One year after SCOTUS relaxed the rule on award of fees through Octane Fitness, the new standard is popping up in trademark cases. Cincinnati Office Managing Attorney Daniel J. Donnellon explains this phenomenon and what it means for litigants in his latest “Litigation Lesson” video, which you can watch here (free).
About the Octane Fitness Decision
It’s been one year since the U.S. Supreme Court decided the Octane Fitness case that relaxed the rule for award of attorney’s fees in patent cases. The language of the Patent Act provides that fees can be awarded in exceptional cases. Exceptional cases up until Octane Fitness were those that were defined as “objectively baseless and had subjective bad faith.” SCOTUS changed that rule in Octane Fitness and defined exceptional cases as “one that stands out from the others based upon litigation tactics, or the strength of the legal claim or defense.”
Since Octane Fitness, trial lawyers have been bolstered by the ability to fit patent cases within the exception to the American rule for attorney’s fees. Fee applications have more than doubled in patent cases. The ways in which patent cases have been litigated have changed as well, with lawyers trying to winnow out claims or defenses that lacked the strength to be able to be awarded exceptional fees, or trying to foist baseless litigation tactics on the other side to try to set the stage for fitting their case within the exception.
Does the decision apply to “other” intellectual property cases?
The Trademark Act, for example, has the same statutory language that defines fees as awarded in exceptional cases. The same statutory language should have the same interpretation in the courts, or least so says the Sixth Circuit Court of Appeals in a case between two rival karaoke companies.
In Slep-Tone Entertainment Corp. vs. Karaoke Kandy Store, Inc., Plaintiff Slep-Tone Entertainment Corp. brought the action against Defendants Karaoke Kandy Store and its owner, Charles Polidori, alleging trademark infringement and unfair business practices under the Lanham Act and Ohio state law.
Slep-Tone owns the “Sound Choice” trademark and an accompanying display mark. Slep-Tone encodes these marks onto karaoke discs which it sells under the trade name Sound Choice. When played in a karaoke machine, these discs display the Sound Choice marks on the screen. According to Slep-Tone, Defendants copied Slep-Tone’s discs without permission onto hard drives and MP3 players which then were sold to customers who use these devices for karaoke. When customers see the Sound Choice marks on the screen, Slep-Tone alleged, they believe the Sound Choice brand is somehow aligned with Defendants.
The Sixth Circuit remanded the case back to the district court for a determination on whether attorney’s fees should be award because it is an exceptional case. The Sixth Circuit said that the identical language between the Patent Act and the Trademark Act should make Octane Fitness apply to trademark cases.
Was there a claim or defense in the trademark case that lacked certain strength, enough to make it an exceptional case? Were the trademark litigants employing baseless litigation tactics in order to advance their cause? If so, under Octane Fitness, the trademark case may be appropriate for an award of attorney’s fees.
We will have to come back in one year to see whether the application of Octane Fitness to trademark litigation will have the same effect as it has in patent cases.
Will fee award applications more than double? Will the way trademark cases are litigated change as well, with opponents arguing that the other side has employed baseless litigation tactics or that a certain claim or defense is not as strong, and so therefore attorney’s fees should be awarded?
The “Sound Choice,” the fundamental argument between the two karaoke companies in Slep-Tone Entertainment Corp. vs. Karaoke Kandy Store, Inc., will likely have to await the financial fact and conclusions of law from the district court. But the remand of the Sixth Circuit to apply Octane Fitness to trademark cases provides a litigation lesson for all of us.
Watch “Litigation Lesson: Octane Fitness Revisited”
Click here to view the video.