PBI Electronic Publication # EP-3613 Trademark and Patent Actions M. Kelly Tillery, Esq. Pepper Hamilton LLP Philadelphia A chapter from Obtaining (or Avoiding) Enhanced Damages and Fees in Copyright, Trademark, Trade Secret and Patent Actions Pub. No. 5421, published November 2008 To purchase this book: See the PBI Online Bookstore at www.pbi.org Email info@pbi.org, or Call 1-800-932-4637 2009 Pennsylvania Bar Institute. All rights reserved. This file is licensed only to the person downloading this file from PBI s website, for printing and for saving to his or her personal computer. No further use is permitted. This file may not be shared electronically with any other person without the express written permission of the Pennsylvania Bar Institute. The Pennsylvania Bar Institute does not render any legal, accounting, or other professional services. The Institute s programs and publications are designed solely to help attorneys maintain their professional competence. In dealing with specific legal matters, the attorney using PBI publications or orally conveyed information should also research original sources of authority.
Table of Contents Obtaining (or Avoiding) Enhanced Damages and Fees in Copyright, Trademark, Trade Secret and Patent Actions -- TRADEMARK AND PATENT ACTIONS Authored and Submitted by: M. Kelly Tillery, Esquire Pepper Hamilton LLP, Philadelphia PART ONE RECOVERY OF ATTORNEYS FEES IN TRADEMARK CASES...79 I. THE EXCEPTIONAL CASE...79 A. STATUTORY AUTHORITY THE LANHAM ACT...79 B. THE LEGISLATIVE HISTORY OF SECTION 1117(a) NARROWLY DEFINES EXCEPTIONAL CASE...80 C. THE THIRD CIRCUIT REQUIRES THAT THE TOTALITY OF THE CIRCUMSTANCES BE EXAMINED TO DETERMINE WHETHER A CASE IS EXCEPTIONAL...81 D. A DISTRICT COURT MUST ENGAGE IN A MULTI-STEP PROCESS TO DETERMINE WHETHER ANY ATTORNEYS FEE AWARD IS APPROPRIATE...82 E. THE PREVAILING PARTY DETERMINATION...84 F. THE BURDEN OF PROOF REQUIRED TO ESTABLISH THE ELEMENTS FOR AN ATTORNEYS FEE CLAIM...84 G. WHAT HAS BEEN FOUND TO BE AND WHAT HAS BEEN FOUND NOT TO CONSTITUTE CULPABLE CONDUCT...86 H. A LAPP FACTOR INTENT FINDING IS NOT EQUIVALENT TO A 1117(a) FINDING OF KNOWING/DELIBERATE/WILLFUL INFRINGEMENT...91 I. GOOD FAITH USES AND ADVICE OF COUNSEL MAY MAKE CASE UNEXCEPTIONAL...93 J. WHAT HAS BEEN FOUND TO BE AND WHAT HAS BEEN FOUND NOT TO CONSTITUTE LITIGATION MISCONDUCT?...93 K. THE PREVAILING PARTY S OWN LITIGATION MISCONDUCT MAY BE SUFFICIENT TO NEGATE ANY CLAIM FOR ATTORNEYS FEES...96 L. EVEN IF A COURT FINDS CULPABLE CONDUCT, THE TOTALITY OF THE CIRCUMSTANCES MAY NOT SUPPORT A FINDING OF EXCEPTIONAL CASE 97 II. EVEN IF A COURT FINDS CULPABLE CONDUCT AND EXCEPTIONAL CASE, AN AWARD OF ALL, OR EVEN MOST ATTORNEYS FEES MAY BE UNFAIR AND INAPPROPRIATE...98 A. THE COURT MUST STILL THEN BALANCE FACTS IN THE TOTALITY OF THE CIRCUMSTANCES...99 III. CONCLUSION...99 PART TWO INCREASED/ENHANCED DAMAGES IN TRADEMARK CASES...100 vi
