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granting defendant's motion for attorney fees under the Lanham Act reasoning that plaintiffs case initially presented “some arguable issues” but after the court entered a lengthy order denying Plaintiff's motion for preliminary injunction pointing out the weaknesses of the plaintiff's Lanham Act claims, the “plaintiff failed to fill the gaps or respond in any meaningful way to the Court's direction, yet pursued the non-meritorious case, the case became exceptional” because “[i]nstead of acknowledging the flaws in [its] case, plaintiff pressed forward and required defendants to file, brief, and argue their summary judgment motion”
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Civil Action No. 00-6230 (JBS)
May 9, 2003
William C. Mead, Jr., Esquire, A. Fred Ruttenberg, Esquire, BLANK ROME COMISKY MCCAULEY LLP, Cherry Hill, New Jersey, for Plaintiff.
Donald A. Robinson, Esquire, ROBINSON LIVELLI, Newark, New Jersey, Richard Lehv, Esquire, Tamar Niv Bessinger, Esquire, Jessica Mann, Esquire, FROSS, ZELNICK, LEHRMAN ZISSU, P.C., New York, New York, for Defendants The Earthgrains Co. (now known as Sara Lee Baking Group, Inc.), Earthgrains Baking Companies, Inc., and Earthgrains Refrigerated Dough Products, L.P.
OPINION
Under section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a), the district court has authority to award attorneys's fees to the prevailing party in certain trademark cases, but only if the case is an "exceptional" case. The prevailing defendants in this trademark infringement and unfair competition case about the use of the "BREAK BAKE" mark on premade cookie dough have filed the present motion for attorneys' fees and costs pursuant to section 35(a), seeking $263,938.56 in fees and $74,269.09 in costs for a total of $338,207.65. They argue that this case was "exceptional" because plaintiff pursued the action when it was clear that its position lacked merit, so they are entitled to fees and costs. This argument requires the Court to determine (1) whether defendants are entitled to attorneys fees because this case was exceptional and (2) whether section 35(a) of the Lanham Act allows an award of costs to prevailing defendants.
The Court has considered the submissions of the parties and has decided that the case, though not exceptional when filed, became exceptional on November 29, 2001. By that time, plaintiff had received this Court's lengthy preliminary injunction opinion of June 27, 2001 that outlined what evidence was necessary for its success on the merits, and plaintiff had obtained its expert report which was devoid of the necessary evidence under the uncontroverted legal standard, yet continued its action. Pursuant to section 35(a), the Court will award defendants $89,600.00 in attorneys' fees for reasonable amounts incurred after the case became exceptional on November 29, 2001. The Court will not award costs, finding that the statute restricts such an award to prevailing plaintiffs.
In J J Snack Foods Corp. v. The Earthgrains Co., 149 F. Supp.2d 136 (D.N.J. 2001), this Court denied plaintiff's motion for preliminary injunctive relief based on the clear lack of a likelihood of success on the merits, as well as other factors.
I. BACKGROUND
J J Snack Foods ("J J") filed its complaint on December 26, 2000, alleging that defendants, The Earthgrains Co., Earthgrains Baking Companies, Inc., and Earthgrains Refrigerated Dough Products, L.P., ("Earthgrains") were infringing its "BREAK BAKE" trademark by marketing their refrigerated cookie dough as "Break `n Bake Style" cookies. The extensive factual background of the case has previously been detailed in two published opinions and will not be recounted in full here. See J J Snack Foods Corp. v. The Earthgrains Co., 220 F. Supp.2d 358 (D.N.J. 2002); J J Snack Foods Corp. v. The Earthgrains Co., 149 F. Supp.2d 136 (D.N.J. 2001). The Court will detail the procedural history of the case as pertinent to this motion.
Earthgrains is now known as "Sara Lee Baking Group, Inc." because it was purchased by Sara Lee in the summer of 2001, but will continue to be referred to as "Earthgrains" here.
The factual background involves the former consolidated case J J Snack Foods Corp. v. Nestle USA, Inc., Civil No. 00-3081 (JBS). J J filed a complaint in the Nestle case on June 23, 2000 charging Nestle with trademark infringement and unfair competition based on its use of the "BREAK BAKE" mark on its pre-scored cookie dough. On March 21, 2001, this Earthgrains case was consolidated with the Nestle case.
The cases were then deconsolidated on December 20, 2001, after this Court had issued its June 27, 2001 preliminary injunction decision. The parties to the Nestle action reported their case settled, and on January 22, 2002, a stipulation of dismissal with prejudice was filed in the Nestle action.
Plaintiff J J filed this suit based on its trademark right to the use of the "BREAK BAKE" mark on its frozen cookie dough which it packaged as a sheet of twenty-four round disks of dough that the consumer could "[b]reak apart . . . and bake for delicious cookies." The suit was filed when Earthgrains marketed refrigerated cookie dough labeled as "Break `n Bake Style" that was packaged in a rectangular sheet of dough which was partially scored to form twenty dough cubes.
On January 16, 1996, the United States Patent and Trademark Office ("PTO") granted trademark registration to Schwan's Sales Enterprises, Inc. for use of the "BREAK BAKE" mark on frozen cookie dough. On February 4, 1999, J J acquired Camden Creek Bakery from Schwan, and also received an assignment of the trademark rights to the "BREAK BAKE" mark.
