Opinion
3:15-cv-849-MMH-PDB
08-20-2021
Lanard Toys Limited, Plaintiff, Counter-Defendant, v. Dolgencorp, LLC, Etc., Defendants, Counterclaimants.
Marcia Morales Howard Counsel of record
Marcia Morales Howard Counsel of record
REPORT AND RECOMMENDATION
PATRICIA D. BARKSDALE UNITED STATES MAGISTRATE JUDGE
This action involved an intellectual property dispute over a children's sidewalk-chalk holder resembling a giant no. 2 pencil. After more than six years of litigation, the Federal Circuit affirmed summary judgment for the defendants on all claims-patent infringement, copyright infringement, trade dress infringement, and unfair competition. Now before the Court is their motion for an award of $2,492,765 in attorney's fees under federal and state law, D518, the plaintiff's response in opposition, D523, and the defendants' reply, D528. Both sides provide declarations and other evidence.
Also before the Court is the defendants' motion for $102,764.55 in taxable costs under federal law ($26,698.01) and non-taxable costs under state law ($76,066.54), D477, and Lanard's response in opposition, D499. The defendants provide declarations, other evidence, and a proposed bill of costs.
In granting summary judgment and ruling on some Daubert motions, the Court entered a comprehensive, seventy-five-page order. This report and recommendation borrows heavily from that order.
I. Overview
In the order granting summary judgment for the defendants, this Court summarized the litigation:
Plaintiff Lanard Toys Limited (Lanard) developed a chalk holder in the shape of an over-sized, no. 2 pencil (the Chalk Pencil) as a fanciful toy for children. Lanard registered a copyright in its Chalk Pencil and also obtained a design patent for the toy. Soon thereafter, Defendant Ja-Ru, Inc. (Ja-Ru) released a similar version of a chalk holder in the shape of a pencil (the Ja-Ru Chalk Holder). When Defendants Toys R Us-Delaware, Inc. (TRU) and Dolgencorp, LLC (Dolgencorp) stopped selling Lanard's Chalk Pencil and began selling the Ja-Ru Chalk Holder instead, Lanard brought this lawsuit asserting claims for copyright infringement, patent infringement, trade dress infringement and unfair competition against Defendants. Defendants responded with counterclaims seeking declaratory judgment as to the invalidity, unenforceability, and non-infringement of Lanard's copyright, patent and trade dress, as well as the lack of any unfair competition. At present, this simple toy, retailing at less than $5, has spawned five years of contentious litigation, hundreds of pages of evidence, expert testimony, and legal briefing, and no doubt hundreds of thousands of dollars in legal fees.D468 at 1-2. This Court then summarized the facts:
Lanard manufactures and sells toys to retail stores throughout the world, who, in turn, sell Lanard's toys to the public. In 2010, Lanard's designers developed a design for a chalk holder-”a device that can hold pieces of colored chalk to allow children to draw on the sidewalk.” The initial design for this chalk holder was in the shape of a “magic wand.” However, an individual in the Lanard Hong Kong office saw the wand prototype and made the suggestion that it look like a big pencil instead. Lanard's corporate design director, Blake C. Nichols, then tasked Logan James Williams, a senior product designer at Lanard, with making the initial prototype of a chalk holder that looks like a pencil. In creating this prototype, Williams looked at pencils present in the design shop.
Lanard began selling its Chalk Pencil in the United States on November 1, 2010. Lanard submitted a United States copyright application for the design of the Chalk Pencil on September 20, 2011. The Copyright Office issued a Certificate of Registration for Lanard's
Chalk Pencil effective September 20, 2011, and assigned it Registration No. VA 1-794-458. The Certificate of Registration identifies the title of the work as “Pencil / Chalk Holder” and identifies it as a work of sculpture. Since the Chalk Pencil's first publication in 2010 and continuing with every Chalk Pencil sold since that time, Lanard has stamped a copyright notice, “© 2010 LANARD” into the plastic on the Chalk Pencil.
On August 3, 2011, Lanard designers Blake Christopher Nichols and Logan James Williams applied for a design patent in the Chalk Pencil with the United States Patent and Trademark Office (USPTO). On August 25, 2011, Nichols and Williams assigned their patent application to Lanard. In late 2011, Lanard began stamping “Patent Pending” into the plastic of the Chalk Pencil. The USPTO issued a patent for the Chalk Pencil on November 20, 2012, assigning it patent number D671,167 (the D#167 Patent). The D#167 Patent contains one claim for “The ornamental design for a chalk holder, as shown and described,” and includes five figures showing the design from all views. Following the issuance of the D#167 Patent, Lanard stamped the full patent number into the plastic on all models of the Chalk Pencil.
Lanard sold the Chalk Pencil to Dolgencorp beginning in 2011. Dolgencorp purchased the Chalk Pencil through the 2011, 2012, and 2013 selling seasons, and sold it under the label “Concrete Canvas.” Lanard supplied the Chalk Pencil to TRU beginning with the 2012 selling season. TRU sold the Chalk Pencil under its “Sizzlin' Cool” private label. Lanard also sold the Chalk Pencil to other major retailers, including Walgreen[s] Co., Kmart Corporation, and Wal-Mart Stores, Inc.
