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Unlike the systems of many other countries, the “American” rule in litigation provides that each party is responsible for paying its own attorney fees, regardless of who prevails. There are certain statutory exceptions that permit the prevailing party to recover reasonable attorney fees incurred during the litigation from the losing party. One such exception is set forth in �35 of the Lanham Act: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. 1117(a). The “exceptional” standard is subjective, and has forced courts to develop their own criteria for what type of conduct makes a case eligible for the award of attorney fees to a prevailing party. The legislative history of �35 provides some basic guidance, stating that an exceptional case is one “where the act of infringement can be characterized as ‘malicious,’ ‘fraudulent,’ ‘deliberate,’ or ‘willful’ ” or “ when equitable considerations justify such awards.” S. Rep. No. 93-1400, at 5-6 (1974), reprinted in 1974 U.S.C.C.A.N. 7132-33, 7137. But because there is no bright-line test for conduct that falls to such a level as to make a case exceptional, different courts have taken different approaches, which has resulted in inconsistent holdings across circuits. The determination of whether a case is exceptional is left to the trial court judge’s discretion. See, e.g., Tamko Roofing Prods. v. Ideal Roofing Co., 282 F.3d 23, 31 n.5 (1st Cir. 2002). The prevailing party must demonstrate the exceptional nature of the case by “clear and convincing evidence.” Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1390 (5th Cir. 1996). An appeal from an award of attorney fees is generally reviewed on an abuse of discretion standard. See, e.g., Tamko, 282 F.3d at 30; SecuraComm Consulting Inc. v. Securacom Inc., 224 F.3d 273, 279 (3d Cir. 2000); Waco Int’l Inc. v. KHK Scaffolding Houston Inc., 278 F.3d 523, 529 (5th Cir. 2002); Retail Servs. Inc. v. Freebies Pub., 364 F.3d 535, 550 (4th Cir. 2004). On appellate review, a district court’s determination may be set aside if it fails to articulate the reasoning behind its award, unless the record supports the decision. See, e.g., Earthquake Sound Corp. v. Bumper Indus., 352 F.3d 1210, 1216 (9th Cir. 2003) (citing Tamko, 282 F.3d at 31). Because the legislative history of 15 U.S.C. 1117 mentions willfulness as a type of infringement that can be characterized as exceptional, some courts have awarded attorney fees merely upon a showing of willful or intentional infringement. See, e.g., Horphag Research Ltd. v. Pellegrini, 337 F.3d 1036, 1042 (9th Cir. 2003); BASF Corp. v. Old World Trading Co. Inc., 41 F.3d 1081, 1099 (7th Cir. 1994); Tamko, 282 F.3d at 32-34; Earthquake Sound, 352 F.3d at 1219. Most courts, however, require a showing of more than just willful infringement — that is, more than just deliberate or knowing infringement. There is usually an additional showing of culpable conduct akin to malice, fraud or bad faith on the part of the losing party when attorney fees are awarded. See, e.g., Conopco Inc. v. Campbell Soup Co., 95 F.3d 187, 194-95 (2d Cir. 1996); Scotch Whisky Ass’n v. Majestic Distilling Co., 958 F.2d 594, 599 (4th Cir. 1992); Moore Bus. Forms Inc. v. Ryu, 960 F.2d 486, 491-92 (5th Cir. 1992) (citation omitted). This additional culpable conduct does not necessarily have to be connected to the infringing activity; instead, it can be malicious or oppressive litigation tactics or other bad behavior on the part of the losing party. Some courts have even gone so far as to classify a case as exceptional if there is any type of culpable conduct on the part of the losing party, even if there is no finding of willful infringement. See, e.g., Patsy’s Brand Inc. v. I.O.B. Realty Inc., 317 F.3d 209, 221-22 (2d Cir. 2003); SecuraComm Consulting, 224 F.3d at 280. TYPES OF MISCONDUCT The courts thus consider a wide variety of behavior in making the determination as to whether a case is “exceptional.” Often, it is the exceptional nature of the infringing activity itself that gives rise to the award of attorney fees. Courts have found a case to be exceptional when, prior to adopting a mark, an accused infringer did not search and clear the mark for use. See, e.g., N.Y. State Soc’y of Certified Pub. Accountants v. Eric Louis Assocs., 79 F. Supp. 2d 331, 347-50 (S.D.N.Y. 1999). However, consulting with an attorney is not a complete bar to a finding of willfulness. See, e.g., Takecare Corp. v. Takecare of Okla. Inc., 889 F.2d 955, 957-58 (10th Cir. 1989). Courts have found cases to be exceptional when the accused infringer continues to violate the trademark owner’s rights after the infringer has been put on notice that its conduct violates the Lanham Act. See, e.g., Bear U.S.A. Inc. v. JooAn Co., No. 98 Civ. 7649, 2001 U.S. Dist. Lexis 637, at 29 (S.D.N.Y. 2001); Discovery Communications Inc. v. Animal Planet Inc., 172 F. Supp. 2d 1282, 1292 (C.D. Calif. 