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Supreme Court Decision in Patent Case May Make it Easier to Obtain Attorneys' Fees in Trademark and Trade Dress Cases

In Octane Fitness LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), decided in April 2014, the Supreme Court lowered the bar for obtaining attorneys’ fees in patent infringement cases. In particular, the Supreme Court replaced the previously restrictive interpretation of an “exceptional case” that qualifies for the award of attorneys’ fees under § 285 of the Patent Act (chapter 35 of the United States Code (U.S.C.)) with a lower, more discretionary standard. We previously provided an analysis of Octane Fitness, and the related Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. decision in an April 30, 2014 advisory. Since then, there has been a rash of litigants attempting to cash in on their success in intellectual property litigation of all types—including trademark and trade dress litigation brought under the Lanham Act (15 U.S.C.). Section 1117(a) of the Lanham Act includes a provision for awarding attorneys’ fees that is identical to § 285 of the Patent Act; however, because Octane Fitness only expressly addresses exceptional cases under § 285 of the Patent Act, courts are struggling with whether to replace the prevailing standard in their Circuit with the new, lower standard in cases brought under the Lanham Act. So far, courts are divided as to whether Octane Fitness applies to the Lanham Act, although a greater weight of authority exists in favor of applying the Octane Fitness standard to § 1117(a) of the Lanham Act.

The only Circuit Court to have directly addressed the issue, the Third Circuit, held that the Octane Fitness analysis applies to trademark and trade dress infringement claims brought under § 1117(a) of the Lanham Act. See Fair Wind Sailing, Inc. v. Dempster, 764 F. 3d 303 (3rd Cir. 2014). According to the Third Circuit, references to the Lanham Act within the Octane Fitness opinion send “a clear message that [the Court] was defining ‘exceptional’ not just under the fee provision in the Patent Act, but for the fee provision of the Lanham Act as well.” However, the Sixth Circuit called this determination into question by reversing a district court’s award of attorneys’ fees under the standard for that Circuit. See Premium Balloon Accessories, Inc. v. Creative Balloons Mfg., Inc., 573 Fed. Appx. 547 (6th Cir. 2014). The Sixth Circuit did not expressly consider whether Octane Fitness might apply, but merely reversed the lower court’s decision on an abuse of discretion standard.

Decisions at the district court level reflect this conflict. For reasons similar to those cited by the Third Circuit, the United States District Court for the Middle District of Florida held that Octane Fitness does apply to the Lanham Act. See BMW of North America, LLC v. Eurocar Technology, L.L.C., C.A. No. 6:13-cv-1215-Orl-DAB (M.D. Fla. July 15, 2014). Other district courts simply apply Octane Fitness to claims for attorneys’ fees under the Lanham Act with little or no analysis, taking for granted that the Supreme Court’s interpretation of the term “exceptional” in Octane Fitness applies generally to intellectual property cases. See, e.g., Reynolds Consumer Products, Inc. v. Handi-Foil Corp., C.A. No. 1:13-cv-214 (E.D. Va. July 18, 2014); American National Insurance Company v. American National Investment Advisors, LLC, C.A. No. 11-cv-4016 (N.D. Ill. Nov. 21, 2014). However, at least one district court, the United States District Court for the District of Connecticut, has held that Octane Fitness does not apply to the Lanham Act, because “the Supreme Court was interpreting only the Patent Act and not the Lanham Act in Octane Fitness.” See Romag Fasteners, Inc. v. Fossil, Inc., C.A. No. 3:10cv1827 (JBA) (D. Conn. Aug. 14, 2014).

Of course, even if it is ultimately found to apply to the Lanham Act, Octane Fitness’ impact on the granting of attorneys’ fees in trademark and trade dress infringement cases will depend upon the stringency of the existing standard in each Circuit. While the standard announced in Octane Fitness was decidedly lower than the current standard applied to patent infringement cases, it has been found not to differ significantly from the Lanham Act standard in some Circuits. For example, District Courts within the Ninth Circuit, apparently finding no conflict between the Ninth Circuit standard and the Octane Fitness standard, have actually applied both the Ninth Circuit standard and the Octane Fitness standard to exceptionality determinations. See, e.g., Apple Inc. v. Samsung Electronics Co., Ltd., C.A. No. 11-cv-01846-LHK (N.D. Cal. Aug. 20, 2014); Memory Lane, Inc. v. Classmates International, Inc., C.A. No. SACV 11-00940-JLS (RNBx) (C.D. Cal. May 8, 2014); AFD China Intellectual Property Law (USA) Office, Inc. v. AFD China Intellectual Property Law Office, C.A. No. 3:09-cv-1509-BR (D. Or. Dec. 19, 2014). Furthermore, District Courts within the Second and Fourth Circuits have been able to avoid making any definitive holding on Octane Fitness’ applicability because the outcome would be the same under either the Octane Fitness standard or the prevailing standard in those Circuits. See, e.g., Cross Commerce Media, Inc. v. Collective, Inc., C.A. No. 13-cv-2754 (S.D.N.Y. Dec. 16, 2014); Monster Cable Products, Inc. v. Monster Daddy, C.A. No. 6:10-1170-MGL (D.S.C. June 16, 2014).

Nonetheless, at least in some Circuits, and particularly in the Third Circuit, the Supreme Court’s decision in Octane Fitness may make it easier to obtain attorneys’ fees in trademark and trade dress infringement cases. In the absence of any definitive ruling on the issue, litigants should be aware of this potential. Also, in Circuits where Octane Fitness’ reach is not yet settled, prevailing parties in Lanham Act litigation should argue for attorneys’ fees using both the prevailing standard for that Circuit and the Octane Fitness standard.

This update was prepared by James C. Hall, a member of the Intellectual Property practice at Nutter McClennen & Fish LLP. For more information, please contact James or your Nutter attorney at 617.439.2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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Maximizing the protection and value of intellectual property assets is often the cornerstone of a business's success and even survival. In this blog, Nutter's Intellectual Property attorneys provide news updates and practical tips in patent portfolio development, IP litigation, trademarks, copyrights, trade secrets and licensing.

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