attorney’s fees Archives

attorney’s fees

David-Versus-Goliath Trademark Victory Isn’t Necessarily “Exceptional”

by Karen Gover | Jul 25, 2024 | Trademarks

The US Court of Appeals for the Third Circuit vacated an award of attorneys’ fees for reanalysis, explaining that the district court’s finding that the case was “exceptional” under the Lanham Act was based on policy considerations rather than the totality of the circumstances. Lontex Corp. v. Nike, Inc., Case Nos. 22-1417; -1418 (3rd Cir. July 10, 2024) (Hardiman, Matey, Phipps, JJ.)

Lontex Corporation is a small Pennsylvania business that manufactures and sells compression apparel to professional athletes and the public. Since 2008 it has held a registered trademark for the mark COOL COMPRESSION, which it used in conjunction with its sale of apparel. In 2015, Nike rebranded an athletic clothing line that included a category of “Cool” products designed to reduce body temperature, as well as various fits, including “Compression.” It also began using the words “Cool” and “Compression” together in the names of Nike clothing products sold online and in Nike catalogues. Nike used “Cool Compression” as a product name on tech sheets, which are internal documents used to explain Nike products to employees and third-party retailers.

The following year, upon discovering Nike’s use of the phrase “Cool Compression,” Lontex sent Nike a cease-and-desist letter. Nike’s lawyers directed the company to stop using the phrase “as soon as possible.” Nike took steps to remove the phrase from its website and catalogs but not its tech sheets. Two years later, Nike reached out to its third-party retailers and asked them to stop using “Compression” in product names.

Lontex sued Nike for trademark infringement of its COOL COMPRESSION mark, for contributory infringement based on its supply of “Cool Compression” products to retailers, and for counterfeiting. The district court dismissed the counterfeiting claim, and a jury trial was held on the infringement actions. The jury returned a verdict for Lontex, finding Nike liable for willful and contributory infringement. The jury awarded Lontex $142,000 in compensatory damages and $365,000 in punitive damages but declined to award Lontex disgorgement of Nike’s profits.

Post-trial, Nike renewed motions for judgment as a matter of law on fair use, trademark infringement, contributory infringement, willfulness and punitive damages. Lontex moved for disgorgement of profits and trebling of the damages awarded by the jury. The district court granted Lontex’s request for treble damages, increased the compensatory award to $426,000, and separately awarded Lontex almost $5 million in attorneys’ fees after finding that the case was “exceptional” under the Lanham Act. Both parties appealed.

As to the willfulness finding, Nike argued that the jury should not have been permitted to infer willfulness solely from its continued use of the mark after it received its cease-and-desist letter. The Third Circuit disagreed, pointing out that not only did Nike adopt the “Cool Compression” phrase without doing a trademark search, it also continued to use the phrase after receiving Lontex’s cease-and-desist letter and being advised by its own legal team to stop using it as soon as possible. The Court concluded that a jury could reasonably infer willful infringement. For similar reasons, [...]

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Smart Choice: Survey Design Didn’t Render Survey Unreliable

by Karen Gover | Jul 18, 2024 | Trademarks

Underscoring its faith in a jury’s competency to use its “common sense and experience” in evaluating evidence, the US Court of Appeals for the Ninth Circuit affirmed a district court’s judgment in favor of the defendants in a trademark infringement action following a trial, as well as its order partially denying the defendants’ motion for attorneys’ fees. BillFloat, Inc. v. Collins Cash, Inc., Case Nos. 23-15405; -15470 (9th Cir. July 1, 2024) (Thomas, McKeown, Christen, JJ.)

BillFloat and Collins Cash both provide financing to small businesses. In 2013, BillFloat began using SMARTBIZ as a trademark and registered the mark in 2014. That same year (2014), Collins Cash began using the mark SMART BUSINESS FUNDING, although it did not file an application to register the mark until 2020. Meanwhile, in 2018, BillFloat and Collins Cash entered into a partnership agreement under which Collins Cash would refer current and prospective customers to BillFloat in exchange for a referral fee. The parties’ agreement stated that “[i]f either Party employs attorneys to enforce any right arising out of or relating to this Agreement, the prevailing Party shall be entitled to recover reasonable attorneys’ fees.”

