Court Opinion

ID: 2971066
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:28:17.803662+00
Date Added: 2024-06-11T11:43:33.707721
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                     2     Eagles, Ltd., et al. v. Am.                   No. 02-5560
        ELECTRONIC CITATION: 2004 FED App. 0035P (6th Cir.)                  Eagle Foundation
                    File Name: 04a0035p.06
                                                                                            _________________
UNITED STATES COURT OF APPEALS                                                                   COUNSEL
                  FOR THE SIXTH CIRCUIT                                ARGUED: James R. Hastings, COLLEN IP, Ossining, New
                    _________________                                  York, for Appellant. Carla J. Christofferson, O’MELVENY
                                                                       & MYERS, Los Angeles, California, for Appellees.
 EAGLES, LTD . and EAGLES         X                                    ON BRIEF: James R. Hastings, Jess M. Collen, COLLEN
 RECORDING CO .,                   -                                   IP, Ossining, New York, for Appellant.            Carla J.
           Plaintiffs-Appellees, -                                     Christofferson, Daniel M. Petrocelli, O’MELVENY &
                                   -   No. 02-5560                     MYERS, Los Angeles, California, Michael J. Avenatti,
                                   -                                   GREEN, BROILLET, PANISH & WHEELER, Santa
            v.                      >                                  Monica, California, for Appellees.
                                   ,
                                   -
 AMERICAN EAGLE                                                                             _________________
                                   -
 FOUNDATION f/k/a NATIONAL -                                                                    OPINION
 FOUNDATION TO PROTECT             -                                                        _________________
 AMERICA ’S EAGLES,                -
          Defendant-Appellant. -                                          AVERN COHN, District Judge. This is a trademark case.
                                   -                                   Defendant American Eagle Foundation (AEF) appeals from
                                  N                                    the district court’s denial of its motion for attorney’s fees and
       Appeal from the United States District Court                    costs under 15 U.S.C. § 1117(a) and 28 U.S.C. § 1927 and the
    for the Eastern District of Tennessee at Knoxville.                district court’s denial of its motion to order the Patent and
     No. 98-00090—R. Leon Jordan, District Judge.                      Trademark Office (PTO) to dismiss a trademark opposition
                                                                       filed by plaintiffs based on the dismissal of the district court
                  Argued: December 10, 2003                            action. AEF says that (1) the district court erred by failing to
                                                                       articulate its reasons for denying attorney’s fees and costs;
             Decided and Filed: January 29, 2004                       (2) the district court improperly held it to a higher standard
                                                                       for proving an “exceptional” case under 15 U.S.C. § 1117(a);
Before: ROGERS and COOK, Circuit Judges; COHN,                         and (3) the district court had jurisdiction and should have
                District Judge.*                                       ordered the PTO to dismiss the pending opposition. Plaintiffs
                                                                       say that (1) the district court adequately stated the applicable
                                                                       legal standards for an award of attorney’s fees as well as its
                                                                       reasoning for the denial; (2) the district court did not abuse its
                                                                       discretion in holding that the circumstances of the case were
    *                                                                  not “exceptional;” and (3) the district court correctly refused
     The Honorab le Avern Cohn, United States District Judge for the
Eastern District of Michigan, sitting by designation.

                                 1
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                                     Eagle Foundation                     Eagle Foundation

