It’s no secret, lawsuits can be expensive. That’s why parties frequently consider the availability of recovering attorney’s fees when deciding whether to pursue (or defend) a lawsuit. While attorney’s fees have been available in trademark infringement lawsuits for many years, the standard for granting awards of such fees has shifted in light of recent Supreme Court precedent. Just this week, Whole Foods learned that, at least in one Washington court, not much actually changed.
Whole Foods Market, Inc. (“Whole Foods”) is a national grocery store chain specializing in organic foods. Eat Right produces organic foods under the EAT RIGHT mark. Whole Foods even sold Eat Right’s products for nearly a decade. The relationship soured, however, when Whole Foods began a promotion in 2009 called “Eat Right America” that encouraged consumers to (you guessed it) eat right.
Eat Right reached out to Whole Foods and graciously offered to sell its brand. After three years of not taking any action, Eat Right demanded that Whole Foods stop using the “Eat Right America” phrase. Eat Right took another year to file a lawsuit. On May 14, 2015, the District Court of Washington granted Whole Foods’ Motion for Summary Judgment, ruling that the affirmative defenses of laches and acquiescence barred Eat Right’s claims.
Whole Foods filed a Motion for attorney’s fees on July 6, bringing us back to where we started.
The Lanham Act grants courts discretion to award attorney’s fees in “exceptional” cases. 15 U.S.C. § 1117(a)(3). However, “exceptional” has carried different meaning from circuit to circuit. The ambiguity was partially intentional, allowing courts to truly exercise their discretion in whether a party should be required to pay the fees of the other.
Many circuits required “willful infringement” or “bad faith” conduct on the part of the losing party before awarding fees. The conduct could involve the parties’ legal position, such as pursuing “objectively baseless” claims or defenses. The conduct could involve “vexatious litigation conduct.”
However, in Octane Fitness v. Icon Health & Fitness, the Supreme Court rejected these heightened standards. 134 S.Ct. 1749 (2014). The court found that the meaning of “exceptional” was not subject to any formula, but instead simply means that the case “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
Although Octane Fitness interpreted a provision of the Patent Act, the language is identical and courts frequently rely on interpretation of the Patent Act to interpret provisions of the Lanham Act. The Third Circuit applied Octane Fitness to trademark claims in Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014).
Here, the court acknowledged the shift in standards under Octane Fitness:
Although the Lanham Act may not require subjective bad faith, a defendant seeking attorney’s fees under the Lanham Act must demonstrate, at minimum, that ‘the plaintiff has no reasonable or legal basis to believe in success on the merits.’
The court then concluded that Eat Right’s claims “were not groundless, unreasonable, or vexatious . . . or pursued in bad faith.” Accordingly, it denied Whole Foods’ motion for attorney’s fees.
While the court retains wide discretion to award attorney’s fees, the reasoning appears to disregard the Supreme Court’s ruling in Octane Fitness. The Supreme Court rejected the requirement of bad faith. Instead, it required only that the strength of the claims “stand out.” While there isn’t a clear way to quantify these with numbers, “standing out” certainly seems to be a lower threshold than “groundless” or “unreasonable.”
A number of practitioners (myself included) believed that Octane Fitness would make attorney’s fees more available to prevailing plaintiffs and defendants. The language of the Octane Fitness certainly enables this. However, it appears old habits die hard, and it may take some time for courts to kick the old habit of requiring “bad faith.”