In 2020, upon learning of Collins Cash’s use of the SMART BUSINESS FUNDING mark, BillFloat brought claims for federal and state trademark infringement, breach of contract, unfair competition and unlawful business practices. The district court granted summary judgment to Collins Cash on the breach of contract claim and proceeded to trial on the trademark infringement claim.

Collins Cash engaged an expert to conduct a likelihood of confusion survey using the so-called “Squirt” methodology, which is used for lesser-known marks. BillFloat filed a motion to exclude the expert and his survey from trial, arguing that various errors made the survey unreliable and therefore inadmissible. The district court denied the motion and admitted the expert’s testimony and his survey. The district court also admitted testimony from BillFloat’s expert that challenged the survey. Both experts were cross-examined on their qualifications and on the merits of the survey.

The jury found that BillFloat had not established trademark infringement by a preponderance of the evidence. Post-trial, BillFloat moved for judgment as a matter of law and for a new trial, and Collins Cash moved for attorneys’ fees and non-taxable costs. The district court denied BillFloat’s motion and awarded Collins Cash attorneys’ fees under the partnership agreement for the breach of contract claim but declined to award Collins Cash attorneys’ fees for the trademark infringement claim or non-taxable costs for either claim. Both parties appealed.

BillFloat argued that the district court abused its discretion in admitting Collins Cash’s expert testimony and survey evidence. It also argued that the district court erred in declining to give BillFloat’s proposed jury instruction not to draw any inferences about the fact that BillFloat did not offer its own survey evidence.

The Ninth Circuit found no abuse of discretion on these issues. The Court pointed to the distinction between the admissibility of survey evidence as opposed to the relative weight a [...]

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What Makes a Trademark Case “Exceptional” in the Fifth Circuit?

by Benjamin Ediger, Ph.D. | Jul 11, 2024 | Trademarks

The US Court of Appeals for the Fifth Circuit affirmed a senior party mark but found that the district court committed clear error in finding that a similar junior party mark was valid. The Fifth Circuit also found that the district court abused its discretion in awarding attorneys’ fees to the senior user. Appliance Liquidation Outlet, L.L.C. v. Axis Supply Corp., Case No. 23-50413 (5th Cir. June 21, 2024) (Smith, Haynes, Douglas, JJ.)

Appliance Liquidation Outlet (ALO), a decades-old appliance store in San Antonio, Texas, brought a trademark action under the Lanham Act and Texas law (which in all relevant aspects tracks the Lanham Act) against Axis Supply Corporation, another San Antonio appliance store that opened in 2021. Axis’s store and social media prominently featured the phrase “Appliance Liquidation”:

ALO noted that Axis’s opening happened to coincide with an influx of customers conflating ALO with Axis. ALO’s storefront had prominently displayed a banner reciting “Appliance Liquidation Outlet” for years:

Although ALO had never registered its mark, ALO had long engaged in a variety of promotional activities to raise brand recognition, including partnering with local sports teams and holding antique exhibitions and car shows.

Soon after Axis opened its store, ALO experienced a rush of customers who failed to differentiate between the stores and believed that ALO operated both. ALO requested that Axis stop using “Appliance Liquidation” and sued Axis in state court when Axis refused. Axis removed the dispute to the federal district court. After a bench trial, the district court held for ALO, enjoining Axis from using “Appliance Liquidation” and “Appliance Liquidation Outlet” and causing confusion between the two businesses. The district court also awarded attorneys’ fees under 15 U.S.C. § 1117(a) to ALO, finding that Axis’s decision to change its name only a week before trial (about 1.5 years into the dispute) amounted to litigating in an unreasonable manner. Axis appealed.

The Fifth Circuit affirmed the district court’s holding that Axis had infringed ALO’s “Appliance Liquidation Outlet” mark but assigned clear error to the district court’s finding that “Appliance Liquidation” was valid mark. The Fifth Circuit also found that the district court had abused its discretion in awarding attorneys’ fees to ALO.