Plaintiff requested preliminary injunctive relief to enjoin the use of the "BREAK BAKE" mark. On June 27, 2001, this Court denied the preliminary injunction motion and issued lengthy findings of facts and conclusions of law. Most of the opinion, published as J J Snack Foods Corp. v. The Earthgrains Co., 149 F. Supp.2d 136 (D.N.J. 2001), explained the Court's finding that plaintiff was not likely to succeed on the merits of its claims. The Court spelled out the requirements for Lanham Act trademark protection and detailed what plaintiff needed to prove to establish a viable infringement case.
To establish a claim of trademark infringement under § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1), plaintiff must show that (1) it owns the mark; (2) its mark is valid and legally protectable; and (3) the Defendant's use of the mark to identify its goods or services is likely to create confusion concerning the origin of those goods or services. Here, there was no dispute that plaintiff owned the mark. At issue was whether the mark was legally protectable as a suggestive mark or as a descriptive mark with secondary meaning, and whether the defendants' use of the mark created a likelihood of confusion.
The Court found that it was unlikely that plaintiff would be able to show that its mark warranted trademark protection because it had not presented evidence that could establish that its mark should be classified as a suggestive mark and because it had not shown that its mark, if classified as a descriptive mark, had developed a secondary meaning with the consuming public. The Court also explained that the mark, even if it was suggestive or descriptive with secondary meaning, was likely still not protectable because plaintiff had not shown anything to indicate that there was a likelihood of confusion between its product and defendants' product. Id. at 154-57.
A suggestive mark "suggest[s] rather than describe[s] the characteristics of the goods." A.J. Canfield, 808 F.2d at 296. It requires "consumer `imagination, thought, or perception' to determine what the product is." A H Sportswear, Inc v. Victoria's Secret Stores, Inc., 237 F.3d 198, 222 (3d Cir. 2000).
A descriptive mark "describe[s] the purpose, function or use of the product, a desirable characteristic of the product, or the nature of the product." 2 McCarthy, Trademarks and Unfair Competition § 11:16. It is a mark that "immediately conveys knowledge of the ingredients, qualities or characteristics of the product." interState Net Bank v. Netb@nk, Inc., No. 01-1324, 2002 WL 31050952 at *4 (D.N.J. Sept. 16, 2002).
Plaintiff never argued that the mark was legally protectable as an arbitrary or fanciful mark. Defendants did argue that the mark was not protectable because it was a generic mark, but the Court found that based on the preliminary injunction record, while the issue was "admittedly close," defendants had not shown the mark was generic.
The Court explained that the products had "markedly different" package sizes and design styles and that plaintiff had not produced any evidence of actual confusion or of advertising, and that plaintiff had only sold to one limited market. J J Snack I, 149 F. Supp.2d at 155-56.
On April 3, 2002, Earthgrains filed a motion for summary judgment. The only difference in plaintiff's case between the preliminary injunction motion and the summary judgment motion was an October 12, 2001 survey of Michael Rappeport, Ph.D. and the accompanying November 28, 2001 deposition testimony of Dr. Rappeport. J J Snack II, 220 F. Supp.2d at 361. Dr. Rappeport's survey "suffer[ed] from substantial flaws" and the Court found that it was unreliable and inadmissible. Id. at 372. It failed to properly define suggestive and descriptive marks, even though it was submitted as evidence of the suggestive nature of the "BREAK BAKE" mark, and it did not attempt to replicate the market conditions of the J J product. Id. at 370-71.
Dr. Rappeport admitted his survey did not "tell you whether [the mark] describes a desirable characteristic of the J J product," but felt the mark was descriptive under his own opinion of what should be considered a descriptive mark.
Dr. Rappeport's survey determined what adults at four United States shopping malls thought about the nature of a product labeled "BREAK BAKE," although J J frozen dough product was only marketed to commercial distributors in the food service industry.
After finding the Rappeport survey inadmissible, the Court considered a record that corresponded almost exactly to the record it considered for the preliminary injunction motion; the only difference was some additional evidence submitted by defendants. The Court granted the motion and entered summary judgment for defendants, finding that the "BREAK BAKE" mark is a descriptive mark with no secondary meaning and that the plaintiffs had not established likelihood of confusion because of the use of the mark on the parties' products. Id. at 380-81.
Defendants then filed the present motion seeking an award of attorneys' fees and costs as a prevailing party pursuant to section 35(a) of the Lanham Act.
II. DISCUSSION
Section 35(a) of the Lanham Act provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a) (emphasis added), and provides that a prevailing "plaintiff shall be entitled . . . to recover . . . the costs of the action." Here, defendants are unquestionably the prevailing party as they were granted summary judgment on all of plaintiff's claims. The two principal issues presented on this motion, therefore, are (A) whether this case was an "exceptional case" that justifies an award of attorneys' fees under the Lanham Act to defendant as the prevailing party, and (B) whether a prevailing defendant is entitled to recover the costs of the action under section 35(a) when it specifically refers to prevailing plaintiffs.
A. Attorneys' Fees
To determine an appropriate award of attorneys fees under section 35(a) of the Lanham Act, the Court must determine (1) whether the case was an exceptional case for which fees are warranted, and (2) if it was exceptional, whether defendants' proposed fees are reasonable and should be awarded.
1. "Exceptional case"
The Court may only award fees in a Lanham Act case if the case was "exceptional." 15 U.S.C. § 1117(a). When the prevailing party is the plaintiff, federal courts, including the Third Circuit, have consistently held that "a district court must make a finding of culpable conduct on the part of the losing party, such as bad faith, fraud, malice, or knowing infringement, before a case qualifies as `exceptional.'" Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44, 47 (3d Cir. 1991). The culpable conduct warranting a fee award generally, though not always, involves the willful infringement of a defendant who deliberately attempted to pass off its goods as those of the plaintiff "in order to free ride on the good will built up by the plaintiff." Id. at 49.
