31 Remedies: Monetary Recovery Part II 31 Remedies: Monetary Recovery Part II
PART 5: Remedies
31.1 Microsoft Corporation v. Marturano 31.1 Microsoft Corporation v. Marturano
Statutory Damages: Trademark and Copyright
2009 WL 1530040 (E.D. Cal. 2009) (unreported decision)
31.2 Coach, Inc. v. Ocean Point Gifts 31.2 Coach, Inc. v. Ocean Point Gifts
Slip Copy, 2010 WL 2521444 (D.N.J. 2010) (unreported decision)
COACH, INC. and COACH SERVICES, INC., Plaintiff, v. OCEAN POINT GIFTS and DOES 1 THROUGH 10, Defendant.
United States District Court, D. New Jersey.
June 14, 2010.
Attorney(s) appearing for the Case
Erica Susan Helms, Esq., STERNS & WEINROTH, PC, Trenton, NJ, Counsel for Plaintiffs.
OPINION
JEROME B. SIMANDLE, District Judge.
This matter comes before the Court on Plaintiffs Coach, Inc. and Coach Services, Inc.'s ("Coach") motion for default judgment (Docket No. 9) as against Defendant Ocean Point Gifts ("Defendant"). For the reasons expressed below, the Court will grant Plaintiffs' motion.
I. BACKGROUND
A. Facts1
For over sixty years Coach has been in the trade of luxury fashion accessories. Coach manufactures, markets, and sells a variety of goods including, most prominently, handbags. Coach sells its goods through its own specialty retail stores, department stores, catalogs, and via the Internet at www.coach.com. Coach owns a number of trademarks, trade dresses, and design elements/copyrights that it uses on its products.
Based on information obtained from a private investigator and Coach staff, Coach alleges that Defendant Ocean Point Gifts has sold counterfeit Coach items at its store located at 1631 Boardwalk, Atlantic City, New Jersey. (Compl. ¶ 28; Smith Decl. ¶¶ 3-4.) For example, Defendant sold a $12.99 imitation of a $200 Coach wallet that included a paper insert reading "The Coach Signature Collection" with contact information for Coach Consumer Service. (Smith Decl. ¶¶ 5-6.) Ocean Point Gifts has not been given permission to use the Coach trademarks. (Pyatt Decl. ¶ 11; Compl. ¶ 33.)
Plaintiffs served Defendant Ocean Point Gifts with a copy of the summons and complaint on August 23, 2009. (Docket No. 5.) On November 20, 2009, nearly three months after process was served, the investigator returned to the store and found that the Defendant was still selling counterfeit Coach products. (Smith Decl. ¶ 8.) Coach alleges that Defendant Ocean Point Gifts has engaged in selling counterfeit goods knowingly and intentionally for the purpose of trading on the reputation of Coach and that Defendant will continue to do so unless otherwise restrained. (Compl. ¶¶ 34, 36.)
B. Procedure
On August 18, 2009, the Plaintiffs filed a nine-count Complaint against Ocean Point Gifts and ten John Does presenting claims of trademark counterfeiting (15 U.S.C. § 1114), trademark infringement (15 U.S.C. § 1114), trade dress infringement (15 U.S.C. § 1125(a)), false designation of origin and false advertising (15 U.S.C. § 1125(a)), trademark dilution (15 U.S.C. § 1125(c)), copyright infringement (17 U.S.C. §§ 501-513), trafficking in counterfeit trademarks (N.J. Stat. Ann. § 56:3-13.16), unfair competition (N.J. Stat. Ann. §§ 56:4-1, 56:4-2), and unjust enrichment. The Defendant was properly served on August 23, 2009, but has failed to respond. On November 10, 2009, Coach filed a request for default, which the Clerk of Court entered pursuant to Rule 55(a), Fed. R. Civ. P., on November 12, 2009. Coach now moves the Court to enter a default judgment against Defendant and seeks a permanent injunction, statutory damages, and an award of attorney fees, investigator fees, and costs.
II. DISCUSSION
Fed. R. Civ. P. 55(b)(2) authorizes the entry of a default judgment against a party that has defaulted. However, default judgment is not a right. Franklin v. Nat'l Mar. Union of Am., No. 91-480, 1991 WL 131182, at *1-2 (D.N.J. July 16, 1991) (quoting 10A Wright, Miller, & Kane, Federal Practice and Procedure § 2685 (3d ed. 1998)), aff'd, 972 F.2d 1331, 1331 (3d Cir. 1992). The decision about whether default judgment is proper is primarily within the discretion of the district court. Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984).
A. Standard of Review
Once a party has defaulted, the consequence is that "the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true." Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990) (internal quotations omitted) (citing Thomas v. Wooster, 114 U.S. 104 (1885)). Entry of default judgment where damages are not a sum certain requires an application to the court to prove, inter alia, damages. Fed. R. Civ. P. 55(b)(2); Comdyne, 908 F.2d at 1149. In addition, liability is not established by default alone. D.B. v. Bloom, 896 F.Supp. 166, 170 n.2 (D.N.J. 1995) (citing Wright, supra, § 2688). The Court must determine whether a sufficient cause of action was stated, Chanel, Inc. v. Gordashevsky, 558 F.Supp.2d 532, 535 (D.N.J. 2008), and whether default judgment is proper. Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000).
B. Sufficiency of Causes of Action
In the present case, after being properly served on August 23, 2009 (Docket No. 5), the Defendant failed to appear or otherwise defend and the Clerk of the Court entered a default. Therefore, the first issue is whether the Plaintiffs have stated a sufficient cause of action. As will be explained below, the Court determines that Coach has established Defendant's liability for the purposes of this default judgment motion.
1. Federal Claims
In their Complaint, Plaintiffs have asserted six federal claims against the Defendant: trademark counterfeiting (15 U.S.C. § 1114(1)(a)); trademark infringement (15 U.S.C. § 1114(1)(a)); trade dress infringement (15 U.S.C. § 1125(a)); false designation of origin and false advertising (15 U.S.C. § 1125(a)(1)(A)); trademark dilution (15 U.S.C. § 1125(c)); and copyright infringement (17 U.S.C. §§ 501-513). Each was stated sufficiently to establish liability based on federal law.
a. Trademark Infringement (15 U.S.C. § 1114(1)(a)) and False Designation (15 U.S.C. § 1125(a)(1)(A))
Trademark infringement (Count II) and false designation (Count IV) are measured by identical standards. A & H Swimwear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 210 (3d Cir. 2000). The record must show: (1) the plaintiff has a valid and legally protectable mark, (2) the plaintiff owns the mark, and (3) the defendant's use of the mark causes a likelihood of confusion. Id.
The first two elements are satisfied by registration and ownership of the relevant trademarks. (Compl. ¶¶ 14-15.) The third element is also satisfied. In the Complaint (Compl. ¶ 49) and through exhibits, (e.g. Smith Decl., Ex. B) the record has uncontested assertions and evidence that are sufficient to show a likelihood of confusion between the counterfeit handbags and genuine Coach product. Further, it is reasonable to believe that some consumers would be confused by these counterfeit products. See Coach, Inc. v. Cellular Planet, No. 2:09-cv-00241, 2010 WL 1853424, at *1, *4 (S.D. Ohio, May 7, 2010) (holding that although the counterfeit items could be distinguished from genuine Coach items because they were being sold out of a trunk of a car, the counterfeit nature of the products meant they were inherently likely to cause confusion). Therefore, a cause of action for trade infringement and false designation has been sufficiently established.
b. Trademark Counterfeiting (15 U.S.C. § 1114(1)(a))
To establish trademark counterfeiting (Count I) the record must show (1) the defendant infringed a registered trademark in violation of the Lanham Act, 15 U.S.C. § 1114(1)(a) and (2) the defendant intentionally used the trademark knowing it was counterfeit or was willfully blind to such use. Chanel v. Gordashevsky, 558 F. Supp. 2d at 537. "The only distinction between the standard for federal trademark counterfeiting and the standard for establishing infringement is that to obtain treble or statutory damages for a counterfeiting claim, a plaintiff must show that the defendant intentionally used the plaintiff's trademark, knowing that it was a counterfeit." Chanel v. Gordashevsky, 558 F. Supp. 2d at 536-537. Intent can be inferred from continued use after being given notice. Platypus Wear, Inc. v. Bad Boy Club, Inc., No. 08-02662, 2009 WL 2147843, at *6 (D.N.J. July 15, 2009)
Here, both elements of trademark counterfeiting are met. As discussed above, a trademark was infringed. The alleged willfulness of the Defendant (Compl. ¶ 41) is confirmed by evidence showing the Defendant continuing to sell the handbags nearly three months after being served with notice of the Complaint. (Smith Decl. ¶ 8, Ex. C.) Therefore, a cause of action for trademark counterfeiting has been sufficiently established.
c. Trade Dress Infringement (15 U.S.C. § 1125(a))
To establish trade dress infringement (Count III), a plaintiff must show: (1) the allegedly infringing design is non-functional, (2) the design is inherently distinctive or has acquired secondary meaning, and (3) consumers are likely to confuse the source of the plaintiff's product with that of the defendant's product. McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, 511 F.3d 350, 357 (3d Cir. 2007).
Each of these elements was stated in the Complaint, (Compl. ¶¶ 57-59) and was not contested. The Court is therefore satisfied that the Plaintiffs have a meritorious claim for trade dress infringement based on the non-functional nature of the infringement, the distinctiveness of the Coach elements, and the likelihood of confusion.
d. Trademark Dilution (15 U.S.C. § 1125(c))
To establish trademark dilution under the Lanham Act a plaintiff must prove:
(1) the plaintiff is the owner of a mark that qualifies as a `famous' mark in light of the totality of eight factors listed in § 1125(c)(1); (2) the defendant is making commercial use in interstate commerce of a mark or trade name; (3) defendant's use began after the plaintiff's mark became famous; and (4) defendant's use causes dilution by lessening the capacity of the plaintiff's mark to identify and distinguish goods or services.
Times Mirror Magazine, Inc. v. Las Vegas Sports News, LLC, 212 F.3d 157, 163 (3d Cir. 2000); 800-JR-Cigar, Inc. v. GoTo.com, Inc., 437 F.Supp.2d 273, 293 (D.N.J. 2006).
As set forth in Count V of the Complaint, the Plaintiff has shown that the relevant Coach marks are "famous" and Defendant's actions lessen the capacity of such marks to identify and distinguish Coach products. (Compl. ¶¶ 75-76.) The interstate nature of the commerce and the timing of the Defendant's use of the mark is not perfectly clear from the record. Private investigator Erin Smith, employed by a Pennsylvania investigative firm, purchased a wallet at Defendant's store. (Smith Decl. ¶¶ 2, 5.) This is evidence that the Defendant is involved in interstate commerce. Similarly, although uncertain due to the Defendant's failure to respond, the Defendant's use almost certainly began following the time when the Plaintiffs' marks became famous. Therefore, the Court will accept that these elements are satisfied and a cause of action for trademark dilution has been established.
e. Copyright Infringement (17 U.S.C. §§ 501-513)
To establish copyright infringement pursuant to 17 U.S.C. §§ 501-513, a plaintiff must prove (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original. Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361 (1991); Dam Things from Denmark v. Russ Berrie & Co., Inc., 290 F.3d 548, 561 (3d Cir. 2002). The copying element can be proven by showing that the defendant had access to the work and there are substantial similarities between the two works. Dam Things, 290 F.3d at 561. Both elements have been sufficiently asserted to state a cause of action for copyright infringement. (Compl. ¶¶ 84-86.) Therefore, a cause of action for copyright infringement has been established.
2. State Claims
In their Complaint Plaintiffs have also asserted three state law claims: trademark counterfeiting (N.J. Stat. Ann. § 56:3-13.16); unfair competition (N.J. Stat. Ann. §§ 56:4-1, 56:4-2); and unjust enrichment. The state common law claim was sufficiently stated and because federal liability has already been established, state statutory liability is also met.
a. State Statutory Claims
N.J. Stat. Ann. § 56:3-13.16 provides civil liability against a person who engages in trafficking of counterfeit marks and N.J. Stat. Ann. § 56:4-2 provides civil liability against a person who appropriates trademarks. These state law claims are similar to the federal Lanham Act claims and this Court has found liability under federal law to be sufficient to establish liability under state law. See Axelrod v. Heyburn, No. 09-5627, 2010 WL 1816245, at *3 (D.N.J. May 3, 2010); Zinn v. Seruga, No. 05-3572, 2009 WL 3128353, at *27-*28 (D.N.J. Sept. 28, 2009); N.V.E., Inc. v. Day, No. 07-4283, 2009 WL 2526744, at *2 (D.N.J. Aug. 18, 2009). Therefore, because Plaintiffs have established liability for their federal claims for trademark counterfeiting, the Plaintiffs have also established trademark counterfeiting under N.J. Stat. Ann. § 56:3-13.16 and unfair competition under N.J. Stat. Ann. §§ 56:4-1, 56:4-2.
b. Unjust Enrichment
The Plaintiffs have stated a claim under New Jersey common law for unjust enrichment. (Compl. ¶ 107.) Here the Defendant was profiting from counterfeit items based on Coach's reputation. It would be unjust for the Defendant to enrich itself without compensating the Plaintiffs, so a cause of action for unjust enrichment has been established. See Howard Johnson Int'l, Inc. v. Vraj Brig, LLC, No. 08-1466, 2010 WL 215381, at *9 (D.N.J. Jan. 14, 2010) (citing Kopin v. Orange Prod.s, Inc., 297 N.J.Super. 353, 366-68 (N.J. Super. Ct. App. Div. 1997)).
In sum, each count of the complaint stated a sufficient cause of action that is supported by evidence in the record. The Court now turns to whether default judgment is proper.
C. Default Judgment
"Before imposing the extreme sanction of default [judgment], district courts must make explicit factual findings as to (1) whether the party subject to default has a meritorious defense, (2) the prejudice suffered by the party seeking default, and (3) the culpability of the party subject to default." Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008) (citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir. 1987)).
The current record does not show any meritorious defenses. Because the Defendant did not respond, the Court cannot determine whether the Defendant had meritorious defenses that are not reflected in the record. The Plaintiffs have been prejudiced by the Defendant's failure to answer because they have been prevented from prosecuting their case, engaging in discovery, and seeking relief in the normal fashion. Defendant was properly served, yet failed to appear or defend itself in any fashion and has continued to sell bags. (See Smith Decl. ¶8.) It has been nearly a year and the Defendant has failed to contact the Court or the Plaintiffs. This shows the Defendant's culpability in its default. See Platypus Wear, 2009 WL 2147843 at *5. Plaintiff is entitled to default judgment against Defendant Ocean Point Gifts.
D. Remedies
1. Statutory Damages
The Lanham Act provides that a plaintiff can elect to recover either actual damages based on the defendant's profits and the plaintiff's damages (15 U.S.C. § 1117(a)) or statutory damages (15 U.S.C. § 1117(c)). The Plaintiffs have elected to recover statutory damages. (Mem. in Supp. of Mot. for Default J. and Permanent Inj., 11.) As discussed below, after considering past awards in this District, the point of sale, the extent of sales, and the lack of evidence concerning plaintiffs' losses, the Court will award $200,000 in statutory damages.
For statutory damages the plaintiff may recover "not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just." 15 U.S.C. § 1117(c)(1)). If the use of the counterfeit mark was willful, the maximum increases to $2,000,000 per mark per type of good. 15 U.S.C. § 1117(c)(2). For use to be willful, a defendant must show an "aura of indifference to plaintiff's rights" or a "deliberate and unnecessary duplicating of a plaintiff's mark . . . in a way that was calculated to appropriate or otherwise benefit from the good will the plaintiff had nurtured." SecuraComm Consulting Inc. v. Securacom Inc., 166 F.3d 182, 187 (3d Cir. 1999) (citations and internal marks omitted), superseded by statute on other grounds as recognized by Banjo Buddies, Inc. v. Renosky, 399 F.3d 182, 187 (3d Cir. 1999).
"In the absence of clear guidelines for setting a statutory damage award, courts have tended to use their wide discretion to compensate plaintiffs, as well as to deter and punish defendants, often borrowing from factors considered for statutory damages in copyright infringement." Louis Vuitton Malletier & Oakley, Inc. v. Veit, 211 F.Supp.2d 567, 583-84 (E.D. Pa. 2002) (citing cases showing wide range of statutory damages awarded by district courts). Because statutory damages are meant to serve as a substitute for actual damages the Court should discern whether the requested damages "bear some relation to the actual damages suffered." Bly v. Banbury Books, Inc., 638 F.Supp. 983, 987 (E.D. Pa. 1986); see also Gucci Am. V. Duty Free Apparel, Ltd., 315 F.Supp.2d 511, 520 (S.D.N.Y. 2004) ("To the extent possible, statutory damages `should be woven out of the same bolt of cloth as actual damages.'") (quoting 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 14.04[E][1], at 14-69 (2003.))
To assess whether the request is appropriate, the Court may be guided by past statutory damage awards. See Louis Vuitton Malletier, S.A. v. Mosseri, No. 07-2620, 2009 WL 3633882, at *3 (D.N.J. Oct. 28, 2009); N.V.E., 2009 WL 2526744, at *3-*4; Louis Vuitton & Oakley, 211 F. Supp. 2d at 583-84. The recent Lanham Act cases in this District for counterfeit products can be generally grouped under two categories: Internet cases and cigarette cases.