In the first quarter of 2012, Ja-Ru began development of the Ja-Ru Chalk Holder. Specifically, the director of merchandising at Ja-Ru, Angela Ku, developed the idea for the Ja-Ru Chalk Holder. According to Ku, she came up with the idea for the Ja-Ru Chalk Holder as follows: “Shop the market, and we look at the sample. And also, in China there are all different pencil-looking product[s], so we [meaning, she and the Chinese factories] put the idea together.” Ku explains that the Lanard Chalk Pencil was one of the samples she considered, but maintains that there were “other pencil chalk samples too.” Ku concedes that she purchased a “market sample” of the Lanard Chalk Pencil in early 2012 and used that sample as a reference in the development of Ja-Ru's own version of the toy. Although Ku insists other market samples were considered as well, the only documented reference sample is the Lanard Chalk Pencil. Indeed, in an August 2, 2012 email exchange, a Ja-Ru employee compares Ja-Ru's design sample to what appears to be
Lanard's Chalk Pencil and specifically identifies which items of its design should remain the same as the “market sample” and which items should be changed.
Ja-Ru's art director, Stephen Hearon, who designed the Ja-Ru Chalk Holder, recalls that he was given the Lanard Chalk Pencil as a “market sample to use for reference.” According to Hearon, he then attempted to make “a better Ja-Ru toy by designing elements of it, making-you know, design the ferrule the way that I thought a ferrule should look. Design the tip the way that I thought would be more functional and would give it-be more attractive.” Hearon cannot recall whether he referred to any other market sample or reference sample in designing the Ja-Ru Chalk Holder. Hearon testified that he worked with Russel[l] Selevan and made improvements to the design “based on his suggestions and his approval.” Selevan is a vice-president with Ja-Ru, who “probably” has “the lead” role in the design and development of toys. Selevan also concedes that Ja-Ru had the Lanard Chalk Pencil during its design of the Ja-Ru Chalk Holder, but maintains that Ja-Ru made changes to the design so that it would not look like Lanard's product. According to Selevan, Ja-Ru reduced the size, changed “[t]he piece that holds the eraser; the piece that holds the chalk on the bottom; changed the color of the yellow pencil to look more like what we believe a yellow No. 2 pencil looks like; and probably some other changes.” According to Selevan, Ja-Ru designed its product to look like a no. 2 lead pencil, and while it referenced the Lanard Chalk Pencil, it also referenced “No. 2 lead pencils, [Selevan's] Think Big 25-year-old six-foot pencil, and many other pencils of different sizes and shapes.”
The Ja-Ru Chalk Holder was available to the public for purchase by at least as early as January 2014. TRU and Dolgencorp stopped ordering Lanard's Chalk Pencil in late 2013. Beginning with the 2014 selling season, TRU and Dolgencorp began offering the Ja-Ru Chalk Holder instead. Dolgencorp purchased approximately 21,282 units of the Ja-Ru Chalk Holder and generated $38,691 in sales from the product in 2014. Between 2013 and 2015, TRU sold 8,154 units of the Ja-Ru Chalk Holder and generated $23,444.63 in gross revenue, for total gross profits of $14,076. Ja-Ru sold the Ja-Ru Chalk Holder from 2013-2015, with 86,304 total units sold for a total gross revenue of $77,618.62. At present, however, Ja-Ru no longer sells the Ja-Ru Chalk Holder. Prior to January 2014, when TRU began selling the Ja-Ru Chalk Holder, Lanard sold a total of 581,984 units of its Chalk Pencil to its major customers in the United States, representing $1,113,077.92 in sales for the fiscal years 2011, 2012, and 2013. In total, between 2010 and 2016,
Lanard shipped 1,415,034 units of the Chalk Pencil worldwide, accumulating gross sales in excess of two million dollars.D468 at 2-10 (some alterations in original).
In entering summary judgment for the defendants on all claims, this Court held that (1) the patent infringement claim failed because no reasonable juror could find substantial similarity between the products; (2) the copyright infringement claim failed because the copyright is invalid under a useful-article analysis, and even if the copyright was valid, the defendants copied no protectable element; (3) the trade dress infringement claim failed because Lanard offered insufficient evidence of secondary meaning; and (4) the unfair competition claim failed because that claim depended on the trade dress infringement claim. D468. In affirming summary judgment, the Federal Circuit issued a published opinion rejecting each of Lanard's claims of error. D500; see Lanard Toys Ltd. v. Dolgencorp, LLC, 958 F.3d 1337 (Fed. Cir. 2020). Lanard did not petition for a writ of certiorari.
Along the way, twenty-two lawyers with seven law firms appeared.More than five hundred numbered docket entries were made. Twenty-six pleadings were filed. Depositions occurred in at least nine states, Washington, D.C., and Hong Kong. TRU petitioned for bankruptcy. The parties litigated a motion for a preliminary injunction (Lanard lost). They litigated a motion to transfer venue (Lanard lost). They litigated a motion to dismiss some claims or for a more definite statement of those claims (carried with summary judgment). They litigated a motion to amend the pleadings (Lanard lost). They litigated a motion to disqualify Lanard's counsel (the defendants lost). They litigated motions to compel discovery and to protect information (mixed success). They litigated a motion to impose sanctions (the defendants lost). They litigated whether to stay the case after TRU's bankruptcy (mixed success). They litigated motions to exclude expert testimony (mixed success; some not decided). They litigated motions in limine (not decided). They litigated cross-motions for summary judgment (Lanard lost). They even litigated motions for leave to file replies (mixed success).
The parties now litigate attorney's fees, non-taxable costs, and taxable costs. All attempts to settle the claims, the appeal, the fees, and the costs failed.
II. Attorney's Fees
A. Law
Under the “American Rule,” each party pays its own attorney's fees, “win or lose, unless a statute or contract provides otherwise.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 253 (2010).