See also, e.g. Tamko Roofing Prods., Inc. v. Ideal Roofing Co., 294 F.3d 227, 229 (1st Cir. 2002); Procter Gamble Co. v. Amway Corp., 280 F.3d 519, 527 (5th Cir. 2002); Tire Kingdom, Inc. v. Morgan Tire Auto, Inc., 253 F.3d 1332, 1335 (11th Cir. 2001); Nat'l Assoc. of Prof. Baseball Leagues, Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143, 1148 (10th Cir. 2000); Stephen W. Boney, Inc. v. Boney Servs., Inc., 127 F.3d 821, 826 (9th Cir. 1997); Door Sys., Inc. v. Pro-Line Door Sys., Inc., 126 F.3d 1028, 1031 (7th Cir. 1997).
However, when the prevailing party is the defendant, as in the present case, the culpable conduct must encompass more than willful infringement because the losing party, the plaintiff, was never accused of any infringement. Securacomm Consulting, Inc. v. Securacom Inc., 224 F.3d 273, 280 (3d Cir. 2000). Therefore, when the defendant is the prevailing party, the "culpable conduct will necessarily center on the act of filing the lawsuit" and on the plaintiff's "litigation conduct." Id. at 280-81. Whether the case "qualifies as exceptional ultimately turns on consideration of the equities in full." Id.
The Third Circuit allows a prevailing defendant to receive fees under the Lanham Act. Securacomm, 224 F.3d at 280. The legislative history of the fee provision explains that:
The bill would also permit prevailing defendants to recover attorney fees in exceptional cases. This would provide protection against unfounded suits brought by trademark owners for harassment and the like. . . .
Section 3 provides that attorney fees may be awarded to the prevailing party in actions under the federal trademark laws, when equitable considerations justify such awards. It would . . . give defendants a remedy against unfounded suits.
S. Rep. No. 93-1400 at 2 (1974), reprinted in 1974 U.S.C.C.A.N. 7132, 7133, quoted in Securacomm, 224 F.3d at 280-81.
Whether the suit is, or is not, exceptional requires a factual determination by the district court because every suit that a plaintiff loses is not "exceptional." The court should consider both the objective merits of plaintiff's action (whether it was unjustified, groundless, or frivolous) and the plaintiff's subjective conduct throughout the litigation (whether vexatious or involving other misconduct). Id. at 282. The plaintiff does not need to have acted in bad faith for defendant to be awarded fees, though bad faith is an appropriate factor to consider in making the determination. Cairns, 292 F.3d at 1156; S Indus., 249 F.3d at 627; Door Sys., 126 F.3d at 1032. But see Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 194-95 (2d Cir. 1996) (requiring defendant to show plaintiff's bad faith).
See Very Minor Leagues, 223 F.3d at 1147, stating:
Not every losing suit is without foundation, and not every strategic decision by a plaintiff in bringing suit and in prosecuting it in a manner to enhance the prospects of success is done for the purpose of harassment or another improper purpose.
See S Indus., Inc. v. Centra 2000, Inc., 249 F.3d 625, 627-28 (7th Cir. 2001) (affirming fee award where plaintiff never produced evidence during 4 years of litigation of a single sale of merchandise with the disputed trademark on it); Yankee Candle Co. v. Bridgewater Candle Co., 140 F. Supp.2d 111, 121-22 (D.Mass. 2001) (awarding fees considering plaintiff's "aggressive pursuit of unfounded claims").
See Cairns v. Franklin Mint Co., 292 F.3d 1139, 1156 (9th Cir. 2002) (affirming fee award when trademark claim was "groundless and unreasonable because it had no legal basis, having been based on the `absurd' and `just short of frivolous' contention that the mark `Diana, Princess of Wales' has taken on a secondary meaning in the mind of the public and now primarily identifies `charitable and humanitarian services rather than Princess Diana the individual'").
See Door Sys., 126 F.3d at 1032 (stating that a "suit can be oppressive because of lack of merit").
See Door Sys., 126 F.3d at 1032 (stating that a suit would be vexatious if plaintiff is "trying merely to extract a settlement based on the suit's nuisance value").
See S Indus., 249 F.3d at 627-28, where the court affirmed a fee award because the plaintiff:
added to the cost of this meritless litigation by not responding to discovery requests, repeatedly failing to properly serve or sign motions filed with the court, and failing to satisfy the requirements of the local rules of the district court. . . . It refused to cooperate with [defendant]. . . . It ignored a filing deadline, submitted motions late, or failed to properly file them at all. Its counsel missed a scheduled hearing.
The court must focus on the equities of the case when making its decision. For example, it was "exceptional" when the plaintiff's case "present[ed] more than isolated incidents of litigation abuse; it involve[d] a sweeping attempt to beat a financially weaker opponent through the use of vexatious litigation." Id. at 283. However, it was not "exceptional" where the plaintiff's "arguments, while not strong, were respectable; were made in areas where the law of this circuit was unclear; and had some reason to them," Tamko Roofing, 294 F.3d at 231, or where plaintiff's "case was not frivolous and raised debatable issues of law and fact," Boney, 127 F.3d at 827.