The typical Internet case involves a suit against someone selling counterfeit luxury items on the Internet. These cases often have high damage awards due in part to the wide market exposure that the Internet can provide. See Louis Vuitton v. Mosseri, 2009 WL 3633882, at *3 (awarding $25,141.31 per infringement for $4,072,892.22 total); Chanel, Inc. v. Guetae, 2009 WL 1653137, at *5 (D.N.J. June 8, 2009) (awarding $490,818.45 total); Chanel, Inc. v. Mosseri, No. 07-2619, Order at 2 (D.N.J. May 20, 2008)(awarding $180,000 per infringement for $3,780,000 total); Chanel v. Gordashevsky, 558 F. Supp. 2d at 538 (awarding $2,238,624.50 total); Chanel, Inc. v. Craddock, No. 05-1593, 2006 WL 1128733, at *1 (D.N.J. April 27, 2006) (awarding $100,000 per infringement for $8,100,000 total); see also Louis Vuitton & Oakley, 211 F.Supp.2d 567, 584-85 (awarding $1,500,000 total and stating "the point of sale is very relevant to the statutory damages discussion").
The typical cigarette case involves a small retail store selling counterfeit cigarettes. These cases have dramatically lower damage awards. See Philip Morris USA, Inc. v. Jaritza Supermarket, Inc., No. 09-CVS-2372, 2009 WL 4496047, at *2 (D.N.J. Nov. 9, 2009) (awarding $4,000 total); Philip Morris USA, Inc. v. Dorta Bars & Liquor, Inc., No. 07-4599, Order of June 1, 2009 at 3 (D.N.J. June 1, 2009) (awarding $1,000 each against two defendants). These awards were similar to cigarette case settlement amounts enforced by this Court. See Lorillard Tobacco Co. v. Asian Am. Mkt., No. 06-cv-00948, Order at 2 (D.N.J. July 7, 2008) (settlement of $3,000); Lorillard Tobacco Co. v. Atlantic Produce & Supermarket, No. 06-cv-951, Consent Judgment at 1 (D.N.J. Feb. 13, 2008) (settlement of $20,000).
This case falls somewhere between the Internet cases and the cigarette cases. While the counterfeit products at issue were not widely distributed via the Internet, they are counterfeit luxury items of far greater value than cigarettes. If the Internet cases represent "the new era of counterfeiting," Louis Vuitton & Oakley, 211 F. Supp. 2d at 584, this case reminds us that there are still hucksters on the boardwalk capitalizing on the famous marks of others. To determine damages when there is less guidance from other cases this Court has adopted factors that have been used in the Second Circuit:
(1) the expenses saved and the profits reaped; (2) the revenues lost by the plaintiff; (3) the value of the copyright; (4) the deterrent effect on others besides the defendant; (5) whether the defendant's conduct was innocent or willful; (6) whether a defendant has cooperated in providing particular records from which to assess the value of the infringing material produced; and (7) the potential for discouraging the defendant.
Platypus Wear, 2009 WL 2147843, at *7; Fitzgerald Publ'g Co. v. Baylor Publ'g Co., 807 F.2d 1110, 1117 (2d Cir. 1986).
As discussed earlier in the context of trademark counterfeiting, the Defendant's conduct was willful, so the maximum award of $2,000,000 per counterfeit mark per type of good sold is available. Four types of goods were sold by the Defendant that carried counterfeit Coach marks: handbags, wallets, scarves, and hats2. Five Coach trademarks were infringed: the "Signature C;"3 "Coach Leatherware Est. 1941;"4 "COACH;"5 "Coach & Lozenge Design;"6 and "Coach Op Art"7). Because there are four types of goods and five marks, the statutory damage amount must be not less than $20,000 or more than $40,000,000. The Plaintiffs have requested one hundred times the minimum statutory damages, $100,000 per mark per good for a total of $2,000,000. However, the Plaintiffs have provided no information about their lost revenue or the value of their trademarks, trade dresses, and copyrights. While the Court is tempted to follow the approach of Philip Morris v. Dorta Bars and ask for an affidavit supporting its damage request, 2009 WL 872026, at *3 (D.N.J. Mar. 30, 2009), the Court recognizes that the root of this deficiency is Defendant's failure to respond.
The Court chooses to follow the approach of Platypus Wear and award $10,000 per infringement for $200,000 total, ten times the minimum statutory damages. 2009 WL 2147843, at *7. This amount is within the guidelines established by Congress, takes into account the wilfulness shown by continuing to sell bags after receiving the Complaint and the culpability of failing to respond, and is significant enough to serve as compensation to the Plaintiffs and a deterrent to both the Defendant and others. This award also acknowledges that the sales took place at a small shop on the boardwalk rather than the Internet. This award is consistent with another recent case in this District which only increased the award beyond $10,000 per infringement due to the mass-distribution of a banned substance using the Internet. N.V.E., 2009 WL 2526744, at *4 (awarding $250,000 even though plaintiff requested $2,000,000). Because neither the Internet nor a banned substance is present here, ten times the minimum, namely $10,000 per infringement, is appropriate, for each of the twenty infringements.
To check whether this amount "bears some relation," Bly, 638 F. Supp. at 987, the Court will approximate what the Plaintiff may have gotten based on an "actual damages" calculation under 15 U.S.C. §§ 1117(a)-(b). See Malletier v. Apex Creative Int'l Corp., 687 F.Supp.2d 347, 355-356 (S.D.N.Y. 2010).
During the November 20, 2009 visit8 by Investigator Smith there were 25 bags priced at $24.99, 60 handbags priced from $39.00 to $59.00 and 5 scarf and hat matching sets with an unstated price. (Smith Decl. ¶ 8.) If the Court assumes that the scarf and hat sets were also priced $39.00 to $59.00, then the value of the displayed inventory that day was between $3,159.75 and $4,459.75. Assuming the store sold this volume of displayed inventory each week and the store had a 300% profit margin, then the amount of trebled damages would be between $7,109.44 and $10,034.44 per week. Thus, the "actual damages" would equal the Court's determination of statutory damages at some point between 20 and 28 weeks of sales. This period of time is approximately equal to the tourist season on the Jersey Shore. The Court's determination is more reasonable than the requested award of $2,000,000 which would not approximate actual damages without four to six years of brisk year-round sales of counterfeit items.
Thus, considering the limited record of losses, the point of sale, and the likely extent of the Defendant's business and consistent with other awards in this District, the Court will award $10,000 per infringement for $200,000 total.
2. Costs and Attorney Fees
In addition to statutory damages, Coach asks for both attorney fees and costs, which their evidence shows to be $7,648 for attorney fees, $443.33 for investigative fees, and $434.95 for costs.
The costs of actions brought under § 43(a), § 43(d), or a willful violation under § 43(c) of the Lanham Act (codified at 15 U.S.C. § 1117(a), (d), & (c), respectively) can be recovered pursuant to § 35(a) (codified at 15 U.S.C. § 1117(a)). In "exceptional cases" the court may award reasonable attorney fees. 15 U.S.C. § 1117(a). "Exceptional" has been interpreted by the Court to mean involving culpable conduct. Securacomm, 224 F.3d at 280. Because this case involved the culpable conduct of continuing to sell goods after the Complaint was received, then consistent with other decisions by this Court, attorney fees and costs will be awarded to the Plaintiffs.9 See Louis Vuitton v. Mosseri, 2009 WL 3633882, at *4; Chanel v. Gordashevsky, 558 F. Supp. 2d at 539.
Attorneys fees can includes fees for investigators working under the direction of an attorney. Chanel v. Gordashevsky, 558 F. Supp. 2d at 539 (citing Louis Vuitton S.A. v. Downtown Luggage Ctr., 706 F.Supp. 839, 842 (S.D. Fla. 1988); 130 Cong. Rec. H12076, H12083 (Oct. 10, 1984) (J. Explanatory Statement on Trademark Counterfeiting Legis.)). Thus, in this case the fees that the Plaintiffs have paid to the investigative firm can be included in damages.
3. Permanent Injunction
Coach also seeks the equitable relief of a permanent injunction to enjoin the Defendant from infringing Coach's trademarks. This request is consistent with 15 U.S.C. § 1116(a). The Supreme Court requires that any plaintiff seeking a permanent injunction to show:
(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006) (citations omitted).
a. Irreparable Injury
The Third Circuit has explicitly stated that "once the likelihood of confusion caused by trademark infringement has been established, the inescapable conclusion is that there was also irreparable injury." Pappan Enter.s, Inc. v. Hardee's Food Sys.s, Inc., 143 F.3d 800, 805 (3d Cir. 1998) (quoting Opticians Ass'n of Am. v. Indep. Opticians of Am., 920 F.2d 187, 1976 (3d Cir. 1990). Thus, because a likelihood of confusion has been shown, the requirement of irreparable harm has been met.
b. Inadequacy of Remedies at Law
While a remedy at law would provide a degree of monetary relief, it will not compensate for the injury to Coach's reputation or necessarily prevent future trademark infringement. Louis Vuitton v. Mosseri, 2009 WL 3633882 at *5; See also Audi AG v. D'Amato, 469 F.3d 534, 550 (6th Cir. 2006) (stating when there is potential for future harm there is no adequate remedy at law). A remedy at law would be inadequate to compensate Coach.
c. Balancing of Hardships
The only hardship imposed upon the Defendant is that they obey the law. On the other hand if an injunction were not issued then Coach suffers the hardships that gave rise to this suit, loss of reputation and sales. Louis Vuitton v. Mosseri, 2009 WL 3633882 at *5 (citing Microsoft Corp. v. McGee, 490 F.Supp.2d 874, 882-83 (S.D. Ohio 2007).
d. Public Interest
The Third Circuit has recognized that the public has an interest in trademark and copyright protection.
Since Congress has elected to grant certain exclusive rights to the owner of a copyright in a protected work, it is virtually axiomatic that the public interest can only be served by upholding copyright protections and, correspondingly, preventing the misappropriation of the skills, creative energies, and resources that are invested in the protected work.
Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1255 (3d Cir. 1983) (quoting Klitzner Indus., Inc. v. H.K. James & Co., 535 F.Supp. 1249, 1259-60 (E.D. Pa. 1982). Issuing an injunction will serve the public interest goals of preventing consumer confusion and the trademark holder's property interest. Microsoft, 490 F. Supp. 2d at 883. Here the public interest is served by issuing an injunction.
Because each of the eBay requirements have been met by Coach, the Court will grant Coach the relief it seeks by enjoining Defendant Ocean Point Gifts from infringing Coach's trademarks and copyrights. Ocean Point Gifts must also surrender the infringing products for destruction by freight prepaid to Coach.
In sum, the Court will grant $200,000 in statutory damages under the Lanham Act and $8,526.28 in attorney fees and litigation costs, bringing Plaintiffs' total recovery from Defendant Ocean Point Gifts to $208,526.28. In addition, the Court will permanently enjoin Ocean Point Gifts from infringing Coach's trademarks and copyrights in the future and require it to surrender all infringing products it currently possesses.
III. CONCLUSION
For the foregoing reasons the Court will grant the Plaintiffs' motion for default judgment, award a default judgment of $208,526.28, and issue a permanent injunction. The accompanying order for default judgment and permanent injunction shall be entered.
FootNotes
1. The facts recited herein are derived from the Plaintiffs' supporting declaration, including private investigator Richard H. Smith and Coach's Manager of Intellectual Property April E. Pyatt, and documents attached thereto.
2. Neither scarves nor hats are explicitly listed as a class of goods that the "Signature C" mark, Registration 2,822,318, is registered for under International Class 24. But because the class is broad and scarves and hats could be considered "clothing," then this will be sufficient.
3. Registration No. 2,822,318
4. Registration No. 3,441,671
5. Registration No. 1,071,000
6. Registration No. 1,309,779
7. Registration No. 3,696,470
8. This visit identified the largest inventory of any of the investigator's visits. During the July 13, 2009 visit by Investigator Smith there were "at least 50 different counterfeit Coach products" but no price was entered into evidence. (Smith Decl. ¶ 4.)
9. In their brief, Plaintiffs request $8,113.25 in attorney fees. The supporting documents (Davis Decl. ¶ 8; Confoy Decl. ¶ 8) show attorney costs as $7,648. The Court will only award what the evidence shows.
31.3 Thomas v. Pansy Ellen Products, Inc. 31.3 Thomas v. Pansy Ellen Products, Inc.
Statutory Damages: Trademark and Copyright
Brenda P. THOMAS, Plaintiff, v. PANSY ELLEN PRODUCTS, INC., Defendant.
No. C-C-87-79-P.
United States District Court, W.D. North Carolina, Charlotte Division.
Oct. 14, 1987.
*238W. Thad Adams, III, Charlotte, N.C., for plaintiff.
William H. Needle, Lawrence K. Nodine, Needle & Rosenberg, P.C., Atlanta, Ga., Michael D. McCoy, John H. Thomas, Bell, Seltzer, Park & Gibson, Charlotte, N.C., for defendant.
MEMORANDUM OF DECISION
THIS MATTER is before the Court on Defendant’s first Motion for Partial Summary Judgment, Plaintiff’s Motion for partial summary judgment, and Plaintiff’s Motions to compel production of documents, for an in camera inspection, and to reschedule discovery. The Court heard oral argument of both parties on their respective summary judgment motions on August 31, 1987. Plaintiff was represented by W. Thad Adams, III of Charlotte; Defendant, by Lawrence K. Nodine of Atlanta and Michael D. McCoy of Charlotte.
Plaintiff sued Defendant for copyright infringement, claiming that Defendant infringed her copyright on several designs, mostly cute animals, for use on nursery room accessories. Defendant placed these designs on nursery room storage jars, which it marketed to the public.
The Parties’ respective motions for partial summary judgment center on the availability of statutory damages and attorney’s fees under 17 U.S.C. §§ 504 and 505 (1982). Defendant urges that Plaintiff is barred from recovering §§ 504 and 505 damages because her registration of the copyright was untimely. See 17 U.S.C. § 412 (1982). Defendant, though not admitting Plaintiff’s ownership of the copyright, argues that it commenced “infringement” more than three months before Plaintiff registered her copyright in the designs. Moreover, Defendant contends, Plaintiff is not entitled to § 412’s three-month grace period, so that, even if the alleged infringement commenced less than three months prior to registration, §§ 504 and 505 damages are unavailable. Compare 17 U.S.C. § 412(1) with 17 U.S.C. § 412(2).
Three copyrighted designs are involved here. Two designs, “My Bear” and “Pastel Playmates,” will be considered together, for Defendant committed identical acts at the same times with respect to these two designs. The “Country Traditions” design will be considered separately. Plaintiff registered all three of the designs on April 21 or 22, 1986.
The pertinent statutes are part of the Copyright Act of 1976, which completely revamped the nation’s copyright laws. For purposes of these motions, the exclusive rights in question are set out in 17 U.S.C. § 106(1) and (5).
Subject to sections 107 through 118, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
*239(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, ... to display the copyrighted work publicly.
Under 17 U.S.C. § 504, the owner of a copyright is entitled to choose between recovering actual damages from an infringer, or recovering statutory damages of between $250 and $50,000. Section 505 allows a copyright owner to recover attorney’s fees and costs. The damages provided for in §§ 504 and 505 are limited by 17 U.S.C. § 412 (1982), which reads:
In any action under this title, other than an action instituted under section 411(b), no award of statutory damages or of attorney’s fees, as provided by sections 504 and 505, shall be made for—
(1) any infringement of copyright in an unpublished work commenced before the effective date of its registration; or
(2) any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.
Defendant moved for partial summary judgment, claiming that the undisputed facts establish that Plaintiff is not entitled to §§ 504 and 505 damages by virtue of § 412. Plaintiff cross-moved for summary judgment on the same issue.
The parties agree that the “My Bear” and “Pastel Playmates” designs were displayed at a Juvenile Manufacturers Products Association (“JMPA”) trade show in Dallas, Texas in October, 1985, and that the products bearing the “My Bear” and “Pastel Playmates” designs were received in the United States from an overseas manufacturer at least as early as January 1986. Similarly, the parties do not dispute that the Vice President of Marketing for Defendant Pansy Ellen Products requested, by letter dated December 20, 1985, that an overseas manufacturer produce “a few samples” of products bearing the “Country Traditions” design. The parties agree that products bearing the “Country Traditions” designs did not arrive in the United States until after April 21 or 22, 1986.
I. CROSS-MOTIONS FOR SUMMARY JUDGMENT
A. “My Bear” and “Pastel Playmates” Designs.
The question which must be answered to determine Plaintiff’s eligibility for §§ 504 and 505 damages is “when did infringement commence?” Defendant first argues that Plaintiff is bound by her statement in the Complaint that, “[cjommencing in 1985, the exact date being presently unknown to Plaintiff, Defendants began marketing a ‘nursery jar organizer set’ ” bearing “artwork which is the subject of ... [Plaintiff’s] copyright applications.” Amended Complaint, ¶¶ 9 and 10. The Court is not inclined to place such a restrictive construction on the allegations of the Complaint. Plaintiff will be allowed to argue that infringement commenced at a time other than that alleged as the commencement of “marketing” of infringing copies.
More damaging to Plaintiff’s case is the admitted display of jars bearing the “My Bear” and “Pastel Playmates” designs at the 1985 Dallas trade show. Although in her briefs Plaintiff claims that the only infringements at issue in this case are “the reproducing of the copyrighted work in copies, the preparation of derivative works ... and the distribution of copies of the copyrighted work to the public by sale or other transfer of ownership,” Plaintiff’s Memorandum in Opposition to Defendant’s Motion for Partial Summary Judgment and in Support of Plaintiff's Motion for Summary Judgment at 2, Plaintiff also seeks recovery for Defendant’s acts of “displaying the copyrighted work publicly,” Amended Complaint 1115. If the 1985 trade show constituted a public display of the copyrighted designs in violation of Plaintiff’s right under 17 U.S.C. § 106(5), then Defendant’s infringement commenced in October, 1985, and Plaintiff is precluded from recovering statutory damages and attorney’s fees regardless of whether her work *240is published or unpublished as contemplated by § 412.
