The battle for attorneys’ fees after an intense trademark dispute often leaves many prevailing parties empty handed. This is because the Lanham Act only provides for attorneys’ fees in “exceptional cases.” Congress’s (and courts’) reluctance to award attorneys’ fees stems from the “American Rule,” which provides that each party to a lawsuit is responsible for paying its own fees–unless a statute provides otherwise. But the Lanham Act erects a high bar to obtaining fees by requiring that the case be “exceptional.”

On the one hand, trademark owners should not have to fully shoulder the burden of what often turns into expensive litigation just to enforce their rights. Indeed, the estimated cost of protecting one’s rights can dramatically affect the calculus of whether to sue for infringement in the first place. But on the other hand, trademark violations are sometimes debatable and unclear. In such circumstances, the American Rule provides some protection to litigants who would otherwise be discouraged from seeking redress due to the risk that they might have to pay the defendant’s fees in the end if they lose. Thus, the Lanham Act strikes a balance, providing for reimbursement in cases of brazen and clear infringement–or brazen and clear abuse of the litigation process–while retaining the benefits the American Rule otherwise provides.

The Lanham Act’s fee provision has come up recently in two high-profile trademark cases: one involving Comic Con (reported on previously here and here), the other meme-famous Grumpy Cat (also reported on previously here). But the result was legally different in both cases, with Comic-con obtaining millions in fees under the Lanham Act, while Grumpy Cat obtained nothing under the Act, but recovered nevertheless pursuant to a contract between her and the infringer. What explains the different results?

Comic-con: The Comic Con (short for “comic book convention”) dispute began when the San Diego Comic Con sued the Salt Lake Comic Con for infringing on San Diego’s “Comic-Con” trademarks. The San Diego convention was one of the first comics-fan conventions.  And it is the largest convention of its kind, drawing more than 130,000 attendees each year. Salt Lake’s convention began in 2013, but it has quickly grown to over 120,000 attendees. Thus, it is probably no surprise that San Diego took exception to Salt Lake’s competing event and use of the same “Comic Con” name–though, as my colleague Jessica Alm pointed out, there are many other conventions across the United States using the same name.

San Diego Comic Con sued Salt Lake Comic Con for infringement. But despite the seemingly-debatable nature of the dispute (because the name could be generic, and it would be difficult to prove consume confusion), less than a year ago a jury determined that Salt Lake was liable for infringement in the amount of $20,000. Thereafter, San Diego moved for fees in the amount of $5 million–a little disproportionate, one would think (but perhaps not in view of San Diego’s requested $12 million in damages).

The district court judge granted $3.9 million. The reasons? Salt Lake repeatedly disregarded court rules, violated confidentiality rules, squandered judicial resources by relitigating issues, based arguments on irrelevant law, and attempted to bias the jury during the trial. The judge felt that the case stood out from others due to the “unreasonable manner it was litigated.” Expect an appeal on the $20,000:$3.9 million ratio.

Grumpy Cat: The Grumpy Cat dispute began when Grenade Beverage LLC, which had licensed Grumpy Cat’s trademarks (names and likenesses) to be used in trade dress and advertising for a new line of iced coffee products called “Grumppuccinos,” also used the marks in connection with a new coffee bean product without Grumpy Cat’s permission. Like the Comic Con litigation, the parties also litigated this case for three years. In addition, a jury awarded Grumpy Cat over $700,000–much more than San Diego Comic Con. But only $1 of that was for breach of the licensing agreement.

But unlike the Comic Con litigation, a federal judge recently denied Grumpy Cat’s request for approximately $320,000 in fees under the Lanham and Copyright Acts. The judge did, however, granted Grumpy Cat fees under the licensing agreement with Grenade Beverage–though, the judge said that there needs to be additional briefing on how much in fees can be awarded under the contract. Central to the judge’s decision on the Lanham Act fees issue was the fact that Grenade Beverage had not acted frivolously or in bad faith when they adopted an interpretation of the licensing agreement that entitled them to use Grumpy Cat’s marks in a line of Grumpy-Cat- branded “coffee products,” rather than just iced coffee. This reasonable difference of opinion–and, presumably, reasonable litigation behavior throughout the case–did not make out “exceptional” circumstances justifying fees under the Lanham Act.