Generally, when a plaintiff files suit to protect its own registered mark, it is not an "exceptional" suit, unless it was brought by the trademark owner "for harassment and the like." Very Minor Leagues, 223 F.3d at 1146; Fuji Photo Film Co. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591, 602 (5th Cir. 1985) (explaining that trademark owner has a right to "police its mark"); cf. interState Net Bank v. NetB@nk, Inc., 221 F. Supp.2d 513, 527 (D.N.J. 2002) (denying fees to plaintiff when defendant was protecting its mark). A suit that is initially brought with good reason and in good faith, though, may become "exceptional" enough to warrant an award of attorneys' fees since "litigation conduct" is relevant to the fee inquiry. See Proctor Gamble Co. v. Amway Corp., 280 F.3d 519, 531 (5th Cir. 2002).
Here, plaintiff argues that it filed its suit in good faith to police and protect its registered trademark, so should not be responsible for defendants' fees. (Pl.'s Br. at 1.) Defendant, however, argues that plaintiff's conduct justifies a full fee award because "[f]rom the beginning, plaintiff knew it had neither evidence nor law to support its case, yet it went forward." (Defs.' Reply at 6.) Defendant alternatively argues that "[a]t the very least," it should be awarded partial fees because "following the denial of its motion for a preliminary injunction, plaintiff was obligated to rethink its case, and not proceed unless it could support its case with real evidence." (Id.)
This Court finds that plaintiff's initial filing of this action was justified and was not exceptional, but also finds that its continued pursuit of the action after it was aware that Dr. Rappeport's survey lent no credence to its position, in light of the Court's clear guidance in the preliminary injunction opinion upon principles of well-settled law, made the case exceptional.
This Court does not fault plaintiff for filing the lawsuit. It owned the "BREAK BAKE" mark and had the right to defend it. Initially, the case presented some arguable issues which caused the parties to present "lengthy submissions . . . including detailed affidavits, attachments consisting of documents and depositions, several expert reports, as well as . . . oral arguments held on June 18, 2001." J J Snack I, 149 F. Supp. at 140. Plaintiff's position at the preliminary injunction stage was not especially strong, but it was defensible. In its lengthy preliminary injunction opinion, the Court walked the parties through the arguments and the requirements of trademark law and pointed out the precise factual weaknesses in plaintiff's position. In essence, the preliminary injunction opinion was a chance for plaintiff to pre-try its case and learn what evidence it needed to prevail. When plaintiff failed to fill the gaps or respond in any meaningful way to the Court's direction, yet pursued the non-meritorious case, the case became exceptional.
The Court's June 27, 2001 Opinion is filled with explanations of the weaknesses in plaintiff's case and suggestions of the evidence needed to buttress plaintiff's claim. The Court explained that "[p]laintiff has not offered any evidence of actual customer confusion, such as a survey," id. at 142, that "plaintiff has submitted no evidence of any advertising campaign or expenditures that would lead to consumer association of the mark with J J," id. at 152, that "[p]laintiff, not surprisingly, does not argue the customer survey, customer testimony, and trade journal factors in their moving papers, because there has been no suggestion that any such evidence exists," id. at 153, that plaintiff has "yet to conduct any customer survey of their own to provide support of their claim that their mark has secondary meaning," id., that plaintiff "has presented no evidence of advertising," id. at 155, and that plaintiff has not offered any "testimony or evidence . . . that any actual confusion among plaintiff's customers exists," id. at 154.
The Court also explained that plaintiff's case would likely be unsuccessful if premised on the argument that the mark was suggestive. Id. at 148. Plaintiffs had argued that "BREAK BAKE" was not descriptive because it required imagination to understand that "BREAK BAKE" cookies would allow the consumer to "take a break" from mixing raw ingredients. Id. The Court explicitly found that "the mark is best classified as descriptive, because it informs the consumer about the functional characteristics of the refrigerated cookie dough, without requiring any significant mental gymnastics." Id. at 151 (emphasis in original). Plaintiff had itself marketed its "BREAK BAKE" cookies with instructions to the consumer to "break apart cookie dough and bake for delicious cookies." Id.
This Court explained plaintiff's argument in favor of the suggestive nature of the mark as follows:
J J argues that their mark requires some imagination to understand that the product eliminates the consumer's need to mix raw ingredients together in order to obtain cookies, and therefore is an easy, more convenient way to bake. Also . . . customers must understand that they are not referring to "broken cookies," which would have a negative connotation, and that the phrase is also a double entendre, requiring the consumer to connect the word "break" with "taking a break" and then imagining how pleasant it might be to take a break with this new type of cookie dough. J J concludes that, in light of the pleasant, alliterative sound of the phrase, and the suggesting that the product is easy, the "BREAK BAKE" mark should receive the heightened protection of a suggestive mark.
J J Snack I, 149 F. Supp.2d at 148 (internal citations omitted).
The Court provided express explanations for why each of plaintiff's suggestive arguments was flawed, stating:
The Court finds no evidence that some significant mental leap or imagination is necessary for a cookie consumer to understand that the phrase "BREAK BAKE," when used on a package for pre-made cookie dough, means that no mixing is required. Furthermore, although the Court appreciates the alliterative value of the phrase, the Court finds plaintiff's argument about the double meaning of the common word break to be strained and not sufficiently imaginative to conclude that this mark is suggestive. That these two common words contain the "B" and "K" sounds and rhyme is of diminished significance when these same words happen to be the best descriptors of the product itself.
J J Snack I, 149 F. Supp.2d at 151.
Plaintiff had the responsibility to consider its case and determine whether it had merit throughout the entire litigation process, especially after the Court explained in its June 27, 2001 opinion exactly why the case would not have merit unless strong new evidence was presented. Plaintiff should have either made the necessary changes to its case to ensure that it would have merit, or should have withdrawn its action. This was not a case where plaintiff was unsure of its status until this Court issued its summary judgment opinion; this was a case where the Court, at an earlier phase after thorough motion practice, provided plaintiff with an explicit recipe for success. Plaintiff did not heed the Court's instructions, but instead obtained one expert report that was devoid of relevant evidence.