The Copyright Act of 1976 (the “Act”) represents the first time that Congress recognized an exclusive right to display a copyrighted work as a component of copyright. H.R.Rep. No. 1476, 94th Cong., 2d Sess. 63, reprinted in 1976 U.S.Code Cong. & Admin.News 5659, 5676; 2 M.B. Nimmer, Nimmer on Copyright § 8.20[A] (1987). The Act defines “display” as a showing of a copy of a work. 17 U.S.C. § 101 (1982). A “public display” is a display “at a place open to the public or ... where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” Id. The parties do not appear to contest the characterization of the trade show display as a “display;” rather, the issue is whether it was a public display.
Plaintiff argues that the showing at the Dallas Trade show was not public because attendance at the trade show was restricted to “members of the Juvenile Products Manufacturers Association and only qualified buyers ... are permitted to attend.” Affidavit of Brenda P. Thomas 113, Exhibit C to Plaintiffs Reply to Defendant’s Opposition to Plaintiff’s Motion for Summary Judgment. Plaintiff cites case law construing the 1909 Copyright Act’s judicially-created concepts of “publication” and “limited publication.” Plaintiff attempts to equate “public display” under the 1976 Act with “publication” under the 1909 Act. Plaintiff does this without any attempt to acknowledge that the copyright laws were overhauled in 1976, or that the right of public display is a newly sanctioned right. Cf. Technicon Med. Info. Systems Corp. v. Green Bay Packaging, Inc., 687 F.2d 1032, 1034 n. 4 (7th Cir.1982) (noting that 1909 Act remains relevant for “ ‘undertakings commenced before January 1, 1978’ ”), cert. denied, 459 U.S. 1106, 103 S.Ct. 732, 74 L.Ed.2d 955 (1983).
Applying a literal construction to Congress’ definition of “public display” leads to the conclusion that the display at the Dallas trade show was public. Though limited to JMPA members, the audience consisted of “a substantial number of persons outside of a normal circle of a family and its social acquaintances.” 17 U.S.C. § 101. In Ackee Music, Inc. v. Williams, 650 F.Supp. 653 (D.Kan.1986), the court held that performance of copyrighted songs at defendant’s private club constituted a public performance, notwithstanding that the club was classified as “private” under Kansas law. 650 F.Supp. at 656. By contrast, the use of a copyrighted turkey decoy in a hunt was held not to be a public display. Streeter v. Rolfe, 491 F.Supp. 416, 421 (W.D.La.1980).
Clearly, the Dallas trade show is closer to the private club involved in Ackee than to the hunting party in Streeter. The public display of the “My Bear” and “Pastel Playmates” designs at the October, 1985 trade show constituted the commencement of infringement under 17 U.S.C. § 412. Since October, 1985 was more than three months prior to Plaintiff’s registration of the copyright on August 21 and 22, 1986, it is unnecessary for the Court to decide whether the designs were published or unpublished. Even if the designs were published, thereby entitling Plaintiff to § 412(2)’s three-month grace period, registration was untimely and Plaintiff cannot recover statutory damages under § 504 or costs and attorney’s fees under § 505 for infringement of the “My Bear” and “Pastel Playmates” designs.1 Accordingly, De*241fendant’s Motion for partial summary judgment on the § 412 issue will be granted as to the “My Bear” and “Pastel Playmates” designs; Plaintiff’s corresponding motion will be denied.2
B. “Country Traditions” Design
The only act respecting the “Country Traditions” design which Defendant committed prior to Plaintiff’s registering her copyright was the act of authorizing or requesting the Taiwan manufacturer to produce “a few samples” of product bearing this design. If this act constituted infringement of Plaintiff’s copyright, then Plaintiff is not entitled to recover the statutory damages and attorney’s fees afforded by 17 U.S.C. §§ 504 and 505.
As with the right of public display discussed above, the Court deals here with a right newly recognized by Congress: the right “to authorize” infringing acts. See 17 U.S.C. § 106 (1982); H.R.Rep. 1476, 94th Cong., 2d Sess. 61, reprinted in 1976 U.S. Code Cong. & Admin.News 5659, 5674. The Copyright Act does not include a definition of “authorize;” however, the legislative history indicates that the inclusion of the right “to authorize” the exercise of the usual rights attendant upon copyright was intended to emphasize that “contributory infringers,” as courts had coined the phrase under the 1909 Act, were liable for copyright infringement even though they did not directly commit a 1909 act infringement. H.R.Rep. 1476, 94th Cong., 2d Sess. 61, reprinted in 1976 U.S.Code Cong. & Admin.News 5659, 5674.
The right “to authorize” reproduction, preparation of derivative works, distribution, and public performance and display of the copyrighted work has been construed in only one case, Peter Starr Production Co. v. Twin Continental Films, Inc., 783 F.2d 1440 (9th Cir.1986). Peter Starr is very nearly on point here, for the court there examined the effect of an authorization occurring inside of the United States, authorizing acts to be committed outside of the United States. The plaintiff alleged that the defendant in Peter Starr had executed a contract with an overseas motion picture company for overseas exhibition of the plaintiff’s copyrighted film. The defendant and the overseas company executed the contract in the United States. When the plaintiff sued for copyright infringement, the defendant moved to dismiss the complaint, claiming that the court lacked subject matter jurisdiction because the complaint alleged no infringing acts occurring within the United States. The court found that the plaintiff had alleged an act of infringement within the United States: the authorization of the overseas infringement. 783 F.2d at 1443.
Precisely the same situation is presented in the case at bar. The undisputed facts show that Defendant’s agent authorized the Taiwan manufacturer to reproduce the copyrighted “Country Traditions” design by letter sent from the United States. The authorization thus occurred here, and constituted the commencement of infringement as contemplated in 17 U.S.C. § 412.
Plaintiff urges that it was not the authorization in Peter Starr that was important; rather, it was the execution of the contract authorizing the overseas distribution. But the Peter Starr court made clear that the only reason that the court focused upon the execution of the contract was because the plaintiff alleged that it was the execution of the contract which constituted the infringing authorization. See 783 F.2d at 1442 n. 2 (noting issue of fact whether “authorization” occurred during contract negotiations in France or during contract *242 execution in U.S.).3 It is not necessary that a contract be executed in order for an infringing authorization to occur. It being undisputed that Defendant authorized reproduction of the “Country Traditions” design in December, 1985, and that the act of authorizing such reproduction occurred in the United States, Plaintiff is precluded from recovering §§ 504 and 505 statutory damages and attorney’s fees for Defendant’s infringement of the “Country Traditions” design.4
II. MOTION TO COMPEL
Plaintiff seeks to compel Defendant to produce seven documents which Defendant claims are protected from discovery by the attorney-client privilege. See Fed.R.Civ.P. 26(b)(1) (scope of discovery includes “any matter, not privileged, ...”). Defendant “inadvertently” produced three of the documents, referred to as documents numbers 1-3, in response to Plaintiff’s request for production. When Defendant apprised Plaintiff of its claim that the three documents it produced were privileged, Plaintiff asked that Defendant provide a list of all requested documents, produced or not, as to which Defendant claimed a privilege.5
Plaintiff claims that the list produced by Defendant inadequately describes the documents.6 Plaintiff also claims that, with respect to those documents which were produced, though inadvertently, the privilege *243has been waived. Plaintiff argues further that, since all of the documents are from Defendant’s employees to Defendant’s attorneys, no privilege attaches because no legal advice is contained therein. Plaintiff requests that the Court conduct an in camera review of the documents to determine whether each is privileged. The Court has done so, and finds that the claim of privilege is valid as to document No. 5, and either is invalid or has been waived with respect to the other documents.
At the outset, the Court notes that Plaintiff’s argument that, because no legal advice was contained in the documents, they are not protected, is specious. It is client confidences, not attorney advice, that are protected by the privilege.
The Fourth Circuit adheres to the standard for attorney-client privilege enunciated in United States v. United Shoe Machinery Corp., 89 F.Supp. 357, 358-59 (D.Mass.1950):
The privilege applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client.”
United States v. Jones, 696 F.2d 1069, 1072 (4th Cir.1982); quoting United Shoe Machinery, 89 F.Supp. at 358-59. Where a corporation asserts the privilege, the concept of “client” is more complicated because the corporation cannot act except through agents. Upjohn Co. v. United States, 449 U.S. 383, 389-90, 101 S.Ct. 677, 682-83, 66 L.Ed.2d 584 (1981). In Upjohn Co., the Supreme Court, examining the scope of the privilege, took into account corporate counsel’s need of obtaining information from varying levels of corporate agents. 449 U.S. at 391, 101 S.Ct. at 683. The Court rejected the more constricting “control group” test in favor of a flexible standard for determining when employee communications to corporate counsel are privileged. 449 U.S. at 392-94,101 S.Ct. at 684-85.
Under Upjohn Co., then, the fact that lower-echelon corporate agents made the communications at issue is unimportant. If “[t]he communications ... were made ... to counsel for [Pansy Ellen] acting as such, at the direction of corporate superiors in order to secure legal advice from counsel,” 449 U.S. at 394, 101 S.Ct. at 685, then the communications are privileged.
With respect to documents Nos. 5-7, the claim of privilege is warranted. All three are communications intended either directly or ultimately for the corporation’s counsel to enable counsel to defend the pending lawsuit. These documents fall squarely within the scope of the privilege as interpreted by the Supreme Court in Upjohn Co. Defendant is not required to produce documents Nos. 5-7.
Documents Nos. 1-4 were produced during discovery, though inadvertently according to Defendant. Voluntary production, even where inadvertent, effects a waiver of privilege. Underwater Storage, Inc. v. United States Rubber Co., 314 F.Supp. 546, 549 (D.D.C.1970).
Plaintiff and Defendant had agreed that several depositions would be taken on July 29, 1987. When the brouhaha over the privileged documents developed, Plaintiff unilaterally cancelled these depositions.
Since Plaintiff’s counsel already possessed documents 1 through 4 when he cancelled the depositions, and this Court has held that he is not entitled to documents Nos. 5-7, Plaintiff’s counsel has succeeded only in further delaying this case. Nonetheless, it is this Court’s opinion that so many of the depositions mentioned in the Court’s Order of June 22, 1987, as have not yet been accomplished, should be allowed; provided that on no *244account shall these depositions be a cause for delaying the trial of this case on any calendar on which it may appear.
Judgment will be entered in accordance with this Memorandum of Decision.
ORDER AND JUDGMENT,
THIS MATTER is before the Court on Defendant’s Motion for partial summary judgment, Plaintiff’s Motion for partial summary judgment, and Plaintiff’s Motions to compel production, for an in camera inspection, and to reschedule discovery. This Order and Judgment is entered in accordance with the Memorandum of Decision filed simultaneously herewith.
NOW, THEREFORE, IT IS ORDERED AND ADJUDGED:
(1) That Defendant’s Motion for partial summary judgment on the issue of statutory damages and attorney’s fees is GRANTED;
(2) That Plaintiff’s Motion for partial summary judgment on the issue of statutory damages and attorney’s fees is DENIED;
(3) That Plaintiff’s Motion to compel production of documents is DENIED insofar as it relates to documents not already produced;
(4) That Plaintiff’s Motion for an in camera review is GRANTED; and
(5) That Plaintiff’s Motion to reschedule discovery is GRANTED and discovery is rescheduled as follows:
Plaintiff shall have forty-five (45) days from the date of this Order and Judgment to accomplish the depositions as mentioned in this Court’s Order of June 22, 1987; provided, that the scheduling of these depositions shall not be cause for delay of the trial of this case on any calendar on which it may appear.
31.4 Octane Fitness, LLC v. Icon Health 31.4 Octane Fitness, LLC v. Icon Health
Attorney's Fees: Patent and Copyright
OCTANE FITNESS, LLC, Petitioner
v.
ICON HEALTH & FITNESS, INC.
No. 12-1184.
Supreme Court of the United States
Argued Feb. 26, 2014.
Decided April 29, 2014.
The Patent Act's fee-shifting provision authorizes district courts to award attorney's fees to prevailing parties in "exceptional cases." 35 U.S.C. § 285. In Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381, the Federal Circuit defined an "exceptional case" as one which either involves "material inappropriate conduct" or is both "objectively baseless" and "brought in subjective bad faith." Brooks Furniture also requires that parties establish the "exceptional" nature of a case by "clear and convincing evidence." Id., at 1382.
Respondent ICON Health & Fitness, Inc., sued petitioner Octane Fitness, LLC, for patent infringement. The District Court granted summary judgment to Octane. Octane then moved for attorney's fees under § 285. The District Court denied the motion under the Brooks Furniture framework, finding ICON's claim to be neither objectively baseless nor brought in subjective bad faith. The Federal Circuit affirmed.
Held: The Brooks Furniture framework is unduly rigid and impermissibly encumbers the statutory grant of discretion to district courts. Pp. 1755 - 1758.
(a) Section 285 imposes one and only one constraint on district courts' discretion to award attorney's fees: The power is reserved for "exceptional" cases. Because the Patent Act does not define "exceptional," the term is construed "in accordance with [its] ordinary meaning." Sebelius v. Cloer, 569 U.S. ----, ----, 133 S.Ct. 1886, 1893, 185 L.Ed.2d 1003. In 1952, when Congress used the word in § 285 (and today, for that matter), "[e]xceptional" meant "uncommon," "rare," or "not ordinary." Webster's New International Dictionary 889 (2d ed. 1934). An "exceptional" case, then, 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. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances. Cf. Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455. Pp. 1755 - 1756.
(b) The Brooks Furniture framework superimposes an inflexible framework onto statutory text that is inherently flexible. Pp. 1756 - 1758.
(1) Brooks Furniture is too restrictive in defining the two categories of cases in which fee awards are allowed. The first category-cases involving litigation or certain other misconduct-appears to extend largely to independently sanctionable conduct. But that is not the appropriate benchmark. A district court may award fees in the rare case in which a party's unreasonable, though not independently sanctionable, conduct is so "exceptional" as to justify an award. For litigation to fall within the second category, a district court must determine that the litigation is both objectively baseless and brought in subjective bad faith. But a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to be "exceptional." The Federal Circuit imported this second category from *1752Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 113 S.Ct. 1920, 123 L.Ed.2d 611, but that case's standard finds no roots in § 285's text and makes little sense in the context of the exceptional-case determination. Pp. 1756 - 1758.
(2) Brooks Furniture is so demanding that it would appear to render § 285 largely superfluous. Because courts already possess the inherent power to award fees in cases involving misconduct or bad faith, see Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258-259, 95 S.Ct. 1612, 44 L.Ed.2d 141, this Court has declined to construe fee-shifting provisions narrowly so as to avoid rendering them superfluous. See, e.g.,Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 419, 98 S.Ct. 694, 54 L.Ed.2d 648. Pp. 1757 - 1758.
(3) Brooks Furniture 's requirement that proof of entitlement to fees be made by clear and convincing evidence is not justified by § 285, which imposes no specific evidentiary burden. Nor has this Court interpreted comparable fee-shifting statutes to require such a burden of proof. See, e.g.,Fogerty, 510 U.S., at 519, 114 S.Ct. 1023. P. 1758.
496 Fed.Appx. 57, reversed and remanded.
SOTOMAYOR, J., delivered the opinion of the Court, in which ROBERTS, C.J., and KENNEDY, THOMAS, GINSBURG, BREYER, ALITO, and KAGAN, JJ., joined, and in which SCALIA, J., joined except as to footnotes 1-3.
Rudolph A. Telscher, Jr., St. Louis, MO, for Petitioner.
Roman Martinez, for the United States as amicus curiae, by special leave of the Court, supporting the Petitioner.
Carter G. Phillips, Washington, DC, for the Respondent.
Rudolph A. Telscher, Jr., Counsel of Record, Kara R. Fussner, Steven E. Holtshouser, Daisy Manning, Harness, Dickey & Pierce, PLC, St. Louis, MO, for Petitioner.
Carter G. Phillips, Ryan C. Morris, Sidley Austin LLP, Washington, DC, Constantine L. Trela, Jr., Sidley Austin LLP, Chicago, IL, Larry R. Laycock, David R. Wright, Jared J. Braithwaite, Maschoff Brennan, Laycock Gilmore, Israelsen & Wright, Salt Lake City, UT, for Respondent.
Justice SOTOMAYOR delivered the opinion of the Court.*
Section 285 of the Patent Act authorizes a district court to award attorney's fees in patent litigation. It provides, in its entirety, that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. In Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378 (2005), the United States Court of Appeals for the Federal Circuit held that "[a] case may be deemed exceptional" under § 285 only in two limited circumstances: "when there has been some material inappropriate conduct," or when the litigation is both "brought in subjective bad faith" and "objectively baseless." Id., at 1381. The question before us is whether the Brooks Furniture framework *1753is consistent with the statutory text. We hold that it is not.
I
A
Prior to 1946, the Patent Act did not authorize the awarding of attorney's fees to the prevailing party in patent litigation. Rather, the "American Rule" governed: " '[E]ach litigant pa[id] his own attorney's fees, win or lose....' " Marx v. General Revenue Corp., 568 U.S. ----, ----, 133 S.Ct. 1166, 1175, 185 L.Ed.2d 242 (2013). In 1946, Congress amended the Patent Act to add a discretionary fee-shifting provision, then codified in § 70, which stated that a court "may in its discretion award reasonable attorney's fees to the prevailing party upon the entry of judgment in any patent case." 35 U.S.C. § 70 (1946 ed.).1
Courts did not award fees under § 70 as a matter of course. They viewed the award of fees not "as a penalty for failure to win a patent infringement suit," but as appropriate "only in extraordinary circumstances." Park-In-Theatres, Inc. v. Perkins, 190 F.2d 137, 142 (C.A.9 1951). The provision enabled them to address "unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force," which made a case so unusual as to warrant fee-shifting. Ibid.; see also Pennsylvania Crusher Co. v. Bethlehem Steel Co., 193 F.2d 445, 451 (C.A.3 1951) (listing as "adequate justification[s]" for fee awards "fraud practiced on the Patent Office or vexatious or unjustified litigation").
