A Bigger Exception to the Rule? Attorneys’ Fee Awards in Trademark Cases

Traditionally, attorneys’ fees were notoriously difficult for a prevailing party to recover in a trademark action.  The United States Supreme Court’s 2014 opinion in a patent case, Octane Fitness, LLC v. ICON Health & Fitness, Inc.,[1] relaxed the applicable standard in construing the Patent Act’s identical fee-shifting provision and will likely result in a lower bar to the recovery of fees in trademark disputes.  On October 24, 2016, the Ninth Circuit joined the Third, Fourth, Fifth and Sixth Circuits in extending Octane’s holding to a trademark fee application.[2]

Section 35 of the Lanham Act permits courts to award attorneys’ fees to a prevailing party in “exceptional cases,” at the discretion of the district court judge.[3] The legislative history, though sparse, reflects that Congress intended to afford the remedy in two situations: “First, the legislature envisioned ‘make whole’ compensation for certain victims of infringement; second, Congress endeavored to afford protection to defendants ‘against unfounded suits brought by trademark owners for harassment and the like.’”[4]

The Pre-Octane Hodgepodge

Before the Supreme Court’s decision in Octane, appellate courts did not interpret the “exceptional case” standard consistently, leading the Ninth Circuit to characterize “the line delineating ‘exceptional’ cases under the Lanham Act” as “murky” and “far from clear.”[5]  In the Eighth and Ninth Circuits, for example, a prevailing party could recover fees in cases deemed “groundless, unreasonable, vexatious, or pursued in bad faith.”[6]  The D.C. Circuit, in an opinion authored by then-Judge Ginsburg and joined by then-Judge Scalia, held that “‘exceptional,’ as Congress used the word in section 35 of the Lanham Act, is most reasonably read to mean what the word is generally understood to indicate—uncommon, not run-of-the-mill.”[7]  In the Tenth Circuit, a prevailing plaintiff could recover fees by showing that the defendant acted in bad faith, while a prevailing defendant had to show that (1) the plaintiff’s case lacked foundation; (2) the plaintiff brought suit in bad faith; (3) the plaintiff prosecuted the case in an “unusually vexatious and oppressive manner”; or (4) “perhaps for other reasons as well.”[8]  This fourth category led the Seventh Circuit to grumble that the Tenth Circuit “can hardly be said to have a test” at all.[9] The Seventh Circuit blamed “circuit drift” for what it complained was “this jumble.”[10]  It concluded that a case under the Lanham Act is “exceptional” if the losing party was the plaintiff and was guilty of abuse of process in suing, or if the losing party was the defendant and had no defense yet persisted in the trademark infringement or false advertising for which it was being sued, in order to impose costs on its opponent.[11]

Compounding these inconsistencies, some appellate courts applied a different standard to prevailing plaintiffs than to prevailing defendants.  In Fogerty v. Fantasy, Inc., the United States Supreme Court held that the Copyright Act’s attorneys’ fees provision must be applied evenhandedly to both prevailing plaintiffs and prevailing defendants.[12]  Following that decision, some appellate courts held that the same evenhanded rule must apply in construing §35 of the Lanham Act.[13]  The Tenth Circuit, by contrast, expressed skepticism that “there should be, or even could be, perfect harmony between the standard for awarding attorney fees to a prevailing plaintiff and a prevailing defendant.  The underlying conduct under scrutiny is different.”[14]

Federal Circuit Smackdown: Supreme Court Edition

Against the backdrop of this hodgepodge, the Supreme Court took up Octane, a patent case in which the Court interpreted §285 of the Patent Act.  Like its Lanham Act counterpart, §285 authorizes an award of fees to the prevailing party in “exceptional” cases.  Octane involved a dispute between competing manufacturers of fitness equipment.[15]  ICON, the plaintiff-respondent, sued Octane, the defendant-petitioner, alleging that certain of Octane’s elliptical machines infringed several claims of a patent owned by ICON.  The district court granted summary judgment in favor of Octane, finding multiple claim elements lacking as a matter of law, both literally and under the doctrine of equivalents.[16]  The court denied Octane’s motion for attorneys’ fees, relying on Federal Circuit authority, which held that “[a]bsent misconduct in conduct of the litigation or in securing the patent, sanctions maybe imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.”[17]  The Federal Circuit affirmed the denial of fees, and the Supreme Court reversed in a nearly unanimous[18] opinion authored by Justice Sotomayor.

