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considering whether "there is some evidence that the plaintiff filed the action for an improper purpose"
Summary of this case from Microban Prods. Co. v. API Indus., Inc.Opinion
99 CIV. 3908 (DLC)
April 27, 2000.
Jack F. Scherer, P.C. Gersten, Savage Kaplowitz, LLP for plaintiff.
Daniel M. Wall Karen Silverman Johnson, Latham Watkins, Ronald G. Blum Kalkines, Arky, Zall Bernstein LLP for defendant.
OPINION and ORDER
On January 6, 2000, this Court granted summary judgment in favor of defendant Intel Corporation ("Intel") and dismissed the claims of plaintiff Multivideo Labs, Inc. ("MVL"). Intel has now moved for its attorneys' fees incurred in defending against MVL's Lanham Act claim pursuant to the Lanham Act's fee provision, 15
U.S.C. § 1117(a). For the reasons discussed below, the motion is denied.
BACKGROUND
MVL filed this action against Intel on May 28, 1999, asserting claims of actual and attempted monopolization, and on August 3, 1999, amended its complaint to add claims of false advertising in violation of the Lanham Act. MVL argued that statements made by Intel to distributors and manufacturers of MVL's product known as the Active Extension Cable (the "ABC") were false or misleading and had harmed sales of the AEC. The making of these statements, MVL asserted, constituted false advertising in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125 (a). MVL moved for a preliminary injunction based on its Sherman Act and Lanham Act claims. On September 22, 1999, the Court denied the motion, entering extensive findings of fact and conclusions of law on the record. The Court held that MVL's Lanham Act claim was deficient in at least two key respects: (1) there was no evidence that the challenged statements were in commercial advertising or promotion, and (2) there was no evidence that the challenged statements were false. Despite this unequivocal ruling, MVL continued to litigate the case, making it necessary for Intel to move for summary judgment. In opposition to Intel's summary judgment motion, MVL relied on only three additional documents — none of which created a triable issue of fact — and offered no new legal arguments in support of its Lanham Act claim.
DISCUSSION
Under Section 35 of the Lanham Act, a court may award reasonable attorneys' fees to a prevailing party in "exceptional cases." 15 U.S.C. § 1117 (a). The Second Circuit has held that a court should award such fees only ""on evidence of fraud or bad faith.'" Gordon Breach Science Publishers S.A. v. American Inst. of Physics, 166 F.3d 438, 439 (2d Cir. 1999) (per curiam) (quoting Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1383 (2d Cir. 1993)). See also Conopco, Inc. v. CamDbell Soup Co., 95 F.3d 187, 194 (2d Cir. 1996). A finding of bad faith is warranted ""when the claim is entirely without color and has been asserted wantonly, for purposes of harassment or delay, or for other improper reasons.'" Hirschfeld v. Board of Election, 984 F.2d 35, 40 (2d Cir. 1992) (quoting Browning Debenture Holders' Comm. v. DASA Corp., 560 F.2d 1078, 1088 (2d Cir. 1977)). The requirement of bad faith is consistent with Congress's intent in including the fee provision in the Lanham Act "both to protect plaintiffs from wilful infringers and "to afford protection to defendants against unfounded suits brought . . . for harassment and the like.'" Hermès Int'l v. Lederer de Paris Fifth Avenue, 50 F. Supp.2d 212, 226 (S.D.N.Y. 1999) (quoting Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant, 771 F.2d 521, 524 (D.C. Cir. 1985)).