In general, the Comic Con and Grumpy Cat cases provide two high-level teachings when it comes to fees. First, it is important to choose professional counsel, make reasonable litigation decisions, and take good faith positions throughout the course of a case. Otherwise, that conduct in and of itself may make the case “exceptional,” putting you on the hook. Second, attorneys’ fees provisions in a licensing agreement can serve as a helpful back-up if the Lanham Act fees request fails. But in providing for such fees, one should consider whether it is truly advantageous in the circumstances to remove the American Rule’s protections. That requires some thought…I need a Grumppuccino.

P.S. In April, I wrote about the USPTO’s attempt to obtain attorneys’ fees when it prevails in district court patent litigation. The Federal Circuit rejected this attempt, stating “the American Rule prohibits courts from shifting attorneys’ fees from one party to another absent a ‘specific and explicit’ directive from Congress. The phrase ‘[a]ll the expenses of the proceedings’ [in 35 U.S.C. § 145] falls short of this stringent standard.”

Legal departments sometimes get a bad reputation for saying “no” too often. A “no” from legal is particularly hard to stomach when you think the potential legal risk is farfetched. In this dispute, Wal-Mart must have decided that there was no way a competitor could own the basic word BACKYARD for grills and grilling accessories. However, after some discovery and a motion for summary judgment, Wal-Mart was left holding a tab for $34 million in damages, costs, and attorney’s fees. Thankfully for Wal-Mart, the Fourth Circuit just issued a decision vacating the award and the grant of summary judgment.

The plaintiff is Variety Stores, Inc., a regional retail chain in the southeast that sells lawn, garden, and grilling products. The company owns a registration for THE BACKYARD for tail store services and has also used variations of the mark such as BACKYARD and BACKYARD BBQ for grilling products. One of their advertisements is included below.

 

About 20 years after Variety’s first use, Wal-Mart decided to develop an in-house line of grilling products. During the clearance search for potential names like BACKYARD BARBECUE and BACKYARD BBQ, Wal-Mart’s in-house legal group identified Variety’s prior registration and advised the business team that Variety’s registration could pose a problem. Wal-Mart decided to go with BACKYARD GRILL, filed an application to register the mark with the US Patent and Trademark Office, and began selling products, like the ones below.

At the district court, Variety prevailed on for summary judgment. In evaluating the likelihood of confusion factors, the district court concluded :

  • Wal-Mart intended to create confusion because Wal-Mart moved forward with the name despite the legal department’s concerns;
  • Variety’s mark was strong because of large numbers of sales and advertising expense, the court declined to give any weight to Wal-Mart’s evidence of dozens of third-parties using variations of BACKYARD with grilling products;
  • The grilling products were competitive;
  • The two marks – BACKYARD GRILL and BACKYARD (or BACKYARD BBQ) – were nearly identical; and
  • That Wal-Mart’s consumer surveys regarding the absence of confusion were faulty and should be given little weight.

The court concluded that the infringement was willful and awarded $32.5 million in profits and $1.5 million in attorney’s fees.

The Fourth Circuit viewed the evidence differently. Because Wal-Mart did not appeal the district court’s findings with respect to all of the likelihood of confusion factors, the court affirmed the decision with respect to some of the factors. Instead, Wal-Mart appealed the court’s findings on the most important factors: the strength of the plaintiff’s mark (often considered “paramount” by the Fourth Circuit); the similarity of the marks; the defendant’s intent; and the presence or absence of actual confusion.

In reviewing the strength of the mark, the Fourth Circuit concluded that Variety’s BACKYARD marks were “conceptually weak,” but that there was a material dispute as to whether the mark had commercial strength.  The court also concluded that a jury could conclude that the marks were dissimilar in light of the design features and the greater visual emphasis on GRILL. With respect to intent, the court noted that the jury could conclude that Wal-Mart intended to avoid confusion by not pursuing the specific names rejected by the legal department (“Backyard Barbecue” and “Backyard BBQ”) and instead choosing “Backyard Grill.” Finally, the court concluded that the district court improperly rejected Wal-Mart’s survey evidence, noting the district court improperly weighed the evidence at the summary judgment stage. As a result, the court vacated the grant of summary judgment and the monetary awards.