The defendants request a fee award under laws on which Lanard brought its unsuccessful claims: the Copyright Act, the Patent Act, the Lanham Act, and the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”). D518. Each law includes a provision for a discretionary award of attorney's fees. Each law considers prevailing plaintiffs and prevailing defendants alike. Each law requires a case-by-case assessment. Each law requires consideration of the totality of the circumstances. Each law eschews precise rules or formulas. No law requires bad faith. Non-exclusive factors under each law overlap. The standards for the Patent Act and the Lanham Act are the same.
The undersigned addresses the laws in the sequence Lanard used in its operative pleading: the Copyright Act, the Patent Act, the Lanham Act, and FDUTPA. D103.
1. Copyright Act
The purpose of the Copyright Act is to enrich “the general public through access to creative works” by “encouraging and rewarding authors' creations while also enabling others to build on that work.” Kirtsaeng v. John Wiley & Sons, Inc., 136 S.Ct. 1979, 1986 (2016).
The attorney's fee provision of the Copyright Act-§ 505-provides, “In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs.” 17 U.S.C. § 505.
In Kirtsaeng, the Supreme Court resolved disagreement in lower courts about “how to address an application for attorney's fees in a copyright case.” 136 S.Ct. at 1984.
The Court began by observing that § 505 authorizes fee-shifting but fails to specify standards or guideposts for determining if an award is appropriate. Id. at 1984-85. The Court reaffirmed precedent recognizing that § 505 “clearly connotes discretion” and “eschews any precise rule or formula for awarding fees.” Id. at 1985. But the Court also cautioned that “in a system of laws discretion is rarely without limits” and “[w]ithout governing standards or principles, [open-ended fee shifting statutes] threaten to condone judicial whim or predilection.” Id. at 1985-86.
The Court reviewed from its precedent “a pair of restrictions.” Id. at 1985. First, a court “may not award attorney's fees as a matter of course; rather, a court must make a more particularized, case-by-case assessment.” Id. “Second, a court may not treat prevailing plaintiffs and prevailing defendants any differently; defendants should be encouraged to litigate meritorious copyright defenses to the same extent that plaintiffs are encouraged to litigate meritorious claims of infringement.” Id.
The Court observed that it had approved “several nonexclusive factors to inform a court's fee-shifting decisions.” Id. The factors-known as the “Fogerty factors”-are “frivolousness, motivation, objective unreasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence.” Id.
The Court then held that a court must give “substantial weight to the reasonableness of a losing party's position.” Id. at 1985. The Court explained this “objective-reasonableness approach” advances the purpose of the Copyright Act by encouraging “parties with strong legal positions to stand on their rights” and deterring “those with weak ones from proceeding with litigation.” Id. at 1986. The Court elaborated:
When a litigant-whether plaintiff or defendant-is clearly correct, the likelihood that he will recover fees from the opposing (i.e., unreasonable) party gives him an incentive to litigate the case all the way to the end. The holder of a copyright that has obviously been infringed has good reason to bring and maintain a suit even if the damages at stake are small; and likewise, a person defending against a patently meritless copyright claim has every incentive to keep fighting, no matter that attorney's fees in a protracted suit might be as or more costly than a settlement. Conversely, when a person (again, whether plaintiff or defendant) has an unreasonable litigating position, the likelihood that he will have to pay two sets of fees discourages legal action. The copyright holder with no reasonable infringement claim has good reason not to bring suit in the first instance (knowing he cannot force a settlement and will have to proceed to judgment); and the infringer with no reasonable defense has every reason to give in quickly, before each side's litigation costs mount. All of those results promote the Copyright Act's purposes, by enhancing the probability that both creators and users (i.e., potential plaintiffs and defendants) will enjoy the substantive rights the statute provides.Id. at 1986-87.
The Court observed this objective-reasonableness approach is “more administrable” than another approach because a “district court that has ruled on the merits of a copyright case can easily assess whether the losing party advanced an unreasonable claim or defense.” Id. at 1987. The Court added, party can afford to pay the fees but whether imposition of fees will further the goals of the Copyright Act.” MiTek Holdings, Inc. v. Arce Eng'g Co., 198 F.3d 840, 843 (11th Cir. 1999).
“That is closely related to what the court has already done: In deciding any case, a judge cannot help but consider the strength and weakness of each side's arguments.” Id. According to the Court, “[P]lacing substantial weight on objective reasonableness also treats plaintiffs and defendants even-handedly. No matter which side wins a case, the court must assess whether the other side's position was (un)reasonable.” Id. at 1988.
The Court emphasized that whether a party prevails and whether a party makes “serious arguments” are separate questions and that district courts are well equipped to distinguish reasonable positions that ultimately fail from “the objectively unreasonable variety.” Id. The Court cautioned, “[I]f some court confuses the issue of liability with that of reasonableness, its fee award should be reversed for abuse of discretion.” Id.