to dismiss the opposition because the issue of estoppel must       for it to go to trial in a week with completely new counsel and
be raised before the PTO not the district court. We affirm.        many of its witnesses unavailable to testify. The district court
                                                                   dismissed EL’s case with prejudice and allowed AEF to move
                    I. BACKGROUND                                  for attorney’s fees and costs. AEF also moved to include as
                                                                   part of the Rule 41(a)(2) dismissal an order directing that the
   Plaintiff Eagles, Ltd. (EL) is one of several companies         suspended opposition in the PTO be dismissed with prejudice.
affiliated with the Eagles, a rock and roll band formed in         The district court declined to dismiss the opposition and
1971. EL owns the registered trademark and service mark            denied AEF’s motion for attorney’s fees and costs under
“Eagles.” AEF is a non-profit organization dedicated to            15 U.S.C. § 1117(a) and 28 U.S.C. § 1927.
protecting American bald eagles. It engages in education and
protection activities, as well as selling and promoting music-                             II. ANALYSIS
related products such as a song entitled “Save the Eagle.”
AEF uses the Internet domain name “eagles.org” and vanity              A. District Court’s Statement of Reasons for Denying
telephone numbers such as (800) 2-EAGLES.                                                 Attorney’s Fees
  AEF filed a trademark application for the “American                The district court’s denial of attorney’s fees under
Eagles Records” mark in 1995. EL filed Opposition No.              15 U.S.C. § 1117(a) and 28 U.S.C. § 1927 is reviewed for
103,477 in response. Before the PTO ruled on AEF’s                 abuse of discretion. See Johnson v. Jones, 149 F.3d 494, 503
application, EL filed suit in the district court in 1998 against   (6th Cir. 1998); Ridder v. City of Springfield, 109 F.3d 288,
AEF for trademark infringement, dilution, and other causes of      298 (6th Cir. 1997). “This court has defined an abuse of
action under the Lanham Act. The PTO then suspended its            discretion as a ‘definite and firm conviction that the trial court
proceedings pending final disposition of the civil action.         committed a clear error of judgment.’” Arban v. West Publ’g
                                                                   Corp., 345 F.3d 390, 404 (6th Cir. 2003) (citation omitted).
  The trial was originally scheduled to begin in April 2000
but was delayed and rescheduled for June 2001. The parties             15 U.S.C. § 1117(a) reads (emphasis added):
then submitted cross motions for summary judgment, which
were denied by the district court. On May 29, 2001, less than          When a violation of any right of the registrant of a mark
two weeks before trial was set to begin, EL moved for                  registered in the Patent and Trademark Office, a violation
substitution of counsel and requested a continuance until fall         under section 43(a) or (d), or a willful violation under
2001 because important witnesses, including members of the             section 43(c), shall have been established in any civil
band, would be on tour in Europe during the summer and                 action arising under this Act, the plaintiff shall be
unavailable to testify. The district court granted the motion          entitled, subject to the provisions of sections 29 and 32,
for substitution of counsel but denied EL’s motion for a               and subject to the principles of equity, to recover
continuance.                                                           (1) defendant’s profits, (2) any damages sustained by the
                                                                       plaintiff, and (3) the costs of the action. The court shall
  EL then moved for voluntary dismissal of its action                  assess such profits and damages or cause the same to be
pursuant to Rule 41(a)(2) of the Federal Rules of Civil                assessed under its direction. In assessing profits the
Procedure, arguing that it would be economically unfeasible            plaintiff shall be required to prove defendant’s sales
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                                     Eagle Foundation                       Eagle Foundation

  only; defendant must prove all elements of cost or                 entry that completely fails to set forth any reason for the
  deduction claimed. In assessing damages the court may              denial is an abuse of discretion because it is impossible to
  enter judgment, according to the circumstances of the              determine on appeal whether the district court was aware that
  case, for any sum above the amount found as actual                 it had the discretion to award attorney’s fees.
  damages, not exceeding three times such amount. If the
  court shall find that the amount of the recovery based on             Unlike the trial courts in Israel and Morscott, the district
  profits is either inadequate or excessive the court may in         court here gave more than a marginal denial without support.
  its discretion enter judgment for such sum as the court            The district court’s order was sufficient because it clearly
  shall find to be just, according to the circumstances of the       stated the applicable law and gave the reasons for the denial.
  case. Such sum in either of the above circumstances                Regarding 15 U.S.C. § 1117(a), the district court recognized
  shall constitute compensation and not a penalty. The               that it had discretion under the “exceptional” case standard
  court in exceptional cases may award reasonable                    and cited cases from this Court applying the test. The district
  attorney fees to the prevailing party.                             court then recited each side’s arguments and stated:

  28 U.S.C. § 1927 reads (emphasis added):                                 The court has considered the circumstances of this case
                                                                         and the applicable legal standard and in its discretion
  Any attorney or other person admitted to conduct cases                 concludes that this is not an exceptional case as called for
  in any court of the United States or any Territory thereof             under § 1117(a). Litigation requires strategic and often
  who so multiplies the proceedings in any case                          difficult and costly decisions. However, in the context of
  unreasonably and vexatiously may be required by the                    this case, such decisions do not qualify it as an
  court to satisfy personally the excess costs, expenses, and            “exceptional” case warranting an award of fees.
  attorneys’ fees reasonably incurred because of such
  conduct.                                                           Regarding 28 U.S.C. § 1927, the district court stated the
                                                                     proper legal standard, recognized its discretion, and held:
   AEF says that the district court in denying attorney’s fees
abused its discretion because it failed to adequately articulate            Defendant contends that the conduct ascribed to the
its reasons. In Israel v. City of Barberton, 936 F.2d 573, No.           plaintiffs satisfies the standard of section 1927. Plaintiffs
90-3268, 1991 U.S. App. LEXIS 32336, at *3 (6th Cir.                     do not specifically direct their response to this contention
Apr. 4, 1991) (unpublished), this Court held that “[i]n order            but argue[] the case was not pursued in a vexatious,
to review a discretionary decision [to deny attorney’s fees],            wanton, or oppressive manner. In any event, the court
some understanding of the trial court’s reasons is necessary.            has again considered the circumstances of this case in
Absent a statement of reasons, no meaningful review can be               light of the standard required by § 192[7], and in its
made.” The district court in Israel denied a motion for                  discretion finds that an award of fees under this provision
attorney’s fees “by a marginal denial” with no hearing or                is not warranted. Accordingly, defendant’s motion for
statement of reasons and the case was remanded so that the               costs and fees will be denied in its entirety.
district court could give its reasons for the denial. Id. at *2,
*4. In Morscott, Inc. v. City of Cleveland, 936 F.2d 271, 272          Having handled the case over the course of four years, the
(6th Cir. 1991), this Court held that a district court’s marginal    district court was in the best position to determine whether the
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                                     Eagle Foundation                   Eagle Foundation

