Friday, December 5, 2008

Eleventh Circuit remands district court decision on attorneys fees for successful defendant

For those following the long running trademark infringement saga between Welding Services, Inc. (“WSI”) and Welding Technologies, inc. (“WTI”), the Eleventh Circuit decided last year that there was no likely confusion between the stylized WSI logo and the stylized WTI logo for welding services and affirmed the district court’s summary judgment in favor of WTI. A summary of the court’s decision can be read at Filewrapper®.

The case went back to the district court where WTI, the successful defendant, renewed its motion for attorney's fees under 15 U.S.C. § 1117(a) as the “prevailing party.” The district court awarded WTI $104,463.71 in fees and costs and WSI appealed.

The Court of Appeals, in an unpublished per curiam opinion, reversed and remanded the case back to the district court on the grounds that the court made a clear error in one of its findings and did not seem to have considered a declaration that was submitted. See Welding Services, Inc. v. Terry Forman, Appeal No. 08-13287 (11th Cir. December 2, 2008) (per curiam).

Since the district court applied the correct legal standard for determining if the case was exceptional, the Court reviewed the district court's award of attorney's fees for an abuse of discretion (i.e., clear error in the court’s findings of facts in its decision).

The district court found that WSI had an improper motive for bringing the infringement claim given that WSI had filed its complaint only after three former WSI employees acquired WTI even though WTI had actually been using the same mark for two years before the lawsuit was filed. The district court also found that WTI attempted to resolve the infringement issue without litigation by "volunteering" to change the allegedly infringing mark in its response to WSI's cease and desist letter. Finally, the district court found WSI’s trademark infringement claims to be “weak” and yet WSI “persisted with expensive, time-consuming litigation in spite of that.” Based on such findings, the district court awarded the fees and costs.

The one basis for clear error cited by the Court of Appeals was the district court’s finding that WTI had “volunteered” to stop using the WTI mark in a response to WSI's cease and desist letter. The actual language of WTI’s response reflected more of a willingness to compromise, but not volunteering to stop using the WTI mark. On remand, the Court directed the district to reconsider that letter and “reassess its conclusion to the extent necessary to correct any misapprehension the court had about the content of the letter.”

The Court also noted that the district court had not commented in its findings about a sworn declaration of a former WSI employee stating that WSI's chief executive officer told him that he intended to “sue WTI out of business.” The Court determined that the district court should make a credibility determination regarding the alleged statement and, if it finds that statement was made, should consider it in deciding whether WSI litigated with an improper motive.

Finally, the Court also directed the district court to, on remand, decide whether WSI’s weak trademark infringement claims was “coupled with evidence of bad faith and improper motive” by WSI, and thus making the case an “exceptional” one in which the prevailing defendant is entitled to attorney's fees. [ed. – in other words, please make it perfectly clear that you applied the legal standard, so that we can simply affirm you next time.]

This case is a nice reminder that with respect to the language in 15 U.S.C. § 1117(a) which states that “The court in exceptional cases may award reasonable attorney fees to the prevailing party,” a “prevailing party” can include a prevailing defendant sued for trademark infringement case. While an “exceptional case” for a prevailing plaintiff is normally characterized by willful or deliberate infringement on the part of the defendant, an “exceptional case” for a prevailing defendant is usually characterized by a plaintiff that brings an “obviously weak” infringement claim along with evidence showing that the plaintiff acted in bad faith and with an improper motive. See Tire Kingdom, Inc. v. Morgan Tire & Auto, Inc., 253 F.3d 1332, 1336 (11th Cir. 2001)

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