The Supreme Court found the Federal Circuit approach overly “rigid and mechanical.”[19]  The Federal Circuit defined subjective bad faith and objective baselessness narrowly, holding that “litigation is objectively baseless only if it is ‘so unreasonable that no reasonable litigant could believe it would succeed,’ and that litigation is brought in subjective bad faith only if the plaintiff ‘actually know[s]’ that it is objectively baseless.”[20] The Supreme Court found this “formulation … overly rigid” because it “superimposes an inflexible framework onto statutory text that is inherently flexible.”[21]  Requiring both objective baselessness and subjective bad faith on the part of the plaintiff was too restrictive, because conduct satisfying either one of these elements standing alone may be enough to merit fees.[22]

Thus, the Supreme Court held that the Federal Circuit’s test was contrary to the express language of §85, which (like its textually identical counterpart in the Lanham Act) provides: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”[23]  Because the Patent Act does not define what constitutes an “exceptional” case, the Court construed it “in accordance with its ordinary meaning.”[24]  “In 1952, when Congress used the word in § 285 (and today, for that matter), ‘[e]xceptional’ meant ‘uncommon,’ ‘rare,’ or ‘not ordinary.’”[25]  Accordingly, the Court held 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.”[26]  In reaching its holding, the Court relied, in part, on the D.C. Circuit Court opinion in which then-Judge Ginsburg, joined by then-Judge Scalia, rejected a claim that fee-shifting awards must be supported by subjective bad faith, holding instead that the “exceptional case” standard should be construed according to its ordinary meaning—“uncommon, not run-of-the-mill.”[27]

Octane Takes Off: Application to Trademark Cases

The Third Circuit was the first to apply Octane in a trademark action, followed by several others, including, most recently, the Ninth Circuit on October 24, 2016.  This progression is consistent with the migration of other Supreme Court rules from one intellectual property field into another; for example, the application of the patent doctrine of willful blindness in copyright cases,[28] and the extension of eBay’s[29] rule regarding irreparable harm in patent permanent injunction applications to preliminary injunctions in both trademark and copyright cases.[30]

Although trademark litigants should not expect awards of attorneys’ fees to become “an ordinary thing,”[31] the Supreme Court’s relaxation of the standard for fee awards in patent cases should result in a corresponding lowering of the bar in trademark cases.

 

 

 

[1] 134 S. Ct. 1749 (2014).

[2] SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., Ninth Circuit Case Nos. 13-17622, 15-16906, slip op. (Oct. 24, 2016).

[3] 15 U.S.C. § 117(a).

[4] Noxell Corp. v. Firehouse No. 1 Bar-B-Que Rest., 771 F.2d 521, 524 (D.C. Cir. 1985) (citing S. REP. NO. 93-1400 at 5, 6 (1974), reprinted in 1974 U.S.C.C.A.N. 7132, 7136).

[5] Secalt S.A. v. Wuxi Shenxi Constr. Mach. Co., Ltd., 668 F.3d 677, 681, 687 (9th Cir. 2012).

[6] See, e.g., Mattel Inc. v. Walking Mountain Prods., 353 F.3d 792, 816 (9th Cir. 2003) (vacating denial of attorneys’ fees to defendant and remanding where plaintiff’s case may have been either groundless or unreasonable); Cairns v. Franklin Mint Co., 292 F.3d 1139, 1156 (9th Cir. 2002) (affirming award of $2,308,000 in attorneys’ fees to defendant where plaintiff asserted groundless false advertising claim); Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 123 (8th Cir. 1987) (affirming denial of fees where plaintiff’s claims were weak but “not baseless”).

[7] Noxell, 771 F.2d at 526.

[8] Nat’l Ass’n of Prof’l Baseball Leagues, Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143, 1147–48 (10th Cir. 2000).

[9] Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, 626 F.3d 958, 960 (7th Cir. 2010).

[10] Id. at 961–62. 10.

[11] Id. at 963-964.

[12] 510 U.S. 517, 534 (1994).

[13] See, e.g., Stephen W. Boney, Inc. v. Boney Servs., Inc., 127 F.3d 821, 826 (9th Cir. 1997).

[14] Nat’l Ass’n of Prof’l Baseball Leagues, Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143, 1148 (10th Cir. 2000).

