Recovering Legal Fees May Be More Likely in Lanham Act Cases
It may be easier for a prevailing party to recover attorneys' fees in Lanham Act cases than it has been. In Fair Wind Sailing, Inc. v. Dempster, No. 13-3305 (3d Cir. Filed Sept. 4, 2014), a "trade dress" action under section 42(a) of the Lanham Act, the U.S. Court of Appeals recently concluded that the "exceptional cases" standard of section 35(a) under which a court can award reasonable attorneys' fees is to be interpreted consistently with the liberal interpretation for recovery of attorneys' fees in "exceptional cases" under section 285 of the Patent Act articulated in April by the U.S. Supreme Court in Octane Fitness.1
Prior to the Supreme Court's Octane Fitness decision, the Federal Circuit had held that a case may be deemed "exceptional" under section 285 of the Patent Act only if it could be established by clear and convincing evidence that there had been "material inappropriate conduct" or that the litigation was both "in subjective bad faith" and "objectively baseless."2 In Octane Fitness, the Supreme Court concluded that standard to be inconsistent with the ordinary meaning of that term and stated, "[W]e hold, then, that an 'exceptional case' is simply one that 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." (Octane Fitness, 134 S. Ct. at 1756 (emphasis added)).3
In Fair Wind, the Third Circuit imported the Supreme Court's Octane Fitness definition of "exceptionality" into its interpretation of section 35 of the Lanham Act. Accordingly, in Lanham Act litigation, a threshold showing of culpable conduct is no longer necessary. Under the Third Circuit's new interpretation, "a district court may find a case 'exceptional,' and therefore award fees to the prevailing party, when (a) there is an unusual discrepancy in the merits of the positions taken by the parties or (b) the losing party has litigated the case in an 'unreasonable manner'." (Fair Wind, No. 13-3305 at 23–24 (emphasis added) (quoting Octane Fitness, 134 S. Ct. at 1756)).
As the Court of Appeals stated, "Whether litigation positions or litigation tactics are 'exceptional' enough to merit attorneys' fees must be determined by district courts 'in the case-by-case exercise of their discretion, considering the totality of the circumstances'." (Id. At 24 (emphasis added)). The Third Circuit’s Fair Wind decision may well spark more aggressive and successful efforts to recover attorneys' fees in Lanham Act litigation.
1 Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (Apr. 29, 2014).
2 Brooks Furniture Mfg. Inc. v. Dutalier Int’l. Inc. 393 F.3d 1378, 1381 (Fed. Cir. 2005).
3 The Supreme Court also rejected the Federal Circuit's "clear and convincing" evidentiary burden and held that such conduct may be established by a preponderance of the evidence. (Octane Fitness, 134 S. Ct. at 1758).
Vedder Thinking | Articles Recovering Legal Fees May Be More Likely in Lanham Act Cases
Newsletter/Bulletin
November 2014
It may be easier for a prevailing party to recover attorneys' fees in Lanham Act cases than it has been. In Fair Wind Sailing, Inc. v. Dempster, No. 13-3305 (3d Cir. Filed Sept. 4, 2014), a "trade dress" action under section 42(a) of the Lanham Act, the U.S. Court of Appeals recently concluded that the "exceptional cases" standard of section 35(a) under which a court can award reasonable attorneys' fees is to be interpreted consistently with the liberal interpretation for recovery of attorneys' fees in "exceptional cases" under section 285 of the Patent Act articulated in April by the U.S. Supreme Court in Octane Fitness.1
Prior to the Supreme Court's Octane Fitness decision, the Federal Circuit had held that a case may be deemed "exceptional" under section 285 of the Patent Act only if it could be established by clear and convincing evidence that there had been "material inappropriate conduct" or that the litigation was both "in subjective bad faith" and "objectively baseless."2 In Octane Fitness, the Supreme Court concluded that standard to be inconsistent with the ordinary meaning of that term and stated, "[W]e hold, then, that an 'exceptional case' is simply one that 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." (Octane Fitness, 134 S. Ct. at 1756 (emphasis added)).3
In Fair Wind, the Third Circuit imported the Supreme Court's Octane Fitness definition of "exceptionality" into its interpretation of section 35 of the Lanham Act. Accordingly, in Lanham Act litigation, a threshold showing of culpable conduct is no longer necessary. Under the Third Circuit's new interpretation, "a district court may find a case 'exceptional,' and therefore award fees to the prevailing party, when (a) there is an unusual discrepancy in the merits of the positions taken by the parties or (b) the losing party has litigated the case in an 'unreasonable manner'." (Fair Wind, No. 13-3305 at 23–24 (emphasis added) (quoting Octane Fitness, 134 S. Ct. at 1756)).
As the Court of Appeals stated, "Whether litigation positions or litigation tactics are 'exceptional' enough to merit attorneys' fees must be determined by district courts 'in the case-by-case exercise of their discretion, considering the totality of the circumstances'." (Id. At 24 (emphasis added)). The Third Circuit’s Fair Wind decision may well spark more aggressive and successful efforts to recover attorneys' fees in Lanham Act litigation.
1 Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (Apr. 29, 2014).
2 Brooks Furniture Mfg. Inc. v. Dutalier Int’l. Inc. 393 F.3d 1378, 1381 (Fed. Cir. 2005).
3 The Supreme Court also rejected the Federal Circuit's "clear and convincing" evidentiary burden and held that such conduct may be established by a preponderance of the evidence. (Octane Fitness, 134 S. Ct. at 1758).
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