Seattle Trademark Lawyer

Courts don’t award attorney’s fees that often in trademark cases.

That’s because the statute only authorizes fees awards in “exceptional” cases.

So what’s that mean?

The Ninth Circuit recently reviewed the standard. “Under the Lanham Act, ‘[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.’”

For the plaintiff, “[a]n exceptional case is one ‘where the acts of infringement can be characterized as ‘malicious’, ‘fraudulent’, ‘deliberate’, or ‘willful.’” For the defendant, “’[e]xceptional circumstances can be found when the non-prevailing party’s case is groundless, unreasonable, vexatious, or pursued in bad faith.’”

The court added that ”’[w]hile a finding that the losing party has acted in bad faith may provide evidence that the case is exceptional, other exceptional circumstances may warrant a fee award.’”

The court didn’t offer much analysis in upholding the district court’s award to the prevailing plaintiff. It just said that “[c]onsidering all of the circumstances of this case, including the jury’s verdict, we agree with the district court that the threshold standard for awarding fees has been met, and further that the district court did not abuse its discretion in awarding attorneys’ fees.”

A little more explanation would have been nice. However, trademark owners still have an important take-away from the decision: it’s important to know the court’s standards when seeking or defending against a claim for attorney’s fees. Most claims won’t cut it, but the cases with egregious facts can.

The case cite is Haas Automation, Inc. v. Denny, No. 11-56991, 2013 WL 2303528 (9th Cir. May 28, 2013).

Defendant George Collett wrongly used T-Mobile’s trademarks in selling T-Mobile SIM cards and airtime without its permission.

Western District Judge Ronald Leighton came to that conclusion April 23 when he granted summary judgment to T-Mobile on its Lanham Act claims and permanently enjoined Mr. Collett from using its trademarks or selling any of its branded products.

The injunction isn’t surprising, given the court’s description of Mr. Collett’s activity:

“Defendant falsely advertised and promoted through interstate commerce that he was an authorized T–Mobile dealer selling genuine T–Mobile products and services. Mr. Collett testified that he sold T–Mobile Phones and SIM cards on eBay and Craigslist, purchased T–Mobile SIM cards, pin numbers and activation codes, posted a sign in his store saying ‘unlimited T–Mobile service $50 a month’ and advertised that he was a T–Mobile dealer. Defendant also improperly advertised his store as a T–Mobile store with an unlimited T–Mobile service plan for $45 per month without a credit check. These representations were false, as the Court finds that George Collett’s store and the T–Mobile products and service plans he offered were not sanctioned by T–Mobile in any way.”

The court also awarded T-Mobile $349,481.64 in damages and found the case was sufficiently “exceptional” that it justified an award of attorney’s fees — in part because Mr. Collett “refused to cooperate in discovery, repeatedly violated Court Orders and continued to violate” the court’s preliminary injunction.

Yesterday’s post was about false advertising, which got me thinking…. What are things a competitor can’t do in competing with you to make a sale?

Here’s a quick rundown:

• It can’t create a likelihood of confusion with you, if you came first. This is the essence of trademark infringement. A later-adopter can’t come into your market with a name or brand that is likely, i.e., probable, to confuse consumers into thinking that its goods or services come from you, are approved by you, or are affiliated with you. It doesn’t matter if your trademark is registered, since trademark rights automatically arise from use. It doesn’t even matter if your competitor was innocent in creating the likelihood of confusion. If its brand, company name, product name, or other marketing tool tends to mislead customers into thinking your competitor’s goods or services come from you, you may be able to put a stop to it. Caveats exist, but this is where the inquiry starts.
• It can’t misrepresent its product or your product. The right to free speech isn’t unlimited. Just like you can’t yell “fire” in a crowded theater, your competitor can’t lie about the qualities of its product or make a false comparison to your products. That means Honda can say Toyota’s cars are wimpy (in its humble opinion), but it can’t say its cars get twice the gas mileage Toyotas get when that’s not true (since it’s a statement of fact that’s provably false). 
• It can’t use your trademark in its domain name. This is cybersquatting. It means no one — regardless of whether they’re a competitor — can register your trademark (or a confusingly similar variation) as part of its domain name in the hopes of either ransoming the domain name to you or profiting from Web traffic that was meant for your site. The Lanham Act provides for statutory damages that begin at $1,000 and go up to $100,000 per infringing domain name, as well as an award of attorney’s fees. Again, there are caveats, but the Anticybersquatting Consumer Protection Act gives trademark owners a big stick to use against bad actors that hope to take wrongful advantage of your brand in their domain names.
• It can’t use your brand as a search engine keyword. Maybe. This is still up in the air. But the Central District of California last year slapped one law firm from buying its competitor’s trademark as a search engine keyword, finding its doing so constituted willful trademark infringement. The court doubled the trademark owner’s lost profits to $292k and awarded it attorney’s fees. See Binder v. Disability Group, Inc., 772 F. Supp. 2d 1172 (C.D. Cal. 2011). It’s still a gray area, but Binder might get traction. It’s certainly gotten some courts’ attention.
• Other things your competitor can’t do. If your brand is a household name, no one (competitor or not) can use it in a way that would tend to lessen the impact your brand has on consumers. That’s trademark dilution. If you manufacture goods, no one can put your trademark on goods that aren’t made by you. That’s counterfeiting. A competitor can’t say its goods — most commonly agricultural products — come from your special part of the world if they don’t. (This means a shellfish company can’t say its oysters come from pristine Penn Cove when they were grown in less favorable waters.) That’s a false designation of origin. 