[15] Octane, 134 S. Ct. at 1754.

[16] ICON Health & Fitness, Inc. v. Octane Fitness, LLC, No. 09-319 ADM/SER, 2011 WL 2457914 (D. Minn. June 17, 2011).

[17] Id. (quoting Brooks Furniture Mfgr., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005).

[18] Justice Scalia joined in the opinion except as to footnotes 1–3, which discuss the legislative history of § 285. 26.

[19] Octane, 134 S.Ct. at 1754.

[20] Id. (quoting Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1382 (Fed. Cir. 2005))

[21] Id. at 1756.

[22] Id. at 1757.

[23] 35 U.S.C. § 285.

[24] Octane, 134 S. Ct. at 1756 (internal quotations marks omitted).

[25] Id. (alteration in original).

[26] Id.

[27] Noxell,  771 F.2d at 526.

[28] Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012) (applying willful blindness rule from Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011), to copyright claim in context of Digital Millennium Copyright Act).

[29] eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).

[30] See, e.g., Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 736 F.3d 1239 (9th Cir. 2013) (following eBay, no presumption of irreparable harm on preliminary injunction motion in trademark case); Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010) (following eBay, finding of likelihood of success on the merits in copyright infringement case does not give rise to presumption of irreparable harm on preliminary injunction motion).

[31] Octane, 134 S. Ct. at 1753 n.1 (quoting S. REP. NO. 79-1503, at 2 (1946)).

Monkey Business at the Ninth Circuit
The Monkey Selfie Strikes Back

I previously blogged about my favorite copyright dispute of all time, the infamous Monkey Selfie, here and here.  As  a quick refresher, British photographer David Slater traveled to Indonesia to photograph macaque monkeys.  He left his camera unattended on the jungle floor, where a monkey grabbed it and took a series of handsome selfies, including this one.  Slater returned to the U.K., where he asserted copyright ownership in the image, including by sending a cease and desist letter to Wikimedia for including the image in its database of public domain images.  Under U.S. law, only human beings can be authors of copyrightable subject matter.  Accordingly, Wikimedia gave Slater the stiff-arm and refused to take the image down.  Although Slater made noise about filing suit, he never did, and the controversy died down.

Enter PETA – People for the Ethical Treatment of Animals.  Dubbing the monkey “Naruto,” PETA sued Slater and others, alleging that the defendants infringed Naruto’s copyright by reproducing, distributing and displaying the selfie.  The defendants moved to dismiss for lack of standing under Article III and the Copyright Act.  The court granted the motion, finding that Congress did not grant statutory standing to animals under the Copyright Act.

The Copyright Act does not define the terms “work of authorship” or “author.”  PETA argued that anyone who creates a work of authorship – even an animal – has Copyright Act standing. Macaque monkeys, PETA reasoned, are “highly intelligent, capable of advanced reasoning and learning from experience”; have “stereoscopic color vision with depth perception”; and are “vision dominant.”  The court noted, however, that the Copyright Act “makes no mention of animals anywhere,” and the Supreme Court and Ninth Circuit have referred to “persons” and “human beings” in analyzing authorship claims.  Moreover, the Copyright Office will not register claims of authorship by animals.  Indeed, the Compendium of U.S. Copyright Office Practices states that to “qualify as a work of ‘authorship’ a work must be created by a human being. Works that do not satisfy this requirement are not copyrightable.”  Compendium 313.2  Indeed, the Compendium specifically cites as an example of uncopyrightable authorship “a photograph taken by a monkey.”

The court thus had little difficulty concluding that Naruto lacks standing to assert a claim of authorship under the Copyright Act.  Naruto is not done monkeying around, however.  An appeal has been filed with the Ninth Circuit, and Naruto’s opening brief is scheduled to be filed on June 28, 2016.  Following the appeal is sure to be more fun than a barrel of monkeys.

You can read the District Court opinion

 

Take a Deep Breath
Ninth Circuit Affirms Yoga Sequence Uncopyrightable

This morning, the Ninth Circuit Court of Appeals issued its ruling in the Bikram yoga case, affirming that a yoga sequence is an uncopyrightable system or method. The plaintiff had obtained a copyright registration for a book in which the sequence was published, but that registration could not extend to the sequence itself because the sequence was a “system” or “method” of working the body’s muscles, ligaments and tendons to achieve optimal health. Accordingly, the sequence was not an expressive work and also could not be protected as a compilation or choreographic work.