Six years later, Congress amended the fee-shifting provision and recodified it as § 285. Whereas § 70 had specified that a district court could "in its discretion award reasonable attorney's fees to the prevailing party," the revised language of § 285 (which remains in force today) provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." We have observed, in interpreting the damages provision of the Patent Act, that the addition of the phrase "exceptional cases" to § 285 was "for purposes of clarification only." 2General Motors Corp. v. Devex Corp., 461 U.S. 648, 653, n. 8, 103 S.Ct. 2058, 76 L.Ed.2d 211 (1983); see also id., at 652, n. 6, 103 S.Ct. 2058. And the parties agree that the recodification did not substantively alter the meaning of the statute.3
For three decades after the enactment of § 285, courts applied it-as they had applied § 70-in a discretionary manner, assessing various factors to determine whether a given case was sufficiently "exceptional" to warrant a fee award. See, e.g., True Temper Corp. v. CF & I Steel Corp., 601 F.2d 495, 508-509 (C.A.10 1979); Kearney & Trecker Corp. v. Giddings & Lewis, Inc., 452 F.2d 579, 597 (C.A.7 1971);
*1754Siebring v. Hansen, 346 F.2d 474, 480-481 (C.A.8 1965).
In 1982, Congress created the Federal Circuit and vested it with exclusive appellate jurisdiction in patent cases. 28 U.S.C. § 1295. In the two decades that followed, the Federal Circuit, like the regional circuits before it, instructed district courts to consider the totality of the circumstances when making fee determinations under § 285. See, e.g.,Rohm & Haas Co. v. Crystal Chemical Co., 736 F.2d 688, 691 (C.A.Fed.1984) ("Cases decided under § 285 have noted that 'the substitution of the phrase "in exceptional cases" has not done away with the discretionary feature' "); Yamanouchi Pharmaceutical Co., Ltd. v. Danbury Pharmacal, Inc., 231 F.3d 1339, 1347 (C.A.Fed.2000) ("In assessing whether a case qualifies as exceptional, the district court must look at the totality of the circumstances").
In 2005, however, the Federal Circuit abandoned that holistic, equitable approach in favor of a more rigid and mechanical formulation. In Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378 (2005), the court held that a case is "exceptional" under § 285 only "when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed.R.Civ.P. 11, or like infractions." Id., at 1381. "Absent misconduct in conduct of the litigation or in securing the patent," the Federal Circuit continued, fees "may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless." Ibid. The Federal Circuit subsequently clarified that litigation is objectively baseless only if it is "so unreasonable that no reasonable litigant could believe it would succeed," iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1378 (2011), and that litigation is brought in subjective bad faith only if the plaintiff "actually know[s]" that it is objectively baseless, id., at 1377.4
Finally, Brooks Furniture held that because "[t]here is a presumption that the assertion of infringement of a duly granted patent is made in good faith[,] ... the underlying improper conduct and the characterization of the case as exceptional must be established by clear and convincing evidence." 393 F.3d, at 1382.
B
The parties to this litigation are manufacturers of exercise equipment. The respondent, ICON Health & Fitness, Inc., owns U.S. Patent No. 6,019,710 ('710 patent), which discloses an elliptical exercise machine that allows for adjustments to fit the individual stride paths of users. ICON is a major manufacturer of exercise equipment, *1755but it has never commercially sold the machine disclosed in the '710 patent. The petitioner, Octane Fitness, LLC, also manufactures exercise equipment, including elliptical machines known as the Q45 and Q47.
ICON sued Octane, alleging that the Q45 and Q47 infringed several claims of the '710 patent. The District Court granted Octane's motion for summary judgment, concluding that Octane's machines did not infringe ICON's patent. 2011 WL 2457914 (D.Minn., June 17, 2011). Octane then moved for attorney's fees under § 285. Applying the Brooks Furniture standard, the District Court denied Octane's motion. 2011 WL 3900975 (D.Minn., Sept. 6, 2011). It determined that Octane could show neither that ICON's claim was objectively baseless nor that ICON had brought it in subjective bad faith. As to objective baselessness, the District Court rejected Octane's argument that the judgment of noninfringement "should have been a foregone conclusion to anyone who visually inspected" Octane's machines. Id., *2. The court explained that although it had rejected ICON's infringement arguments, they were neither "frivolous" nor "objectively baseless." Id., *2-*3. The court also found no subjective bad faith on ICON's part, dismissing as insufficient both "the fact that [ICON] is a bigger company which never commercialized the '710 patent" and an e-mail exchange between two ICON sales executives, which Octane had offered as evidence that ICON had brought the infringement action "as a matter of commercial strategy." 5Id., *4.
ICON appealed the judgment of noninfringement, and Octane cross-appealed the denial of attorney's fees. The Federal Circuit affirmed both orders. 496 Fed.Appx. 57 (2012). In upholding the denial of attorney's fees, it rejected Octane's argument that the District Court had "applied an overly restrictive standard in refusing to find the case exceptional under § 285." Id., at 65. The Federal Circuit declined to "revisit the settled standard for exceptionality." Ibid.
We granted certiorari, 570 U.S. ----, 134 S.Ct. 49, 186 L.Ed.2d 962 (2013), and now reverse.
II
The framework established by the Federal Circuit in Brooks Furniture is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.
A
Our analysis begins and ends with the text of § 285: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." This text is patently clear. It imposes one and only one constraint on district courts' discretion to award attorney's fees in patent litigation:
*1756The power is reserved for "exceptional" cases.
The Patent Act does not define "exceptional," so we construe it " 'in accordance with [its] ordinary meaning.' " Sebelius v. Cloer, 569 U.S. ----, ----, 133 S.Ct. 1886, 1893, 185 L.Ed.2d 1003 (2013); see also Bilski v. Kappos, 561 U.S. 593, ----, 130 S.Ct. 3218, 3226, 177 L.Ed.2d 792 (2010) ("In patent law, as in all statutory construction, '[u]nless otherwise defined, "words will be interpreted as taking their ordinary, contemporary, common meaning" ' "). In 1952, when Congress used the word in § 285 (and today, for that matter), "[e]xceptional" meant "uncommon," "rare," or "not ordinary." Webster's New International Dictionary 889 (2d ed. 1934); see also 3 Oxford English Dictionary 374 (1933) (defining "exceptional" as "out of the ordinary course," "unusual," or "special"); Merriam-Webster's Collegiate Dictionary 435 (11th ed. 2008) (defining "exceptional" as "rare"); Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant, 771 F.2d 521, 526 (C.A.D.C.1985) (R.B. Ginsburg, J., joined by Scalia, J.) (interpreting the term "exceptional" in the Lanham Act's identical fee-shifting provision, 15 U.S.C. § 1117(a), to mean "uncommon" or "not run-of-the-mill").
We hold, then, 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. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances. 6 As in the comparable context of the Copyright Act, " '[t]here is no precise rule or formula for making these determinations,' but instead equitable discretion should be exercised 'in light of the considerations we have identified.' " Fogerty v. Fantasy, Inc., 510 U.S. 517, 534, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994).
B
1
The Federal Circuit's formulation is overly rigid. Under the standard crafted in Brooks Furniture, a case is "exceptional" only if a district court either finds litigation-related misconduct of an independently sanctionable magnitude or determines that the litigation was both "brought in subjective bad faith" and "objectively baseless." 393 F.3d, at 1381. This formulation superimposes an inflexible framework onto statutory text that is inherently flexible.
For one thing, the first category of cases in which the Federal Circuit allows fee awards-those involving litigation misconduct or certain other misconduct-appears to extend largely to independently sanctionable conduct. See ibid. (defining litigation-related misconduct to include "willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed.R.Civ.P. 11, or like infractions"). But sanctionable conduct is not the appropriate benchmark. Under the standard announced *1757today, a district court may award fees in the rare case in which a party's unreasonable conduct-while not necessarily independently sanctionable-is nonetheless so "exceptional" as to justify an award of fees.
The second category of cases in which the Federal Circuit allows fee awards is also too restrictive. In order for a case to fall within this second category, a district court must determine both that the litigation is objectively baseless and that the plaintiff brought it in subjective bad faith. But a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award. Cf. Noxell, 771 F.2d, at 526 ("[W]e think it fair to assume that Congress did not intend rigidly to limit recovery of fees by a [Lanham Act] defendant to the rare case in which a court finds that the plaintiff 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons'.... Something less than 'bad faith,' we believe, suffices to mark a case as 'exceptional' ").
ICON argues that the dual requirement of "subjective bad faith" and "objective baselessness" follows from this Court's decision in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) (PRE ), which involved an exception to the Noerr-Pennington doctrine of antitrust law. It does not. Under the Noerr-Pennington doctrine-established by Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), and United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965)-defendants are immune from antitrust liability for engaging in conduct (including litigation) aimed at influencing decisionmaking by the government. PRE, 508 U.S., at 56, 113 S.Ct. 1920. But under a "sham exception" to this doctrine, "activity 'ostensibly directed toward influencing governmental action' does not qualify for Noerr immunity if it 'is a mere sham to cover ... an attempt to interfere directly with the business relationships of a competitor.' " Id., at 51, 113 S.Ct. 1920. In PRE, we held that to qualify as a "sham," a "lawsuit must be objectively baseless" and must "concea[l] 'an attempt to interfere directly with the business relationships of a competitor....' " Id., at 60-61, 113 S.Ct. 1920 (emphasis deleted). In other words, the plaintiff must have brought baseless claims in an attempt to thwart competition ( i.e., in bad faith).
In Brooks Furniture, the Federal Circuit imported the PRE standard into § 285. See 393 F.3d, at 1381. But the PRE standard finds no roots in the text of § 285, and it makes little sense in the context of determining whether a case is so "exceptional" as to justify an award of attorney's fees in patent litigation. We crafted the Noerr-Pennington doctrine-and carved out only a narrow exception for "sham" litigation-to avoid chilling the exercise of the First Amendment right to petition the government for the redress of grievances. See PRE, 508 U.S., at 56, 113 S.Ct. 1920 ("Those who petition government for redress are generally immune from antitrust liability"). But to the extent that patent suits are similarly protected as acts of petitioning, it is not clear why the shifting of fees in an "exceptional" case would diminish that right. The threat of antitrust liability (and the attendant treble damages, 15 U.S.C. § 15) far more significantly chills the exercise of the right to petition than does the mere shifting of attorney's fees. In the Noerr-Pennington context, defendants seek immunity from a judicial declaration that their filing of a *1758lawsuit was actually unlawful; here, they seek immunity from a far less onerous declaration that they should bear the costs of that lawsuit in exceptional cases.
2
We reject Brooks Furniture for another reason: It is so demanding that it would appear to render § 285 largely superfluous. We have long recognized a common-law exception to the general "American rule" against fee-shifting-an exception, "inherent" in the "power [of] the courts" that applies for " 'willful disobedience of a court order' " or "when the losing party has 'acted in bad faith, vexatiously, wantonly, or for oppressive reasons....' " Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258-259, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). We have twice declined to construe fee-shifting provisions narrowly on the basis that doing so would render them superfluous, given the background exception to the American rule, see Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 419, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978); Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402, n. 4, 88 S.Ct. 964, 19 L.Ed.2d 1263 (1968) ( per curiam), and we again decline to do so here.
3
Finally, we reject the Federal Circuit's requirement that patent litigants establish their entitlement to fees under § 285 by "clear and convincing evidence," Brooks Furniture, 393 F.3d, at 1382. We have not interpreted comparable fee-shifting statutes to require proof of entitlement to fees by clear and convincing evidence. See, e.g., Fogerty, 510 U.S., at 519, 114 S.Ct. 1023;Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990); Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988). And nothing in § 285 justifies such a high standard of proof. Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one. Indeed, patent-infringement litigation has always been governed by a preponderance of the evidence standard, see, e.g., Bene v. Jeantet, 129 U.S. 683, 688, 9 S.Ct. 428, 32 L.Ed. 803 (1889), and that is the "standard generally applicable in civil actions," because it "allows both parties to 'share the risk of error in roughly equal fashion,' " Herman & MacLean v. Huddleston, 459 U.S. 375, 390, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983).
* * *
For the foregoing reasons, the judgment of the United States Court of Appeals for the Federal Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
31.5 Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC 31.5 Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC
Attorney's Fees Trademark
NIGHTINGALE HOME HEALTHCARE, INC., Plaintiff-Appellant, v. ANODYNE THERAPY, LLC, Defendant-Appellee.
No. 10-2327.
United States Court of Appeals, Seventh Circuit.
Submitted Sept. 22, 2010.
Decided Nov. 23, 2010.
*960Jennifer S. Milligan, Attorney, Carmel, IN, for Plaintiff-Appellant.
Robert E. Johnson, Attorney, Gray Robinson P.A., Tampa, FL, Michael A. Wukmer, Attorney, Ice Miller, Indianapolis, IN, for DefendanL-Appellee.
Before POSNER, KANNE, and ROVNER, Circuit Judges.
After Anodyne successfully defended against Nightingale’s suit, see 589 F.3d 881 (7th Cir.2009), the district judge granted the defendant’s request for an award of attorneys’ fees in the amount of $72,747. The award was based on 15 U.S.C. § 1117(a), which allows attorneys’ fees to be awarded to prevailing parties in Lanham Act suits — but only in “exceptional cases,” a term we shall try to clarify in this opinion because of the surprising lack of agreement among the federal courts of appeals concerning its meaning in the Act. See, e.g., 5 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 30.101 (4th ed.2010); 4 Louis Altman & Malla Pollack, Callmann on Unfair Competition, Trademarks and Monopolies § 23:67 (4th ed.2010). The judge had granted summary judgment in favor of Anodyne on Nightingale’s Lanham Act claim early in the litigation. Nightingale, which had not appealed that ruling, contends that no award of attorneys’ fees is justified, because the case is not “exceptional.”
The Fourth, Sixth, Tenth, and D.C. Circuits apply different tests of exceptionality depending on whether it was the plaintiff or the defendant who prevailed. In the Fourth and D.C. Circuits a prevailing plaintiff is entitled to an award of attorneys’ fees if the defendant’s infringement (most cases under the Lanham Act charge trademark infringement) was willful or in bad faith (these terms being regarded as synonyms), while a prevailing defendant “can qualify for an award of attorney fees upon a showing of ‘something less than bad faith’ by the plaintiff,” such as “economic coercion, groundless arguments, and failure to cite controlling law.” Retail Services Inc. v. Freebies Publishing, 364 F.3d 535, 550 (4th Cir.2004); Reader’s Digest Ass’n, Inc. v. Conservative Digest, Inc., 821 F.2d 800, 808-09 (D.C.Cir.1987).
In the Tenth Circuit the prevailing plaintiff has to prove that the defendant acted in bad faith, while the prevailing defendant need only show “(1) ... lack of any foundation [of the lawsuit], (2) the plaintiffs bad faith in bringing the suit, (3) the unusually vexatious and oppressive manner in which it is prosecuted, or (4) perhaps for other reasons as well.” National Ass’n of Professional Baseball Leagues, Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143, 1147 (10th Cir.2000). Given the fourth item in this list, the Tenth Circuit can hardly be said to have a test.
The Sixth Circuit asks in the case of a prevailing plaintiff whether the defendant’s infringement of the plaintiffs trademark was “malicious, fraudulent, willful, or deliberate,” and in the case of a prevailing defendant whether the plaintiffs suit was “oppressive.” Eagles, Ltd. v. American Eagle Foundation, 356 F.3d 724, 728 (6th Cir.2004). As factors indicating oppressiveness, Eagles quotes the Tenth Circuit’s list but states in the alternative, quoting (see id. at 729) our opinion in S Industries, Inc. v. Centra 2000, Inc., 249 F.3d 625, 627 (7th Cir.2001), that “a suit is oppressive if it lacked merit, had elements of an abuse of process claim, and plaintiffs conduct unreasonably increased the cost of defending against the suit.”
The Second, Fifth, and Eleventh Circuits require prevailing defendants, as well *961as prevailing plaintiffs, to prove that their opponent litigated in bad faith, or (when the defendant is the prevailing party) that the suit was a fraud. Patsy’s Brand, Inc. v. I.O.B. Realty, Inc., 317 F.3d 209, 221-22 (2d Cir.2003); Procter & Gamble Co. v. Amway Corp., 280 F.3d 519, 527-28 (5th Cir.2002); Lipscher v. LRP Publications, Inc., 266 F.3d 1305, 1320 (11th Cir.2001); Tire Kingdom, Inc. v. Morgan Tire & Auto, Inc., 253 F.3d 1332, 1335-36 (11th Cir.2001) (per curiam). The Fifth Circuit adds that a court considering a prevailing defendant’s application for an award of attorneys’ fees should “consider the merits and substance of the civil action when examining the plaintiffs’ good or bad faith.” Procter & Gamble Co. v. Amway Corp., supra, 280 F.3d at 528.
The First, Third, Eighth, and Ninth Circuits, like the Second and the Eleventh, do not distinguish between prevailing plaintiffs and prevailing defendants; neither do they require a showing of bad faith. Tamizo Roofing Products, Inc. v. Ideal Roofing Co., 282 F.3d 23, 32 (1st Cir.2002) (“willfulness short of bad faith or fraud will suffice when equitable considerations justify an award and the district court supportably finds the case exceptional”); Securacomm Consulting, Inc. v. Securacom Inc., 224 F.3d 273, 280 (3d Cir.2000) (“culpable conduct on the part of the losing party” is required but “comes in a variety of forms and may vary depending on the circumstances of a particular case”); Stephen W. Boney, Inc. v. Boney Services, Inc., 127 F.3d 821, 827 (9th Cir.1997) (“a finding that the losing party has acted in bad faith may provide evidence that the case is exceptional” but “other exceptional circumstances may [also] warrant a fee award”); Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 123 (8th Cir.1987) (“bad faith is not a prerequisite” to an award). Yet a later Ninth Circuit decision interprets “exceptional” to mean “the defendant acted maliciously, fraudulently, deliberately, or willfully” (note the echo of the Sixth Circuit’s Eagles decision) or the plaintiffs case was “groundless, unreasonable, vexatious, or pursued in bad faith.” Love v. Associated Newspapers, Ltd., 611 F.3d 601, 615 (9th Cir.2010).