2001); but see Moore Bus. Forms, 960 F.2d at 492 (distinguishing between continued use after notice and adoption of a trademark with notice). Often, it is a combination of bad acts on the part of the infringer that warrants an award of attorney fees. For example, the 1st U.S. Circuit Court of Appeals awarded attorney fees to the plaintiff in Tamko based on a combination of willful behavior in connection with the infringement and bad-faith conduct by the defendant (including failure to clear the mark, use of the mark in similar stylized format, violating settlement terms and ignoring a preliminary injunction). Tamko, 282 F.3d at 33. One court has found that reverse passing off, i.e., when the defendant passes off the plaintiff’s products as the defendant’s, is more egregious than passing off, as it involves “deliberate theft” and thus, clearly qualifies as exceptional. Johnson v. Jones, 149 F.3d 494, 504 (6th Cir. 1998). Attorney fees can also be awarded based merely on the parties’ conduct during litigation. For example, in the Southern District of New York, as well as in several other courts, the failure to appear, answer or participate in discovery, demonstrates bad faith so as to warrant an award of attorney fees to the prevailing party. See, e.g., Christian Dior Couture S.A. v. Fred’s Int’l Handbags, No. 98 Civ. 6265, 2002 U.S. Dist. Lexis 778, at 14 (S.D.N.Y. Jan. 17, 2002); Bear U.S.A., 2001 U.S. Dist. Lexis 637, at 29 (citations omitted); Patsy’s Brand, 317 F.3d at 222; Coach Inc. v. We Care Trading Co., No. 99 Civ. 11672, 2001 U.S. Dist Lexis 9879, at 49-54 (S.D.N.Y. July 21, 2001), aff’d, 67 Fed. Appx. 626, 631 (2d Cir. 2002). Similarly, when a party gives false testimony, disobeys a court order or has engaged in vexatious litigation, attorney fees have been awarded even though the infringement itself did not provide a basis for a finding of an “exceptional” case. See, e.g., Rio Properties Inc. v. Rio Int’l Interlink, 284 F.3d 1007 (9th Cir. 2002). Facts that warrant against an attorney fee award include when the area of law is unclear; when there is a close legal question regarding infringement; and when the defendant relied upon reasonable advice of counsel, had no intention to deceive or made a concerted effort to create a noninfringing mark. Ferrero U.S.A. Inc. v. Ozark Trading Inc., 952 F.2d 44, 49 (3d Cir. 1991); Martin’s Herend Imp. Inc. v. Diamond & Gem Trading USA, 112 F.3d 1296, 1305 (5th Cir. 1997). Yet the existence of some or all of these factors is not determinative. For example, failure to conduct a trademark search before use may evidence carelessness, not bad faith. See Tamko, 282 F.3d at 33-34. It is the totality of the circumstances surrounding the infringing activity, and the parties’ conduct in connection with the lawsuit that is examined to determine whether a case is exceptional. See, e.g., Procter & Gamble Co. v. Amway Corp., 280 F.3d 519, 527 (5th Cir. 2002); Yankee Candle Co. v. Bridgewater Candle Co., 140 F. Supp. 2d 111, 120 (D. Mass. 2001). The test for whether a case is exceptional tends to overlap with the evaluation of whether damages should be awarded and trebled under 15 U.S.C. 1117(a). While many courts agree that damages, or the lack thereof, is an important consideration in making a determination of an “exceptional” case under the statute, some courts hold that a showing of damages is not required. See, e.g., Centaur Comm. Ltd. v. A/S/M Comm. Inc., 830 F.2d 1217, 1229 (2d Cir. 1987); Post Office v. Portec Inc., 913 F.2d 802, 812 (10th Cir. 1990), vacated on other grounds, 499 U.S. 915 (1991); but see Hindu Incense v. Meadows, 692 F.2d 1048, 1052 (6th Cir. 1982) (no lost sales renders case “unexceptional”); Texas Pig Stands Inc. v. Hard Rock Caf� Int’l Inc., 951 F.2d 684, 697 (5th Cir. 1992). PREVAILING DEFENDANTS An award of attorney fees is not limited to prevailing plaintiffs. The legislative history of �35 of the Lanham Act states that attorney fee awards are also to afford protection to defendants “against unfounded suits . . . for harassment and the like.” S. Rep. No. 93-1400 at 5, 6. Some courts interpret this legislative history to provide relief to