circumstances of the case and conduct of EL warranted an           Inc., 208 F.3d 212, No. 98-1143, 2000 U.S. App. LEXIS
award of attorney’s fees. The district court addressed the         3290, at *2 (6th Cir. Feb. 25, 2000) (unpublished) (citing
parties’ arguments and applied the correct legal standard.         Finance Inv. Co. v. Geberit AG, 165 F.3d 526, 533 (7th Cir.
Further, the record relied on by the district court is available   1998)). This Court has also held that “[w]here a plaintiff sues
for review on appeal. The adequacy of a district court’s           under a colorable, yet ultimately losing, argument, an award
statement is determined by this Court’s ability to understand      of attorney’s fees is inappropriate.” American Council of
its reasoning, not by the number of sentences it uses. The         Certified Podiatric Physicians & Surgeons v. American Bd.
district court’s order was sufficient to allow meaningful          of Podiatric Surgery, Inc., 185 F.3d 606, 625 (6th Cir. 1999).
review under the deferential abuse of discretion standard.
                                                                      AEF says that these cases have created an artificial bias in
   B. “Exceptional” Case Under 15 U.S.C. § 1117(a)                 favor of prevailing plaintiffs in Lanham Act cases, which
                                                                   violates the party-neutral approach of Fogerty v. Fantasy,
   The district court’s denial of attorney’s fees under            Inc., 510 U.S. 517, 534-35 (1994) (“Prevailing plaintiffs and
15 U.S.C. § 1117(a) is reviewed for abuse of discretion, but       prevailing defendants are to be treated alike, but attorney’s
the district court’s legal analysis and interpretation of the      fees are to be awarded to prevailing parties only as a matter of
Lanham Act is reviewed de novo. See Stephen W. Boney, Inc.         the court’s discretion.”). Fogerty, however, did not specify
v. Boney Servs., Inc., 127 F.3d 821, 825 (9th Cir. 1997).          that the standard for prevailing plaintiffs and prevailing
                                                                   defendants had to be identical. Rather, it stated that courts
   Under 15 U.S.C. § 1117(a), a district court may award           should generally award attorney’s fees in an even-handed
reasonable attorney fees to the prevailing party in                manner. It is difficult to imagine how the standards for
“exceptional” cases. Here, the district court correctly            15 U.S.C. § 1117(a) could be the same given that prevailing
recognized that the term “exceptional” is not defined in the       plaintiffs focus on the act of infringement while prevailing
statute, although a case is not exceptional unless “the            defendants point to the act of litigation. See National Ass’n
infringement was malicious, fraudulent, willful, or                of Prof’l Baseball Leagues, Inc. v. Very Minor Leagues, Inc.,
deliberate.” See Hindu Incense v. Meadows, 692 F.2d 1048,          223 F.3d 1143, 1148-49 (10th Cir. 2000).
1051 (6th Cir. 1982). Because it relates to the act of
infringement, the Hindu Incense standard clearly applies to           While the circuits differ somewhat as to the test for
prevailing plaintiffs. Indeed, most of the cases involving 15      determining whether a case is “exceptional,” often replacing
U.S.C. § 1117(a) have applied the “exceptional” case analysis      the term with other adjectives, see, e.g., Ale House
to prevailing plaintiffs. It is clear, however, that Congress      Management, Inc. v. Raleigh Ale House, Inc., 205 F.3d 137,
intended to include prevailing defendants as well. See S. Rep.     144 (4th Cir. 2000) (“Relevant factors include ‘economic
No. 93-1400 (1974), reprinted in 1974 U.S.C.C.A.N. 7132,           coercion,’ ‘groundless arguments,’ and failure to cite
7136.                                                              controlling law.”); Scott Fetzer Co. v. Williamson, 101 F.3d
                                                                   549, 555 (8th Cir. 1996) (“When a plaintiff’s case is
  In applying 15 U.S.C. § 1117(a) to a prevailing defendant,       groundless, unreasonable, vexatious, or pursued in bad faith,
this Court has held that an “exceptional” case is one “where       it is exceptional, and the district court may award attorney’s
a plaintiff brings a suit that could fairly be described as        fees to the defendant.”), we believe that the “oppressive”
‘oppressive.’” Balance Dynamics Corp. v. Schmitt Indus.,           standard first followed in Balance Dynamics most closely
No. 02-5560                    Eagles, Ltd., et al. v. Am.    9    10   Eagles, Ltd., et al. v. Am.                  No. 02-5560
                                     Eagle Foundation                   Eagle Foundation