With respect to the marks’ validity, the Fifth Circuit noted that both marks were unregistered and thus were not presumptively valid. The Court found that the record did not support the conclusion that “Appliance Liquidation” was a source identifier and thus found that it was not a valid mark. However, the Fifth Circuit was satisfied that “Appliance Liquidation Outlet” served as a source identifier. The Court found that although “Appliance Liquidation Outlet” was descriptive, the evidence established that San Antonian consumers perceived the mark as conveying information about ALO, not merely reflecting a class of services or businesses, and [...]

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No Attorneys’ Fees Available for Successful IPR in Parallel Court Proceedings

by Lillian Spetrino | May 30, 2024 | Patents

The US Court of Appeals for the Federal Circuit concluded that a party that voluntarily elects to pursue parallel proceedings before the Patent Trial & Appeal Board and the district court is not entitled to recover attorneys’ fees under 35 U.S.C. § 285 (exceptional case doctrine) in connection with the Board proceedings, nor does § 285 entitle a party to hold opposing counsel jointly and severally liable for fees. Dragon Intellectual Property LLC v. Dish Network L.L.C., Case Nos. 2022-1621; -1777; -1622; -1779 (Fed. Cir. May 20, 2024) (Moore, C.J.; Stoll, J.) (Bencivengo, J., dissenting).

Dragon sued DISH Network, Sirius XM Radio (SXM) and eight others for patent infringement. The district court stayed proceedings as to DISH and SXM while they pursued inter partes review (IPR) but proceeded with claim construction for the other defendants. Following claim construction, all parties stipulated to noninfringement, and the district court accordingly entered a noninfringement judgment that was subsequently vacated following appeal to the Federal Circuit. Following the Board’s determination that the asserted claims were unpatentable, DISH and SXM filed a motion for attorneys’ fees in the district court proceeding. The district court granted the motion for time spent litigating the district court case but denied for fees incurred solely during the IPR proceedings and recovery from Dragon’s former counsel. DISH and SXM appealed the denial-in-part, and Dragon cross-appealed the grant-in-part.

The Federal Circuit affirmed the district court’s grant-in-part, finding that the district court did not abuse its discretion in declaring these cases exceptional. The Federal Circuit explained that the vacated noninfringement judgment did not require the district court to ignore its claim construction order in determining exceptionality. The Court further explained that even though Dragon was not entitled to a claim construction “do-over,” the prosecution history disclaimer issue was independently considered during the exceptionality inquiry, and Dragon did not provide any grounds for the conclusion that this constituted an inadequate inquiry.

The Federal Circuit also affirmed the denial of attorneys’ fees with regard to fees incurred during the IPR proceedings and Dragon’s former counsel’s liability for fee awards under § 285.

First, the Federal Circuit rejected DISH and SXM’s argument that § 285 allows recovery of fees incurred during parallel IPR proceedings, principally on the grounds that the IPR proceedings were pursued voluntarily. The Court reasoned that there are many advantages to leveraging IPR proceedings and, therefore, “where a party voluntarily elects to pursue an invalidity challenge through IPR proceedings, we see no basis for awarding IPR fees under § 285.”

Second, the Federal Circuit relied on the statutory text and determined that liability for attorneys’ fees awarded under § 285 does not extend to a party’s counsel. The Court explained that while other statutes explicitly allow parties to recover costs and fees from counsel, § 285 is silent as to who can be liable for a fee award, and therefore it is reasonable to conclude that fees cannot be assessed against counsel.

Sitting by designation, Judge Bencivengo of the US District Court for the Southern District of California dissented [...]

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Unclean Hands Aren’t Just for Toddlers

by Jacob Michael Bass | Apr 25, 2024 | Patents

In an action involving manufacturers of a self-sealing dining mat for toddlers, the US Court of Appeals for the Federal Circuit affirmed a district court’s finding that the defendants were barred from obtaining relief on their counterclaims under the unclean hands doctrine, thereby vacating the district court’s other findings on inequitable conduct, obviousness, attorneys’ fees and costs. Luv N’ Care, Ltd. et al. v. Laurain et al., Case No. 22-1905 (Fed. Cir. Apr. 12, 2024) (Reyna, Hughes, Stark, JJ.)