The Court continued, “All of that said, objective reasonableness can be only an important factor in assessing fee applications-not the controlling one.” Id. Reiterating that a district court has broad discretion, the Court explained a district court “must take into account a range of considerations beyond the reasonableness of litigating positions.” Id. The Court elaborated: “That means in any given case a court may award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones).” Id. As examples, the Court observed that a district court “may order fee-shifting because of a party's litigation misconduct, whatever the reasonableness of his claims or defenses,” or a district court “may do so to deter repeated instances of copyright infringement or overaggressive assertions of copyright claims, again even if the losing position was reasonable in a particular case.” Id. at 1988-89. The Court referenced a case awarding fees against a plaintiff that had filed hundreds of lawsuits on an overbroad legal theory, including in a subset of cases in which pursuing the theory was objectively reasonable. Id. at 1989 (citing Bridgeport Music, Inc. v. WB Music Corp., 520 F.3d 588, 593-95 (6th Cir. 2008)). The Court added that a finding of reasonableness raises no presumption against granting fees because that “goes too far in cabining how a district court must structure its analysis and what it may conclude from its review of relevant factors.” Id.
The Court concluded, “Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act's essential goals.” Id.
If the record shows that a district court weighed the pertinent factors and exercised its discretion, the Eleventh Circuit “will not question the court's decision to grant or deny fees absent an abuse of that discretion.” Montgomery v. Noga, 168 F.3d 1282, 1303 (11th Cir. 1999); see also Zuma Press, Inc. v. Getty Images (US), Inc., 845 Fed.Appx. 54, 59 (2d Cir. 2021) (encouraging district courts to explain their application of the Fogerty factors to the facts instead of merely reciting the factors); Glacier Films (USA), Inc. v. Turchin, 896 F.3d 1033, 1042-43 (9th Cir. 2018) (explaining that a district court need not analyze all Fogerty factors because they are discretionary and non-exclusive but must show consideration of the factor to which it must give substantial weight-the objective reasonableness of the losing party's position).
In the infringement context, substantial similarity is “rarely obvious.” Pasillas v. McDonald's Corp., 927 F.2d 440, 444 (9th Cir. 1991). “When close infringement cases are litigated, copyright law benefits from the resulting clarification of the doctrine's boundaries.” MiTek Holdings, Inc. v. Arce Eng'g Co., 198 F.3d 840, 843 (11th Cir. 1999). “But because novel cases require a plaintiff to sue in the first place, the need to encourage meritorious defenses is a factor that a district court may balance against the potentially chilling effect of imposing a large fee award on a plaintiff, who, in a particular case, may have advanced a reasonable, albeit unsuccessful, claim.” Id.
Because a fee determination requires a particularized, case-by-case assessment, cases applying § 505 have limited connection to this case. They do, however, provide examples of decisions in which courts have acted within their discretion and outside of their discretion and the circumstances they have considered relevant. Cf. Nova Chems. Corp. (Canada) v. Dow Chem. Co., 856 F.3d 1012, 1018 (Fed. Cir. 2017) (observing in the patent context that “[o]ne could always search for more similar cases for comparison. Taken to its logical conclusion, continuing to narrow the universe of comparators to cases resolved on similar procedural postures, legal grounds, or facts would leave few or no comparators remaining”). The following cases post-date Kirtsaeng.
In the following two cases, appellate courts affirmed fee awards to defendants, finding no abuses of discretion. In the first case, the plaintiff “had no realistic chance of success,” submitted a fraudulent ghost-written expert report, tried to re-submit the report in his own name, repeatedly amended his pleading to assert new claims in response to motions to dismiss, abused the discovery process, disregarded pretrial orders, and filed the action after filing at least five others, including one in which he pressed forward with a similarly weak claim despite a warning from the court. See Batiste v. Lewis, 976 F.3d 493, 507-08 (5th Cir. 2020). In the second case, the works involved were not substantially similar, the issue of whether they were substantially similar was not close, the plaintiff delayed producing discovery, and the plaintiff disobeyed a court order, forcing the defendants to request another court order. See Shame On You Prods., Inc. v. Banks, 893 F.3d 661, 666-69 (9th Cir. 2018).
In contrast, in another case, an appellate court reversed an award to the defendants, finding an abuse of discretion. There, an appeal clarified law on an important limitation to an affirmative defense, and the district court erroneously found that the plaintiff had shifted its theory of liability. See Univ. Instrs. Corp. v. Micro Sys. Eng'g, Inc., 799 Fed.Appx. 43, 46-47 (2d Cir. 2020).
In the following two cases, appellate courts affirmed denials of awards to defendants, finding no abuses of discretion. In the first case, the plaintiff brought frivolous claims but seemingly brought them in good faith, the defendants expended little energy defending the case, there was “no chance” the plaintiff would re-assert the claims in the future, and the defendants faced no pressure to abandon a meritorious defense and settle. See Timothy B. O'Brien LLC v. Knott, 962 F.3d 348, 351 (7th Cir. 2020). In the second case, one claim concerned a “complex set of facts” that the plaintiffs reasonably argued favored the plaintiffs, one claim turned on a requirement that the appellate court had not addressed in a precedential opinion until after summary judgment, and the defendant pointed to little in the record to undermine the finding that the plaintiffs had sued with proper motivation. See Zuma Press, 845 Fed.Appx. at 59-60.
In contrast, in another case, an appellate court reversed a denial of an award to the defendants, finding an abuse of discretion. There, the defendants “prevailed across the board” on procedural issues below and on a fair-use defense on appeal; the plaintiff's arguments were objectively unreasonable in light of binding precedent; the plaintiff “did more than simply pursue an aggressive litigation strategy,” suing a public-school teacher, a not-for-profit club, and parent volunteers; the plaintiff repeatedly mischaracterized its copyright interests apparently to scare two defendants into buying licenses from the plaintiff rather than to enforce its limited interests; awarding fees ensures that the defendants are compensated for defending against overreaching claims and pressing a defense that benefits those educating children; and an award ensures that an “overzealous monopolist” cannot use his copyright to stamp out the creativity the Copyright Act seeks to foster, allowing “greater breathing room for classroom educators and those involved in similar educational extracurricular activities.” See Tresona Multimedia, LLC v. Burbank High Sch. Vocal Music Ass'n, 953 F.3d 638, 652-54 (9th Cir. 2020).
