The prospect of recovering attorneys’ fees after notching a victory under the Lanham Act just got a bit rosier–at least if you find yourself prevailing in the 5th Circuit. The Lanham Act allows the recovery of attorneys’ fees in “exceptional cases.” Until just recently, in the 5th Circuit that meant the Lanham Act victor would need to make a showing of “bad faith” on the part of the vanquished opponent, and by “clear and convincing” evidence no less. That high bar to recover fees was lowered significantly by the 5th Circuit last week in Baker v. DeShong, a case involving claims of trademark infringement under the Lanham Act.
The new standard articulated by Baker is now as follows:
an exceptional case is one where (1) in considering both governing law and the facts of the case, the case stands out from others with respect to the substantive strength of a party’s litigating position; or (2) the unsuccessful party has litigated the case in an unreasonable manner. The district court must address this issue in the case-by-case exercise of their discretion, considering the totality of the circumstances.”
Gone is the “bad faith” requirement, and with it fell the “clear and convincing” burden of proof, too.
What brought about this Texas-sized change in the 5th Circuit, you ask? The U.S. Supreme Court’s decision in Octane Fitness, LLC v. Icon Health and Fitness, Inc., 134 S. Ct. 1749 (2014). In that case, the Court interpreted the identical “exceptional cases” language from the Patent Act’s attorneys’ fee provision, 35 U.S.C. § 285. The Court rejected the notion that “exceptional” required a showing of bad faith or other culpable conduct before fees could be awarded in patent cases. It also rejected the “clear and convincing” heightened burden of proof. Instead, the Court held that “exceptional” simply meant “uncommon,” “rare,” or “not ordinary.” Accordingly, 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.”
The 5th Circuit eschewed its old definition of “exceptional” under the Lanham Act and embraced the Supreme Court’s interpretation of “exceptional” from Octane Fitness.
In adopting the Octane Fitness definition of exceptional, the 5th Circuit joins a growing chorus of other Circuit Courts of Appeal that have injected the Octane Fitness analysis into Lanham Act cases. Both the 3rd and 4th Circuits did so previously, and more courts are likely to follow suit in the near term.