Beyond Damages: The Availability of Attorneys’ Fees in Trademark Infringement Cases

Sometimes trademark infringement can feel like a David versus Goliath, with Goliath a trademark infringement Plaintiff and Defendant seemingly with everything to lose.  The fact pattern is quite straight forward for Plaintiffs seeking damages in trademark infringement lawsuits.  Plaintiff alleges prior trademark rights, Plaintiff sues Defendant for trademark infringement and Defendant faces not only liability but also monetary damages.  Those monetary damages could include actual damages (e.g. harm to goodwill of trademark, disgorgement of Defendant’s profits, etc.) or statutory damages (e.g. treble damages or significant amount), costs and attorneys fees.  Plaintiffs typically used the possibility of attorneys’ fees as further leverage in enforcing their alleged trademark rights.

What sometimes is forgotten is the fact that an unsuccessful Plaintiff may face damages of its own.  Trademark owners and trademark lawyers must remember that a Plaintiff may ultimately be liable for damages in a trademark infringement case.  The Lanham Act authorizes that “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”  See 15 USC 1117(a).  Defendants can also avail themselves of this provision.

Depending upon the Circuit Court for the underlying case, the standard for an exceptional case so as to warrant ordering of attorneys’ fees to either party was historically difficult to meet.  This may have recently changed now that the Ninth Circuit has clarified what some others (such as the Fifth Circuit, which controls Texas, and Sixth Circuit, which controls Michigan) have been following.  In particular, in SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., the Ninth Circuit has stated 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.

This totality of the circumstances test is now one that Plaintiffs and Defendants alike should consider pre-litigation and throughout.  A Court may exercise its discretion can look to the facts, law and conduct of the parties (and their counsel) in order to determine if a party’s position is frivolous, unreasonable, vexatious, or pursued in bad faith.  Whereas a Plaintiff makes a calculated choice to pursue a lawsuit and understands that it may or may not recover damages, a Defendant is typically left with no choice but to defend.  This clarification from the Ninth Circuit tends to provide the Defendant with greater clarity as to its opportunity to recover its attorneys fees in doing so, especially depending upon the merits of the case and Plaintiffs’ actions.  Put simply, Plaintiffs need to litigate with more care since Defendants may now turn the proverbial tables on a Plaintiff who brings a specious claim (i.e. bad facts or law) or acts unreasonably in litigating the same.

This interpretation becomes more important where the financial stature of the litigating parties are not equal.  David as a Defendant may have a bigger stone than Goliath had thought, and Goliath better think hard about the damages it may face despite being a Plaintiff.  Trademark infringement litigators must advise their clients about the best case and worst case scenarios, which necessarily includes the discretion of the court to award attorneys’ fees to the prevailing party, Plaintiff or Defendant, in an exceptional case.

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