2. Patent Act and Lanham Act
The Constitution permits Congress to issue patents to “promote the Progress of ... useful Arts.” Art. I, § 8, cl. 8. “From their inception, the federal patent laws have embodied a careful balance between the need to promote innovation and the recognition that imitation and refinement through imitation are both necessary to invention itself and the very lifeblood of a competitive economy.” Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146 (1989).
The attorney's fee provision of the Patent Act-§ 285-provides, “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. “The legislative purpose behind § 285 is to prevent a party from suffering a ‘gross injustice[.]'” Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 858 F.3d 1371, 1376 (Fed. Cir. 2017).
The purpose of the Lanham Act “is to regulate commerce ... by making actionable the deceptive and misleading use of marks in such commerce; ... to protect persons engaged in such commerce against unfair competition; [and] to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits, or colorable imitations of registered marks[.]” 15 U.S.C. § 1127. Section 43(a) of the Act “is remedial in nature” and “interpreted and applied broadly so as to effectuate its remedial purpose.” Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1193 (11th Cir. 2001).
Identical to § 285 of the Patent Act, the attorney's fee provision of the Lanham Act-§ 35(a)-provides, “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a).
In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Supreme Court interpreted § 285, holding 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.” 572 U.S. 545, 554 (2014). The Court continued, “District courts may determine whether a case is ‘exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id.
According to the Court, “As in the comparable context of the Copyright Act, there is no precise rule or formula for making these determinations, but instead equitable discretion should be exercised in light of the considerations we have identified.” Id. The Court referenced the non-exclusive Fogerty factors (i.e., frivolousness, motivation, objective unreasonableness of factual or legal positions, and the need in particular circumstances to advance considerations of compensation and deterrence). Id. at 554 n.6. The Court cautioned that “sanctionable conduct is not the appropriate benchmark”; a district court “may award fees in the rare case in which a party's unreasonable conduct-while not necessarily independently sanctionable-is nonetheless so ‘exceptional' as to justify an award of fees.” Id. at 555.
The Court explained that a district court need not “determine both that the litigation is objectively baseless and that the plaintiff brought it in subjective bad faith”; “a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.” Id.
The Court rejected a requirement that a litigant establish entitlement to fees by “clear and convincing evidence.” Octane Fitness, 572 U.S. at 557. The Court explained that § 285 “demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one.” Id. The Court continued, “Indeed, patent-infringement litigation has always been governed by a preponderance of the evidence standard, and that is the standard generally applicable in civil actions, because it allows both parties to share the risk of error in roughly equal fashion.” Id. at 557-58.
In a companion case to Octane Fitness, the Court held that an “appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court's § 285 determination.” Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559, 564 (2014). After all, because a district court deals directly with the parties, that court is “well-situated” to determine if a party's conduct was unreasonable. SiOnyx LLC v. Hamamatsu Photonics K.K., 981 F.3d 1339, 1355 (Fed. Cir. 2020); see also Univ. of Utah v. Max-Planck-Gesellschaft zur Foerderung der Wissenschaften e.V., 851 F.3d 1317, 1323 (Fed. Cir. 2017) (observing that the parties pointed to facts favoring their respective sides and stating, “We should be wary to wade in such circumstantial waters. The trial judge was in the best position to understand and weigh these issues”).
Because the fee provisions in the Patent Act and the Lanham Act are identical, the Octane Fitness standard applies to both. Tobinick v. Novella, 884 F.3d 1110, 1117-18 (11th Cir. 2018). Moreover, Octane Fitness abrogated Eleventh Circuit precedent holding that attorney's fees are appropriate under § 35(a) of the Lanham Act only if an action involves exceptional circumstances and there is evidence of fraud or bad faith. Id. at 1118.
In determining whether to award fees, Octane Fitness provides district courts not with a precise framework but with “several suggestions that might guide a district court's discretionary decision.” Max-Planck-Gesellschaft, 851 F.3d at 1322-23. A district court need not reveal its assessment of every consideration but “must actually assess the totality of the circumstances.” AdjustaCam, LLC v. Newegg, Inc., 861 F.3d 1353, 1360 (Fed. Cir. 2017). The totality of the circumstances includes the movant's conduct. Romag Fasteners, Inc. v. Fossil, Inc., 866 F.3d 1330, 1340 (Fed. Cir. 2017).
A “district court has discretion, in an appropriate case, to find a case exceptional based on a single, isolated act.” Intell. Ventures I LLC v. Trend Micro Inc., 944 F.3d 1380, 1384 (Fed. Cir. 2019). “Whether the conduct is a single, isolated act or otherwise, the relevant question for the district court is the same.” Id. “The district court must determine whether the conduct, isolated or otherwise, is such that when considered as part of and along with the totality of circumstances, the case is exceptional, i.e., the case stands out among others with respect to the substantive strength of a party's litigating position or the unreasonable manner in which the case was litigated.” Id.
