Lanham Act: Motion for Attorney Fees Should Reveal Evidence of an Exceptional Case

In the present case, Avance Health System, Inc. (“Defendant”) has brought the motion for attorney fees against Passport Health, LLC (“Plaintiff”). This case came before the United States District Court for the Eastern District of North Carolina Western Division (“Court”) on the defendant’s renewed motion for attorney’s fees. The court granted summary judgement for the defendant’s motion. Subsequently, plaintiff appealed the court’s entry of summary judgement, however, this matter was decided during the pendency of the appeal. Defendant sought attorney fees of $257,881.19 for the fees incurred by them through August 19, 2020. Plaintiff countered the defendant’s claim and contended that their claim should be denied on the ground, since their request is not properly supported. After considering both the parties arguments, the court denied the defendant’s motion for attorney fees without prejudice. (Passport Health, LLC v. Avance Health Sys. No. 5:17-CV-187-BO (E.D.N.C. Jan. 26, 2021)).

In the original suit, filed by Plaintiff, the defendant was the prevailing party. The cause of action in the original suit was the alleged breach of a settlement with the plaintiff, caused by the defendant’s continued use of the plaintiff’s trademark in advertisements on the big search engine. The court decided the case in favour of the defendants but noted that only the factor of likelihood of confusion weighed in favour of the Plaintiff.

Section 35(a) of the Lanham Act allows a district court to “award reasonable attorney fees to the prevailing party” in “exceptional cases” involving trademark infringement. Section 1117a (Recovery for Violation of Rights) explains exceptional case is when the non-prevailing party has unreasonably litigated the case; or there is an unusual discrepancy in the merits of the positions taken by the parties,based on either frivolous or objectively unreasonable position taken by the non-prevailing party.

The defendant in their motion of attorney’s fees argued that the plaintiff unreasonably litigated the case. The defendant cited plaintiff’s failure to resolve the dispute despite the defendant creating several opportunities to do so. They additionally claimed that the plaintiff’s counsels showed hostility during depositions and caused spoliation of evidence. Further, the defendants contended that the plaintiff’s objectively unreasonable speculative damaged theory and their motion to amend the complaint to add a defendant was frivolous.

The court noted that the failure of the plaintiff to settle the case or accept the defendant’s offer of judgment was a litigation tactic that cannot be said to be patently unreasonable in light of the plaintiff’s theory of the case, which, was not frivolous. Concerning the conduct of Plaintiff and its counsel during discovery, the court noted that the discovery sanctions filed by the defendants against the plaintiffs were not warranted and, hence denied by Judge Jones.

Concerning the claim of spoilage, the court noted that even though the copy of the defendant’s ad was poorly photocopied, advertisements did not amount to spoliation. The court referred to the case of Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001), wherein spoliation has been discussed. The case explained “spoliation”, which refers to evidence that has been destroyed or materially altered, or which a party failed to properly preserve. The court stated that it was able to rely on the photocopy to adjudicate the dispositive motions. Finally, with respect to the plaintiff seeking to add an additional defendant, the court noted that the motion was moot since the defendant prevailed on its summary judgement motion.

The court found that overall the plaintiff’s manner of litigation was not unreasonable. Additionally, the court noted that the defendants did not argue that the court was not persuaded that there was otherwise a need to advance the considerations of compensation and deterrence. The court stated that, given the totality of circumstances, the defendant failed to demonstrate by a preponderance of the evidence that the present case is exceptional for purposes of the Lanham Act’s attorney fee provision.

Therefore, the court denied the defendant’s motion for attorney’s fees, and the defendant’s motion to seal its detailed billing records was granted.

Author: Saransh Chaturvedi an associate at IP And Legal Filings,  in case of any queries please contact/write back us at support@ipandlegalfilings.com.