Supreme Court's Exceptionality Standard for Attorneys' Fees Awards under the Patent Act Applies to Lanham Act Claims: Third Circuit | Practical Law

Supreme Court's Exceptionality Standard for Attorneys' Fees Awards under the Patent Act Applies to Lanham Act Claims: Third Circuit | Practical Law

In Fair Wind Sailing, Inc. v. Dempster, the US Court of Appeals for the Third Circuit remanded a trade dress infringement and unjust enrichment case to the district court to assess whether an award of attorneys' fees was warranted, notably holding that the exceptional case standard set out in the Supreme Court’s Octane Fitness decision under the Patent Act applies to Lanham Act cases.

Supreme Court's Exceptionality Standard for Attorneys' Fees Awards under the Patent Act Applies to Lanham Act Claims: Third Circuit

by Practical Law Intellectual Property & Technology
Published on 05 Sep 2014 • USA (National/Federal)
In Fair Wind Sailing, Inc. v. Dempster, the US Court of Appeals for the Third Circuit remanded a trade dress infringement and unjust enrichment case to the district court to assess whether an award of attorneys' fees was warranted, notably holding that the exceptional case standard set out in the Supreme Court’s Octane Fitness decision under the Patent Act applies to Lanham Act cases.
On September 4, 2014, the US Court of Appeals for the Third Circuit in Fair Wind Sailing, Inc. v. Dempster affirmed the District Court of the Virgin Islands' dismissal of the plaintiff's trade dress infringement and unjust enrichment claims (No. 13-3305, 14-1572, (3d Cir. Sept. 4, 2014)). Notably, the Third Circuit held that the standard for assessing exceptionality under the Patent Act as established by the US Supreme Court's decision in Octane Fitness, LLC v. Icon Health & Fitness, Inc. applies to assessing whether a Lanham Act case is exceptional for purposes of awarding attorneys' fees (134 S.Ct. 1749 (2014)).
Fair Wind Sailing, Inc. sued H. Scott Dempster alleging trade dress infringement under the Lanham Act and unjust enrichment. The district court dismissed both of Fair Wind's claims and awarded Dempster attorneys' fees under Section 35(a) of the Lanham Act (15 U.S.C. § 1117(a)). Fair Winds challenged both the dismissal and the award of attorneys' fees. While on appeal, the Supreme Court decided Octane Fitness, LLC v. Icon Health & Fitness, Inc. and held that district courts may determine whether a case is "exceptional" for purposes of an attorneys' fees award under Section 285 of the Patent Act on a case-by-case basis in their discretion, considering the totality of the circumstances (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.
On appeal, the Third Circuit:
  • Affirmed dismissal of both the trade dress infringement and unjust enrichment claims because Fair Wind:
    • failed to adequately explain what trade dress it sought to protect and the trade dress as pleaded was functional; and
    • did not plead its unjust enrichment claim with sufficient particularity.
  • Remanded the fee dispute to the district court for further proceedings applying the Octane Fitness standard to assess exceptionality under Section 35(a) of the Lanham Act, which authorizes an attorneys' fee award to the prevailing party in "exceptional" cases.
Although Octane Fitness concerned the district court's discretion to award fees in a patent case, the Third Circuit reasoned that the Supreme Court's definition of exceptionality under the Patent Act should apply to Lanham Act actions because:
  • Section 285 of the Patent Act is identical to Section 35(a) of the Lanham Act, which the Supreme Court acknowledged in Octane Fitness.
  • Congress referenced Section 285 of the Patent Act in passing Section 35(a) of the Lanham Act.
The Third Circuit noted that, under Octane Fitness, a district court may find a case exceptional, and award fees to the prevailing party, where either:
  • There is an unusual discrepancy in the merits of the parties' positions.
  • The losing party has litigated the case in an unreasonable manner.
The court noted that the determination is made on a case-by-case basis assessing the totality of the circumstances and that the losing party's culpability is no longer a threshold requirement for finding exceptionality, as it had been in previous Third Circuit Lanham Act decisions.