Slashing a trademark owner’s award from $120,000 to $20,000, the U.S. Court of Appeals for the Ninth Circuit found that a plaintiff’s election to receive statutory damages for trademark counterfeiting under the Lanham Act, in lieu of actual damages, bars the plaintiff from also recovering attorneys’ fees. K & N Engineering, Inc. v. Bulat, 2007 WL 4394416 (9th Cir., Dec. 18, 2007) (Ikuta, J.).

The plaintiff, K& N Engineering, an aftermarket auto parts manufacturer, sued two individuals for selling unauthorized decals bearing its logo on eBay, alleging trademark infringement, trademark counterfeiting, and trademark dilution, as well as related state law and common law infringement. Instead of seeking actual damages under the Lanham Act, the plaintiff elected statutory damages. Presumably, the plaintiff chose statutory damages because the amount of actual damages was quite small—the defendants’ counterfeit sales totaled $267. When granting the plaintiff’s motion for summary judgment, the district court awarded the plaintiff $20,000 in statutory damages and $100,000 in attorneys’ fees.

The defendants appealed, arguing that electing to receive statutory damages under §35(c) of the Lanham Act barred the plaintiff from collecting attorneys’ fees under §35(b). Under §35(a), a plaintiff seeking actual damages for trademark infringement may only recover reasonable attorneys’ fees if the case is “exceptional.” In a case involving counterfeit marks, however, §35(b) allows a plaintiff to recover three times the actual damages plus reasonable attorney’s fees by default, except when “extenuating circumstances” exist. Alternatively, a plaintiff may opt for statutory damages instead of actual damages under §35(c), which are calculated using a defined range based on the amount of counterfeit marks.

Based solely on the language of §35, the Ninth Circuit held that by electing to receive statutory damages instead of actual damages, a plaintiff is precluded from recovering attorneys’ fees, since the attorneys’ fees allowed under §35(b) are provided “in assessing damages under subsection (a),” i.e., they do not apply to subsection (c), the statutory damages provision. Thus, the Ninth Circuit affirmed the district court’s grant of summary judgment on the infringement claims and upheld the statutory damages award of $20,000, but reversed the award of $100,000 in attorneys’ fees.

Practice Note: Choosing statutory damages may not bar the recovery of attorneys’ fees in all cases. The Court did not decide whether the choice of statutory damages precludes a plaintiff from seeking attorneys’ fees under the “exceptional case” standard of §35(a). A trademark case is considered exceptional when the district court finds that the defendant acted maliciously, fraudulently, deliberately or willfully.