I. STATUTORY AUTHORITY ACTUAL DAMAGES...100 A. SECTION 35(a) OF THE LANHAM ACT PROVIDES:...100 II. ACTUAL DAMAGES...100 A. PURPOSE: TO COMPENSATE INJURED PLAINTIFF...100 B. DOES NOT REQUIRE WILLFUL INFRINGEMENT...100 C. ACTUAL DAMAGES INCLUDE:...100 D. CANNOT BE BASED ON CONJECTURE/SPECULATION...101 E. REQUIRES PROOF OF ACTUAL CONFUSION...101 F. PRE-JUDGMENT INTEREST...101 G. PUNITIVE DAMAGES NOT AVAILABLE...101 III. ENHANCED ACTUAL DAMAGES...101 A. LIMITS...101 B. APPEAL...102 IV. STATUTORY AUTHORITY DEFENDANT S PROFITS...102 A. SECTION 35(A) OF THE LANHAM ACT ALSO INCLUDES A PROVISION FOR THE INCREASE OR DECREASE OF ANY AWARD OF DEFENDANT S PROFITS, THOUGH DIFFERENT FROM THE LANGUAGE USED FOR POTENTIAL INCREASE (ONLY) OF AN AWARD OF PLAINTIFF S ACTUAL DAMAGES:...102 V. DEFENDANT S PROFITS ACCOUNTING AND DISGORGEMENT...102 A. REQUIRES FINDING OF WILLFUL OR BAD FAITH INFRINGEMENT IN MOST CIRCUITS (UNLIKE WITH ACTUAL DAMAGES)...102 B. DOES NOT REQUIRE PROOF OF ACTUAL CONFUSION (UNLIKE WITH ACTUAL DAMAGES IN MOST CIRCUITS)...102 VI. INCREASE/DECREASE IN AWARD OF DEFENDANT S PROFITS...102 A. COURT DISCRETION IS WIDE...102 B. PURPOSE OF INCREASE...103 C. PLAINTIFF CANNOT RECOVER ITS LOST PROFITS (ACTUAL DAMAGES) AND DEFENDANT S PROFITS...103 D. FACTORS THAT COURTS CONSIDER...103 E. LIMITS ON COURT POWER...103 VII. ANTI-COUNTERFEITING CONSUMER PROTECTION ACT COUNTERFEITING CASE 15 U.S.C. 1117(c)...103 A. STATUTORY DAMAGES...103 VIII. ANTI-CYBERSQUATTING CONSUMER PROTECTION ACT CYBERSQUATTING 15 U.S.C. 1117(d)...104 A. STATUTORY DAMAGES...104 vii
IX. PRACTICE POINTERS...104 A. FORUM SELECTION...104 B. ENHANCED AWARDS RARE...104 PART THREE RECOVERY OF ATTORNEYS FEES IN PATENT CASES...105 I. THE EXCEPTIONAL CASE...105 A. STATUTORY AUTHORITY THE PATENT ACT...105 B. PATENT LITIGATION IS EXPENSIVE...105 C. INHERENT POWER OF THE COURT...105 D. PURPOSE OF ATTORNEYS FEE AWARD TO PREVENT A GROSS INJUSTICE 106 E. DISTRICT COURT HAS WIDE DISCRETION...106 F. DISTRICT COURT MUST ENGAGE IN A MULTI-STEP PROCESS...107 G. BURDEN OF PROOF REQUIRED...108 H. FACTORS COURTS CONSIDER WHEN EVALUATION FEE CLAIM AGAINST ALLEGED INFRINGER...108 I. FACTORS COURTS CONSIDER WHEN EVALUATING FEE CLAIM AGAINST PATENTEE...108 J. WHAT HAS BEEN FOUND TO BE AND NOT TO BE INEQUITABLE CONDUCT.108 K. WHAT HAS BEEN FOUND TO BE AND NOT TO BE BAD FAITH AND VEXATIOUS LITIGATION...109 L. LODESTAR ADJUSTMENT OF FEE AWARD...113 M. APPEAL STANDARD OF REVIEW...113 N. COSTS AND LITIGATION EXPENSE...113 O. BLAMING LAWYERS AND/OR CLIENTS...113 P. PREJUDGMENT INTEREST ON FEE AWARD...114 Q. LAGNIAPPE...114 PART FOUR INCREASED/TREBLED DAMAGES IN PATENT CASES...115 A. STATUTORY AUTHORITY THE PATENT ACT...115 B. BASES FOR INCREASED DAMAGES...115 C. FACTORS COURTS EXAMINE...115 D. DETERMINING BAD FAITH - THE THREE BOTT FACTORS...116 E. DUTY OF DUE CARE...116 F. RELIANCE ON OPINION OF COMPETENT U.S. PATENT COUNSEL...116 G. SUBSTANTIAL GOOD FAITH DEFENSE OF NO INFRINGEMENT AND/OR INVALIDITY...116 H. WHEN COPYING IS ACTUALLY DESIGN AROUND...117 I. BURDEN OF PROOF...117 J. APPEAL STANDARD OF REVIEW...117 K. INCREASE DAMAGES BY HOW MUCH? WHY? ON WHAT BASIS?...117 viii
L. POWER OF COURT TO INCREASE IS LIMITED TO ACTUAL DAMAGES...117 M. ROLE OF JURY4612...117 Contact Information...118 ix