IP Law Daily Ninth Circuit adopts Octane, Highmark standards in Lanham Act cases
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Monday, October 24, 2016

Ninth Circuit adopts Octane, Highmark standards in Lanham Act cases

By Peter Reap, J.D., LL.M.

In an en banc opinion, the Ninth Circuit has ruled that, in light of the Supreme Court’s opinion in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), district courts entertaining a request for attorney fees under the Lanham Act should examine the totality of the circumstances to determine if the case was exceptional, exercising equitable discretion in light of the nonexclusive factors identified in Octane Fitness and Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994). Furthermore, pursuant to Highmark, Inc. v. Allcare Health Mgmt. Sys. Inc., 134 S. Ct. 1744 (2014), the court of appeals’ review of the district court’s decision on fees awarded under the Lanham Act is for abuse of discretion. The appellate court had granted rehearing en banc in the present case, involving a trademark infringement action brought by manufacturers and sellers of "SunEarth"-branded solar thermal collectors against a China-based manufacturer of photovoltaic cells, solely to reconsider its jurisprudence concerning fee awards in Lanham Act cases, and returned the case to the three-judge panel for resolution of the remaining issues (SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., October 24, 2016, per curiam).

The Supreme Court recently held that a district court analyzing a request for fees under the Patent Act should look to the "totality of the circumstances" to determine if the infringement was exceptional. Octane Fitness, 134 S. Ct. at 1756. The Supreme Court explained that "an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Id.

The Court eschewed a "precise rule or formula for making these determinations" and instructed that "equitable discretion should be exercised ‘in light of the considerations we have identified.’" Id. Specifically, the Court cited a "‘nonexclusive’ list of ‘factors,’ including ‘frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.’" Id. at 1756 n.6 The Court further clarified that the applicable burden of proof for fee entitlement was the preponderance of the evidence standard and not proof by "clear and convincing evidence." Id. at 1758.

In a second decision issued the same day, the Supreme Court held that courts of appeal should review a district court’s award of fees under the Patent Act for abuse of discretion. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1748–49 (2014).

The Ninth Circuit noted that it was in agreement with the majority of its sister circuits in holding that Octane Fitness and Highmark have altered the analysis of fee applications under the Lanham Act. Therefore, district courts analyzing a request for fees under the Lanham Act should examine the "totality of the circumstances" to determine if the case was exceptional, Octane Fitness, 134 S. Ct. at 1756, exercising equitable discretion in light of the nonexclusive factors identified in Octane Fitness and Fogerty, and using a preponderance of the evidence standard, the court decidedMoreover, pursuant to Highmark, appellate review of the district court’s decision on fees awarded under the Lanham Act is for abuse of discretion, the Ninth Circuit ruled. 134 S. Ct. at 1748–49. The court overruled its precedents to the contrary.

The case is Nos. 13-17622 and 15-16096

Attorneys: Clark E. Proffitt (Hayes Soloway P.C.) for SunEarth, Inc. James J. Foster (Hayes Messina Gilman & Hayes LLC) for Sun Earth Solar Power Co., Ltd.

Companies: SunEarth, Inc.; Sun Earth Solar Power Co., Ltd.

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