follows the statute. Awarding attorney’s fees to a prevailing      bringing the suit and not its later conduct during litigation.
defendant is meant to “provide protection against unfounded        However, it is clear that the district court considered EL’s
suits brought by trademark owners for harassment and the           alleged conduct during litigation, including “the use of certain
like.” S. Rep. No. 93-1400 (1974), reprinted in 1974               witnesses, the last-minute exhibit list, and [EL’s] apparent
U.S.C.C.A.N. 7132, 7136. The test requires an objective            intention not to go to trial,” and recognized the difficulty
inquiry into whether the suit was unfounded when it was            faced by EL that led to its voluntarily dismissing lengthy and
brought and a subjective inquiry into the plaintiff’s conduct      expensive litigation.
during litigation. See S Indus. v. Centra 2000, Inc., 249 F.3d
625, 627 (7th Cir. 2001) (“A suit is oppressive if it lacked         Finally, AEF argues that the district court applied the
merit, had elements of an abuse of process claim, and              wrong standard because it based its denial on a finding that
plaintiff’s conduct unreasonably increased the cost of             EL brought the action in good faith. AEF says that the
defending against the suit.”); National Ass’n of Prof’l            district court implicitly required it to prove bad faith on the
Baseball Leagues, 223 F.3d at 1146-47 (“No one factor is           part of EL to receive attorney’s fees, which it says is
determinative, and an infringement suit could be ‘exceptional’     incorrect. See Scotch Whisky Ass’n v. Majestic Distilling Co.,
for a prevailing defendant because of (1) its lack of any          958 F.2d 594, 599 (4th Cir. 1992) (requiring “‘something less
foundation, (2) the plaintiff’s bad faith in bringing the suit,    than bad faith’” to award attorney’s fees to a prevailing
(3) the unusually vexatious and oppressive manner in which         defendant). But see Conopco, Inc. v. Campbell Soup Co., 95
it is prosecuted, or (4) perhaps for other reasons as well.”).     F.3d 187, 194-95 (2d Cir. 1996) (requiring the defendant to
                                                                   show the plaintiff’s bad faith). Simply because the district
  The “oppressive” test is similar to the standard applied to      court referred to EL’s argument that its case was brought in
prevailing plaintiffs where an award is appropriate if the         good faith and on the advice of counsel does not mean that it
infringement is “malicious, fraudulent, willful, or deliberate.”   was looking for the opposite. There is no indication that the
See Hindu Incense, 692 F.2d at 1051. Both allow an award of        district court required a showing of bad faith.
fees where the opposing party abused the protections afforded
by the Lanham Act. The standard of law applied by the                EL had colorable legal arguments and legitimate reasons
district court, therefore, did not violate Fogerty’s party-        for choosing to dismiss the lawsuit. The district court applied
neutral requirement.                                               the correct legal standard and in its discretion found that the
                                                                   case was not “exceptional” under 15 U.S.C. § 1117(a). The
   Next, AEF argues that the district court incorrectly applied    district court did not abuse its discretion in holding that AEF
a heightened “clear and convincing” burden of proof because        was not entitled to attorney’s fees.
it cited Finance Investment, 165 F.3d at 533, which required
clear and convincing evidence of exceptional circumstances.                       C. Pending PTO Opposition
Although AEF is correct that a “clear and convincing”
requirement is not supported by the language of the statute,         The district court’s decision regarding the Rule 41(a)(2)
there is no indication in the district court’s opinion that it     motion is reviewed for abuse of discretion. United States v.
applied a “clear and convincing” burden of proof. Similarly,       266 Tonawanda Trail, 95 F.3d 422, 425 (6th Cir. 1996). The
AEF argues that the district court inappropriately relied on       district court’s decision to include certain terms and
Finance Investment by only considering EL’s actions in             conditions in a Rule 41(a)(2) voluntary dismissal is
No. 02-5560                     Eagles, Ltd., et al. v. Am.    11    12   Eagles, Ltd., et al. v. Am.                  No. 02-5560
                                      Eagle Foundation                    Eagle Foundation