A case may present an “unusual basis for fees” if the exceptional-case determination rests on an examination of issues never fully litigated. Thermolife Intl LLC v. GNC Corp., 922 F.3d 1347, 1356-57 (Fed. Cir. 2019). But that “fact alone” is not a basis to deny an award. Munchkin, Inc. v. Luv n' Care, Ltd., 960 F.3d 1373, 1378 (Fed. Cir. 2020). The Federal Circuit has “made abundantly clear that district courts have wide latitude to refuse to add to the burdens of litigation by opening up issues that have not been litigated but are asserted as bases for a fee award.” Id.; cf. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983) (“A request for attorney's fees should not result in a second major litigation.”). “But when the bases of an attorney's fee motion rest on issues that had not been meaningfully considered by the district court[,] a fuller explanation of the court's assessment of a litigant's position may well be needed when a district court focuses on a freshly considered issue than one that has already been fully litigated.” Munchkin, 960 F.3d at 1378.
A “strong or even correct litigating position is not the standard by which to assess exceptionality.” Spineology, Inc. v. Wright Med. Tech., Inc., 910 F.3d 1227, 1230 (Fed. Cir. 2018). A “case will not qualify as exceptional ... merely because one side has zealously pursued or defended its claim, especially on an issue with no directly controlling precedent.” Tobinick, 884 F.3d at 1119; see also SRI Int'l, Inc. v. Cisco Sys., Inc., 930 F.3d 1295, 1310-11 (Fed. Cir. 2019) (observing that “defending a client aggressively is understandable, if not laudable,” becoming a problem only when the party crosses the line).
Motivation to “harass or burden an opponent may be relevant to an ‘exceptional case' finding.” Checkpoint, 858 F.3d at 1375. But “motivation to implement the statutory patent right by bringing suit based on a reasonable belief in infringement is not an improper motive.” Id. “A patentee's assertion of reasonable claims of infringement is the mechanism whereby patent systems provide an innovation incentive.” Id. Simply put, the enforcement of “the statutory right to exclude those that infringe a patented invention” is not an exceptional case. Id.
“There is no per se rule that a case is exceptional if litigation costs exceed the potential damages.” ATEN Int'l Co. v. Uniclass Tech. Co., 932 F.3d 1371, 1373 (Fed. Cir. 2019). Because there is no “de minimis exception for infringement,” it “cannot be the case that a plaintiff may be subjected to monetary sanctions for failing to drop a case if the cost of litigation exceeds the potential recovery.” Id. After all, “litigation strategies motivating a patent suit are many, with monetary damages being one.” Id. “A patentee may also bring suit to deter other competitors from infringement, encourage licensing, or test a patent's ability to withstand validity challenges.” Id.; see also AdjustaCam, 861 F.3d at 1361 (“[T]here is no minimum damages requirement to file a patent infringement case. Asserting seemingly low damages against multiple defendants-or settling with defendants for less than the cost of litigation- does not necessarily make a case ‘exceptional' under § 285.”).
A “consideration that can and often should be important to an exceptional-case determination is whether the party seeking fees provided early, focused, and supported notice of its belief that it was being subjected to exceptional litigation behavior.” Thermolife, 922 F.3d at 1357. But because the standard for determining whether an award is warranted “is a flexible one within the framework and guidelines established by governing precedents,” notice is not “rigidly required,” and failing to provide notice does not require denial of an award if one is otherwise justified. Id. at 1358.
“Civil litigation often includes numerous phases. But a case should be viewed more as an ‘inclusive whole' rather than as a piecemeal process when analyzing fee-shifting under § 285.” Therasense, Inc. v. Becton, Dickinson & Co., 745 F.3d 513, 517 (Fed. Cir. 2014). Moreover, § 285 does not distinguish “between awarding attorney fees in the district court and in the appellate court” and “does not bar the trial court from awarding fees for the entire case, including any subsequent appeals.” Id.
Because a fee determination requires a particularized, case-by-case assessment in the patent and trade dress infringement context (like in the copyright context), cases applying § 285 and § 35(a) have limited connection to this case but provide examples of decisions in which courts have acted within their discretion and outside of their discretion and the circumstances courts consider relevant. See SiOnyx LLC, 981 F.3d at 1355 (observing that “[u]ltimately, abuse of discretion is a deferential standard, and while the district court may have been within its right to grant [the] motion for fees under these circumstances, we cannot say that it abused its discretion in denying fees”). The following cases post-date Octane Fitness.