Will Wal-Mart prevail at trial? The Fourth Circuit’s analysis certainly suggests Wal-Mart may have the conceptual weakness of Variety’s BACKYARD marks. It seems like the case is ripe for settlement, but it Variety may have an unreasonably high demand, given the district court previously awarded $34 million. Given that us Minneapolitans are going to hit the 70s today (just weeks from a historic April blizzard), I’m comfortable waiting this one out in my own backyard. Let’s just hope we get an answer before the snow returns.

Recently, I attended the University of Minnesota’s celebration of “40 Years of Gopher Justice,” an event honoring the institution’s University Student Legal Service (“USLS”), a non-profit organization that provides UMN students with free legal services. The celebration included a panel on a contemporary topic in student advocacy: “revenge porn.” The topic isn’t relevant just for students, though. One may recall that just last year Hulk Hogan successfully sued the now-defunct gossip news site Gawker for its dissemination of a sex tape depicting him and another woman. Hulk Hogan eventually settled the case with Gawker for $31M.

Hulk Hogan testifies in his suit against Gawker. Image credit: Slate.

The USLS celebration panel hosted three experts on revenge porn, including two attorneys knowledgeable about Minnesota’s new suite of civil and criminal remedies that went into effect in late-summer 2016. See Minn. Stat. §§ 604.31 (civil), 617.261 (criminal). In response to my question about the civil action, one of the attorneys remarked that he believed the Minnesota law created a “copyright” to one’s image, enabling that person to prevent unwanted dissemination and exploitation of pictures and recordings depicting the person in a sexual way. For the sake of persons hoping to prevent and recover damages for unwanted dissemination under Minnesota’s new law, I hope he’s incorrect; after all, the Copyright Act preempts all state laws that overlap with federal protections over the subject matter of copyright, see 17 U.S.C. § 301(a)—which includes photographs and videos, see 17 U.S.C. § 102(a)(5)-(6).

In order to bring a civil action for non-consensual dissemination of private images (the “revenge porn civil action”) in Minnesota, (1) the defendant must have disseminated a private image without the plaintiff’s consent, (2) the image must have been of a sexual character, (3) the plaintiff must have been identifiable in the image, and (4) the image must have been obtained or created under circumstances in which the plaintiff had a reasonable expectation of privacy. See § 604.31, subd. 1. If these four elements are shown, the plaintiff may recover general and special damages, including financial losses resulting from the dissemination of an image and damages for mental anguish, disgorgement of profits made from dissemination, civil penalties, and attorneys’ fees. See § 604.31, subd. 3. See the Minnesota Senate’s overview of this law for more general information about the revenge porn civil action.

What’s interesting about this cause of action is that it’s a blend of both (1) the right to privacy and (2) an intellectual property right called the right of publicity. Right to privacy claims (for invasion of privacy) typically remedy the unjustified exploitation of one’s personality and injury to privacy interests that are emotive or reputational. Right of publicity claims, on the other hand, combat the unauthorized use of one’s identity in commercial advertising and compensate persons for the value of the commercial use of that identity and/or reductions in the value of the cultivated identity. Minnesota’s revenge porn civil action appears to be a specific hybrid of both kinds of claims; it protects both privacy and property interests in a person’s identity and provides relief in the form of both reputational and economic damages, as well as injunctive relief.

Coincidentally, when Minnesota passed its revenge porn bill in 2016, it was also considering the codification of the right of publicity under a bill entitled the “Personal Rights In Names Can Endure” (“PRINCE”) Act. But the bill’s sponsor later pulled his draft after critics expressed concerns about the bill’s broad language. One commentator questioned whether such a bill was necessary in light of Hulk Hogan’s victory. Minnesota’s revenge porn civil action arguably combined two separate claims into one, but it also expanded the scope of recovery under either claim so as to now include multiple forms of relief.

Whether the revenge porn civil action will be utilized to any significant degree is as of yet uncertain. The USLS celebration panelists noted—and a brief case search confirms—that courts have yet to extensively apply and interpret the law. From the face of the law, though, it appears that Minnesota is now a hospitable forum for victims of revenge porn, especially celebrities with economically-valuable identities. And due to the state’s broad remedial scheme, I would not be surprised if we eventually see large cases like Hulk Hogan’s in Minnesota courts.