Plaintiff should have been aware after the deposition testimony of Dr. Rappeport was taken that its case was meritless. The flaws in Dr. Rappeport's survey were patent on its face; the very definitions on which it was based were clearly legally incorrect in light of this Court's preliminary injunction opinion. Indeed, plaintiff never took issue with the legal standards set forth in the preliminary injunction opinion. At his deposition, Dr. Rappeport admitted that he had a copy of the Court's opinion and that his definition of the trademark classifications, upon which his conclusions were based, did not align with this Court's definitions. J J Snack II, 220 F. Supp.2d at 370. He also admitted that if his "understanding of the terms, generic, descriptive, suggestive" was not correct, "it undercuts the survey" because the survey's data would not "support what the, quote, proper definitions are." Id. at 371.
Instead of acknowledging the flaws in their case, plaintiff pressed forward and required defendants to file, brief, and argue their summary judgment motion. This Court finds that after Dr. Rappeport's deposition testimony was taken on November 28, 2001, plaintiff should have reconsidered its position and determined that it was unable to present the evidence that the Court determined was necessary to show that their case had merit. Therefore, this Court finds that plaintiff's case became an "exceptional case" the following day, November 29, 2001, and finds that defendants may seek reasonable fees for the period from November 29, 2001 forward.
Defendants presented a letter dated September 21, 2001 in which they informed plaintiff of their intention to "move for summary judgment if the case cannot be settled." Defendants sent the letter because plaintiff had not sent a settlement proposal as directed by Magistrate Judge Joel B. Rosen at an August 21, 2001 conference. (Lehv Aff., Ex. C.)
This Court realizes it is selecting a date rather late in the case — November 29, 2001 — to delineate when the pursuit of this claim became knowingly futile. An earlier date, such as when the June 27, 2001 opinion was received and digested, or perhaps the date when the deficient expert's report of Dr. Rappeport was received in October, 2001, could have been chosen. But this Court must be cautious in identifying a time when a case becomes "exceptional," that is, where its pursuit is clearly and objectively futile, since section 35(a) of the Lanham Act presumes against the award of fees in most unsuccessful cases. Litigation has its vagaries, and the prosecution of trademark rights must be robust and unchilled by the prospect of fee-shifting in the ordinary unsuccessful case. The Court has therefore sought to find any reasonable justification in the record for pursuing this case after the plaintiff's expert's deposition confirmed the fatal holes in the case, and finds none.
2. Reasonable fees
Having concluded that defendants are entitled to a fee award for the period from November 29, 2001 forward, this Court must determine what fee award is "reasonable."The "starting point" for determining what attorneys' fees are reasonable in any case is to calculate a "lodestar" amount; "that is, the number of hours reasonably expended multiplied by a reasonable hourly rate." Blakey v. Cont'l Airlines, Inc., 2 F. Supp.2d 598 (D.N.J. 1998) (quoting Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). When calculating the lodestar, the district court must "carefully and critically evaluate the hours and the hourly rate set forth by counsel." Blakey, 2 F. Supp.2d at 602. Then, the lodestar formula is presumed to yield a reasonable attorneys' fee which is "adequate to attract competent counsel, but which does not produce a windfall to attorneys." Washington v. Philadelphia County Court of Common Pleas, 89 F.3d 1031, 1035 (3d Cir. 1996) (citing Burlington v. Dague, 505 U.S. 557, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992)); Public Interest Research Group of N.J., Inc. v. Windall, 51 F.3d 1179, 1185 (3d Cir. 1995).
The party seeking the attorneys' fees has the burden to prove that the request is reasonable. Rode v. Dellaciprete, 892 F.2d 1177, 1183 (3d Cir. 1990). The party must submit evidence to support the hours worked and the rates claimed so that the court does not need to speculate as to how the attorneys used their time. Keenan v. City of Philadelphia, 983 F.2d 459, 473 (3d Cir. 1992). The court has great discretion in deciding what attorneys' fees are reasonable in a case, but cannot "decrease a fee award based on factors not raised at all by the adverse party." Rode, 892 F.2d at 1183 (quoting Bell v. United Princeton Props., Inc., 884 F.2d 713, 720 (3d Cir. 1989)). Yet, while the adverse party's objections must be clear, they do not need to challenge every specific time entry believed to be unreasonable or unnecessary. Bell, 884 F.2d at 720.
The lodestar method thus requires the Court to undertake a three-step analysis here: (a) determine a reasonable hourly rate, multiply it by (b) the number of hours reasonably expended, considering plaintiff's objections, and (c) decide whether any final adjustment is warranted. See Hensley, 461 U.S. at 433.
(a) Reasonable Hourly Rate
The first step in applying the lodestar formula is to determine the appropriate hourly rate. Cityside Archives, Ltd. v. N.Y. Health and Hosp. Corp., 37 F. Supp.2d 652, 658 (D.N.J. 1999). The party seeking the rate, here the defendant, bears the burden of producing sufficient evidence of what constitutes a "reasonable market rate for the essential character and complexity of the legal services rendered." Evans v. Port Auth. of N.Y. and N.J., 273 F.3d 346, 361 (3d Cir. 2001) (quoting Smith v. Philadelphia Housing Auth., 107 F.3d 223, 225 (3d Cir. 1997)). A reasonable market rate also depends on the "experience and skill of the attorneys" and on the rates for "similar services by lawyers of reasonably comparable skill, experience, and reputation." Rode, 892 F.2d at 1183. Once the defendant has made a prima facie showing of a reasonable hourly rate, the plaintiff may contest the rate, "but only with appropriate record evidence." Evans, 273 F.3d at 361. With such evidence, the court has great discretion to adjust the rate. Id. Without such evidence, the defendant "must be awarded attorneys' fees at [its] requested rate." Id.
