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Ninth Circuit Updates Attorney Fee Standard in Lanham Act Cases
Practical Law Legal Update w-004-1176 (Approx. 4 pages)
Ninth Circuit Updates Attorney Fee Standard in Lanham Act Cases
by Practical Law Intellectual Property & Technology
| Published on 25 Oct 2016 • USA (National/Federal) |
In SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., the US Court of Appeals for the Ninth Circuit held that district courts analyzing a request for attorney fees under the Lanham Act should examine the totality of the circumstances to determine if the case is exceptional in light of the nonexclusive factors identified in Octane Fitness and Fogerty, using a preponderance of the evidence standard.
On October 24, 2016, in SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., in an appeal from the US District Court for the Northern District of California, the US Court of Appeals for the Ninth Circuit explicitly overruled contrary precedent, holding in an en banc opinion that district courts analyzing requests for attorney fees under the Lanham Act should:
- Examine the totality of the circumstances to determine if the infringement case is exceptional.
- In determining whether a case is exceptional, use the nonexclusive factors identified by the US Supreme Court in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) and Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994).
- Use a preponderance of the evidence standard.
In 2011, SunEarth, Inc. filed a trademark infringement suit under the Lanham Act against Sun Earth Solar Power Co. (SESPC) after SESPC changed its previous name to "Sun Earth" when it entered the US market. The Northern District of California granted SunEarth a permanent injunction against SESPC's use of "Sun Earth" in the US, but denied SunEarth's petition for attorney fees. Under the Lanham Act, courts may award reasonable attorney fees to the prevailing party in exceptional cases (15 U.S.C. § 1117(a)).
SunEarth appealed the district court's decision and in May 2016, a three-judge panel of the Ninth Circuit affirmed the district court's holding. SunEarth sought a rehearing en banc arguing that the district court should have used the Supreme Court's standard in Octane Fitness instead of requiring malicious, fraudulent, deliberate, or willful infringement. In Octane Fitness, the Supreme Court held that a district court analyzing a request for attorney fees under the Patent Act should look to the totality of the circumstances to determine if a patent infringement case was exceptional (35 U.S.C. § 285). For more information on Octane Fitness and the exceptionality standard under the Patent Act, see Legal Update, Supreme Court Reverses Federal Circuit's Rigid Fee Shifting Standard in Patent Cases.
In this rehearing, the Ninth Circuit:
- Relied on the Supreme Court's interpretation in Octane Fitness of the fee shifting provisions in the Patent Act to guide its interpretation of those in the Lanham Act.
- Ruled that district courts should use the Octane Fitness totality of the circumstances standard in determining whether a trademark case is exceptional.
- Held that the burden of proof for fee entitlement is preponderance of the evidence, not clear and convincing evidence.
- Ruled that appellate reviews of attorney fees awards should be for abuse of discretion.
- Remanded the case to the three-judge panel of the Ninth Circuit.
In its en banc opinion, the Ninth Circuit also held that, in examining the totality of the circumstances, district courts should exercise equitable discretion in light of the nonexclusive list of factors identified by the Supreme Court in Octane Fitness, including:
- Frivolousness.
- Motivation.
- Objective unreasonableness.
The Ninth Circuit joins the US Courts of Appeal for the Third, Fourth, Fifth, and Sixth Circuits in applying the Supreme Court's reasoning in Octane Fitness and Fogerty to attorney fees under the Lanham Act.