And where are we, the Seventh Circuit, in this jumble? In Door Systems, Inc. v. Pro-Line Door Systems, Inc., 126 F.3d 1028, 1031 (7th Cir.1997), we said that the test was whether the conduct of the party from which the payment of attorneys’ fees was sought had been “oppressive,” and that “whether the plaintiffs suit was oppressive” turned on whether the suit “was something that might be described not just as a losing suit but as a suit that had elements of an abuse of process, whether or not it had all the elements of the tort.” But that, we said, “would not be the right question if the plaintiff had prevailed and was seeking the award of attorneys’ fees. In such a case the focus would be on whether the defendant had lacked a solid justification for the defense or had put the plaintiff to an unreasonable expense in suing.” Id. The quoted passage was actually discussing the award of attorneys’ fees under the Illinois Consumer Fraud and Deceptive Business Practices Act. But fees were also sought under the Lanham Act, and the opinion — seeking to make sense of one of the definitions of “exceptional” (namely, “malicious, fraudulent, deliberate, or willful”) that is found, as we noted earlier, in the cases — suggests that the test is the same under both statutes: “oppressive,” in the sense expounded in Door Systems. Id. at 1031-32.
In later cases we said that oppressive conduct by a plaintiff that might justify an award of reasonable attorneys’ fees to the defendant would be conduct that “lacked merit, had elements of an abuse of process claim, and plaintiffs conduct in the litiga*962tion unreasonably increased the cost of defending against the suit,” S Industries, Inc. v. Centra 2000, Inc., supra, 249 F.3d at 627; see also Central Mfg., Inc. v. Brett, 492 F.3d 876, 883-84 (7th Cir.2007); that oppressive conduct by defendants included not only willful infringement of the plaintiffs trademark but also “vexatious litigation conduct,” TE-TA-MA Truth Foundation-Family of URI, Inc. v. World Church of the Creator, 392 F.3d 248, 261-63 (7th Cir.2004); and that a finding that a suit was oppressive could be “based solely on the weakness” of the plaintiffs claims, S Industries, Inc. v. Centra 2000, Inc., supra, 249 F.3d at 627, or the plaintiffs “vexatious litigation conduct.” TE-TA-MA Truth Foundation-Family of URI, Inc. v. World Church of the Creator, supra, 392 F.3d at 263. So “vexatious litigation conduct” by the losing party can justify the award of attorneys’ fees to the winner, regardless of which side engages in such conduct, as long as it’s the losing side.
It is surprising to find so many different standards for awarding attorneys’ fees in Lanham Act cases. The failure to converge may be an illustration of “circuit drift”: the heavy caseloads and large accumulations of precedent in each circuit induce courts of appeals to rely on their own “circuit law,” as if each circuit were a separate jurisdiction rather than all being part of a single national judiciary enforcing a uniform body of federal law. But whether the difference in standards generates actual differences in result is unclear because the opinions avoid commitment by using vague words and explicit escape clauses, with the Tenth Circuit’s catchall (“perhaps for other reasons as well”) taking the prize. To decide whether the standards differ more than semantically would require a close study of the facts of each case.
It may be helpful in the interest of clarity, simplicity, and uniformity to start with first principles, by asking why the Lanham Act makes an exception, albeit a narrow one (if “exceptional” is to be given proper force), to the “American” rule that forbids shifting the litigation expenses of the prevailing party to the loser.
The reason has been said to be that “the public interest in the integrity of marks as a measure of quality of products” is so great that it would be “unconscionable not to provide a complete remedy including attorney fees for acts which courts have characterized as malicious, fraudulent, deliberate, and willful,” and the award of fees “would make a trademark owner’s remedy complete in enforcing his mark against willful infringers, and would give defendants a remedy against unfounded suits.” S.Rep. No. 1400, 93d Cong., 2d Sess. 5-6 (1974), U.S.Code Cong. & Admin.News 1974, pp. 7132, 7136-7137. In addition, the patent and copyright statutes authorize the award of attorneys’ fees, id. at 5, and trademark law protects an analogous form of intellectual property.
A more practical concern is the potential for businesses to use Lanham Act litigation for strategic purposes — not to obtain a judgment or defeat a claim but to obtain a competitive advantage independent of the outcome of the case by piling litigation costs on a competitor. Almost all cases under the Act (this one, as we’ll see, is a rare exception), whether they are suits for trademark infringement or for false advertising, 15 U.S.C. §§ 1114, 1125(a), are between competitors. The owner of a trademark might bring a Lanham Act suit against a new entrant into his market, alleging trademark infringement but really just hoping to drive out the entrant by imposing heavy litigation costs on him. See, e.g., Peaceable Planet, Inc. v. Ty, Inc., 362 F.3d 986, 987 (7th Cir.2004). *963“Trademark suits, like much other commercial litigation, often are characterized by firms’ desire to heap costs on their rivals, imposing marketplace losses out of proportion to the legal merits.” Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 883, 888 (7th Cir.2000). “The increased ease of bringing suit in federal court and the greater availability of remedies may extend the competitive battlefield beyond the ‘shelves of the supermarket’ and into the halls of the courthouse. Commentators have already suggested that the availability of large damage awards will motivate firms to litigate false advertising suits aggressively in the hope of winning large damage awards and impairing the competitiveness of a business rival, particularly a new entrant.” James B. Kobak Jr. & Mary K. Fleck, “Commercial Defamation Claim Added to Revised Lanham Act,” Nat’l L.J., Oct. 30, 1989, p. 33. Similarly, a large firm sued for trademark infringement by a small one might mount a scorched-earth defense to a meritorious claim in the hope of imposing prohibitive litigation costs on the plaintiff.
These, then, are the types of suit rightly adjudged “exceptional”; for in a battle of equals each contestant can bear his own litigation costs without impairing competition.
When the plaintiff is the oppressor, the concept of abuse of process provides a helpful characterization of his conduct. Unlike malicious prosecution, which involves filing a baseless suit to harass or intimidate an antagonist, abuse of process is the use of the litigation process for an improper purpose, whether or not the claim is colorable. “The gist of the abuse of process tort is said to be misuse of legal process primarily to accomplish a purpose for which it was not designed, usually to compel the victim to yield on some matter not involved in the suit---- If the plaintiff can show instigation of a suit for an improper purpose without probable cause and with a termination favorable to the now plaintiff, she has a malicious prosecution or a wrongful litigation claim, not a claim for abuse of process---- [T]he abuse of process claim permits the plaintiff to recover without showing the traditional want of probable cause for the original suit and without showing termination of that suit.” 2 Dan B. Dobbs, The Law of Torts § 438 (2001). Abuse of process is a prime example of litigating in bad faith.
The term “abuse of process” is not used to describe behavior by defendants. Id. It has been said that “while it is obvious that the torts of abuse of process and malicious prosecution are prevalent and damaging to both innocent defendants as well as the judicial process, it is not so obvious where the line is that separates an attorney’s zealous advocacy from his tortious interference with the litigation processes.” Leah J. Pollema, “Beyond the Bounds of Zealous Advocacy: The Prevalence of Abusive Litigation in Family Law and the Need for Tort Remedies,” 75 U. Mo.-Kan. City L.Rev. 1107, 1117 (2007). But the need to draw that line is the same whether the plaintiff is attacking or the defendant is defending. If a defendant’s trademark infringement or false advertising is blatant, his insistence on mounting a costly defense is the same misconduct as a plaintiffs bringing a case (frivolous or not) not in order to obtain a favorable judgment but instead to burden the defendant with costs likely to drive it out of the market. Predatory initiation of suit is mirrored in predatory resistance to valid claims.
We conclude that a case under the Lanham Act is “exceptional,” in the sense of warranting an award of reasonable attorneys’ fees to the winning party, if the losing party was the plaintiff and was guilty of abuse of process in suing, or if *964the losing party was the defendant and had no defense yet persisted in the trademark infringement or false advertising for which he was being sued, in order to impose costs on his opponent.
This approach captures the concerns that underlie the various tests and offers a pathway through the semantic jungle. It can account for most of the case outcomes in the various circuits with the exception of those that make it easier for prevailing defendants to obtain attorneys’ fees than prevailing plaintiffs. The usual rule, notably in civil rights cases, is the reverse: a prevailing plaintiff is presumptively entitled to an award of attorneys’ fees, while a prevailing defendant is entitled to such an award only if the plaintiffs suit was frivolous. E.g., Fogerty v. Fantasy, Inc., 510 U.S. 517, 522-23, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994); Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 418-24, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978); Sullivan v. William A. Randolph, Inc., 504 F.3d 665, 670 (7th Cir.2007). But those are cases in which the plaintiff is an individual and the defendant a corporation or other institution, implying an asymmetry of resources for litigation. Plaintiffs and defendants in Lanham Act cases usually are symmetrically situated: they are businesses. Of course they may be very different in size, but this is not a reason for a general rule favoring prevailing plaintiffs or prevailing defendants, for there is no correlation between the size of a party and which side of the litigation he’s on. Big businesses sue big and small businesses for trademark infringement and false advertising, and small businesses sue big and small businesses for the same torts. Disparity in size will often be relevant in evaluating the legitimacy of the suit or defense, but it is as likely to favor the defendant as the plaintiff.
But there’s a puzzle: cases such as Chambers v. NASCO, Inc., 501 U.S. 32, 45-46, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991), state that one of the inherent powers of a federal court is to “assess attorney’s fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” For similar formulations, see, e.g., Mach v. Will County Sheriff, 580 F.3d 495, 501 (7th Cir.2009); Mañez v. Bridgestone Firestone North American Tire, LLC, 533 F.3d 578, 585, 591-92 (7th Cir.2008). That sounds a lot like the abuse of process test that we think best describes the exceptional case that merits an award of attorneys’ fees under the Lanham Act. But if we are right about our interpretation of “exceptional case,” the question arises why Congress bothered to include a fee-shifting provision in the Act; for didn’t the courts already have inherent power to award fees for abuse of process in Lanham Act cases?
Although the fee provision of the Lanham Act dates only from 1975, already by then the courts’ inherent power to assess fees for abusive litigation was recognized. See, e.g., F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 129, 94 S.Ct. 2157, 40 L.Ed.2d 703 (1974); Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402 n. 4, 88 S.Ct. 964, 19 L.Ed.2d 1263 (1968). But in Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 719-20, 87 S.Ct. 1404, 18 L.Ed.2d 475 (1967), decided eight years before the fee provision was added to the Lanham Act, the Supreme Court held that attorneys’ fees could not be awarded in cases under the Act; it was that decision which prompted Congress to add the fee-shifting provision. Fleischmann rejected the proposition that courts could award fees in cases under the Act without explicit statutory authorization. “The recognized exceptions to the general rule [of no fee shifting] were not ... developed in the *965context of statutory causes of action for which the legislature had prescribed intricate remedies.... [I]n the Lanham Act, Congress meticulously detailed the remedies available to a plaintiff who proves that his valid trademark has been infringed. It provided not only for injunctive relief, but also for compensatory recovery measured by the profits that accrued to the defendant by virtue of his infringement, the costs of the action, and damages which may be trebled in appropriate circumstances .... When a cause of action has been created by a statute which expressly provides the remedies for vindication of the cause, other remedies should not readily be implied.” Id. This reasoning is consistent with interpreting the Lanham Act’s “exceptional case” provision as having the same substantive content as the inherent power held inapplicable to Lanham Act cases. The puzzle is solved.
A procedural issue remains to be considered. Abuse of process is the name of a tort. A tort is proved in a tort suit. But a proceeding for an award of attorneys’ fees is not a suit; it is a tail dangling from a suit. We don’t want the tail to wag the dog, and this means that an elaborate inquiry into the state of mind of the party from whom reimbursement of attorneys’ fees is sought should be avoided. It should be enough to justify the award if the party seeking it can show that his opponent’s claim or defense was objectively unreasonable — was a claim or defense that a rational litigant would pursue only because it would impose disproportionate costs on his opponent — in other words only because it was extortionate in character if not necessarily in provable intention. That should be enough to make a case “exceptional.”
In this case, however, there is more. Nightingale, a provider of home healthcare services, had bought several infrared lamps from Anodyne that were designed to relieve pain and improve circulation, paying $6,000 for each lamp. Its Lanham Act claim was that Anodyne’s sales representative had falsely represented that the lamp had been approved by the Food and Drug Administration for treatment of peripheral neuropathy. The device was FDA-approved and ivas intended for the treatment of peripheral neuropathy, and though the FDA had not approved it for that purpose this did not preclude a physician or other healthcare provider, such as Nightingale, from prescribing the device to patients as a treatment for that condition. The decision to prescribe such “off-label usage,” as it is called, is deemed a professional judgment for the healthcare provider to make. 21 U.S.C. § 396.
Nightingale told its patients that Anodyne’s device was intended for treating peripheral neuropathy, but as far as appears did not tell them that it had been approved by the FDA for the treatment of that condition — a representation that could have gotten Nightingale into trouble with the agency. And when it replaced Anodyne’s lamps with the virtually identical lamps of another company (apparently for reasons of price, unrelated to the scope of the FDA’s approval), it advertised them just as it had advertised Anodyne’s lamps — as devices for the treatment of peripheral neuropathy.
Not only had the Lanham Act claim no possible merit (which would not by itself demonstrate an abuse of process), but the district judge found that Nightingale had made the claim in an attempt to coerce a price reduction from Anodyne. Nightingale would have been content to continue buying Anodyne’s lamps, as indicated by its purchasing lamps that were subject to the same limited FDA approval and advertising them the same way. The fact that *966the FDA had not approved Anodyne’s lamps for treatment of peripheral neuropathy was thus of no consequence, for neither had it approved for that purpose the lamps that Nightingale bought to replace Anodyne’s. To bring a frivolous claim in order to obtain an advantage unrelated to obtaining a favorable judgment is to commit an abuse of process.
Nightingale continues its frivolous litigation tactics in this court by arguing that Anodyne has “unclean hands” because it failed to turn over certain documents during discovery. It is apparent that the documents are not within the scope of Nightingale’s discovery demand once omitted matter indicated by an ellipsis in Nightingale’s quotation from the demand is restored.
Nightingale argues that even if Anodyne is entitled to reimbursement for some of the attorneys’ fees that it incurred, the district court’s award is excessive because it includes fees for defending against claims (discussed in our previous opinion) that were based on state law rather than the Lanham Act. But Anodyne showed that the work that its lawyers had performed in defending against the Lanham Act claim could not be separated from their work in defending against the other claims, and Nightingale presented no rebuttal.
We not only affirm the judgment of the district court but also grant Anodyne’s motion for fees and costs pursuant to Rule 38 of the appellate rules, and we dismiss as moot Anodyne’s motion to strike Nightingale’s brief and appendix.
31.6 Sophia & Chloe, Inc. v. Brighton Collectibles, Inc., 2019 U.S. Dist. LEXIS 54576 31.6 Sophia & Chloe, Inc. v. Brighton Collectibles, Inc., 2019 U.S. Dist. LEXIS 54576
United States District Court for the Southern District of California
March 29, 2019, Decided; March 29, 2019, Filed
Case No.: 12-CV-2472-AJB-KSC
Reporter
2019 U.S. Dist. LEXIS 54576 * | 2019 WL 1429588
SOPHIA & CHLOE, INC., a California Corporation, Plaintiff, v. BRIGHTON COLLECTIBLES, INC., a California Corporation, Defendant.
Prior History: Sophia & Chloe, Inc. v. Brighton Collectibles, Inc., 2013 U.S. Dist. LEXIS 190763 (S.D. Cal., May 2, 2013)
Opinion
ORDER:
(1) DENYING BRIGHTON COLLECTIBLES, INC.'S MOTION FOR ATTORNEY'S FEES AND NON-TAXABLE COSTS (Doc. No. 249); and
(2) DENYING SOPHIA & CHLOE'S MOTION TO RE-TAX COSTS (Doc. No. 256)
Before the Court is Defendant Brighton Collectibles, LLC's motion for attorney's fees and non-taxable costs under both the Copyright Act and the Lanham Act. (Doc. No. 249.) Because the Court finds the balance of factors favors no award, the Court DENIES granting fees and costs under the Copyright Act. As to fees under the Lanham Act, the Court DENIES granting fees and costs because the Court does not find this case to be exceptional—even under the [*2] relaxed standards set forth in the Ninth Circuit. Accordingly, the Court DENIES that motion in its entirety. (Doc. No. 249.)
Sophia & Chloe also moves the Court to re-tax costs, arguing it should not be required to pay costs the Court Clerk entered. (Doc. No. 256.) Finding that Sophia & Chloe failed to rebut the presumption of costs in favor of the prevailing party, the Court also DENIES that motion. (Id.)
I. BACKGROUND
This dispute arose from Brighton's willful infringement of Sophia & Chloe's ("S&C") jewelry.1
During a jury trial, the jury found that ten of S&C's copyrights were invalidated, one of S&C's copyrights was valid, but that Brighton did not infringe on it, and that two of S&C's copyrights were valid and Brighton infringed on them. (Doc. Nos. 161; 249 at 17.) Post-trial, the parties filed dueling attorney's fees motions, which the Court denied. Both parties then appealed to the Ninth Circuit. The Ninth Circuit found that only the Buddha's Kiss copyrights were protected against "virtually identical" copying, and that Brighton's designs did not infringe. The Court also noted that after this Court's denial of attorney's fees under the Lanham Act, the Circuit overruled nearly all [*3] its precedence for fees under the Act. SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179, 1181 (9th Cir. 2016). The Court then vacated the judgement and remanded the case to this Court for reconsideration of the denial of Brighton's attorney's fees. Brighton then filed the instant motion for attorney's fees under both the Copyright Act and the Lanham Act. (Doc. No. 249.)