Here, defendants have presented the court with a prima facie showing that their attorneys charged reasonable hourly rates by presenting the affidavits of Richard Lehv, Esquire, of Fross Zelnick Lehrman Zissu, P.C., and Donald Robinson, Esquire, of Robinson Livelli. Mr. Robinson, who billed 1.9 hours to this matter after November 29, 2001, represented that his $350.00 rate was "reasonable" and compared to the "rates charged by attorneys with comparable levels of experience in trademark and copyright litigation in New Jersey." (Robinson Aff. ¶ 9.) Mr. Lehv, whose firm billed the bulk of the time charged to the matter after November 29, 2001, represented that the rates charged by the Fross Zelnick firm are "competitive and reasonable" and "lower than the rates charged by some attorneys with comparable experience." (Lehv Aff. ¶ 17.)
Mr. Robinson was admitted to the New Jersey Bar in 1954, see 2002 N.J. Lawyers Diary Manual at 1222, and is a pre-eminent federal trial attorney.
For his work on this case, Mr. Lehv charged an hourly rate of $450.00 until April 2002 when his hourly rate increased to $495.00. Mr. Lehv, "to as great an extent as possible," asked two associates with lower billing rates to work on the case; Jessica Mann, Esquire, worked on the case before and after her maternity leave and Tamar Niv Bessinger, Esquire, worked on the case while Ms. Mann was on leave. (Id. ¶ 14.) During the time period from November 29, 2001 on, Ms. Mann charged an hourly rate of $270.00 and Ms. Bessinger charged an hourly rate of $225.00 from November 2001 through January 2002 and an hourly rate of $295.00 from February 2002 on. Also included on the time sheets is time billed by paralegals at a $160.00 hourly rate.
Mr. Lehv graduated from Union College magna cum laude in 1969 and from Columbia University School of Law in 1972. (Lehv Aff. ¶ 16.) For the past twenty-six years, his practice has focused primarily on trademark and copyright litigation and for the past nine years, he has taught Trademark Law at Brooklyn Law School as an Adjunct Professor. (Id.)
Ms. Mann received a B.A. from Wesleyan University with departmental honors, an M.F.A. from Yale School of Drama, and a J.D. from Columbia University School of Law. (Lehv Aff. ¶ 15.) Ms. Bessinger received her B.A. summa cum laude from the University of Pennsylvania, where she was Phi Beta Kappa and a Benjamin Franklin Scholar, and her J.D. from New York University Law School. (Id.)
Plaintiff has not presented any argument or evidence to contest the reasonableness of defendants' rates. Therefore, because the Third Circuit in Evans has instructed the court to award fees at the requested rate when the defendant presents a prima facie showing that the rate is reasonable and the plaintiff fails to contest the rate, this Court will award fees at the requested rates.
(b) Time Reasonably Expended
The second step in the calculation of the lodestar requires the court to determine what time was reasonably expended on the matter. Cityside, 37 F. Supp.2d at 658 (citing Windall, 51 F.3d at 1188). Hours that are not reasonably expended — those which are excessive, redundant, or otherwise unnecessary — are not compensated by the court. Hensley, 461 U.S. at 433; Rode, 892 F.2d at 1183. In contrast, time is compensated if it is reasonably expended for work that is "useful and of a type ordinarily necessary to secure the final result obtained from the litigation." Cityside, 37 F. Supp.2d at 658 (quoting Pennsylvania v. Del. Valley Citizens' Council for Clean Air, 478 U.S. 546, 560-61 (1986)).
Plaintiff argues that defendants had an "unsatiable appetite for billable hours" and spent an "inordinate amount of time in connection with the summary judgment motion" because it simply rehashed the arguments previously made in the preliminary injunction motion. (Pl.'s Br. at 11.) Defendants, however, argue that their fee request includes time for much more than just presenting their preliminary injunction arguments again. They spent time reviewing Dr. Rappeport's report and survey questionnaires, researching Dr. Rappeport's qualifications and prior litigation history, responding to plaintiff's argument that Dr. Rappeport's report could not be excluded without a hearing, researching the possibly generic nature of the mark by acquiring IRI reports and by searching for Internet uses, drafting the summary judgment brief and reply, preparing affidavits, selecting and compiling exhibits, preparing for and attending oral argument, writing "letters to the Court in response to issues raised about Dr. Rappeport's fee arrangements and prior decisions on his surveys," and preparing their fee petition. (Defs.' Br. at 21; Defs.' Reply at 11-12; Lehv Aff. ¶ 12.)
In total, defendants request compensation for $106,493.00 in attorneys' fees for the time spent on this matter from November 29, 2001 forward. In support of this fee amount, defendants cite Securacomm, 224 F.3d at 277, where the Third Circuit affirmed a fee award of $233,600.26, and SNA, Inc. v. Array, 173 F. Supp.2d 347, 349 (E.D.Pa. 2001), where the district court awarded $213,341.50 in fees.
