Low Octane Levels? Octane Fitness’ Impact in the Trademark and Trade Secret Realms

We have previously addressed the Supreme Court’s decision in Octane Fitness, LLC v. Icon Health & Fitness, Inc., 12-1184, Slip Op. at 7 (2014), which relaxed the standard for awarding attorney’s fees under Section 285 of the Patent Act (“§285”) and ruled that decisions on §285 are entitled to deference on appeal.  In the patent litigation realm, the Octane Fitness decision does not seem to have led to an overwhelming trend toward awarding fees.  It does, however, beg the question: how has this impacted the standard for awarding attorney’s fees in other types of intellectual property cases, such as trademarks and trade secrets?

Trademarks

Attorney’s fees for trademark cases are governed by the Lanham Act.  Under 15 U.S.C. § 1117, a court “in exceptional cases may award reasonable attorney’s fees to the prevailing party.”  Six months after the Octane Fitness ruling, its impact on trademark cases has been inconclusive.  The Third Circuit Court of Appeals expressly adopted the Octane Fitness standard in the case of Fair Wind Sailing v. Dempster, Case Nos. 13-3305, 14-1572 (3d Cir. Sept. 4, 2014).  In this case, which involved a dispute over the trade dress of a sailing school, the court found that a finding of culpable behavior was no longer necessary for the awarding of attorneys’ fees.  Instead, the court applied the Octane Fitness standard, finding that the “exceptional case” language in both the Lanham Act and the Patent Act was identical, and thus, the same standard applied to both.  Other district courts have followed suit.  See BMW of North Am., LLC v. Cudahar, No. 6:14-cv-40-ORL-37DAB, 2014 U.S. Dist. LEXIS 112365, at *4-6 (M.D. Fla. June 20, 2014); Am. Nat’l Ins. Co. v. Am. Nat’l Inv. Advisors, LLC, No. 11-CV-4016, 2014 WL 6613342, at *20 (N.D. Ill. Nov. 21, 2014)(declining to award attorney’s fees in a trademark case where the Octane Fitness standard was not met).

However, other courts have declined to apply Octane Fitness in authorizing attorney’s fees in trademark cases.  For example, the Sixth Circuit declined to apply Octane Fitness to trademark claims, despite applying that standard to patent claims in the same case.  Premium Balloon Accessories v. Creative Ballon Mfg., Inc. Nos. 13-3587, 13-4049, 13-4130, 2014 U.S. App. LEXIS 15326 (6th Cir. Aug. 7, 2014).  Similarly, the Northern District of California has continued to apply the Ninth Circuit’s approach in determining whether a case is exceptional under the Lanham Act. Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846-LHK, 2014 U.S. Dist. LEXIS 117494, at *53 n. 1 (N.D. Cal. Aug. 20, 2014).  Under the Ninth Circuit approach, willful infringement alone is insufficient to support an award of fees “in the absence of some aggravating circumstance or heightened level of culpability.”  Id.  The court has discretion to award fees, based on the court’s evaluation of the totality of the circumstances.

Still other courts have applied both Octane Fitness as well as the traditional standard in that circuit.  For example, in the case of Monster Daddy v. Monster Cable Products, Inc., No. CIV.A. 6:10-1170-MGL, 2014 WL 2780331, at *1 (D.S.C. June 19, 2014), the court applied the Fourth Circuit’s standard, as well as Octane Fitness, finding that under either standard, the case was not exceptional and did not warrant attorneys’ fees.

Trade Secrets

Unlike the Patent Act and the Lanham Act, state trade secret statutes do not require “exceptional cases” in order to award fees.  Under the Uniform Trade Secrets Act (“UTSA”), “if a claim of misappropriation is made in bad faith. . . the court may award reasonable attorney’s fees to the prevailing party.”  In states such as New York, where UTSA has not been adopted, the Federal Courts rely on their inherent power to award fees.  See Ransmeier v. Mariani, 718 F.3d 64, 68 (2d. Cir. 2013)(permitting the court to use its inherent power to sanction a party who has acted “in bad faith, vexatiously, wantonly, or for oppressive reasons”).

A recent federal case in the Southern District of New York, however, suggests that the courts may consider Octane Fitness in deciding whether to award fees.  In the case of TNS Media Research, LLC v. TiVo Research and Analytics, Inc., 2014 U.S. Dist. LEXIS 155914 (S.D.N.Y. Nov. 4, 2014), TiVo Research sued TNS, alleging patent infringement and trade secret misappropriation.  The court found both claims meritless and awarded summary judgment for TNS, which subsequently sought fees from TiVo.  The court granted attorney’s fees for the patent claims, finding that TiVo’s conduct was exceptional, and sanctionable.  However, the court also awarded attorney’s fees in connection with the trade secret claims, finding “bad faith may be inferred” because the claims were “so completely without merit” as to require the conclusion that they may have been undertaken for some improper purpose.”  Although the court applied different standards in awarding attorney’s fees for the two types of claims, the patent fee shifting standard appears to have been influential, as both fee awards were driven by the weak nature of the claims.  Further, fee awards in favor of trade secret defendants are extremely rare: neither party cited a single case where a trade secret defendant was awarded fees.

Conclusion

Recent cases suggest that Octane Fitness has had some impact on the awarding of attorneys’ fees in trademark and trade secret cases, and that the courts may consult that case for guidance in deciding whether to award fees.  How significant the impact is remains to be seen, and we will continue to update you as additional cases are decided.  However, recent decisions suggest that plaintiffs should continue to use caution and avoid pursuing questionable claims in order to avoid being forced to pay significant attorney’s fees.

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Posted By:
Jessica Mendelson

Jessica Mendelson

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