II. ATTORNEY'S FEES UNDER THE COPYRIGHT ACT
A. LEGAL STANDARDS
The Copyright Act of 1976 permits the district court to award a prevailing party costs and attorney's fees. 17 U.S.C. § 505. Fees are proper under this statute when either successful prosecution or successful defense of the action furthers the purposes of the Copyright Act. See Fantasy, Inc. v. Fogerty, 94 F.3d 553, 558 (9th Cir. 1996) ("[A] successful defense of a copyright infringement action may further the policies of the Copyright Act every bit as much as a successful prosecution of an infringement claim by the holder of a copyright.") (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 527, 114 S. Ct. 1023, 127 L. Ed. 2d 455 (1994)). As such, prevailing defendants as well as prevailing plaintiffs are eligible for such an award, and the standards for evaluating whether an award is proper are the same regardless of which party prevails. Fogerty, 510 U.S. at 534.
The key factor in determining whether to award fees under the Copyright Act is whether the award will further the purposes of the Act. Fantasy, 94 F.3d at 558 (9th Cir. 1996). The Act's [*4] "ultimate aim is . . . to stimulate artistic creativity for the general public good." Fogerty, 510 U.S. at 526 (quoting Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S. Ct. 2040, 45 L. Ed. 2d 84 (1975)).
In determining whether to award attorney's fees, the court may consider nonexclusive factors such as: (1) the degree of success obtained; (2) frivolousness of the losing party; (3) motivation of the losing party; (4) the objective unreasonableness of the losing party's factual and legal arguments; and (5) the need, in particular circumstances, to advance considerations of compensation and deterrence. See Fantasy, 510 U.S. at 534 n.19; see also Love v. Assoc. Newspapers, Ltd., 611 F.3d 601, 614 (9th Cir. 2010).
Every factor does not need to be met for a court to award or deny fees. See Fantasy, Inc., 94 F.3d 553, 556-60 (upholding an award of attorney's fees based on the prevailing party's success and the policy objectives of the Copyright Act, even though the district court found that none of the "culpability" factors of frivolousness, motivation, or objective unreasonableness weighed against the losing party); see also Metcalf v. Bocho, 200 Fed. Appx. 635 (9th Cir. 2006) (because half of the factors weigh in favor of defendants and half against them, district court did not abuse its discretion by denying attorneys' fees to defendants). Moreover, fees are not awarded automatically to every prevailing party; it is only at the court's discretion. Zuill v. Shanahan, 80 F.3d 1366, 1371 (9th Cir. 1996); see also Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1120 (9th Cir. 2007) (affirming [*5] district court's denial of attorney's fees and costs to prevailing defendant).
B. DISCUSSION
1. Degree of Success Obtained
Brighton asserts it "achieved maximum success, defeating all 13 copyright claims, invalidating 10 copyrights, and obtaining a judicial declaration that substantially narrowed the scope of two other copyrights." (Doc. No. 249 at 20.) S&C submits that "this was a very close case" which was decided on appeal by a divided panel and that Brighton only narrowly won. (Doc. No. 255 at 19.)
The material alteration test governs the prevailing party inquiry for an award of attorney's fees under the Copyright Act. Cadkin v. Loose, 569 F.3d 1142, 1149 (9th Cir. 2009). This inquiry defines a prevailing party to mean one "who was awarded some relief by the court." Buckhannon Bd. And Care Home, Inc. v. West Virginia Dept. Of Health and Human Resources, 532 U.S. 598, 603, 121 S. Ct. 1835, 149 L. Ed. 2d 855 (2001). The key inquiry is whether some court action has created a "material alteration of the legal relationship of the parties." Id. at 604 (internal quotation marks omitted). Ninth Circuit case law holds that "attorney's fees may be properly denied where [a party's] success on a legal claim can be characterized as purely technical or de minimis . . . De minimis judgments are those that confer no right on the party—those that do not affect the obligations of the defendants toward the [*6] plaintiff." Park, ex rel. Park v. Anaheim Union High School Dist., 464 F.3d 1025, 1036 (9th Cir. 2006) (citation and internal quotation marks omitted).
Looking at the factor through this lens, it is clear to the Court that Brighton prevailed on the merits of the claims themselves and not on a purely technical or de minimis basis. Brighton invalidated 10 copyrights, which materially altered the legal relationship of the parties, affected the obligations of the parties with respect to each other, and narrowed the scope of two other copyrights to a virtually identical standard. Thus, despite the divided panel, this factor weighs in favor of awarding attorney's fees to Brighton.
2. Frivolousness of the Losing Party
S&C argues its lawsuit was not frivolous by pointing to the Court's partial denial of summary judgment, as well as two motions for judgment as a matter of law. (Doc. No. 255 at 20.) S&C again points to the Ninth Circuit's split panel and a "persuasive dissent and a vote by the dissenting judge to rehear the appeal and review it en banc" as proof that the case was not frivolous. (Id.)
A claim is frivolous when it is "clearly baseless" and involves "fantastic or delusional scenarios." Perfect 10, Inc. v. Visa Int'l Serv. Ass'n, No. C 04-00371 JW, 2005 U.S. Dist. LEXIS 48013, 2005 WL 2007932, at *4 (N.D. Cal. Aug.12, 2005) (quoting Neitzke v. Williams, 490 U.S. 319, 327-28, 109 S. Ct. 1827, 104 L. Ed. 2d 338 (1989)). "A claim is not frivolous [*7] merely because it is unsuccessful." Bisson-Dath v. Sony Computer Entm't Am. Inc., No. CV-08-1235 SC, 2012 U.S. Dist. LEXIS 103159, 2012 WL 3025402, at *2 (N.D. Cal. July 24, 2012). The standard for frivolousness appears to be "somewhat" higher than the standard for objective unreasonableness. See Perfect 10, Inc. v. Giganews, Inc., No. CV 11-07098-AB (SHx), 2015 U.S. Dist. LEXIS 53681, 2015 WL 1746484, at *11 (C.D. Cal. Mar. 24, 2015).
S&C's arguments are not lost on the Court. If a divided Ninth Circuit panel could not agree on which standard should have applied, how could the Court expect S&C—a sophisticated business entity, but not a legal one—to understand the discernment between "substantially similar" and "virtually identical" when bringing their lawsuit? If one other judge agreed with Judge Rawlinson, then the case would have been remanded for a new trial to apply the substantially similar standard. With this framework in mind, Brighton's allegations of bad faith pre-litigation fail to show S&C was only acting to secure financial benefits. Brighton argues S&C was "trying to profit from an overly broad, unreasonable interpretation of the copyright laws of our country," however the dissent's reasoning, albeit not controlling, at the very least shows S&C's position is not unreasonable. Thus, this factor weighs in favor of S&C.
3. Motivation of the Losing Party
Brighton [*8] alleges that S&C's motivation was not to protect her business or "protect[] a valuable business or asset" because—as Brighton alleges—S&C "spent more time and effort threatening or litigating copyright claims than cultivating its business." (Doc. No. 249 at 22.) Brighton asserts S&C's motivation was "to profit from an overly broad, unreasonable interpretation of the copyright laws of our country." (Id. at 23.) S&C assert that its "motivation in bringing this case were legitimate and simple: to protect Sophia & Chloe's original creations and thereby preserve and enhance its business." (Doc. No. 255 at 21.) S&C argues it had to pursue litigation to enforce its copyrights, otherwise they risk forfeiture, and the copyrights were important business investments to make the business more valuable. (Doc. No. 255 at 21-22.) S&C also asserts it "pursued only colorable claims, and did so in order to survive." (Id. at 22.)
"[T]he existence of bad faith or an improper motive in bringing or pursuing an action weighs in favor of an award of fees to a prevailing party." Frost-Tsuji Architects, 2015 U.S. Dist. LEXIS 127213, 2015 WL 5601853, at *7. "A finding of bad faith can be based on actions that led to the lawsuit, as well as on the conduct of the litigation." Id. Courts have held a plaintiff [*9] demonstrates bad faith when alleging a copyright claim to secure benefits other than merely addressing grievances. E.g., Maljack Prods. v. Goodtimes Home Video Corp., 81 F.3d 881, 889 (9th Cir. 1996) (finding an improper motivation where evidence demonstrated that plaintiff brought lawsuit in effort to expose defendant to risk and to secure competitive advantage in the market).
Brighton refutes some of S&C's claims by noting that S&C "demanded money from its targets [including, but not limited to, Brighton], which were sued if they did not pay up." (Doc. No. 258 at 2.) Brighton points to S&C's original demand letter, which did not include a request to stop infringing on their copyrights, but instead asked for "an accounting of all revenue so that Sophia & Chloe could calculate compensation that Brighton would have to pay to avoid being sued." (Doc. No. 249 at 22.) Indeed, attached as an exhibit to Peter Ross's declaration is the demand letter, which states: "We will need a complete accounting of all revenues from the sale of the Toledo line of jewelry, so that we can formulate a demand for compensation to remedy this infringement." (Doc. No. 249-3, Ross Decl., Ex. I.) And another declaration submitted by S&C informs that S&C received disgorged profits from other [*10] infringers it sent demand letters to. (Doc. No. 79-4, Sherman Decl., ¶ 20.) Brighton finally states that it defended against the lawsuit rather than comply with the demand letter because it believed it was not infringing on any copyrights—and Brighton was correct, the jury and Ninth Circuit, in combination, found it did not infringe on any of S&C's copyrights.
Brighton also objects to S&C's claim that it needed to bring the lawsuit enforcing its copyrights to survive, and notes in its reply that only 11% of S&C's profits came from its copyrighted products; that the products were already on a "downward trend" before Brighton's products were released; and that S&C's "overall sales were also steadily declining years before Brighton began selling" its products. (Doc. No. 258 at 2-4.) S&C had also testified that she was letting the business coast while her children were in school and would focus on the business later down the road.
Finally, Brighton negates S&C's argument that it needed to bring litigation on its copyrights or risk foreclosure of them. (Doc. No. 258 at 5 n.3.) S&C quotes to a Ninth Circuit case purporting to hold that "a copyright owner risks forfeiture of its copyrights [*11] by not enforcing it against others." (Doc. No. 255 at 21 (citing to Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1019 (9th Cir. 1985)).) However, Brighton is correct that S&C's assertion is incorrect. Transgo, Inc. states that "[a] copyright can be forfeited through some overt act which indicates the copyright proprietor's desire to surrender its rights." Transgo, Inc., 768 F.2d at 1019. The line of cases stemming from this principle hold that failure to place copyright notices on published works may constitute a forfeiture of that copyright—but talks nothing of failure to litigate a copyright will result in losing it.
Thus, the Court finds that the scale tips to Brighton here. For each reason S&C claims they brought the lawsuit, Brighton was able to refute. While the Court does not necessarily adopt the narrative Brighton repeatedly asserts, they have convinced the Court that S&C's motives leading up to the lawsuit and in litigation show degrees of bad faith. This factor weighs in favor of Brighton.
4. Objective Unreasonableness of Losing Party's Position
Brighton argues "Sophia & Chloe's copyright claim was objectively unreasonable." (Doc. No. 249 at 20-21.) Brighton gives several examples of why Sophia & Chloe's factual and legal arguments were not reasonable. First, Brighton [*12] notes it "claimed a monopoly on shapes that even it and its jewelry expert admitted are extremely common or 'ubiquitous.'" (Id. at 20.) Second, Brighton claims "Sophia & Chloe gave incredible testimony" surrounding the shape of the earrings by another designer claiming it was "completely different" from hers, while also testifying that Brighton's shape was "virtually identical" to her own. (Id. at 21.) Third, Brighton states that S&C "individually registered slight variations of the same designs and then used its 13 registrations to seek a statutory damage award of nearly $2 million — i.e., more than Sophia & Chloe had made in revenue over its nearly decade-long existence." (Id.) Finally, Brighton argues that S&C continued to allege Brighton's "Toledo Cuff Bangle" infringed on S&C's copyright knowing "it had no piece that looked anything like the accused product." (Id. at 22.)
"A claim is objectively unreasonable where the party advancing it 'should have known from the outset that its chances of success in this case were slim to none.'" See Giganews, Inc., 2015 U.S. Dist. LEXIS 53681, 2015 WL 1746484, at *11 (quoting SOFA Entm't, Inc. v. Dodger Productions, Inc., 709 F.3d 1273, 1280 (9th Cir. 2013)). Similarly, "[a] claim that is not 'objectively unreasonable' at the outset can become so if the litigant continues to pursue it when the litigant knew or should [*13] have known that the chance of success was slim to none." Frost-Tsuji Architects v. Highway Inn, Inc., No. 13-00496-SOM/BMK, 2015 U.S. Dist. LEXIS 127213, 2015 WL 5601853, at *5 (D. Haw. Sept. 23, 2015). The "mere fact that [a party] lost cannot establish his objective unreasonability." Seltzer v. Green Day, Inc., 725 F.3d 1170, 1181 (9th Cir. 2013).
S&C rebuts the lionshare of Brighton's claims. It states that the Court found in both the summary judgment phase and during trial that the evidence could support infringement. (Doc. No. 255 at 23.) S&C also notes the Court previously rejected the argument in its summary judgment order that S&C "was misusing copyright to monopolize common shapes." (Id. (citing to Doc. No. 86 at 8-11.) Finally, S&C points to the Court's finding that substantial evidence supported the jury's findings and upheld that standard during and after trial.
Although the Ninth Circuit ultimately disagreed, similar to the Court's analysis regarding frivolousness, supra, the Court agrees with S&C that their litigation position was not objectively unreasonable. Thus, this factor weighs in favor of S&C.
5. Considerations of Compensation and Deterrence
An award of attorney's fees may advance the purposes of the Copyright Act if it encourages other parties to defend themselves when they have valid defenses. Goldberg v. Cameron [*14] , No. C-05-03534 RMW, 2011 U.S. Dist. LEXIS 89376, 2011 WL 3515899, at *6 (N.D. Cal. Aug. 11, 2011); Omega S.A. v. Costco Wholesale Corp., No. CV 04-05443 TJH RCX, 2012 U.S. Dist. LEXIS 117143, 2012 WL 3150432, at *1 (C.D. Cal. June 20, 2012) aff'd, 776 F.3d 692 (9th Cir. 2015) ("awarding Costco attorneys' fees would encourage future defendants to resist improperly-motivated infringement actions, and would deter the filing of such actions"). This is particularly important "[w]hen the prevailing party is the defendant, who by definition receives not a small award but no award . . . . For without the prospect of such an award, the party might be forced into a nuisance settlement or deterred altogether from exercising his rights" under the Copyright Act. Assessment Techs. of WI, LLC v. WIREdata, Inc., 361 F.3d 434, 437 (7th Cir. 2004) (citation omitted)).
The Court finds this factor is neutral. Neither party needs to be discouraged or deterred from the position it took. As stated numerous times herein, the Court finds that S&C's litigation position was reasonable, but also that Brighton's defense position was reasonable. A fee award to either party would deter those who should be properly prosecuting and defending claims under the Copyright Act.
6. Other Factors
Courts in this circuit also consider "whether the chilling effect of attorney's fees may be too great or impose an inequitable burden on an impecunious plaintiff." Ets-Hokin v. Skyy Spirits, Inc., 323 F.3d 763, 766 (9th Cir. 2003). Thus, the Court must consider whether, in light [*15] of the losing party's financial condition, it would be inequitable to award attorney's fees. Id.
S&C asserts that "[a] fee award to Brighton will destroy what is left of Sophia & Chloe." (Doc. No. 255 at 25.) In its declaration accompanying the opposition, S&C states it only has $2,353 in cash, between $5,000 - $20,000 of inventory, operates out of a converted garage, and its 2017 annual sales were under $30,000. (Doc. No. 255-1, Sherman Decl. ¶¶ 33-35.) S&C also states in its declaration it has no way to "satisfy an award of attorney's fees to Brighton. (Id. at ¶ 34.) S&C also states it fears Brighton would attempt to pierce the corporate veil and go after Sherman personally, which would be devastating to her. (Id. ¶ 35.)
Brighton argues that "No Ninth Circuit or Supreme Court case authorizes this Court to consider Sophia & Chloe's financial status." (Doc. No. 258 at 9.) However, the Court found numerous Ninth Circuit and district court cases taking this factor into consideration. See Ets-Hokin, 323 F.3d at 766; Epikhin v. Game Insight North America, No. 14-cv-04383-LHK, 2016 U.S. Dist. LEXIS 44170, 2016 WL 1258690, at *8-9 (N.D. Cal. Mar. 31, 2016); Frost-Tsuji Architects, 2015 U.S. Dist. LEXIS 127213, 2015 WL 5601853, at *8. Brighton also attacks the sufficiency of S&C's evidentiary showing of impecuniousness, noting it is self-serving and lacks detailed documentation. [*16] (Doc. No. 258 at 9, n.6.) However, Brighton cannot dispute that S&C is a small business owned by one person, who's declining sales is clear in the record—as Brighton noted when discussing the coasting of S&C's business. Thus, this factor weighs in favor of S&C.
7. Balance of Factors and the Purposes of the Copyright Act
In sum, the factors are nearly evenly split between the parties. The degree of success obtained and S&C's motivation weigh in favor of granting fees, while objective reasonableness, frivolousness, and S&C's impecuniousness weigh against an award of fees. The compensation and deterrence factor is neutral. Viewing these factors in the totality of the circumstances, the Court concludes that an award of fees does not further the purposes of the Copyright Act.