Luv N’ Care and Nouri E. Hakim (collectively, LNC) filed suit against Lindsey Laurain and Eazy-PZ (EZPZ), asserting various claims for unfair competition under the Lanham Act and Louisiana law. LNC also sought declaratory judgment that EZPZ’s design patent was invalid, unenforceable and not infringed. After the suit was filed, the US Patent & Trademark Office (PTO) issued Laurain a utility patent directed toward self-sealing dining mats. Laurain subsequently assigned her rights to EZPZ, which then asserted counterclaims for utility patent, design patent and trademark infringement.

Following discovery, the district court granted LNC’s motion for summary judgment, finding all claims of EZPZ’s utility patent as obvious in view of three prior art references. EZPZ moved for reconsideration, which the district court denied, indicating that a “ruling providing further reasoning will follow in due course.” Before any such ruling issued, the PTO issued an ex parte reexamination certificate confirming the patentability of the utility patent claims two days before the district court’s bench trial began.

EZPZ did not provide this reexam certificate to the district court prior to the bench trial. During the bench trial, the district court found that EZPZ had not committed inequitable conduct but that EZPZ’s litigation conduct constituted unclean hands. After the district court entered judgment, EZPZ moved for reconsideration of summary judgment based on the ex parte reexamination certificate. The district court denied this motion and found that the evidence did not compel alteration of the prior ruling that the utility patent was invalid. It also denied LNC’s motion for attorneys’ fees and costs. EZPZ appealed.

The Federal Circuit affirmed the unclean hands determination but vacated the district court’s rulings on inequitable conduct, invalidity, attorneys’ fees and costs. As to unclean hands, the Court reasoned that EZPZ failed to disclose patent applications related to the utility patent until well after the close of discovery and dispositive motion practice. EZPZ also blocked LNC’s efforts to discover Laurain’s prior art searches by falsely claiming that she had conducted no such searches and that all responsive documents had been produced. It further found that EZPZ witnesses, including Laurain and EZPZ’s former outside counsel, repeatedly gave evasive testimony during depositions and at trial. The Court affirmed the district court’s determination that EZPZ’s misconduct bore an immediate and necessary connection to EZPZ’s claims for infringement because the undisclosed material was directly relevant to the development of LNC’s litigation strategy and undermined LNC’s ability to press its invalidity and unenforceability challenges. The Court found no clear error in the district court’s reasoning that [...]

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Don’t Cut, Paste, Copyright: Bonding over Borrowed Words

by Keval Amin | Jan 25, 2024 | Copyrights

The US Court of Appeals for the Seventh Circuit affirmed a district court’s award of attorneys’ fees and its determination that trivial additions to existing documents were not copyrightable. UIRC-GSA Holdings, LLC v. William Blair & Company, L.L.C., and Michael Kalt, Case Nos. 23-1527; -2566 (7th Cir. Jan. 12, 2024) (Brennan, Flaum, Kirsch. JJ.)

UIRC, a property management company overseeing leases for the US General Services Administration, sought copyright protection for two documents it produced related to a bond offering: a private placement memorandum (PPM) and an indenture of trust. UIRC did not create these documents from scratch but instead borrowed most of the language from the Idaho Housing and Finance Association. Nevertheless, UIRC secured copyright registrations by explicitly focusing on the “additional and revised text” it contributed, not the “standard legal language.”

While aiding UIRC in transactions utilizing its copyrighted documents, William Blair concurrently assisted a third party in a similar transaction. During that transaction, William Blair used UIRC’s copyrighted PPM and indenture of trust documents. In response, UIRC filed a copyright infringement suit against William Blair. The district court granted William Blair’s summary judgment motion, finding that UIRC’s documents lacked valid copyright protection because of the trivial nature of the language added to the bond documents, such as “facts, short phrases, and functional elements.” The district court also awarded attorneys’ fees to William Blair under 17 U.S.C. § 505, finding that three of the four factors from the 1994 Supreme Court of the United States decision in Fogerty v. Fantasy favored an award. UIRC appealed.

The Seventh Circuit affirmed, stressing that UIRC was not the original author of the copyrighted works since it did not independently create the PPM and indenture of trust documents. The Court explained that copyright protection requires original works with a minimal degree of creativity, a criterion UIRC failed to meet because its contributions resembled facts, fragmented phrases or language driven by functional considerations.