prevailing defendants only when it can be shown that the plaintiff brought or litigated the suit in bad faith. See, e.g., Conopco Inc., 95 F.3d at 195; SecuraComm Consulting, 224 F.3d at 282 n.2; Lipscher v. LRP Publications Inc., 266 F.3d 1305, 1320 (11th Cir. 2001). Other courts instead examine other factors such as the merits of the lawsuit. See, e.g., Ale House Mgmt. Inc. v. Raleigh Ale House Inc., 205 F.3d 137, 144 (4th Cir. 2000) (considering economic coercion, groundless arguments and failure to cite controlling law); Hartman v. Hallmark Cards, 833 F.2d 117, 123 (8th Cir. 1987) (denying fees); Stephen W. Bone Inc. v. Boney Servs. Inc., 127 F.3d 821, 827 (9th Cir. 1997). For example, the 9th Circuit uses a standard of whether a plaintiff’s claim is “groundless, unreasonable, vexatious, or pursued in bad faith.” Cairns v. Franklin Mint Co., 292 F.3d 1139, 1156 (9th Cir. 2002). The 10th Circuit adopts a more holistic approach, looking to the entirety of the plaintiff’s conduct in bringing the lawsuit and the manner in which it is prosecuted. Nat’l Ass’n of Professional Baseball Leagues Inc. v. Very Minor Leagues Inc., 223 F.3d 1143, 1147 (10th Cir. 2000). The 7th Circuit adopts the idea that a defendant must prove that the plaintiff’s claim was “oppressive,” a standard that falls between bad faith and deliberateness. Oppressive suits are “something that might be described not just as a losing suit but as a suit that had the elements of abuse of process.” Door Sys. Inc. v. Pro-Line Door Sys., 126 F.3d 1028, 1031-32 (7th Cir. 1997). A suit can also be oppressive because of lack of merit or cost of defense. Id. at 1032. Even in the 2nd Circuit, where a showing of “fraud or bad faith” is required to obtain attorney fees under the Lanham Act, “plaintiff’s pursuit of patently frivolous claims is circumstantial evidence of bad faith.” National Distillers Prods. v. Refreshment Brands Inc., No. 00 Civ. 8418, 2002 U.S. Dist. Lexis 13962, at 2-3 (S.D.N.Y. July 30, 2002). And while the 5th Circuit at one point seemed to require a showing of bad faith for a prevailing defendant to recoup attorney fees, in a later decision, the court instructed the district court to “consider the merits and substance of the civil action when examining the plaintiffs’ good or bad faith.” Procter & Gamble, 280 F.3d at 527-28. In Tamko Roofing Prods. v. Ideal Roofing Co., 294 F.3d 227, 229-30 (1st Cir. 2002), the court addressed the issue of whether attorney fees should be awarded to a prevailing party for an appeal, when that same prevailing party was awarded attorney fees in the district court. The 1st Circuit established a middle ground between the appellee’s argument that such an award should be automatic and the appellant’s argument that the appeal must be frivolous in order to warrant a fee award. The court considered, among other things, the following factors: whether the appeal was on different issues than those considered exceptional by the trial court; the strength of the appellate issues; the extent the appeal prolonged, without justification, the exceptional case; and whether the appeal “appears to be … otherwise inequitable.” The Tamko court denied an award of fees on appeal. Id. at 231; see also AANP v. American Ass’n of Naturopathic Physicians, 37 Fed. Appx. 893, 894 (9th Cir. 2002); Kellogg Co. v. Toucan Golf Inc., 337 F.3d 616, 629 (6th Cir. 2003) (holding that attorney fees claim cannot be first raised on appeal). There is no hard and fast rule or precedent that governs the award of attorney fees in Lanham Act cases. To minimize the risk of being subject to an award of attorney fees, it is advisable to get reasonable advice of counsel; not to ignore cease-and-desist letters or summonses; to cooperate in discovery; and to focus only on claims that are truly warranted. Practitioners should also be mindful that attorney fees can be awarded even when no damages have been awarded. Lara A. Holzman, Sarah C. Hsia and Philippe Bennett are attorneys in the New York office of Atlanta’s Alston & Bird. Holzman is counsel, whose practice encompasses all aspects of trademark law. Hsia is an associate, whose practice focuses on transactions and litigations involving trademarks, copyrights and digital media. Bennett is a partner and head of the intellectual property group at the New York office. He litigates patent and trademark infringements suits. Michael S. Burns, an associate who practices in trademark, copyright and patent litigation, provided additional research assistance. 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