"The primary objective of the Copyright Act is to encourage the production of original literary, artistic, and musical expression for the good of the public." Fogerty, 510 U.S. at 524. The Copyright Act commonly accomplishes that purpose by incentivizing plaintiffs to protect their copyrights even though a successful defense may also promote that purpose. See Visa Int'l Serv. Ass'n, 2005 U.S. Dist. LEXIS 48013, 2005 WL 2007932, at *5. The Ninth Circuit has affirmed that a defense on the merits furthers the purposes [*17] of the Copyright Act in a way that "a technical defense, such as . . . copyright registration requirements" does not. Fogerty II, 94 F.3d at 556, 560 (noting that prevailing parties are not automatically awarded attorney's fees because, in part, "copyright defendants do not always reach the merits, prevailing instead on technical defenses").
Here, the Court finds the factors are nearly split, and notes that this was a difficult conclusion to come to. While S&C may not have had the best intentions in bringing their lawsuit, i.e., a bad faith motivation, the merits of their claim was strong enough to be reasonable. If the substantially similar standard was used rather than the virtually identical one, S&C might have even prevailed on the merits. That being said, Brighton had a valid defense on the merits and gained a sweeping win, invalidating nearly all of S&C's copyrights. However, a hindsight-victory does not tip the scale in favor of attorney's fees. Although the jury invalidated many of S&C's copyrights, a jury also found willful infringement, and a Ninth Circuit dissent agreed with S&C's arguments. Both parties in this case exemplified the primary objective of the Act: reasonableness in belief versus merit in [*18] defense. Looking at these factors under the totality of circumstances, the Court finds that they ultimately weigh against finding an award of attorney's fees. Thus, the Court DENIES Brighton's request for attorney's fees under the Copyright Act.
III. ATTORNEY'S FEES UNDER THE LANHAM ACT
A. LEGAL STANDARDS
The Lanham Act permits an award of reasonable attorneys' fees to the prevailing party in "exceptional cases." 15 U.S.C. § 1117(a). Originally, "[w]hile the term 'exceptional' [was] not defined in the statute, generally a trademark case [was] exceptional for purposes of an award of attorneys' fees when the infringement [was] malicious, fraudulent, deliberate or willful." Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1409 (9th Cir. 1993).
In 2016, the Ninth Circuit in SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., 839 F.3d 1179 (9th Cir. 2016), relied on the Supreme Court's decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 134 S. Ct. 1749, 1756, 188 L. Ed. 2d 816 (2014), to abrogate Lindy Pen Co. and modify the standard definition of "exceptional" in attorney fee recovery Lanham Act cases. SunEarth, Inc., 839 F.3d at 1180. Ultimately, the Ninth Circuit held that "district courts analyzing a request for fees under the Lanham Act should examine the 'totality of the circumstances' to determine if the case [is] exceptional, exercising equitable discretion in light of the nonexclusive factors identified in Octane Fitness and Fogerty, and using a preponderance of the [*19] evidence standard." Id. at 1181 (internal citation omitted).
The Ninth Circuit also defined an exceptional case as one that simply "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. at 1180 (citation omitted). The nonexclusive factors in determining if a case is "exceptional" include: "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 1181 (citation omitted). There is no doubt that "Octane Fitness lowered the bar for an exceptional case finding[.]" Veracode, Inc. v. Appthority, Inc., 137 F. Supp. 3d 17, 102 (D. Mass. 2015). Additionally, despite the Ninth Circuit's decision to alter the definition of "exceptional," the Federal Circuit held that Octane Fitness "gave no indication that [the Federal Circuit] should rethink [its] litigation misconduct line of § 285 cases" and stated that "district courts can turn to [] pre-Octane Fitness case law for guidance" regarding such arguments. SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1349 (Fed. Cir. 2015).
In sum, litigation brought in bad faith or with objectively baseless claims may [*20] be considered exceptional, as may litigation demonstrating inequitable conduct or willful infringement. Fogerty v. Fantasy, Inc., 510 U.S. 517, 525 n.12, 114 S. Ct. 1023, 127 L. Ed. 2d 455 (1994); see also Octane Fitness, 134 S. Ct. at 1757 ("[A] case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award."). Similarly, courts "have awarded attorneys' fees . . . where a party advances arguments that are particularly weak and lack support in the record or seek only to re-litigate issues the court has already decided." Intex Recreation Corp. v. Team Worldwide Corp., 77 F. Supp. 3d 212, 217 (D.C. Cir. 2015). Thus, the determination of "exceptional" falls squarely within the discretion of the trial court. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559, 134 S. Ct. 1744, 1748, 188 L. Ed. 2d 829 (2014).
Here, Brighton asks the Court to award it attorney's fees for defending against S&C's trade dress claim, arguing: (1) no evidence of likelihood of confusion; (2) no evidence to show secondary meaning; and (3) the relaxed standard for awarding attorney's fees should change the Court's prior analysis on this issue.
B. DISCUSSION
While the Ninth Circuit overruled much of its precedence defining what an exceptional case is under the Lanham Act, the Ninth Circuit did not overturn the substantive law or balance of factors used to determine a trade dress claim. The Court addressed this claim thoroughly in its [*21] prior order denying attorney's fees. (Doc. No. 218.) Rather than re-analyze the entire test, the Court will briefly discuss each of the factors addressed in the motion and spend its judicial resources discussing whether those factors make this an exceptional case under the new standard.
"[T]rade dress involves the total image of a product and may include features such as size, shape, color, color combinations, texture, or graphics." Vision Sports, Inc. v. Melville Corp., 888 F.2d 609, 613 (9th Cir. 1989) (internal quotation marks omitted). To prove trade dress infringement, a plaintiff must demonstrate that (1) the trade dress is nonfunctional, (2) the trade dress has acquired secondary meaning, and (3) there is a substantial likelihood of confusion between the plaintiff's and defendant's products. Disc Golf Ass'n v. Champion Discs, 158 F.3d 1002, 1005 (9th Cir. 1998). In summary judgment, Brighton challenged the sufficiency of Plaintiff's evidence on the secondary meaning and confusion elements.
1. Likelihood of Confusion
In a trade dress infringement claim, Plaintiff bears the burden of establishing that the defendant's use of the same or similar mark is likely to cause consumer confusion. See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979). Courts use the eight factors listed in Sleekcraft to evaluate the likelihood of confusion: (1) strength of the mark, (2) [*22] proximity of the goods, (3) similarity of the marks, (4) evidence of actual confusion, (5) marketing channels used, (6) type of goods and the degree of care likely to be exercised by the purchaser, (7) defendant's intent in selecting the mark, and (8) likelihood of expansion of the product lines. Id.; see Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 632 (9th Cir. 2007).
Brighton alleges that S&C only addressed one factor, "while ignoring the rest." (Doc. No. 249 at 25.) Brighton also asserts that S&C "cited no evidence on seven of the eight Sleekcraft factors" or discuss them. Brighton concludes that "[t]his deficiency alone makes the case 'stand out' from the garden-variety trademark and trade dress case." (Id. (quoting Octane Fitness, 134 S. Ct. at 1756).) These assertions belie the findings the Court previously made in its order denying attorney's fees and its summary judgment motion. (Doc. No. 86 at 17 (MSJ); Doc. No. 218 at 30-31 (Attorney's Fees).) In the post-trial order, the Court stated:
As the Court noted in its order granting summary judgment on the trade dress claim, "Plaintiff does not address the Sleekcraft factors by name . . . ." (Doc. No. 86 at 17.) However, the Court's analysis makes clear that Plaintiff's evidence addressed several of the factors. For example, [*23] the Court "infer[red] that there is some close proximity of the products—both are in Southern California" (second factor). (Id. at 18.) The Court acknowledged that Plaintiff proffered some evidence of the products' similarity, although the evidence's probative value was weakened by its source (third factor). (Id. at 17-18.) The Court noted "Plaintiff provide[d] extensive information regarding the marketing channels used" (fifth factor). (Id. at 18.) And the Court stated that both parties "provided great detail about how they developed their respective lines and the inspiration for the lines' development" (eighth factor). (Id.) While the analysis was "slim," (id. at 17), and the evidence was ultimately insufficient to withstand Defendant's motion, the Court is not persuaded that Plaintiff's showing was "completely lacking in merit" to support a fee award, Secalt S.A., 668 F.3d at 688.
(Doc. No. 218 at 30-31.) The Court concluded by acknowledging that while Plaintiff failed to provide enough evidence to defeat summary judgment and create a triable issue of material fact, S&C's claim was not so devoid of merit that it would stand out as exceptional.
Even in cases where a plaintiff failed to produce any evidence, the Ninth Circuit has upheld a finding the [*24] case was not exceptional and denying attorney's fees because it found the case was not frivolous and raised debatable issues. Applied Information Sciences Corp. v. eBay, Inc., 511 F.3d 966, 973 (9th Cir. 2007). Here, Brighton simply re-raises the same arguments the Court previously disagreed with. The Court finds no reason to change its analysis now with regards to the sufficiency of S&C's case.
2. Secondary Meaning
Secondary meaning is "the mental association by a substantial segment of consumers and potential consumers between the alleged mark and a single source of the product." Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1354 (9th Cir. 1985) (citation and internal quotation marks omitted). "Secondary meaning can be established in many ways, including (but not limited to) direct consumer testimony; survey evidence; exclusivity, manner, and length of use of a mark; amount and manner of advertising; amount of sales and number of customers; established place in the market; and proof of intentional copying by the defendant." Filipino Yellow Pages, Inc. v. Asian Journal Publ'ns, Inc., 198 F.3d 1143, 1151 (9th Cir. 1999).
Brighton argues that S&C "had no evidence whatsoever on key factors relevant to secondary meaning." (Doc. No. 249 at 27.) Supporting this assertion, Brighton notes they "had no survey evidence" and "no evidence that Brighton had intentionally copied Sophia & Chloe's [*25] trade dress in order to confuse consumers or trade upon Sophia & Chloe's goodwill." (Id. at 27-28.) Again, this is the identical argument that Brighton previously raised. Addressing it, the Court found:
Defendant argues Plaintiff "had no evidence whatsoever on key factors relevant to secondary meaning." (Doc. No. 177-1 at 23.) Defendant points out that Plaintiff had no survey evidence and no evidence that Defendant intentionally copied Plaintiff's trade dress to confuse consumers or trade upon Plaintiff's goodwill. (Id. at 23-25.) While the Court found it notable that Plaintiff failed to offer a consumer survey at summary judgment, the Court rejected Defendant's argument "that this is sufficient to sink Plaintiff's secondary meaning claim[.]" (Doc. No. 86 at 16.) The Court again rejects this argument in light of the Ninth Circuit's admonition that secondary meaning "can be established in many ways, including (but not limited to) . . . survey evidence[.]" Filipino Yellow Pages, Inc., 198 F.3d at 1151(emphasis added).
(Doc. No. 218 at 28.) Brighton—again—acknowledges that S&C proffered sales and advertising evidence but asserts this "evidence showed that the amount of Sophia & Chloe's sales and advertising was inadequate as a matter of law to prove secondary [*26] meaning." (Doc. No. 249 at 28.) Brighton also states that the evidence submitted was undisclosed, an issue duly noted by the Court. (Doc. No. 218 at 29 n.5 ("Defendant has made it abundantly clear that it disputes the accuracy of the Court's finding that Plaintiff's late disclosure of these witnesses was harmless and substantially justified . . . . to the extent Defendant 'respectfully submits the finding is erroneous,' . . . it may take that issue up with the Court of Appeals." (internal citations omitted)).)
Ultimately, the Court concluded again that when the factors are taken together, "the Court cannot conclude that Plaintiff's showing on secondary meaning was so deficient as to make this an exceptional case." (Id. at 29.) The Court finds no reason to reverse that analysis now.
3. Relaxed Standard for Exceptional Cases
The only substantive change between the Court's previous order and this one is the relaxed standard defining exceptional cases under 15 U.S.C. § 1117. However, Brighton must still prove by a preponderance of the evidence and in light of the totality of the circumstances that the case is exceptional. "The Supreme Court explained that an 'exceptional' case is simply one that stands out from others [*27] 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." SunEarth, 839 F.3d at 1180.
Under the first prong of Octane Fitness, "[t]he 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)[.]" SunEarth, 839 F.3d at 1180. Brighton's only basis for such a finding boils down to S&C's failure to present enough evidence to defeat its summary judgment motion, such as only providing evidence of confusion from industry insiders, failing to get a consumer confusion survey, and inability to show Brighton intentionally copied S&C's work. (Doc. No. 249 at 24-30.)
Courts have denied attorney's fees in similar situations when a plaintiff's "position . . . was not unreasonably or exceptionally weak" and it "submit[ted] evidence of some actual confusion from customers[.]" Sazerac Co., Inc. v. Fetzer Vineyards, Inc., No. 3:15-CV-04618-WHO, 2017 U.S. Dist. LEXIS 201909, 2017 WL 6059271, at *6 (N.D. Cal. Dec. 7, 2017) (citing Reserve Media, Inc. v. Efficient Frontiers, Inc., No. 2-15-05072-DDP (AGRx), 2017 U.S. Dist. LEXIS 90865, 2017 WL 2562098, at *1 (C.D. Cal. June 12, 2017)); see also Caiz v. Roberts, No. CV1509044RSWLAGRX, [*28] 2017 U.S. Dist. LEXIS 29794, 2017 WL 830386, at *5 (C.D. Cal. Mar. 2, 2017) (declining to accept defendants' invitation to find the case exceptional based on a lack of evidence in the absence of an improper motive or "a particular need . . . to advance considerations of compensation and deterrence," and concluding that defendants had failed to meet their burden to show the case was "exceptional" based only on plaintiff's failure of proof or lack of success.)
Under the second prong of Octane Fitness, a court may find a case "exceptional" given the "unreasonable manner in which [it] was litigated." SunEarth, 839 F.3d at 1180. Again, as discussed throughout this analysis and the Court's previous analyses in the summary judgment order and the order denying attorney's fees, Brighton has failed to show that S&C litigated the case in an unreasonable manner. Although the Court ultimately did not find S&C's evidence persuasive, and was surprised at the lack of a consumer confusion survey at summary judgment, S&C nevertheless set forth good faith arguments in its defense. Thus, the Court holds here as the Court held in Caiz, by stating that "it is difficult for the Court to conclude, as Defendants suggest, that it was frivolous or objectively unreasonable for Plaintiff to pursue this litigation." [*29] 2017 U.S. Dist. LEXIS 29794, 2017 WL 830386, at *5. "[W]here a party has set forth some good faith argument in favor of its position, it will generally not be found to have advanced exceptionally meritless claims." Deckers Outdoor Corp. v. Romeo & Juliette, Inc., No. 2:15-cv-02812-ODW (Cwx), 2016 U.S. Dist. LEXIS 138593, 2016 WL 5842187, at *3 (C.D. Cal. Oct. 5, 2016) (internal quotation marks and citation omitted).
While the Court acknowledges that the exceptional standard is now relaxed, the Court exercises its discretion in light of the totality of the circumstances and finds that this case is not exceptional warranting attorney's fees. "[M]ere failure of proof on a claim or lack of success in a lawsuit is not sufficient to warrant a finding that a case is exceptional." Caiz, 2017 U.S. Dist. LEXIS 29794, 2017 WL 830386, at *5. Thus, the Court DENIES Brighton's motion for attorney's fees under the Lanham Act as well.
IV. NON-TAXABLE COSTS
Brighton requests that the Court award its non-taxable costs, which can be awarded under both the Copyright Act and the Lanham Act. (Doc. No. 249 at 33-34.) The non-taxable costs Brighton seeks are expert witness fees totaling $111,831.11. The test to determine if non-taxable costs should be awarded is the same as attorney's fees under both the Copyright Act and the Lanham Act. Thus, the Court incorporates its analysis as such, and declines [*30] granting non-taxable costs.
V. MOTION TO RE-TAX COSTS
S&C moves the Court to re-tax costs awarded to Brighton. (Doc. No. 256.) The Court Clerk awarded $14,838.78 to Brighton. (Doc. No. 250.)
A. LEGAL STANDARDS
Under Rule 54(d)(1) of the Federal Rules of Civil Procedure, a prevailing party should be awarded costs unless "a federal statute, these rules, or a court order provides otherwise. . . ." This rule "creates a presumption in favor of awarding costs to a prevailing party, but vests in the district court discretion to refuse to award costs." Ass'n of Mexican-American Educators v. California ("AMAE"), 231 F.3d 572, 591 (9th Cir. 2000) (en banc). The losing party bears the burden of making a showing that the award of costs would be inequitable under the circumstances. Nat'l Info. Servs., Inc. v. TRW, Inc., 51 F.3d 1470, 1472 (9th Cir. 1995), overruled on other grounds by AMAE, 231 F.3d at 593.
If a district court denies costs, it must "specify reasons," explaining "why a case is not 'ordinary' and why, in the circumstances, it would be inappropriate or inequitable to award costs." Champion Produce, Inc. v. Ruby Robinson Co., 342 F.3d 1016, 1022 (9th Cir. 2003) (citing AMAE, 231 F.3d at 591-93). Appropriate reasons to deny costs include: (1) the need to punish a prevailing party's misconduct, (2) the losing party's limited financial resources, (3) the degree of economic disparity between the parties, (4) "the chilling effect of imposing such high costs on future civil [*31] rights litigants," (5) the closeness and difficulty of the issues raised in the case, and (6) that the losing party litigated in good faith. AMAE, 231 F.3d at 592-93.
Alternatively, a district court "need not give affirmative reasons for awarding costs." Save Our Valley v. Sound Transit, 335 F.3d 932, 945 (9th Cir. 2003). "[I]nstead, it need only find that the reasons for denying costs are not sufficiently persuasive to overcome the presumption in favor of an award." Id.
