Trademark defendant not entitled to attorney's fees and costs

In Eagles Ltd v American Eagle Foundation, the US Court of Appeals for the Sixth Circuit has affirmed a decision to refuse the defendant's motion for attorney's fees and costs, following the voluntary dismissal of the plaintiff's case. The Sixth Circuit held that the case was not exceptional under the Lanham Act because the plaintiff had legitimate grounds to dismiss.

In 1995, American Eagle Foundation (EAF) filed a trademark application for the mark AMERICAN EAGLE RECORDS. Eagles Ltd (EL), a company that is affiliated with the rock group the Eagles and is the owner of the mark EAGLES, filed an opposition. Before the US Patent and Trademark Office (USPTO) ruled on the opposition, EL filed suit in 1998 against AEF for trademark infringement and dilution under the Lanham Act. The USPTO suspended the opposition proceeding pending final disposition of the civil action.

On May 29 2001, less than two weeks before the scheduled trial date, EL moved for substitution of counsel and requested a continuance because many important witnesses, including band members, would be on tour in Europe and therefore unavailable. The court granted the motion for substitution of counsel but denied the motion for a continuance. EL then moved for voluntary dismissal of its action, arguing that it was economically unfeasible for it to go to trial with new counsel and at a time when many of its witnesses would be unavailable to testify. The court dismissed EL's case with prejudice. AEF moved for attorney's fees and costs, as well as an order directing the USPTO to dismiss the opposition with prejudice. The court denied the motions and AEF appealed.

The Sixth Circuit affirmed, rejecting AEF's claim that the district court improperly held it to a higher standard for proving an "exceptional" case under 15 USC § 1117(a). AEF claimed that Sixth Circuit precedent had created an artificial bias favouring prevailing plaintiffs in Lanham Act cases, in violation of the party-neutral approach set forth by the Supreme Court in Fogerty v Fantasy Inc. The Sixth Circuit disagreed. In Lanham Act cases involving a prevailing defendant, an exceptional case is one where a plaintiff brings a suit that could fairly be described as oppressive. The test to determine whether a suit is oppressive requires an objective inquiry into whether the suit was unfounded when it was brought, and a subjective inquiry into the plaintiff's conduct during litigation. The Sixth Circuit determined that the 'oppressive' test is similar to the standard applied to prevailing plaintiffs where an award is appropriate if the infringement is "malicious, fraudulent, wilful or deliberate" because both allow an award of fees where the opposing party abused the protections afforded by the Lanham Act. The standard applied by the district court therefore did not violate the Fogerty party-neutral requirement.

The Sixth Circuit also rejected arguments that the district court had applied an incorrect heightened "clear and convincing" burden of proof, and had applied the wrong standard because it based its denial on a finding that EL brought the action in good faith. The Sixth Circuit found that (i) EL had colourable legal arguments and legitimate reasons for dismissing the lawsuit, and (ii) the district court did not abuse its discretion in holding that AEF was not entitled to attorney's fees.

The Sixth Circuit also affirmed the district court's decision not to order the USPTO to dismiss the pending opposition because the district court did not have authority to decide an issue regarding a mark that was not properly before it. The issue in this case was whether AEF's activities infringed or diluted EL's EAGLES mark, not AEF's rights in the AMERICAN EAGLE RECORDS mark.

William Jackson, Brinks Hofer Gilson & Lione, Chicago