Exceptionally Vague: Attorney Fee Shifting Under the Lanham Act

• Jurisdiction: United States,Federal
• Citation: Vol. 23 No. 1
• Publication year: 2015

Exceptionally Vague: Attorney Fee Shifting Under the Lanham Act

Kelsie Willett

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EXCEPTIONALLY VAGUE: ATTORNEY FEE SHIFTING UNDER THE LANHAM ACT

Kelsie Willett^*

Table of Contents

I. Introduction..........................................................................................212

II. Background.............................................................................................214

A. TRADEMARK LAW................................................................................214

1. Trademark Infringement Causes of Action........................................214
2. Counterfeiting....................................................................................215

B. AWARDS OF ATTORNEY FEES TO SUCCESSFUL LITIGANTS IN OTHER AREAS OF INTELLECTUAL PROPERTY................................216

1. Attorney Fees in Copyright...............................................................216
2. Attorney Fees in Patent....................................................................218

III. Attorney Fees in Trademark...........................................................219

A. CIRCUIT CONFUSION OVER TRADEMARK'S "EXCEPTIONAL" STANDARD FOR ATTORNEY FEES.....................................................221
B. CONSIDERING ATTORNEY FEES AND STATUTORY DAMAGES FOR INFRINGEMENT ...........................................................................226

1. Circuit Split on Providing Attorney Fees with Statutory Damages.....226

a. The Ninth Circuit Approach.....................................................227
b. The Second Circuit Approach....................................................228
c. Recent Developments in the Ninth Circuit.................................230

IV. Analysis......................................................................................................230

A. AN IMPROVED BURDEN FOR PROVING EXCEPTIONALITY..........230
B. A PARTY NEUTRAL APPROACH..........................................................231
C. CRITERIA FOR DETERMINING EXCEPTIONALITY..........................233
D. AN ELECTION FOR STATUTORY DAMAGES UNDER § 116(C) SHOULD NOT PRECLUDE AN AWARD OF ATTORNEY FEES..........235

V. Conclusion...............................................................................................239

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I. Introduction

"Government has no other end but the preservation of property."¹ When English philosopher John Locke wrote those words in the late Seventeenth Century, he could have scarcely imagined the myriad laws governing intellectual property today. However, his statement is just as valid now as it was when he wrote it. Intellectual property law should function in a manner that allows owners to preserve and profit from their creations. Yet increasingly expensive litigation costs complicate trademark owners' ability to prosecute infringement of their marks, and trademark law can be amended to make prosecution of infringement more economically feasible.

The size of the global market for counterfeit goods is staggering.² In Fiscal Year 2013, the U.S. government's Intellectual Property Rights enforcement resulted in 24,361 seizures, with total seizures valued at $1,743,515,581 according to the Manufacturer's Suggested Retail Price (MSRP).³ For comparison, LVMH, the international luxury goods conglomerate, posted revenues of slightly over $12 billion for 2013 for its fashion and leather goods brands.⁴ The massive size of the counterfeit market renders it imperative that the law facilitates and encourages trademark owners to vigilantly protect their intellectual property.

Litigation is quite expensive, and prosecuting every infringement of his property may not be economically feasible for a trademark owner. The prosecution of a small-scale infringer can still result in massive legal bills.

Our traditional "American Rule" of litigation provides that costs, other than attorney fees, are provided to the prevailing party unless otherwise specified by statute, court order, or elsewhere in the federal rules.⁵ Trademark is one specific area of law that deviates from the traditional standard. The 1975 amendments to the Trademark Act of 1946 authorized the award of attorney fees in exceptional cases.⁶ The language of the statute is limited, simply stating "[t]he court in exceptional cases may award reasonable attorney fees to the

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prevailing party."⁷ The ability to recover attorney fees encourages prosecution of infringement by allowing litigation to remain economically viable in cases deemed to be exceptional.⁸

The ability to recover attorney fees in exceptional cases encourages prosecution of infringement, and allows litigation to remain economically viable.⁹ Yet, as Judge Posner stated, "a rainbow of standards has been promulgated to define the word 'exceptional' in the Lanham Act, some seemingly requiring bad faith or other culpability, others following a less stringent approach."¹⁰ The Circuits' varied approaches in determining exceptionality apply both to the factor tests used and the burdens placed on prevailing plaintiffs and defendants.¹¹