Last week a federal lawsuit was filed in Minnesota by Blu Dot to protect alleged intellectual property rights in the floor lamp shown on the left below. The accused “strikingly and confusingly similar” floor lamp shown on the right below is sold by Canadian Rove Concepts:

stilt-floor-lamp-walnutNordicLamp

So, what type of intellectual property do you suppose is being asserted here?

The “strikingly similar” allegation is a hint that copyright infringement is being alleged, although Blu Dot admits it hasn’t yet obtained a copyright registration, which used to be considered a predicate to the court having jurisdiction over a copyright claim. Instead Blu Dot filed for copyright registration only the week before filing suit in Minnesota federal district court.

Given that delay, what is clear about Blu Dot’s copyright claim is that waiting to seek copyright registration will cost it any hope of obtaining statutory damages or attorneys fees against Rove Concepts, even if it has a copyright and even if it was infringed. What remains unclear is whether Blu Dot actually has a copyright and whether it will be able to obtain the necessary registration to sustain a copyright infringement cause of action.

Copyright registration and protection is denied to useful articles such as lamps, unless an original sculptural work of authorship can be identified separately from, or exist independently of, the utilitarian aspects of the article. So stay tuned, as it is certainly debatable whether copyright is a proper form of intellectual property protection for this particular floor lamp.

The “confusingly similar” allegation by Blu Dot is a further hint that non-traditional trademark infringement is being alleged here too. This won’t be an easy claim to pursue for Blu Dot either, since it will have to prove its design is “non-functional” (as it is not federally-registered as a non-traditional trademark product configuration) and it will have to establish acquired distinctiveness in its claimed trade dress elements (before addressing likelihood of confusion):

  • three legs that descend from a single base leg of the same width and depth;
  • each of the three legs pivots horizontally away from the center before angling down to the floor;
  • a portion of upper limb of each leg is stacked on top of each other making the legs different heights;
  • the legs angle out to form a tripod-like base; and
  • smooth fabric-covered shade.

A year and half ago we wrote about an interesting chandelier configuration trademark application — despite more than five years of use, registration on the Principal Register was refused as a non-distinctive product design, so the applicant amended to the Supplemental Register. It will be interesting to see what kind of evidence Blu Dot is able to establish in support of acquired distinctiveness, as five years of exclusive use won’t be enough.

Probably what is most surprising about Blu Dot’s federal complaint is that it alleges no ownership of or infringement of any design patents. Design patent protection seems ideally suited for this very kind of useful product, and it is not at all cost prohibitive to obtain.

Finally, back to Blu Dot’s non-traditional trademark infringement claim again, to the extent copyright is applicable, the Supreme Court’s Dastar case may very well knock out any trademark or unfair competition protection sought by Blu Dot. As the Chief Judge of the United States District Court for the District of Minnesota recently noted in Bruce Munro and Bruce Munro Studio v. Lucy Activewear, Inc. et al:

Courts, however, are “‘careful to caution against misuse or over-extension’ of trademark and related protections into areas traditionally occupied by patent or copyright.” [quoting Dastar] Copyright and patent laws are meant to protect against copying the originality and creativity of another, for a certain time and under certain guidelines, while the Lanham Act and trademark law serve a distinct purpose. * * * The Lanham Act “‘does not protect the content of a creative work on artistic expression’ because an ‘artist’s right in an abstract design or other creative work’ is protected by copyright law.” * * * [E]xtending trademark protection to a particular style of artistic expression would improperly extend trademark law into the area of copyright protection.” * * * Thus, the Court will dismiss with prejudice the trademark and trade dress claims to the extent they are based on Munro’s style and the elements of Munro’s artistic works.

So, how do you come down on the lamp case — is Blu Dot going to face red lights on its copyright and trademark claims? Will it end up wishing it had a design patent to assert against Rove Concepts?

Slowly but surely, the extension of the Supreme Court’s 2014 Octane Fitness v. LLC v. Icon Health and Fitness, Inc. decision to trademark claims is gaining traction among federal appellate courts. The Octane Fitness decision addressed the standard for determining whether a case is “exceptional” under the Patent Act and therefore eligible for an award of attorney fees. Earlier this week, the Fifth Circuit jumped on the bandwagon with its decision in Baker v. DeShong, Case No. 14-11157 (May 3, 2016)(available here).