appealable only if unreasonable. See Duffy v. Ford Motor             diluted EL’s “Eagles” mark; the case did not involve AEF’s
Co., 218 F.3d 623, 627 (6th Cir. 2000).                              rights in the “American Eagles Records” mark. While the
                                                                     district court may have had general authority under 15 U.S.C.
   EL’s opposition in the PTO to AEF’s application for the           § 1119 to order the PTO to take action, it did not have the
“American Eagles Records” mark was suspended pending                 authority to decide issues regarding a mark that was not
resolution of this case. After the district court dismissed the      properly before it. See Old Dutch Foods, Inc. v. Dan Dee
case with prejudice pursuant to Rule 41(a)(2), AEF moved to          Pretzel & Potato Chip Co., 477 F.2d 150, 157 (6th Cir. 1973)
reconsider the dismissal arguing for the first time that the         (directing the PTO to issue a concurrent registration to the
district court should order EL or the PTO to dismiss the             defendant with limitations); Durox Co. v. Duron Paint Mfg.
opposition with prejudice as part of the Rule 41(a)(2)               Co., 320 F.2d 882, 883, 885-86 (4th Cir. 1963) (directing the
dismissal’s terms and conditions. AEF argued that EL should          PTO to issue a registration for the plaintiff’s mark after the
be “estopped” from pursuing the opposition because it told           plaintiff properly raised the issue of validity in the
the PTO that this case would be dispositive of the opposition,       complaint); Massa v. Jiffy Prods. Co., 240 F.2d 702, 704, 707
although EL’s statement is not in the record. The district           (9th Cir. 1957) (directing the PTO to cancel the “Jiffy” mark
court denied EL’s request and held that “[t]he issue of              for the plaintiff and award a registration for the same mark to
estoppel is before the Trademark tribunal not this court. If         the defendant).
defendant believes that the plaintiffs should be prohibited
from pursuing the Opposition action in the Trademark Office            Further, the prospect of dismissal of the PTO opposition
because of the result in this case, then defendant needs to          was not properly before the district court because AEF raised
make that argument to the Trademark Office.”                         the issue for the first time in its motion for reconsideration.
                                                                     AEF failed to raise the argument as a counterclaim to the
   AEF says that district courts are given clear statutory           infringement action. Hence, according to the procedural
authority over actions regarding the trademark registration          posture of the case and by AEF’s own admissions, its
process under 15 U.S.C. § 1119, which states that “[i]n any          argument for dismissal is not based on the merits but on an
action involving a registered mark the court may determine           estoppel theory. As the district court correctly pointed out,
the right to registration, order the cancelation of registrations,   estoppel issues are ordinarily enforced by awaiting a second
in whole or in part, restore canceled registrations, and             action in which they are pleaded and proved by the party
otherwise rectify the register with respect to the registrations     asserting estoppel. The PTO, not the district court, must
of any party to the action.” AEF cites Avon Shoe Co. v.              determine the preclusive effect of EL’s statements.
David Crystal, Inc., 279 F.2d 607, 609 (2d Cir. 1960), which
involved a dispute over the plaintiff’s use of the “Haymakers”         Even if the issue of estoppel was properly before the district
mark and the defendant’s use of the “Haymaker” mark. The             court, however, in light of the PTO’s expertise and the district
Second Circuit affirmed the district court’s order directing the     court’s failure to reach the merits of the underlying action in
PTO to dismiss the plaintiff’s opposition and grant the              this case, the district court’s decision was reasonable and not
concurrent registration of defendant’s mark. Id. at 614-16.          an abuse of discretion.
This case is factually distinguishable from Avon Shoe,
however, because the marks at issue are not the same. The
issue in this case was whether AEF’s activities infringed or
No. 02-5560                    Eagles, Ltd., et al. v. Am.   13
                                     Eagle Foundation

                    III. CONCLUSION
   The district court adequately articulated its reasons for
denying attorney’s fees and costs, applied the correct legal
standard for “exceptional” cases under 15 U.S.C. § 1117(a),
and in its discretion denied AEF’s request for attorney’s fees.
The district court also did not abuse its discretion by refusing
to dismiss the pending trademark opposition.
  Accordingly, the district court’s decision is AFFIRMED.