The Seventh Circuit heavily relied on the Supreme Court’s 1991 Feist Publ’ns v. Rural Tel. Serv. decision, drawing parallels to emphasize that UIRC’s bond documents, being “incredibly similar” to the Idaho Housing and Finance Association documents, lacked the necessary creative expression for copyright protection. The Seventh Circuit deemed trivial additions made by UIRC, which the Court categorized as “facts, short phrases, and functional language” ineligible for copyright protection. The Court highlighted the importance of independent creation using examples where even photographs of familiar characters were copyrightable due to the photographer’s “unique angle, perspective, lighting, and dimension.” In the present case, the Court found that UIRC’s contributions lacked the necessary creative expression. Accordingly, the Court concluded that UIRC’s bond documents were not protected by valid copyrights.

In addressing the attorneys’ fees award to William Blair, the Seventh Circuit applied the Fogerty factors:

Frivolousness of the Suit: The Court found that UIRC’s suit lacked merit, emphasizing the frivolousness factor in favor of William Blair.
Losing Party’s Motivation: UIRC’s lack of disclosure about the Idaho Housing and Finance Association documents was deemed [...]

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Still Exceptional: Fee-Shift Appropriate in View of Noninfringement Stipulation

by Connor M. Larson | Nov 16, 2023 | Patents

In a split decision, the US Court of Appeals for the Federal Circuit affirmed a district court’s award of more than $5 million in attorneys’ fees, finding that the district court did not abuse its discretion in finding the underlying case “exceptional” under 35 U.S.C. § 285 or in calculating the total fees awarded. In re PersonalWeb Tech., Case No. 21-1858 (Fed. Cir. Nov. 3, 2023) (Reyna, Lourie, JJ.) (Dyk, J., dissenting).

Under 35 U.S.C. § 285, a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” In Octane Fitness (2014), the Supreme Court of the United States held 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,” and the court considers the totality of the circumstances in making this determination.

PersonalWeb’s litigation positions at issue date back to 2011, when PersonalWeb first asserted five patents against an e-commerce company. After an unfavorable claim construction ruling, PersonalWeb stipulated to dismiss the action, and the district court entered the dismissal with prejudice.

In 2018, PersonalWeb asserted the patents against customers of the e-commerce company. The e-commerce company intervened and filed a new action against PersonalWeb seeking a declaratory judgment to bar the infringement actions against the customers based on the 2011 dismissal. Some of the cases proceeded while others were stayed. The district court granted summary judgment against PersonalWeb on claims directed to two allegedly infringing products for two separate reasons: because of the Kessler doctrine and claim preclusion, and because PersonalWeb conceded that it could not prevail after an unfavorable claim construction order.

The district court also entered an award of attorneys’ fees and costs against PersonalWeb, finding the case to be “exceptional” for the following reasons:

The infringement claims were “objectively baseless and not reasonable when brought because they were barred due to a final judgment in the [2011 action].”
PersonalWeb frequently changed its infringement positions to overcome the hurdle of the day.
PersonalWeb unnecessarily prolonged this litigation after claim construction foreclosed its infringement theories.
PersonalWeb’s conduct and positions regarding the customer cases were unreasonable.
PersonalWeb submitted declarations that it should have known were inaccurate.

The district court calculated the attorneys’ fees to be more than $5 million and costs to be more than $200,000. PersonalWeb appealed.

PersonalWeb argued that the district court erred in awarding fees and, even if fees were warranted, the court erred in assessing almost $2 million of the $5 million award. The Federal Circuit found that the district court did not abuse its discretion in any of its findings related to the fee grant, agreeing with the district court’s application of the Kessler doctrine. In Kessler, the Supreme Court ruled that after a final judgment of noninfringement, follow-up suits by the same patentee over the same non-infringing product against customers of the party [...]

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Just How Similar Must Competing Marks Be to Survive Dismissal?

by Mike Baldwin | Oct 5, 2023 | Trademarks

After a de novo review, the US Court of Appeals for the Sixth Circuit affirmed in part and reversed in part a district court’s motion to dismiss, finding the competing marks sufficiently similar to avoid dismissal, and the attorneys’ fee award. Bliss Collection, LLC v. Latham Companies, LLC, Case Nos. 21-5723; -5361 (6th Cir. Sept 21, 2023) (Mathis, Bush, JJ.) (Larsen, J., dissenting).