The fees requested for the period after November 29, 2001 include:
This Court has considered the fee invoices and will award $89,600.00 in attorneys fees for time that the Court has found was reasonably spent and properly documented. The Court will not award the $16,893.00 in fees that defendants seek for the period from October 1 through 9, 2002 as they have not submitted any documentation of which attorney billed for the hours or of how the hours were spent.
Defendants properly documented 261.9 hours spent on this matter from November 29, 2001 through October 7, 2002. The time sheets show that defendants billed for approximately 13.5 hours spent on settlement negotiations with plaintiffs; about 50.7 hours on issues relating to plaintiff's expert report (including researching and arguing about Dr. Rappeport's fee arrangement with plaintiff, and researching and drafting brief about whether Dr. Rappeport's survey was admissible); about 106.4 hours on other portions of the summary judgment brief; about 55.9 hours on the reply brief; about 12 hours preparing for and attending oral argument; and about 23.4 hours on other tasks, such as compiling additional evidence about the generic nature of the mark, making telephone calls to opposing counsel and to their client, and communicating with the Court about the status of the case. All of these tasks were necessary to defendants' success and no excessive time was expended on any task when compared with the work product and the overall stakes of the litigation.
The Court finds that these 261.0 hours were reasonably spent and will award $89,600.00 to defendants as compensation.
(c) Final Adjustments
Having decided that $89,600.00 of the fees claimed in this matter were for time reasonably spent, this Court has the discretion to make downward adjustments, and award fewer fees, at third step of the lodestar formula. Hensley, 461 U.S. at 434-37. At this stage, the district court may consider "the relationship between the degree of success and the amount of the award," and adjust the award accordingly. Pa. Envtl. Def. Found. v. Canon-McMillan Sch. Dist., 152 F.3d 228, 231 (3d Cir. 1998) (quoting Windall, 51 F.3d at 1190).
Here, defendants obtained the maximum possible success; they prevailed on the merits of their summary judgment motion and the case against them was dismissed with prejudice. Therefore, this Court will not adjust the lodestar amount, but will order payment of $89,600.00 in attorneys fees to defendants.
B. Costs
Defendants also seek compensation for $74,269.09 in costs pursuant to section 35(a) of the Lanham Act, arguing that they are "plainly entitled" to them as a prevailing party. The Court, however, disagrees with defendants and will not award costs here.
Defendants filed a timely Bill of Costs pursuant to Fed.R.Civ.P. 54(d) on October 24, 2002, in which it claimed $5,762.79 in costs — $5,498.65 for the taking and transcribing of five depositions and a March 21, 2001 court hearing, $251.64 for photocopying, and $12.50 for a docket fee. [Docket Item 37-1.] The Clerk of Court considered the Bill of Costs, and on January 3, 2003, taxed $2,585.55 costs in favor of defendant and against plaintiff. [Docket Item 39-1.] Here, defendants seek the approximately $74,000 award pursuant to section 35(a) for charges incurred for photocopying, telephone, facsimile, transportation, travel, meals, courier service, court reporter fees, computer research, surveys, and expert consultation fees.
While the law is admittedly unclear on this issue, this Court finds that prevailing plaintiffs may seek costs pursuant to section 35(a), but prevailing defendants may not. The plain language of the statute distinguishes prevailing plaintiffs from prevailing parties, stating:
When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office . . . shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled . . . subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. . . . The court in exceptional cases may award reasonable attorney fees to the prevailing party.15 U.S.C. § 1117(a) (emphasis added). The Third Circuit has held that the award of profits to the prevailing plaintiff is different from an award of attorney fees to the prevailing party. Securacomm Consulting Inc. v. Securacom, Inc., 166 F.3d 182, 186 (3d Cir. 1999) (Securacomm Consulting I). For an award of profits, the Third Circuit found there must be evidence of willful infringement; for an award of attorneys fees, there must be evidence of culpable conduct. Id. at 186. The Third Circuit clarified this holding in 2000, explaining:
We begin with our prior decision in this case, for it is of some significance that in Securacomm Consulting I we remanded the issue of attorney's fees for further consideration after finding that there was no knowing or willful infringement by Securacom New Jersey. If we had believed that willful infringement by a defendant was the exclusive basis for finding a case to be exceptional under § 35(a), there would have been no reason for us to have remanded for a decision on attorney's fees. In contrast, we did not remand on the award of profits or treble damages because we held that those remedies are dependent on a finding of willful infringement.
Securacomm Consulting Inc. v. Securacom, Inc., 224 F.3d 273, 279 (3d Cir. 2000) (Securacomm Consulting II). The court explained that, by allowing an award of attorney's fees based on culpable conduct, rather than willful infringement, it was adopting "an evenhanded approach to the degree of culpability required to justify a fee award to a prevailing plaintiff or defendant under the Lanham Act." Id. at 280 n. 1. It did not find, however, that this evenhanded approach extends to awards of profits under section 35(a); instead it held that willful infringement is required. Thus, while recognizing that in cases where the defendant is the prevailing party, there will have been no willful infringement by the plaintiff, the Third Circuit still required evidence of willful infringement prior to an award of profits.
This Court finds that the Third Circuit would apply the same standard to an award of costs as it would to an award of profits because they are grouped together in the statute. See 15 U.S.C. § 1117(a) (stating that prevailing plaintiff is entitled "to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action"). Thus, because willful infringement is a necessary precursor to an award of profits under the statute, it is also a necessary precursor to an award of costs under the statute, meaning that a prevailing defendant cannot obtain costs pursuant to section 35(a).
