952 F.2d at 49; there is a close legal question as to whether there is any trademark violation, Martin's Herend Imps., Inc. v. Diamond & Gem Trading USA, Co., 112 F.3d 1296, 1305 (5th Cir.1997); Ferrero U.S.A., 952 F.2d at 49; defendant had no intent to deceive or confuse the public, VIP Foods, 675 F.2d at 1107; the defendant made a concerted effort to create a non-infringing mark, Roulo v. Russ Berrie & Co., 886 F.2d 931, 942 (7th Cir.1989); the plaintiff suffered no actual damage, Bishop, 154 F.3d at 1224; VIP Foods, 675 F.2d at 1107. We agree that these are factors to be considered as part of a case-specific multi-factored analysis. 30 Here, there was adequate evidence of exceptional, willful behavior, both in the infringing acts and in Ideal's conduct after Tamko brought the infringement to Ideal's attention. We outline just some of the pertinent conduct. 31 1. Within several days of a 1997 trade show attended by Ideal, where Tamko's Heritage Mark was prominently displayed, Ideal adopted the Heritage name and told its advertising agency not to do a trademark search, which is usually done. Neither Ideal nor its patent attorney did a trademark search. 32 2. The other two names considered by Ideal for its new product were substantially similar to marks owned by other companies. 33 3. Ideal used an elaborate cursive script for its Heritage Series mark, very similar to the one used in Tamko's mark The American Heritage Series (which was displayed in a 1996 Tamko brochure). 34 4. Ideal's metal roofing competes directly with Tamko's asphalt roofing for steep-slope roofs and Ideal tried to increase its market in the residential marketplace, which is asphalt's primary market. 35 5. Ideal did not respond to the March 9, 1999 letter from Tamko, which notified Ideal of its infringement. Tamko sent another letter on March 26, 1999. Ideal responded and suggested a lengthy two-year phase out. When Tamko informed Ideal that the USPTO rejected a trademark application for Heritage for another company's metal roofing panels, Ideal still refused to stop its use of the mark. 36 6. Before filing suit, Tamko gave Ideal notice on August 17, 1999; Ideal asked for a one-year phase out. 37 7. In August 1999, Ideal nonetheless reprinted one of its brochures that continued the use of the Heritage Series name. 38 8. On February 29, 2000, the district court issued a preliminary injunction against Ideal, enjoining it from further use of the mark. 39 9. Nonetheless, Ideal used the brochures containing the mark in a trade show in mid-March 2000, after the preliminary injunction had issued against it. 40 10. Despite the preliminary injunction, Ideal continued to use the mark on its web site, which was accessed by users in the United States. 41 11. On May 15, 2000, the magistrate judge issued a report and recommendation, which found that Ideal was in contempt for violation of the preliminary injunction. The district court adopted the report and recommendation and held Ideal in contempt on May 26, 2000. 42 12. Ideal did not come into compliance with the preliminary injunction until June 13, 2000; in the course of its noncompliance it incurred fines of $3,000. 43 It is the totality of the circumstances, rather than a particular item alone, that suffices for an award of attorneys' fees. For example, mere failure to conduct a trademark search before using a mark may evidence nothing more than carelessness, and so may not warrant an award of fees. SecuraComm Consulting, 166 F.3d at 188-89. In combination, the facts above warrant the district court's conclusion that the initial infringement and continuing infringement, even in the face of court orders, was deliberate and willful and that equity required an award of fees.
44 The district court determined the amount of attorneys' fees under the commonly used lodestar method, in which the number of hours reasonably spent by the attorneys on the case is multiplied by a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983); Lipsett v. Blanco, 975 F.2d 934, 937 (1st Cir.1992). Tamko submitted a supporting declaration by an experienced trademark attorney. It also submitted detailed time records from lead counsel, house counsel, and local counsel. The court considered the time and labor required, the skill required, the nature and length of the professional relationship with the client, and time limitations imposed by the client. It is clear from the court's October 6, 2000 order that it reviewed the materials in some detail. 45 Because Ideal did not file any opposition to Tamko's attorneys' fees request and materials, it may well have forfeited this issue for appeal. Hebert v. Wicklund, 744 F.2d 218, 223-24 (1st Cir.1984). Ideal argues that because the size of the award is substantially larger than the award of profits in this case, an injustice might result if this court does not review the amount of fees. Neither the statute nor the legislative history limits the award of fees to an amount less than the award of profits or damages. To the contrary, the legislative intent was partly to encourage the enforcement of trademark rights in cases where the measurable damages are nominal. S. Rep. 93-1400, reprinted in 1974 U.S.C.C.A.N. 7132, 7136. When a trademark is infringed, trademark owners have more at stake than just the damages or loss of profits in that case. Their failure to enforce their rights may result in the weakening of these rights over time. 2 McCarthy on Trademarks, supra, § 17:17, at 17-31. The cost of enforcing the rights may well be larger than the lost profits in any particular case. In all events, the district court appears carefully to have scrutinized Tamko's filing, 9 and it articulated a clear understanding of the applicable lodestar principles. Given these facts, and given Ideal's failure to furnish the district court with any reasons why Tamko's fee application should have been pared down, we do not think that this is an issue that requires further review. 46