Courts generally award attorneys' fees to defendants in Lanham Act actions only where there is some evidence that the plaintiff filed the action for an improper purpose. See, e.g., Orient Express Trading Co. v. Federated Department Stores, Inc., No. 84 Civ. 5964, 1988 WL 3385, at *16 (S.D.N.Y. Jan. 8, 1988) (CBM) (awarding fees where plaintiff fraudulently registered trademark to create basis for litigation), aff'd, 842 F.2d 650 (2d Cir. 1988); Universal City Studios. Inc. v. Nintendo Co., 615 F. Supp. 838, 864 (S.D.N.Y. 1985) (awarding attorneys' fees after trial upon a finding that suit was initiated in bad faith and to serve ulterior business motives), aff'd, 797 F.2d 70 (2d Cir. 1986); Mennen Co. v. Gillette Co., 565 F. Supp. 648, 657 (S.D.N.Y. 1983) (awarding fees where claims had no real substance and where "substantial overtone" of the case warranted "an inference that this suit was initiated as a competitive ploy"), aff'd, 742 F.2d 1437 (2d Cir. 1984). See also Gamla Enterps. North America. Inc. v. Lunor-Brillen Design U. Vertriebs GMBH, No. 98 Civ. 992, 2000 WL 193120, at *5 (S.D.N.Y. Feb. 17, 2000) (MGC) (declining to award attorneys' fees where plaintiff's pursuit of its claims "was at worst negligent"); Hermès Int'l, 50 F. Supp. 2d at 226 (declining to award attorneys' fees where there was no evidence that plaintiff brought suit "in an attempt to bully defendants").
Intel asserts that because MVL's Lanham Act claim was baseless, attorneys' fees are warranted in this case. It is true that in some instances, courts have inferred bad faith where a plaintiff's Lanham Act claims were meritless. See, e.g., IMAF S.p.A. v. J.C. Penney Co. Inc., 26 U.S.P.Q.2d 1667, 1676 (S.D.N.Y. 1992) (awarding fees in light of "absolute failure to make a sincere attempt validly to establish an essential element" of a Lanham Act claim); Diamond Supply Co. v. Prudential Paper Prods., 589 F. Supp. 470, 476 (S.D.N Y 1984) (awarding fees based on finding that suit was "so patently baseless" that it presented an exceptional case); Viola Sportswear, Inc. v. Mimun, 574 F. Supp. 619, 621 (E.D.N Y 1983) (awarding fees where case was without merit and noting that "[o]ne can only speculate about the motives which prompted this suit and in doing so none that are laudable come readily to mind"). "The circumstances were generally such in those cases, however, that a court could draw no inference other than that the actions had been brought for improper purposes. For example, the plaintiff in Viola Sportswear had charged that the defendants were engaged in a nationwide trademark conspiracy based upon the discovery of one pair of jeans worth ten dollars. 574 F. Supp. at 621. Furthermore, the president of the plaintiff corporation admitted that there was no basis upon which a reasonable person could conclude that the charges were valid. See id. at 620. Here, in contrast, although MVL's Lanham Act claim was completely devoid of merit, there is no reason to doubt that MVL believed it had been and would continue to be harmed by Intel's statements.
A case on which Intel relies, Simon Says Enterps., Inc. v. Schaffer, 218 U.S.P.Q. 146 (S.D.N.Y. 1982), applies a standard other than one of bad faith, and is thus inconsistent with current Second Circuit law.
In its opposition to this motion, MVL summarizes its Lanham Act claim against Intel as follows: Intel, a powerful player in the marketplace positioned in an industry organization capable of affecting a wide range of competitive conduct, violated the Lanham Act by contacting MVL's customers and informing them that the AEC was not compliant with an industry specification, thereby harming MVL. Indeed it was not disputed that Intel did disparage MVL's product with the intent to keep it and similar products off the market. MVL's claim is fatally flawed in that the truthful dissemination of information about a product is simply not a Lanham Act violation. Careful counsel should have warned MVL that there was neither legal nor factual support for its lawsuit. The pursuit of MVL's theory, however, absent any evidence of an improper purpose, is at worst incompetent. Compare Banff, Ltd. v. Colberts. Inc., 810 F. Supp. 79, 81 (S.D.N.Y. 1992) ("[R]eliance on faulty interpretations of the law does not support an award of attorney fees on the basis that the lawsuit was unfounded."). Because there is insufficient evidence that MVL pursued its Lanham Act claim in bad faith, the motion for attorneys' fees is denied.
This failure became particularly egregious when, after the Court had noted in denying the motion for a preliminary injunction that there was no evidence to support MVL's Lanham Act claim, MVL continued to litigate this claim without offering any additional evidence.
CONCLUSION
For the reasons stated, the defendant's motion for attorneys' fees is denied.
SO ORDERED:
Date April 26, 2000.