Octane Fitness Exceptionality Standard for Patent Infringement Attorneys' Fees Applies to Trademark Claims: D. Md. | Practical Law

Octane Fitness Exceptionality Standard for Patent Infringement Attorneys' Fees Applies to Trademark Claims: D. Md. | Practical Law

In Teal Bay Alliances, LLC v. Southbound One, Inc., the US District Court for the District of Maryland awarded defendant Southbound its reasonable attorneys' fees, ruling that this was an exceptional case under the Lanham Act. The court based its exceptionality finding on the Supreme Court standard articulated in a patent infringement case, Octane Fitness, LLC v. Icon Health & Fitness, Inc.

Octane Fitness Exceptionality Standard for Patent Infringement Attorneys' Fees Applies to Trademark Claims: D. Md.

by Practical Law Intellectual Property & Technology
Published on 03 Feb 2015 • USA (National/Federal)
In Teal Bay Alliances, LLC v. Southbound One, Inc., the US District Court for the District of Maryland awarded defendant Southbound its reasonable attorneys' fees, ruling that this was an exceptional case under the Lanham Act. The court based its exceptionality finding on the Supreme Court standard articulated in a patent infringement case, Octane Fitness, LLC v. Icon Health & Fitness, Inc.
On January 26, 2015, in Teal Bay Alliances, LLC v. Southbound One, Inc., the US District Court for the District of Maryland awarded Southbound its reasonable attorneys' fees based on the court's ruling that the action presented an exceptional case under Section 35(a)(3) of the Lanham Act (No. 1:13-cv-02180, (D. Md. Jan. 26, 2015)). Section 35(a)(3) of the Lanham Act allows prevailing parties to recover attorneys' fees in exceptional cases but does not define the term exceptional (15 U.S.C. § 1117).
In determining whether the case was exceptional, the court used the standard recently adopted by the US Supreme Court in a patent infringement case, Octane Fitness, LLC v. Icon Health & Fitness, Inc. (No. 12-1184, (2014)). In that case, the Supreme Court held:
  • An exceptional case does not require culpable conduct.
  • A case is exceptional if it stands out from other cases in either:
    • the substantive strength of case; or
    • the unreasonable manner in which a party litigated the case.
  • The exceptionality analysis is on a case-by-case basis and should be based on the totality of the circumstances.
  • Proof of exceptionality by a preponderance of the evidence is sufficient.
The court next addressed whether the Supreme Court's analysis in Octane of the Patent Act's attorney fee provision (35 U.S.C. § 285), is applicable to trademark infringement cases given the identical wording of the corresponding provision of the Lanham Act, namely, "The court in exceptional cases may award reasonable attorney fees to the prevailing party." The court noted that the only US Court of Appeals to address this issue, the Third Circuit, ruled in Fair Wind Sailing, Inc. v. Dempster that the Supreme Court made clear in Octane that the criteria it set out for determining "exceptional" cases applies to both patent and trademark cases (Nos. 13-3305, 14-1572, (3d Cir. 2014)). For more information on Fair Wind Sailing, see Legal Update, Supreme Court's Exceptionality Standard for Attorneys' Fees Awards under the Patent Act Applies to Lanham Act Claims: Third Circuit.
The court found the Third Circuit's rationale in Fair Wind persuasive and predicted that the US Court of Appeals for the Fourth Circuit would follow suit.
Therefore, guided by the Octane and Fair Wind decisions, the court held that the case was exceptional because:
  • Plaintiff Teal's case was based on a trademark registration that Teal had obtained by relying on a false representation.
  • Teal had not used its trademark in commerce before Southbound first used its mark.
  • Teal did not establish that Southbound would have infringed its trademark rights by using a name and logo having no similarity to Teal's claimed mark.