In the following nine cases, the Federal Circuit (for § 285) or the Eleventh Circuit (for § 35(a)) affirmed fee awards to defendants (or affirmed exceptional case determinations but reversed for other reasons), finding no abuses of discretion. In the first case, the plaintiff's litigating position was “meritless” and “frivolous”; the plaintiff's “exercise of even a modicum of due diligence would have revealed the weaknesses”; the plaintiff knew of the defendants' intention to seek fees; the plaintiff made nuisance value settlement offers, decreasing in amount over time; the plaintiff unreasonably delayed producing documents, withheld documents until after its corporate representative's deposition, and failed to produce other responsive documents; on the day pretrial submissions were due and shortly before the defendants' motion for summary judgment was to be decided, the plaintiff filed a notice of dismissal, a covenant not to sue, and a motion to dismiss without notifying the defendants' counsel; and the plaintiff had filed more than one hundred patent infringement lawsuits with none decided on the merits in its favor. See Blackbird Tech LLC v. Health In Motion LLC, 944 F.3d 910, 914-17 (Fed. Cir. 2019). In the second case, the plaintiffs induced a witness to provide false testimony, spoliated evidence, and asserted fraudulently revived patents. See In re Rembrandt Techs. LP Pat. Litig., 899 F.3d 1254, 1267, 1277 (Fed. Cir. 2018). In the third case, the plaintiff took positions in bad faith to vexatiously multiply the proceedings and avoid early dismissal, causing the defendants to incur significant fees and costs. See Raniere v. Microsoft Corp., 887 F.3d 1298, 1302 (Fed. Cir. 2018). In the fourth case, the district court ruled against one plaintiff in three orders, and the plaintiffs repeatedly failed to make new arguments or produce new evidence to distinguish prior rulings, repeatedly sought to add new parties and new claims after the court twice ruled against them, and “tried to inject new issues into the proceedings by making unsupported allegations of perjury.” See Tobinick, 884 F.3d at 1118. In the fifth case, the plaintiff's litigation conduct-in the face of evidence contradicting its “contorted reading” of an agreement-was unreasonable, the plaintiff failed to perform a diligent pre-suit investigation of its claims, and the plaintiff filed a frivolous motion for a preliminary injunction. See Bayer CropScience AG v. Dow AgroSciences LLC, 851 F.3d 1302, 1303-05 (Fed. Cir. 2017). In the sixth case, the plaintiff's allegations of infringement were ill-supported and appeared baseless, particularly considering the parties' communications and claim constructions. See Lumen View Tech., LLC v. Findthebest.com, Inc., 811 F.3d 479, 483 (Fed. Cir. 2016). In the seventh case, the plaintiff failed to respond to the defendant's motion for fees and costs; the defendant repeatedly warned the plaintiff about the shortcomings of the claims; four of seven factors used to test likelihood-of-confusion weighed heavily against the plaintiff; the commercial context revealed the source of the goods such that no reasonable consumer had been or likely would be confused; the mark lacked distinctiveness and fame in Florida; and the plaintiff failed to provide evidence of a loss of commercial value, made weak arguments, and provided little support at the summary judgment stage. See Off Lease Only, Inc. v. Lakeland Motors, LLC, 846 Fed.Appx. 772, 775 (11th Cir. 2021). In the eighth case, the plaintiff failed to conduct an adequate pre-filing investigation, which would have revealed the weaknesses of its infringement claims; most of the plaintiff's evidence was irrelevant to infringement; and the plaintiff failed to timely respond to the defendants' motions to dismiss and discovery requests, served multiple discovery requests just before the end of the discovery period, employed discovery tactics that caused unnecessary motion practice and briefing, and even after a discovery sanction continued filing motions and refused to comply with court orders, causing more expense and a motion to hold the plaintiff in contempt. See Most Worshipful Nat'l Grand Lodge, Free & Accepted Ancient Yorkrite Masons, Prince Hall Origin Nat'l Compact, U.S.A. v. United Grand Lodge GA AF & AYM, Inc., 813 Fed.Appx. 455, 460-61 (11th Cir. 2020). Finally, in the ninth case, the plaintiffs' litigating position was “unusually weak” because they had admitted-and a nonjudicial panel had found-the defendants used the marks first, the plaintiffs threatened that the defendants would be “begging for mercy,” the plaintiffs demanded a licensing fee to settle the dispute, and the plaintiffs baselessly claimed on appeal that the district court had conspired to help the defendant in exchange for payment. See Domond v. PeopleNetwork APS, 750 Fed.Appx. 844, 848 (11th Cir. 2018).
In contrast, in the following case, the Federal Circuit reversed an award to the defendants, finding an abuse of discretion. There, although the plaintiff's expert tested products manufactured in a different location than the accused products, the defendants made no claim that the accused products differed from the tested products; there was no allegation of falsity, fraud, or bad faith by the plaintiff or its expert; the plaintiff survived a Daubert challenge and summary judgment on infringement; and the plaintiff previously had obtained two infringement opinions from counsel as well as favorable judgments. See Checkpoint, 858 F.3d at 1376.
In the following case, the Federal Circuit affirmed the denial of an award to the defendant, finding no abuse of discretion. There, the plaintiff's positions on claim construction and indefiniteness “did not stand out,” the defendant proffered insufficient evidence of improper motivation, and the district court found no evidence of any misrepresentation or misleading statements by the plaintiff during the litigation. See SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1348-52 (Fed. Cir. 2015).
In contrast, in the following four cases, the Federal Circuit reversed denials of awards to defendants, finding abuses of discretion. In the first case, the plaintiff mailed standardized demand letters and filed repeat patent infringement actions to obtain low-value “license fees” and force quick settlements with no intention of testing the strength of the patent or the allegations of infringement, and the district court failed to consider the objective unreasonableness of the plaintiff's allegations in light of two prior adverse rulings against the plaintiff. See Elec. Commc'n Techs., LLC v. ShoppersChoice.com, LLC, 963 F.3d 1371, 1377 (Fed. Cir. 2020). In the second case, the plaintiff's lawsuit was baseless; the district court failed to consider irregularities in the plaintiff's damages model; and the plaintiff used “after-the-fact declarations” repeatedly, served a new expert report on the day of the expert's deposition, made new infringement arguments on appeal but failed to disclose them as new, and “asserted nuisance-value damages against many defendants, settled with them for widely varied royalty rates, and continued to press baseless infringement contentions well past an adverse Markman order and expert discovery.” See AdjustaCam, 861 F.3d at 1361-62. In the third case, the district court erroneously conflated the standard for Rule 11 sanctions with the standard for § 285 fees; and the plaintiff willfully ignored prior art, asserted its patent in fifty-eight cases against varied defendants, and settled all or nearly all for significantly below the cost of defense. See Rothschild Connected Devices Innovs., LLC v. Guardian Prot. Servs., Inc., 858 F.3d 1383, 1388-89 (Fed. Cir. 2017). In the fourth case, the district court clearly erred in finding that the defendant had engaged in litigation misconduct by declining to rely on a technical expert when challenging the validity of the patent at the preliminary injunction stage and in finding that the defendant had made inconsistent statements. See Gaymar Indus., Inc. v. Cincinnati Sub-Zero Prod., Inc., 790 F.3d 1369, 1373 (Fed. Cir. 2015).