This case between Bliss and Latham was the latest installment in a series of cases between the children’s clothing companies after a Bliss founder left to start Latham as a competitor company. Here, Bliss sued Latham for infringement of three trademarks for Bliss’s stylized lowercase “b” logo, appearing as if stitched out in thread. Bliss sued for federal copyright infringement, federal trademark infringement, federal trade dress infringement, federal false designation of origin and misappropriation of source, federal unfair competition, trademark under Kentucky law and unfair competition under Kentucky law.

The competing marks are depicted below:

Latham moved to dismiss, and the district court dismissed the federal copyright and trade dress claims. The district court did not initially dismiss the remaining claims, but later did so after a motion for reconsideration. The district court determined that Latham was not entitled to attorneys’ fees because the case was not exceptional, and Bliss had brought the suit in good faith. Bliss appealed the federal trademark infringement, federal trade dress infringement and trademark infringement under Kentucky common law only.

The Sixth Circuit focused its analysis on whether the amended complaint properly alleged that Latham’s logo was a use of Bliss’s trademark. The Court noted that dismissal was not warranted for anything but the most extreme cases, concluded that this was not such a case and reversed.

The Sixth Circuit found that Latham used the accused mark “in a trademark way” (i.e., to identify goods). Then, weighing the Frisch factors to determine likelihood of confusion between the marks, the Court found that the similarity between the marks and their “impression” favored Bliss despite the fact “that the logos share no words or homophones.” Overall, the Court found that five of the eight factors favored Bliss and that two were neutral. Only the likelihood of purchaser care factor was found to favor Latham. The Court thus found that Bliss had plausibly alleged a likelihood of confusion and that its complaint stated a federal trademark infringement claim. Applying the same logic to the state trademark claims, the Court also reversed the dismissal of those claims.

The Sixth Circuit affirmed the dismissal of the trade dress claim, however, because Bliss failed in its affirmative duty to plead facts in support of nonfunctional trade dress.

Turning to the attorneys’ fee award, the Sixth Circuit found that the mere fact that Bliss sued Latham was not sufficient to warrant an “exceptional” case finding in terms of an award for fees. The Court was also unpersuaded that the trade dress claim was worthy of a fee award [...]

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Change in Law Leading to Case Dismissal Doesn’t Preclude Attorneys’ Fees

by Eleanor B. Atkins | Aug 24, 2023 | Copyrights

Addressing the symmetrical fee-shifting provision of the Copyright Act and whether a prevailing defendant was entitled to fees even when the plaintiff moved to dismiss the case in response to a change in law, the US Court of Appeals for the Seventh Circuit reversed the district court’s denial of attorneys’ fees and remanded the case for reconsideration. Live Face on Web, LLC v. Cremation Society of Illinois, Inc., et al., Case No. 22-1641 (7th Cir. Aug. 11, 2023) (Scudder, Kirsch, Jackson-Akiwumi, JJ.)

The Cremation Society of Illinois and its co-defendants (collectively, CSI) licensed software from Live Face on Web. Live Face on Web then sued CSI for copyright infringement, seeking damages of more than 1,000 times the initial license fee. Five years later, while summary judgment was pending, Live Face on Web moved to dismiss the case, arguing that the Supreme Court’s 2021 decision in Google LLC v. Oracle America, Inc. “made the defendants’ fair-use defense insurmountable.” The district court granted the motion to dismiss, and CSI filed a motion to recover fees. The court denied the motion for fees, in part because “awarding fees would neither encourage nor discourage other defendants from maintaining valid defenses against copyright claims.” CSI appealed.

The Copyright Act allows prevailing parties to recover costs and fees. The Seventh Circuit examined the nonexclusive factors that guide this analysis:

The frivolousness of the lawsuit
The losing party’s motivation for bringing or defending the lawsuit
The objective unreasonableness of the losing party’s claims
The need to advance considerations of compensation and deterrence.