Baker operates the HIV Innocence Group, which provides medical, legal, and investigative services for individuals in criminal and civil suits who have been accused of intentionally or recklessly infecting another person with HIV. Baker owns a trademark registration for the HIV INNOCENCE GROUP mark. He also does not like to be criticized. When Jeffrey DeShong created a website criticizing the HIV Innocence Group, Baker sued him for trademark infringement.

The District Court granted DeShong’s Motion to Dismiss on the ground that the allegations failed to support a claim of likelihood of confusion (discussed in more detail here). Following that ruling, DeShong requested an award of attorney’s fees, arguing that the case was “exceptional”. However, the District Court denied the motion, citing prevailing precedent that to qualify as “exceptional,” a case must be brought in bad faith.

The Fifth Circuit reversed the decision, ruling that the Octane Fitness Court “provided clear guidance” that to be exceptional does not require a claim to be brought in “bad faith.” Instead, an exceptional case is a case that “stands out from the others with respect to the substantive strength of a party’s litigation position” or with respect to “the unreasonable manner” of a party’s actions in litigation.

Although DeShong requested that the Fifth Circuit also find that the claims qualified as an exception for an award of attorney fees, the Fifth Circuit remanded to the District Court to decide the issue. With this ruling, the Fifth Circuit joins the Third Circuit (Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014)) and the Fourth Circuit (Georgia-Pac. Consumer Prods. LP v. von Drehle Corp., 781 F.3d 710 (4th Cir. 2015). The Sixth Circuit has not squarely addressed the issued, but remanded a case to the District Court to “assess the applicability” of Octane Fitness to the request for attorney fees (Slep-Tone Entertainment Corp. v. Karaoke Kandy Store, Inc., 782 F.3d 313 (6th Cir. 2015)).

While no circuit court has reached a contrary decision, there has been disagreement among district courts. Most district courts have applied Octane Fitness to trademark infringement claims, but at least one district court has rejected the applicability of Octane Fitness to non-patent claims (Romag Fasteners, Inc. v. Fossil, Inc., 2014 WL 4073204 (D. Conn. Aug. 14, 2014)). There the court concluded that Second Circuit precedent requiring “bad faith” was still good law and therefore binding upon the court.

Although it is possible other courts may choose to reject the applicability of Octane Fitness to trademark infringement claims, this seems unlikely in light of the trend among the circuits. The Fifth Circuit’s decision lends further support to this notion.

Of course, the standard adopted in Octane Fitness does not guarantee that it will be easier to obtain an award of attorney’s fees. We previously discussed a Washington district court decision refusing to grant an award of fees under the Octane Fitness standard.

At a minimum, however, these decisions caution trademark infringement plaintiffs to objectively examine the strength of their claim. They also provide victims of unreasonable or meritless claims of infringement with some potential leverage: the threat of forcing the plaintiff to write a check for the defendant’s legal fees.

Earlier this month the Southern District of New York granted the defendant’s Motion for Summary in Louis Vuitton Malletier, S.A. v. My Other Bag , Inc. The fashion giant had brought suit against a California company over its sales of a canvas tote bag that included an image that “evoked” Louis Vuitton’s classic handbag design. An image of the Defendant’s products is shown below and you can read more about the Motion for Summary Judgment here.

 

Fresh off their victory, the Defendant My Other Bag (“MOB”) filed a Motion for Attorney’s fees just last week. MOB claims that the facts of the case render it an “exceptional” case under the Lanham Act and therefore request an award of $398,821.

In its Memorandum, MOB acknowledges that the Second Circuit normally requires a showing of “bad faith” before awarding attorney fees. However, the Supreme Court’s ruling in Octane Fitness v. Icon Health & Fitness, 134 S. Ct. 1749, 1758 (2014) rejected this interpretation of the term “exceptional,” instead finding that an exceptional case is merely one that stands out from others due to the relative merits of the claims or the litigation conduct of the parties. Although the case involved a claim of patent infringement, much of the language in the Patent Act mirrors the language of the Lanham Act and, as a result, courts regularly rely on decisions interpreting provisions of one act to interpret the other. Indeed, the Third, Fourth, and Sixth Circuits (and numerous district courts) have all recognized the applicability of Octane Fitness to requests for attorney fees under the Lanham Act.