In the following case, the Federal Circuit held that an award of fees to the plaintiff, who prevailed on declaratory judgment claims of copyright, patent, and trade dress non-infringement, was proper only to the extent the fees were awarded under the Lanham Act. For the copyright and patent claims, the defendants neither filed frivolous submissions nor engaged in unreasonable conduct; but for the trade dress claim, the defendants substantially pursued the claim while providing “only bare assertions of nonfunctionality,” “no evidence of likelihood of confusion,” and “no direct consumer surveys or testimony.” See Indus. Models, Inc. v. SNF, Inc., 716 Fed.Appx. 949, 958-60 (Fed. Cir. 2017).
3. FDUTPA
The purpose of FDUTPA is to (1) “simplify, clarify, and modernize the law governing consumer protection, unfair methods of competition, and unconscionable, deceptive, and unfair trade practices”; (2) “protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce”; and (3) “make state consumer protection and enforcement consistent with established policies of federal law relating to consumer protection.” Fla. Stat. § 501.202.
The attorney's fee provision of FDUTPA provides, “In any civil litigation resulting from an act or practice involving a violation of this part ... after judgment in the trial court and exhaustion of all appeals, if any, [a party] may receive his or her reasonable attorney's fees and costs from the nonprevailing party.” Fla. Stat. § 501.2105(1).
Under this provision, a trial court has discretion to award attorney's fees to a prevailing plaintiff or a prevailing defendant. Coral Gables Imports, Inc. v. Suarez, 306 So.3d 348, 349 n.3 (Fla. 3d DCA 2020); Humane Soc. of Broward Cnty., Inc. v. Fla. Humane Soc., 951 So.2d 966, 969 (Fla. 4th DCA 2007). In addition to fees, “FDUTPA allows for the award of non-taxable costs, i.e. those costs that are not taxable under federal law at 28 U.S.C. § 1920.” Chow v. Chak Yam Chau, 640 Fed.Appx. 834, 836 n.4 (11th Cir. 2015).
In exercising its discretion, a court “might consider” seven non-exclusive factors: (1) “the scope and history of the litigation”; (2) “the ability of the opposing party to satisfy an award of fees”; (3) “whether an award of fees against the opposing party would deter others from acting in similar circumstances”; (4) “the merits of the respective positions-including the degree of the opposing party's culpability or bad faith”; (5) “whether the claim brought was not in subjective bad faith but frivolous, unreasonable, [and] groundless”; (6) “whether the defense raised a defense mainly to frustrate or stall”; and (7) “whether the claim brought was to resolve a significant legal question under FDUTPA law.” Humane Soc., 951 So.2d at 971-72; accord Chow, 640 Fed.Appx. at 838-39; Colomar v. Mercy Hosp., Inc., 335 Fed.Appx. 29, 31 (11th Cir. 2009); N. Am. Clearing, Inc. v. Brokerage Comp. Sys., Inc., 395 Fed.Appx. 563, 566 (11th Cir. 2010). A finding of frivolity, unreasonableness, or the absence of foundation is unnecessary. Humane Soc., 951 So.2d at 968.
In Diamond Aircraft Industries, Inc. v. Horowitch, the Florida Supreme Court addressed the FDUTPA fee provision. 107 So.3d 362, 367-68 (Fla. 2013). The court explained that the provision is tied to the purpose of the law. Id. The court determined that the Florida Legislature made fees available to “encourage citizens to invoke the protections of FDUTPA and file actions under that statute[.]” Id. Still, the court cautioned that by “invoking FDUTPA and seeking redress under its remedial provisions,” a plaintiff exposes itself to “both the benefits and the possible consequences of that act's provision.” Id. at 369. The court also stated, “[T]he purpose of FDUTPA's attorney's fees provision ... is to award attorney's fees to the party that prevailed in civil litigation that involved a violation of FDUTPA[.]” Id. at 371.
Addressing allocation of fees, the court explained that the FDUTPA fee provision contemplates “recovery for the hours an attorney dedicated to litigating a civil action involving a FDUTPA claim unless the attorney's services clearly were not related in any way to establishing or defending an alleged violation” of FDUTPA. Id. at 367-68. The court elaborated: “Even if a FDUTPA claim is based on the same transaction as an alternative theory of recovery, a court may allocate attorney's fees for only the FDUTPA portion” if “either (1) counsel admits that the other services provided in that action were unrelated to the FDUTPA claim, or (2) a party establishes that the services related to non-FDUTPA claims were clearly beyond the scope of a [FDUTPA] proceeding.” Id.; see Chow, 640 Fed.Appx. at 843 (applying Diamond Aircraft and holding that the losing party failed to show the services related to non-FDUTPA claims were clearly beyond the scope of the FDUTPA proceeding; the plaintiffs' observation that the FDUTPA claim was only one of nineteen claims and counterclaims “says nothing about how much time was devoted to the various claims, the importance of each claim in the litigation, and whether some non-FDUTPA claims nonetheless fell within the scope of the FDUTPA claims”).