This conclusion is buttressed by the differing purposes behind the statute's costs provision and attorneys' fee provision. The attorney's fee provision was added to the statute after the Supreme Court in Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714 (1967), found that attorney's fees were not available in trademark cases under the Lanham Act absent express statutory authority. See Securacomm, 224 F.3d at 280. Congress added the fee provision for two purposes: (1) to ensure complete compensation to certain plaintiffs who were victims of bad faith infringement and (2) to afford protection to defendants against "unfounded suits brought by trademark owners for harassment and the like." Noxell Corp. v. Firehouse No. 1 Bar-B-Que, 771 F.2d 521, 524 (D.C. Cir. 1985). Awarding fees to any prevailing party, whether plaintiff or defendant, in an "exceptional case" thus serves the statutory purpose.
The costs provision, on the other hand, was included in the statute for one purpose — "to provide a sufficient deterrent to ensure that a [trademark infringer] will not return to its former ways and once again pollute the marketplace." Sands, Taylor Wood v. Quaker Oats Co., 34 F.3d 1340, 1348 (7th Cir. 1994) (quoting Playboy Enterp., Inc. v. Baccarat Clothing Co., 692 F.2d 1272, 1274 (9th Cir. 1982)). The trial court's "primary function" in awarding costs should be on "making any violations of the Lanham Act unprofitable to the infringing party." Id.; see also Maltina Corp. v. Cawy Bottling Co., Inc., 613 F.2d 582, 585 (5th Cir. 1980). This purpose is only served when awarding costs to a prevailing plaintiff. Awarding costs to a prevailing defendant will not deter the plaintiff from future infringement because the plaintiff never infringed in the first place.
The prevailing defendant is not deprived of all costs of suit in this situation; it is still entitled to seek costs that are customarily taxable to litigants pursuant to 28 U.S.C. § 1920. Here, defendants have already been awarded $2,585.55 in costs pursuant to section 1920. [Docket Item 39-1.] The Court does not dispute this award; it simply finds that defendants are not entitled to an additional award of costs under section 35(a) of the Lanham Act. Defendants' motion for attorneys fees and costs, therefore, will be denied in part to the extent that it seeks compensation for costs.
III. CONCLUSION
For the foregoing reasons, this Court will grant in part defendants motion for attorneys fees and costs by awarding defendants $89,600.00 in attorneys' fees for reasonable amounts incurred after the case became exceptional on November 29, 2001. The Court will not award compensation for fees incurred prior to November 29, 2001 or for costs beyond those recovered under 28 U.S.C. § 1920, supra.
The accompanying Order is entered.
ORDER
This matter having come before the Court upon the motion of Defendant Earthgrains Co. ("Earthgrains") for an award of attorneys fees and expenses pursuant to 15 U.S.C. § 1117(a), [Docket Item 34-1]; and the Court having considered the submissions of the parties; and for the reasons expressed in Opinion of today's date;
IT IS this 9th day of May, 2003, hereby
ORDERED that Defendant Earthgrains' motion for attorneys fees [Docket Item 24-1] be, and hereby is, GRANTED IN PART as to $89,600.00 in attorneys fees and DENIED IN PART as to the remainder of attorneys fees and to costs; and
IT IS FURTHER ORDERED that Plaintiff pay Defendant $89,600.00 as compensation for attorneys fees.
Date of Invoice Attorney Time Rate Total Fees 11/29/01 Lehv 1.3 450.00 585.00 12/1/01-12/31/01 Lehv 8.2 450.00 3,690.00 Bessinger 25.5 225.00 5,737.50 1/1/02-1/31/02 Lehv 16.3 450.00 7,335.00 Bessinger 25.6 225.00 5,760.00 2/1/02-2/28/02 Ortiz 3.6 160.00 576.00 Manocchio 7.0 160.00 1,120.00 Lehv 28.9 450.00 14,305.50 Bessinger 54.4 295.00 16,048.00 2/14/02 Robinson .3 350.00 105.00 3/1/02-3/31/02 Lehv 8.7 450.00 4,306.50 Bessinger 24.1 295.00 7,109.50 4/1/02-4/30/02 Manocchio 7.0 160.00 1,120.00 Lehv 10.1 495.00 4,999.50 Bessinger 8.8 295.00 2,596.00 5/1/02-5/31/02 Weinberger .8 260.00 208.00 Lehv 16.7 495.00 8,266.50 Bessinger .7 295.00 206.50 6/1/02-6/30/02 Ortiz .3 160.00 48.00 Lehv .2 495.00 99.00 7/1/02-7/31/02 Ortiz .2 160.00 32.00 Lehv 3.2 495.00 1,584.00 8/1/02-9/30/02 Mann 3.8 270.00 1,026.00 Ortiz .3 160.00 48.00 Lehv 4.3 495.00 2,128.50 10/1/02-10/9/02 Fross Zelnick 16,893.00 10/3/02-10/7/02 Robinson 1.6 350.00 560.00 TOTAL 106,493.00Defendants filed a timely Bill of Costs pursuant to Fed.R.Civ.P. 54(d) on October 24, 2002, in which it claimed $5,762.79 in costs — $5,498.65 for the taking and transcribing of five depositions and a March 21, 2001 court hearing, $251.64 for photocopying, and $12.50 for a docket fee. [Docket Item 37-1.] The Clerk of Court considered the Bill of Costs, and on January 3, 2003, taxed $2,585.55 costs in favor of defendant and against plaintiff. [Docket Item 39-1.] Here, defendants seek the approximately $74,000 award pursuant to section 35(a) for charges incurred for photocopying, telephone, facsimile, transportation, travel, meals, courier service, court reporter fees, computer research, surveys, and expert consultation fees.