Does MOB have a winning claim? MOB won on summary judgment on all three claims. That’s helpful, but does not mean that Louis Vuitton’s claims were weak enough to justify an award of attorney fees. Moreover, defenses of fair use or parody are particularly difficult to evaluate as courts frequently reach different conclusions on similar facts. In fact, Louis Vuitton successfully sued Hyundai Motor Co. in the same district under arguably less favorable facts (as MOB points out in its motion, though, Hyundai Motors undermined its own case with some poorly worded testimony).

Predictably, MOB also throws out the “bully” label.  This is by far the first time the label has been thrown at Louis Vuitton.  MOB argues that Louis Vuitton has pursued numerous “weak” claims, including a law school symposium’s use of the LV design on a promotional poster, a “Chewy Vuitton” dog toy, a Danish artist who placed a photograph of a child refugee holding a Louis Vuitton bag on a t-shirt (and then the painting of that photograph), other art exhibits, and the appearance of a character named “Lewis Vuitton” in the movie The Hangover II.  It certainly can’t help that Louis Vuitton appears to wear these tactics as a badge of honor, alleging in its own pleadings that it “actively and aggressively” enforces its trademark rights.

The chances of the court not adopting Octane Fitness are low, but the better question is whether the court considers the facts of the case to justify an award. It will also be interesting to see what consideration the court gives to Louis Vuitton’s perceived “bullying” tactics. When granting the Motion for Summary Judgment, the court did not seem particularly impressed with Louis Vuitton’s claims as it wondered whether the company “just cannot take a joke.” Maybe a $400,000 bill would be the perfect punchline.

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.”

Techdirt has written extensively about why Monster Cable is considered “somewhat famous as a trademark bully.” Numerous comments to a TTABlog post reinforce this view.

One of the examples Mike Masnick over at Techdirt has highlighted is a TTAB case we handled for a Monster Cable victim a few years back, reported here, with pleadings here.

This victory led us to helping another brand owner determined to defend itself: Monster Daddy. So, the hits keep coming. Check out the story behind this gem of a trophy and attorneys fee award:

Yep, Monster Cable was ordered to pay Monster Daddy $9,348.10 for attorneys fees resulting from Monster Cable’s breach of a forum selection clause contained in a prior settlement agreement between the parties.

As if that weren’t enough, instead of promptly paying the ordered amount, Monster Cable appealed to the Fourth Circuit Court of Appeals, and lost, so it was ordered to pay to Monster Daddy additional costs and attorneys fees, totaling $42,966.58:

According to the District Court:

“It is obvious that the appeal of the original award in the amount of $9,290.50 in attorney fees had no merit and the Fourth Circuit so held. Because the record in this case is somewhat long and tortured, it is reasonable that counsel for Monster Daddy would be required to spend considerable time defending the appeal. The court has considered the objections raised by Monster Cable as to the amount claimed by Monster Daddy and finds that the objections are without merit.

Therefore, the court awards attorney fees of $41,609.75 and costs of $1,356.83 for a total award of $42,966.58 to be paid to Monster Daddy by Monster Cable.”

So, what do you think, does Monster Cable deserve the trademark bully label? Do you have any Monster Cable experiences to share?

Stay tuned, trial is expected in South Carolina in May 2013 in the case: Monster Daddy, LLC v. Monster Cable Products, Inc., Monster LLC, and West Coast Customs, Inc.

Minnesota State Representative Joyce Peppin, is convinced that “trademark bullying” is a problem and that it requires a brand new law in Minnesota to properly deal with it.

Representative Peppin apparently is a law student at William Mitchell College of Law, and she has teamed up with other students and William Mitchell law faculty to write and introduce into the Minnesota State House, a bill entitled the “Small Business Trademark Protection Act” (H.F. 2996).

The body of the proposed bill makes no reference to “small business,” nor does it attempt to define “small business,” but it does purport to define “trademark bullying” this way:

 “[T]he practice of a trademark holder using litigation tactics in an attempt to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark holder.”