The plaintiff in this case, Bikram Choudhury, has gained notoriety for his aggressive efforts at enforcing his copyright against other yoga instructors. And the notion of obtaining copyright protection for yoga poses seems understandably silly given that yoga has been around for thousands of years. It puts the Happy Birthday dispute – over a work authored in 1893 – into perspective!

Sing It!
Judge Rules Warner-Chappell Does Not Own Copyright in “Happy Birthday” Lyrics

Yesterday a federal judge ruled that Warner-Chappell does not own copyright in the lyrics to the song “Happy Birthday.” The lawsuit addressed only the lyrics, as the parties agreed that the music passed into the public domain long ago. The opinion is a beast, weighing in at a very dense 43 pages, and leaves the reader hanging until the very last minute.

The court addresses several issues, concluding (1) there is a genuine issue of material fact as to the authorship of the “Happy Birthday” lyrics; (2) there is a genuine issue of material fact as to whether a divestive publication of the “Happy Birthday” lyrics occurred (specifically, whether the lyrics were the subject of an authorized “general publication” under the Copyright Act of 1909 that divested the lyrics of common-law copyright protection); (3) there is a genuine issue of material fact as to whether the purported author abandoned her copyright in the lyrics; and, finally, (4) there is insufficient evidence to establish that the purported author ever transferred her rights in the lyrics to Warner-Chappell’s predecessor-in-interest.

It is important to note that, contrary to various assertions by commentators online, that the opinion does not hold that the lyrics are in the public domain. This is perhaps a wonky copyright distinction, but one that is substantively very important. The ruling holds only that Warner-Chappell does not own copyright in the lyrics. It is at least theoretically possible that some other party could come forward and establish ownership. This seems fairly unlikely, given that the song was authored in 1893 and solid evidence regarding chain of title has faded into the mists of time.

The resulting uncertainty highlights the problem of “orphan works” – works as to which it is very difficult, if not impossible, to establish ownership. The orphan works problem plagues many would-be users of works, who cannot identify or locate the owners of works they may wish to license. There have been many calls for a legislative fix of the “orphan works” problem, and we can only hope that Congress takes it up as part of the broader need for copyright reform.

In the meantime, happy birthday to everyone!

Flo & Eddie 2, SiriusXM 1
Florida Grants Summary Judgment to Sirius on pre-1972 sound recordings

The Southern District of Florida has granted summary judgment to SiriusXM on Flo & Eddie’s claims that Sirius infringed Flo & Eddie’s public performance rights under Florida state law by streaming pre-1972 sound recordings. Although Flo & Eddie have prevailed in the trial courts in the Southern District of New York and Central District of California on nearly identical claims, the court found that “Florida is different” because, unlike California and New York, the state has no statutory or decisional law recognizing public performance rights in pre-1972 sound recordings. The New York case is currently on interlocutory appeal to the Second Circuit on the merits, whereas the California case is likewise on appeal, but on the issue of the court’s grant of class certification following a summary judgment ruling in favor of Flo & Eddie. Flo & Eddie will no doubt appeal the Florida ruling to the Eleventh Circuit.

From “Happy Together” to “Eve of Destruction”
Turtles Seek to Upend Streaming Business Models for Pre-1972 Sound Recordings

On Friday I had the privilege of speaking at the AIPLA Spring Meeting in Los Angeles on the subject of pre-1972 sound recordings and the current series of lawsuits brought by the successors of the Turtles against Sirius XM regarding royalties over pre-1972 sound recordings.  Copyright law in the United States is almost exclusively governed by the federal Copyright Act, which preempts equivalent state laws.   As originally drafted, however, federal copyright law did not extend copyright protection to sound recordings, leaving those works to be regulated by the states.  Congress amended the copyright law in 1972 to add federal protection for sound recordings, but it granted this protection on a prospective basis only.  Sound recordings fixed before February 15, 1972 thus remain subject to state law. A series of lawsuits brought by Flo & Eddie, Inc. (“Flo & Eddie”), the entity that owns the copyrights for sound recordings created by the 1960s rock group the Turtles, is upending rules thought long established regarding performance rights of pre-1972 sound recordings under state law. Continue reading »