Attorney’s Fees Under the Lanham Act

Posted by on Aug 27, 2013

Today we look at Aviva USA Corporation v. Vazirani, a case recently heard by the United States District Court for the District of Arizona.  Interestingly, Arizona is located in the famous (or infamous) 9th Circuit of the United States, the largest circuit including areas as diverse as Alaska, Oregon, California, and of course, Arizona.  This case explores the issue of when it is appropriate to award attorney’s fees to the prevailing party in an action for trademark infringement.

Attorney’s Fees, Generally

In the British judicial system the rule is that the losing party pays the attorney’s fees of the victor.  Although we have adopted many features of the British system, the automatic award of fees is not one of the elements.  The prevailing rule in the United States is that each party to a lawsuit pays for their own costs and fees.  A full discussion of the benefits and consequences of each system is beyond the scope of this article; however one thing to note is that in the United States, under certain circumstances, one party may have to pay the attorney’s fees and costs of the other.  We examine these special circumstances in the trademark context.

Background of the Case

Plaintiff Aviva is a large insurance company with many clients and services.  Defendant Vazirani and other co-defendants used to sell life insurance products for the plaintiff at some point in the past, but no longer do so.  In fact, the two sides have been embroiled in disputes and litigation over the severing of their former contractual relationship.

The cozy relationship turned sour, the plaintiffs sued for both trademark infringement and racketeering!  As any fan of the television series The Sopranos would tell you, racketeering is an allegation made under the Racketeer Influenced Corrupt Organization (or RICO) statutes which seeks to combat organized crime and corporations controlled by criminals.

The court summarily dismissed both the trademark infringement and the RICO claims without bothering with a trial.  The defendant now asks for the award of attorney’s fees.  We will focus on only the trademark portion of the lawsuit here.

Lanham Act Section 35(a)

The court discussed the standard for attorney fees awards in the 9th Circuit.  Under Section 35(a) of the Lanham Act (AKA 15 USC 1117(a)), a prevailing party is entitled to fees only in “exceptional cases.”  As the court mentions, the 9th Circuit interprets the word “exceptional” very narrowly, citing Gracie v. Gracie.

Cases are deemed exceptional when “the non-prevailing party’s case is groundless, unreasonable, vexatious, or pursued in bad faith.”  A case that is settled by summary judgment is not exceptional in the court’s eyes – there has to be more impropriety or bad motive.  The burden is on the prevailing party to show the case is exceptional via “compelling proof” – a higher standard than the preponderance (more likely than not) standard normally applied to civil cases.

Defendant said that plaintiff’s purpose was to harass and chill their right to free speech in a non-commercial setting.  The court, after a long discussion, focused on the fact that there was some merit to Aviva’s lawsuit.  There was some suggestion of customer confusion and defendant did in fact offer some products in competition with Aviva.  So although the plaintiff’s case failed rather badly, relying on hearsay evidence, among other defects, it bore the trappings of legitimacy, and thus the narrow construction of “exceptional” cut against the defendant.  The court ruled that the award of fees was not appropriate.