As presently written, the proposed Minnesota state law would require the following:

  1. All trademark cease-and-desist letters sent to a Minnesota entity by an entity with a presence in Minnesota must contain specific language notifying the recipients of their right to a settlement conference through the Minnesota Office of Administrative Hearings; not available after suit has been commenced by any party.
  2. The primary purpose is said to assist the parties in resolving disputes and the secondary purpose is said to identify and label cases of “trademark bullying.”
  3. The timing, format, and additional requirements are detailed, e.g., how the conference shall not exceed eight hours unless the parties and the judge agree otherwise.
  4. Attendance by parties or their representatives is mandatory; if the party starting the dispute won’t participate, it is liable for a $1,500 fine and the attorney fees, costs, and disbursements incurred by the other party.
  5. At its own cost, any party may provide information such as expert testimony, industry practice standards, and evidence of trademark use in commerce.
  6. If a settlement is not reached but the parties have reached an agreement on any fact or other issue, the alj must issue an order confirming and approving, if necessary, those matters agreed upon. The order is binding on any Minnesota state district court judge who is later assigned to hear a related civil action.
  7. If no settlement is reached, any party may request the issuance of an alj summary. The alj may issue such a summary without the request of any party if the alj believes that the claim brought is a case of “trademark bullying.”
  8. Treble damages may be awarded against a party guilty of “trademark bullying”.
  9. If a party is found by a Minnesota state district court or the Office of Administrative Hearings to have engaged in “trademark bullying” more than two times in a period of ten years the party may have their right to conduct business in the state revoked.
  10. The cost of the settlement conference is split equally, unless the alj orders otherwise.
  11. The proposed effective date is August 1, 2012, and would apply to disputes evidenced by cease-and-desist letters and similar communications sent on or after that date.

I’m thinking this proposed legislative solution to “trademark bullying” really misses the mark, your thoughts?

While it is true that not responding to a trademark cease and desist letter is always an available option, I tend to believe it is rarely a good choice. The strategy of silence seldom makes the issue go away, it often ends up costing the recipient more money to resolve the issue, and it is more likely to place the trademark enforcement target in a less favorable business and legal position in the end.

So, it is surprising to me how many recipients of trademark demand letters actually ignore or seriously consider ignoring the cease and desist letter and doing nothing. Perhaps more surprising is when I hear about lawyers recommending silence as a serious option, apparently hoping that the trademark owner isn’t serious, that it won’t smell blood in the water, that it will get tired of chasing the enforcement target, lose interest, and/or not follow through on its “trademark bullying” demands.

Instead, a more plausible reaction to the silent treatment comes from a now highly agitated and frustrated trademark owner who files a federal district court trademark infringement complaint, who may then obtain a default judgment, permanent injunction, order to pay damages, order to pay the attorneys fees of the trademark enforcer, and even seek a contempt of court order for failure to honor the previous court orders.

Of course, one of the serious pitfalls of choosing silence is that it forces others (both adversaries and the court) to fill in the blanks, and it actually can speak volumes, perhaps communicating incorrect and/or very unintended messages to the trademark enforcer:

  1. I will both run and hide from facing responsibility for my actions;
  2. I can’t be trusted and I don’t operate a reputable business;
  3. OK, I’m guilty and I have no valid defense to your trademark infringement claims;
  4. I actually intended to confuse consumers and benefit from that confusion;
  5. In fact, I’m profiting nicely from my actions while unfairly trading on your goodwill;
  6. I don’t care if my silence ends up costing you more time, effort, and expense;
  7. I’ll call your bluff and simply dare you to sue me;
  8. If you sue me, I’ll ignore that too; and
  9. Maybe I can’t or won’t afford to respond or defend myself or my company.

While the last listed possible message above may, in fact, be the only truly correct interpretation of the silence, unfortunately, communicating it tends to mimic blood in the water with a nearby circling shark. Far better to leave your resources a mystery while conveying an intelligent, serious, and direct written response (assuming there is a valid defense to the demands). Doing so will go a long way toward dispelling anyone’s reasonable belief of the other possible eight messages.

While there is no doubt that sole business owners and entrepreneurs can have limited budgets, it is hard to believe they are unable to afford at least one intelligent response by an experienced trademark attorney.

In my experience, nothing beats a prompt and intelligent response that details the weakness or baseless nature of the trademark infringement claims asserted in the demand letter. But, I’ll save for another day my thoughts about the actual anatomy of an intelligent trademark response letter.

In the meantime, where do you stand on the issue, do you favor and/or recommend silence or a detailed response to trademark cease and desist letters?