Congress has created even more confusion through the passing of The Anti-Counterfeiting Consumer Protection Act of 1996, which introduced statutory damages to the Lanham Act for cases involving the use of counterfeit marks.¹² The impact of the introduction of statutory damages to the attorney fee shifting provision in 15 U.S.C. § 1117(a) is subject to limited case law. The Second Circuit has held that electing to receive statutory damages does not prohibit an award of attorney fees.¹³ Conversely, the Ninth Circuit found that § 1117(c) makes no provision for attorney fees and reversed a previous award of them.¹⁴ The confusion is compounded because 15 U.S.C. § 1117(b) deals with intentionally using counterfeit marks in commerce and expressly provides for an award of treble profits or damages, whichever is greater, together with reasonable attorney fees.¹⁵

Part II.A will provide an overview of trademark law, with an extensive discussion of the various causes of action for trademark infringement and counterfeiting. Part II.B will examine how attorney fees are awarded to successful litigants within the copyright and patent realms of intellectual property. Part III will discuss how courts award attorney fees within the

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trademark sphere. Part III.a will center on the confusion over how to apply the exceptionality standard in trademark infringement cases. Part III.b will look at how courts have interpreted the law with respect to receiving attorney fees in conjunction with statutory damages in trademark infringement cases.

This Note argues in Part IV two distinct points. The first being that the proper standard for determining exceptionality is the presence of malicious, fraudulent, deliberate, or willful conduct while holding plaintiffs and defendants to equal burdens. A finding of exceptionality should be based on conduct before the commencement of the suit, conduct during litigation, or both. Conduct prior to the commencement of the suit meeting the exceptional circumstance requirement should be malicious, fraudulent, deliberate or willful. Conduct during litigation that gives rise to exceptionality must meet any of the aforementioned factors, viewed through the prism of "abuse of process" as outlined by Judge Posner in a 2010 Seventh Circuit opinion.¹⁶ Secondly, this paper argues that the election of statutory damages under 15 U.S.C. § 1117(c) does not prohibit an award of attorney fees in exceptional cases as that would run counter to the legislation's intent in enacting the statutory damages provision.

II. Background

A. TRADEMARK LAW

Before examining how attorney fees should be awarded in trademark infringement cases, it is necessary to outline the various causes of action for infringement. There are separate causes of action depending upon whether the mark is registered, whether it is famous, and whether the infringement was so great as to result in counterfeiting. Following the discussion of trademark litigation, this Part will look at how the law treats attorney fees in both copyright and patent law. The extensive body of case law in these two areas of intellectual property provide guidance as to what a more efficient scheme for awarding attorney fees in trademark should look like.

1. Trademark Infringement Causes of Action. The Lanham Act provides for three distinct federal causes of action for trademark owners who believe that their mark has been infringed.¹⁷ First, under § 32(1), a trademark owner has protection for his registered mark against any reproduction, counterfeit, copy, or colorable imitation of the mark in connection with its use in commerce relating to any goods or services likely to cause confusion, mistake, or

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deception.¹⁸ A second cause of action is available to trademark owners whose marks are not registered within the United States, and they find similar protections available to them under § 43 of the Lanham Act.¹⁹

A third cause of action is provided to a specific subset of trademarks whose characteristics provide for special protection. Under § 43 of the Lanham Act, famous marks may bring actions for dilution or tarnishment regardless of whether confusion or economic injury is present.²⁰ A famous mark is one that is widely recognized by the general consuming public of the United States as an indicator of the goods or services source or owner.²¹ A dilution claim arises when a similarity between the contested mark and the famous mark exists, and that similarity impairs the distinctiveness of the famous mark.²² Tarnishment means association that harms the reputation of a famous mark.²³

2. Counterfeiting. Counterfeiting is a subset of trademark infringement: "All counterfeits infringe, but not all infringements are counterfeit."²⁴ A counterfeit mark is a spurious mark that is substantially indistinguishable from a valid registered mark.²⁵ The counterfeit...