The Seventh Circuit noted that the last factor relates to the purpose of the fee-shifting provision: “[b]y encouraging parties to stand on their rights, the Act’s symmetrical fee-shifting provision advances its core purposes.” A successful copyright infringement litigant “encourages others to use the copyright system, fostering further innovation,” whereas a defendant “who successfully protects his rights to use things in the public domain necessarily gives others a license to do the same.” The Court stated that prevailing defendants in particular benefit from a strong presumption that they are entitled to recover attorneys’ fees: “Without an award of attorney’s fees, a defendant faces pressure to abandon his meritorious defenses and throw in the towel because the cost of vindicating his rights (his attorney’s fees) will exceed the private benefit he receives from succeeding (a nonexcludable right to continue doing what he was already doing).”

In this case, the district court reasoned that CSI’s success was due to the change in the law rather than meritorious defenses and, therefore, awarding fees to CSI would not advance or deter any conduct. The Seventh Circuit disagreed, stressing that Live Face on Web did not demonstrate that it would have prevailed but for the Supreme Court’s decision in Google. Moreover, the Court noted that CSI had raised multiple other defenses that were not impacted by Google. In any event, the Court reasoned, “[i]n litigation, both sides accept that as the case evolves, the law might, [...]

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Disgorgement of Profits Appropriate Remedy for Breach of Contract, Trademark Infringement

by Kathleen Lynch | Aug 24, 2023 | Trademarks

In a trademark infringement and breach of contract case involving real estate companies with a shared name, the US Court of Appeals for the Fourth Circuit affirmed summary judgment in favor of the trademark owner, including almost $43 million in profit disgorgement. Dewberry Engineers v. Dewberry Group, Case Nos. 22-1622; -1845 (4th Cir. Aug. 9, 2023) (Gregory, Thacker, JJ.) (Quattlebaum, J., dissenting).

Dewberry Engineers and Dewberry Group (formerly Dewberry Capital) operate in the same states, and both provide commercial real estate services. Dewberry Engineers started in the mid-1950s as a civil engineering and surveying firm in northern Virginia. Over time, its business expanded to include real estate development services such as architecture and site development. Dewberry Group similarly provides real estate development services through its affiliates, including the Dewberry Hotel in Charleston, South Carolina.

In 2006, Dewberry Group sent Dewberry Engineers a cease-and-desist letter, asserting that Dewberry Group had “senior common law rights” to use “Dewberry” in real estate. In response, Dewberry Engineers sued Dewberry Group for infringing its federally registered DEWBERRY trademark. That litigation ended in 2007 when the parties entered a confidential settlement agreement (CSA). Among other things, the CSA stated that Dewberry Group:

Would not challenge Dewberry Engineers’ trademark registrations
Could use its “Dewberry Capital” name except in enumerated geographical areas where it instead must use “DCC”
Would use no logo other than its “column” logo.

In 2017, Dewberry Group rebranded and attempted to register DEWBERRY GROUP and other marks, which the US Patent & Trademark Office (PTO) repeatedly rejected.

In 2020, Dewberry Engineers filed suit claiming breach of contract and trademark infringement under the Lanham Act and Virginia common law. The district court granted summary judgment to Dewberry Engineers on the contract claim, finding that Dewberry Group had violated the unambiguous CSA by changing its logo, among other offenses. The district court also granted summary judgment to Dewberry Engineers on its trademark infringement claim, finding that Dewberry Engineers’ mark was not only valid, it was incontestable since it had been in continuous use for more than five years. The district court also found that the likelihood-of-confusion factors favored infringement. The district court entered a permanent injunction against Dewberry Group’s use of “Dewberry” and granted Dewberry Engineers its attorneys’ fees and profit disgorgement. Because the court believed the tax information Dewberry Group provided did not show the true “economic reality” of the close relationship between Dewberry Group and its affiliates, the disgorgement calculation also included some of Dewberry Group’s affiliated companies’ profits. Dewberry Group appealed, challenging the summary judgment grant, the permanent injunction and the monetary awards.

The Fourth Circuit began by noting that there was “uncontroverted evidence” that Dewberry Group used the DEWBERRY trademark, used a logo other than its column logo and failed to use “DCC” in restricted areas, all in breach of the undisputedly valid CSA. The Court therefore affirmed the district court’s finding that Dewberry Group breached the CSA.

The Fourth Circuit next addressed the trademark infringement claim. The Court rejected [...]

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