This list isn’t exhaustive, and there are a lot of gray areas. But hopefully this will help you put a label on your competitor’s bad acts when you know in your gut what they’re doing isn’t fair.

Next time: You mean they can get away with that? Things competitors can say about your products and you in the course of honest competition.

One thing many trademark owners forget about, or don’t know about, is they don’t need a federal trademark registration to expand the automatic rights they acquire by using their mark.

They can get a state trademark registration.

State registration can be a good alternative to getting a federal registration. Here’s why:

• It’s cheaper. In Washington, it costs $55 to apply for state registration, compared with $275 or more to apply for federal registration. (These are the government filing fees only.)
• It’s quicker. You can expect your registration to issue in a few weeks instead of nine months or more.
• It’s easier. I think California is the only state that employs examiners to review applications for state trademark registration. By contrast, every application for federal registration is examined by an attorney. Hint: if you can’t get a federal registration, you probably still can get a state registration.
• You may have a better shot at attorney’s fees. In Washington, it’s within the court’s discretion to award attorney’s fees to a state registrant that succeeds in an action to enforce its trademark rights. In federal court, it’s a higher standard: courts only award attorney’s fees in “exceptional” cases. That means it’s rare. I tell clients not to expect such an award even if they’re proved right.
• You may qualify for protection against dilution. If your mark is famous within a state — or perhaps even in a niche market within a state — a state anti-dilution statute may protect against use that blurs or tarnishes a mark even if such use isn’t likely to confuse consumers. Not so on the federal level, where a mark needs to be “widely recognized by the general consuming public of the United States,” meaning a nationally-known household word. That’s a tough standard to meet.
• You can combine state registrations for regional protection. Only do business in Alaska, Washington, and Oregon? For the reasons stated above, you might do better forgoing a federal registration and simply get state registrations in Alaska, Washington, and Oregon.

The moral of the story is that trademark owners should think beyond the PTO when looking to expand their rights. It’s not always the best option. But sometimes state trademark registration provides a better fit.

In November 2009, the Central District of California denied the prevailing defendant’s motion for attorney’s fees.

The court found plaintiff’s claims couldn’t have been groundless when it survived defendant’s motion for summary judgment. It reasoned: “Given the standard for summary judgment, the Court is not willing to find that a party has litigated a groundless or unreasonable case when the Court itself found that there were genuine issues of fact on all disputed claims. Indeed, what wold have been ‘exceptional’ is if Plaintiff had unilaterally stopped litigating the case after the Court made such a finding.”

On appeal, the Ninth Circuit held that wasn’t a good basis to deny defendant’s request.

“In denying Fortune’s motion for attorney’s fees under the Copyright and Lanham Acts, the district court gave undue weight to the fact that Tokidoki survived Fortune’s motion for summary judgment. The summary judgment ruling should have been afforded little or no weight in deciding whether to award fees, given that many of the factual contentions upon which Tokidoki relied at the summary judgment stage were not borne out at trial.”

The Ninth Circuit vacated the denial of fees and remanded to the district court “to reconsider Fortune’s motion, without regard to the court’s summary judgment ruling,” though it expressed no opinion about whether a fees award was appropriate.

The case cite is Tokidoki, LLC v. Fortune Dynamic, Inc., 2011 WL 2036466, Nos. 09–56388, 10–55661 (9th Cir. May 25, 2011).