B. DISCUSSION
S&C cites to the case being a "close call" as a reason to re-tax costs. (Doc. No. 256 at 2.) S&C argues first, a jury found that Brighton willfully infringed on its patents; second, S&C was awarded a judgment in wrongful profits; and third, the Ninth Circuit panel was divided on the standard to use. (Id. at 2-3.) Finally, S&C states it has "extremely limited resources, consisting of only a few thousand dollars in cash." (Id. at 3.) Brighton reasserts its arguments used throughout its attorney's fees motion and urges the Court to reject S&C's limited resources argument. (Doc. No. 257 at 2-3.) Here, the arguments submitted by S&C do not overcome the heavy presumption favoring an award of costs. While the Court was more lenient on the burden of financial hardship under the Copyright Act, the standard under that act [*32] is more equitable and based on a totality of circumstances. Here, S&C's declaration does not contain substantial evidence showing financial hardship, only conclusory statements—albeit under penalty of perjury—about S&C's financial status. Thus, the Court declines to re-tax costs and DENIES S&C's motion. (Doc. No. 256.)
VI. CONCLUSION
Underlying Brighton's motion for attorney's fees under both the Copyright Act and the Lanham Act is a fairly and reasonably litigated case. Keeping in line with the principle of the Copyright Act, awarding both parties fees would further its purpose because both parties had legitimate reasons to both prosecute and defend against S&C's copyrights. Under the totality of circumstances though, the Court finds that the balance is at best neutral and at worst tipped in favor of S&C, and thus declines awarding fees. Moreover, the Court finds that even under the Lanham Act's relaxed approach to defining an exceptional case, the Court still finds that this case does not warrant that label. Accordingly, the Court also declines granting fees under the Lanham Act. Thus, Brighton's motion for attorney's fees and non-taxable costs is DENIED. (Doc. No. 249.) Finally, S&C's [*33] motion to re-tax costs is DENIED.
Hon. Anthony J. Battaglia
31.7 Halo Elecs., Inc. v. Pulse Elecs., Inc. 31.7 Halo Elecs., Inc. v. Pulse Elecs., Inc.
31 (20)
HALO ELECTRONICS, INC.
v.
PULSE ELECTRONICS, INC., et al.
Nos. 14-1513
14-1520.
Supreme Court of the United States
Argued Feb. 23, 2016.
Decided June 13, 2016.
Jeffrey B. Wall, Washington, DC, for the petitioners.
Roman Martinez for the United States as amicus curiae, by special leave of the Court, supporting the petitioners.
Carter G. Phillips, Washington, DC, for the respondents.
Craig E. Countryman, Fish & Richardson P.C., San Diego, CA, Michael J. Kane, William R. Woodford, John A. Dragseth, Fish & Richardson P.C., Minneapolis, MN, for Petitioner.
Sharon A. Hwang, Deborah A. Laughton, Stephanie F. Samz, McAndrews Held & Malloy Ltd., Chicago, IL, Garrard R. Beeney, Robert J. Giuffra, Jr., Sullivan & Cromwell LLP, New York, NY, Jeffrey B. Wall, Austin L. Raynor, Sullivan & Cromwell LLP, Washington, DC, for Petitioners.
*1928Mark C. Fleming, Rebecca A. Bact, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, DC, Seth P. Waxman, Thomas G. Saunders, Thomas G. Sprankling, John B. Sprangers, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, Jason D. Hirsch, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, for Respondents.
Carter G. Phillips, Sidley Austin LLP, Washington, DC, Constantine L. Trela, Jr., Steven J. Horowitz, Sidley Austin LLP, Chicago, IL, Mark L. Hogge, Victor H. Boyajian, Shailendra K., Maheshwari, Charles R. Bruton, Rajesh C. Noronha, Dentons US LLP, Washington, DC, for Respondents.
Section 284 of the Patent Act provides that, in a case of infringement, courts "may increase the damages up to three times the amount found or assessed." 35 U.S.C. § 284. In In re Seagate Technology, LLC, 497 F.3d 1360 (2007) (en banc), the United States Court of Appeals for the Federal Circuit adopted a two-part test for determining when a district court may increase damages pursuant to § 284. Under Seagate, a patent owner must first "show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." Id., at 1371. Second, the patentee must demonstrate, again by clear and convincing evidence, that the risk of infringement "was either known or so obvious that it should have been known to the accused infringer." Ibid. The question before us is whether this test is consistent with § 284. We hold that it is not.
I
A
Enhanced damages are as old as U.S. patent law. The Patent Act of 1793 mandated treble damages in any successful infringement suit. See Patent Act of 1793, § 5, 1 Stat. 322. In the Patent Act of 1836, however, Congress changed course and made enhanced damages discretionary, specifying that "it shall be in the power of the court to render judgment for any sum above the amount found by [the] verdict ... not exceeding three times the amount thereof, according to the circumstances of the case." Patent Act of 1836, § 14, 5 Stat. 123. In construing that new provision, this Court explained that the change was prompted by the "injustice" of subjecting a "defendant who acted in ignorance or good faith" to the same treatment as the "wanton and malicious pirate." Seymour v. McCormick, 16 How. 480, 488, 14 L.Ed. 1024 (1854). There "is no good reason," we observed, "why taking a man's property in an invention should be trebly punished, while the measure of damages as to other property is single and actual damages." Id., at 488-489. But "where the injury is wanton or malicious, a jury may inflict vindictive or exemplary damages, not to recompense the plaintiff, but to punish the defendant." Id., at 489.
The Court followed the same approach in other decisions applying the 1836 Act, finding enhanced damages appropriate, for instance, "where the wrong [had] been done, under aggravated circumstances,"
*1929Dean v. Mason, 20 How. 198, 203, 15 L.Ed. 876 (1858), but not where the defendant "appeared in truth to be ignorant of the existence of the patent right, and did not intend any infringement," Hogg v. Emerson, 11 How. 587, 607, 13 L.Ed. 824 (1850). See also Livingston v. Woodworth, 15 How. 546, 560, 14 L.Ed. 809 (1854) ("no ground" to inflict "penalty" where infringers were not "wanton").
In 1870, Congress amended the Patent Act, but preserved district court discretion to award up to treble damages "according to the circumstances of the case." Patent Act of 1870, § 59, 16 Stat. 207. We continued to describe enhanced damages as "vindictive or punitive," which the court may "inflict" when "the circumstances of the case appear to require it." Tilghman v. Proctor, 125 U.S. 136, 143-144, 8 S.Ct. 894, 31 L.Ed. 664 (1888) ; Topliff v. Topliff, 145 U.S. 156, 174, 12 S.Ct. 825, 36 L.Ed. 658 (1892) (infringer knowingly sold copied technology of his former employer). At the same time, we reiterated that there was no basis for increased damages where "[t]here is no pretence of any wanton and wilful breach" and "nothing that suggests punitive damages, or that shows wherein the defendant was damnified other than by the loss of the profits which the plaintiff received." Cincinnati Siemens-Lungren Gas Illuminating Co. v. Western Siemens-Lungren Co., 152 U.S. 200, 204, 14 S.Ct. 523, 38 L.Ed. 411 (1894).
Courts of Appeals likewise characterized enhanced damages as justified where the infringer acted deliberately or willfully, see, e.g., Baseball Display Co. v. Star Ballplayer Co., 35 F.2d 1, 3-4 (C.A.3 1929) (increased damages award appropriate "because of the deliberate and willful infringement"); Power Specialty Co. v. Connecticut Light & Power Co., 80 F.2d 874, 878 (C.A.2 1936) ("wanton, deliberate, and willful" infringement); Brown Bag Filling Mach. Co. v. Drohen, 175 F. 576, 577 (C.A.2 1910) ("a bald case of piracy"), but not where the infringement "was not wanton and deliberate," Rockwood v. General Fire Extinguisher Co., 37 F.2d 62, 66 (C.A.2 1930), or "conscious and deliberate," Goodyear Tire & Rubber Co. v. Overman Cushion Tire Co., 95 F.2d 978, 986 (C.A.6 1938).
Some early decisions did suggest that enhanced damages might serve to compensate patentees as well as to punish infringers. See, e.g., Clark v. Wooster, 119 U.S. 322, 326, 7 S.Ct. 217, 30 L.Ed. 392 (1886) (noting that "[t]here may be damages beyond" licensing fees "but these are more properly the subjects" of enhanced damage awards). Such statements, however, were not for the ages, in part because the merger of law and equity removed certain procedural obstacles to full compensation absent enhancement. See generally 7 Chisum on Patents § 20.03[4][b][iii], pp. 20-343 to 20-344 (2011). In the main, moreover, the references to compensation concerned costs attendant to litigation. See Clark, 119 U.S., at 326, 7 S.Ct. 217 (identifying enhanced damages as compensation for "the expense and trouble the plaintiff has been put to"); Day v. Woodworth, 13 How. 363, 372, 14 L.Ed. 181 (1852) (enhanced damages appropriate when defendant was "stubbornly litigious" or "caused unnecessary expense and trouble to the plaintiff"); Teese v. Huntingdon, 23 How. 2, 8-9, 16 L.Ed. 479 (1860) (discussing enhanced damages in the context of "counsel fees"). That concern dissipated with the enactment in 1952 of 35 U.S.C. § 285, which authorized district courts to award reasonable attorney's fees to prevailing parties in "exceptional cases" under the Patent Act. See Octane Fitness, LLC v. ICON Health & Fitness Inc., 572 U.S. ----, ----, 134 S.Ct. 1749, 1755, 188 L.Ed.2d 816 (2014).
*1930It is against this backdrop that Congress, in the 1952 codification of the Patent Act, enacted § 284. "The stated purpose" of the 1952 revision "was merely reorganization in language to clarify the statement of the statutes." Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 505, n. 20, 84 S.Ct. 1526, 12 L.Ed.2d 457 (1964) (internal quotation marks omitted). This Court accordingly described § 284 -consistent with the history of enhanced damages under the Patent Act-as providing that "punitive or 'increased' damages" could be recovered "in a case of willful or bad-faith infringement." Id., at 508, 84 S.Ct. 1526 ; see also Dowling v. United States, 473 U.S. 207, 227, n. 19, 105 S.Ct. 3127, 87 L.Ed.2d 152 (1985) ( "willful infringement"); Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U.S. 627, 648, n. 11, 119 S.Ct. 2199, 144 L.Ed.2d 575 (1999) (describing § 284 damages as "punitive").
B
In 2007, the Federal Circuit decided Seagate and fashioned the test for enhanced damages now before us. Under Seagate, a plaintiff seeking enhanced damages must show that the infringement of his patent was "willful." 497 F.3d, at 1368. The Federal Circuit announced a two-part test to establish such willfulness: First, "a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent," without regard to "[t]he state of mind of the accused infringer." Id., at 1371. This objectively defined risk is to be "determined by the record developed in the infringement proceedings." Ibid. "Objective recklessness will not be found" at this first step if the accused infringer, during the infringement proceedings, "raise[s] a 'substantial question' as to the validity or noninfringement of the patent." Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc., Inc., 776 F.3d 837, 844 (C.A.Fed.2015). That categorical bar applies even if the defendant was unaware of the arguable defense when he acted. See Seagate, 497 F.3d, at 1371 ; Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319 (C.A.Fed.2010).
Second, after establishing objective recklessness, a patentee must show-again by clear and convincing evidence-that the risk of infringement "was either known or so obvious that it should have been known to the accused infringer." Seagate, 497 F.3d, at 1371. Only when both steps have been satisfied can the district court proceed to consider whether to exercise its discretion to award enhanced damages. Ibid.
Under Federal Circuit precedent, an award of enhanced damages is subject to trifurcated appellate review. The first step of Seagate -objective recklessness-is reviewed de novo ; the second-subjective knowledge-for substantial evidence; and the ultimate decision-whether to award enhanced damages-for abuse of discretion. See Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc., Inc., 682 F.3d 1003, 1005, 1008 (C.A.Fed.2012) ; Spectralytics, Inc. v. Cordis Corp., 649 F.3d 1336, 1347 (C.A.Fed.2011).
C
1
Petitioner Halo Electronics, Inc., and respondents Pulse Electronics, Inc., and Pulse Electronics Corporation (collectively, Pulse) supply electronic components. 769 F.3d 1371, 1374-1375 (C.A.Fed.2014). Halo alleges that Pulse infringed its patents for electronic packages containing transformers designed to be mounted to the surface of circuit boards. Id., at 1374.
*1931In 2002, Halo sent Pulse two letters offering to license Halo's patents. Id., at 1376. After one of its engineers concluded that Halo's patents were invalid, Pulse continued to sell the allegedly infringing products. Ibid.
In 2007, Halo sued Pulse. Ibid. The jury found that Pulse had infringed Halo's patents, and that there was a high probability it had done so willfully. Ibid. The District Court, however, declined to award enhanced damages under § 284, after determining that Pulse had at trial presented a defense that "was not objectively baseless, or a 'sham.' " App. to Pet. for Cert. in No. 14-1513, p. 64a (quoting Bard, 682 F.3d, at 1007 ). Thus, the court concluded, Halo had failed to show objective recklessness under the first step of Seagate . App. to Pet. for Cert. in No. 14-1513, at 65a. The Federal Circuit affirmed. 769 F.3d 1371 (2014).
2
Petitioners Stryker Corporation, Stryker Puerto Rico, Ltd., and Stryker Sales Corporation (collectively, Stryker) and respondents Zimmer, Inc., and Zimmer Surgical, Inc. (collectively, Zimmer), compete in the market for orthopedic pulsed lavage devices. App. to Pet. for Cert. in No. 14-1520, p. 49a. A pulsed lavage device is a combination spray gun and suction tube, used to clean tissue during surgery. Ibid. In 2010, Stryker sued Zimmer for patent infringement. 782 F.3d 649, 653 (C.A.Fed.2015). The jury found that Zimmer had willfully infringed Stryker's patents and awarded Stryker $70 million in lost profits. Ibid. The District Court added $6.1 million in supplemental damages and then trebled the total sum under § 284, resulting in an award of over $228 million. App. in No. 14-1520, pp. 483-484.
Specifically, the District Court noted, the jury had heard testimony that Zimmer had "all-but instructed its design team to copy Stryker's products," App. to Pet. for Cert. in No. 14-1520, at 77a, and had chosen a "high-risk/high-reward strategy of competing immediately and aggressively in the pulsed lavage market," while "opt[ing] to worry about the potential legal consequences later," id., at 52a. "[T]reble damages [were] appropriate," the District Court concluded, "[g]iven the one-sidedness of the case and the flagrancy and scope of Zimmer's infringement." Id., at 119a.
The Federal Circuit affirmed the judgment of infringement but vacated the award of treble damages. 782 F.3d, at 662. Applying de novo review, the court concluded that enhanced damages were unavailable because Zimmer had asserted "reasonable defenses" at trial. Id., at 661-662.
We granted certiorari in both cases, 577 U.S. ----, 136 S.Ct. 356, 193 L.Ed.2d 289 (2015), and now vacate and remand.
II
A
The pertinent text of § 284 provides simply that "the court may increase the damages up to three times the amount found or assessed." 35 U.S.C. § 284. That language contains no explicit limit or condition, and we have emphasized that the "word 'may' clearly connotes discretion." Martin v. Franklin Capital Corp., 546 U.S. 132, 136, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005) (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 533, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994) ).
At the same time, "[d]iscretion is not whim." Martin, 546 U.S., at 139, 126 S.Ct. 704. "[I]n a system of laws discretion is rarely without limits," even when the statute "does not specify any limits *1932upon the district courts' discretion." Flight Attendants v. Zipes, 491 U.S. 754, 758, 109 S.Ct. 2732, 105 L.Ed.2d 639 (1989). "[A] motion to a court's discretion is a motion, not to its inclination, but to its judgment; and its judgment is to be guided by sound legal principles." Martin, 546 U.S., at 139, 126 S.Ct. 704 (quoting United States v. Burr, 25 F.Cas. 30, 35 (No. 14,692d) (C.C.D.Va.1807) (Marshall, C.J.); alteration omitted). Thus, although there is "no precise rule or formula" for awarding damages under § 284, a district court's "discretion should be exercised in light of the considerations" underlying the grant of that discretion. Octane Fitness, 572 U.S., at ----, 134 S.Ct., at 1756 (quoting Fogerty, 510 U.S., at 534, 114 S.Ct. 1023 ).
Awards of enhanced damages under the Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead designed as a "punitive" or "vindictive" sanction for egregious infringement behavior. The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or-indeed-characteristic of a pirate. See supra, at 1928 - 1930. District courts enjoy discretion in deciding whether to award enhanced damages, and in what amount. But through nearly two centuries of discretionary awards and review by appellate tribunals, "the channel of discretion ha[s] narrowed," Friendly, Indiscretion About Discretion, 31 Emory L.J. 747, 772 (1982), so that such damages are generally reserved for egregious cases of culpable behavior.
B
The Seagate test reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under § 284 only in egregious cases. That test, however, "is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts." Octane Fitness, 572 U.S., at ----, 134 S.Ct., at 1755 (construing § 285 of the Patent Act). In particular, it can have the effect of insulating some of the worst patent infringers from any liability for enhanced damages.
1
The principal problem with Seagate 's two-part test is that it requires a finding of objective recklessness in every case before district courts may award enhanced damages. Such a threshold requirement excludes from discretionary punishment many of the most culpable offenders, such as the "wanton and malicious pirate" who intentionally infringes another's patent-with no doubts about its validity or any notion of a defense-for no purpose other than to steal the patentee's business. Seymour, 16 How., at 488. Under Seagate, a district court may not even consider enhanced damages for such a pirate, unless the court first determines that his infringement was "objectively" reckless. In the context of such deliberate wrongdoing, however, it is not clear why an independent showing of objective recklessness-by clear and convincing evidence, no less-should be a prerequisite to enhanced damages.
Our recent decision in Octane Fitness arose in a different context but points in the same direction. In that case we considered § 285 of the Patent Act, which allows district courts to award attorney's fees to prevailing parties in "exceptional" cases. 35 U.S.C. § 285. The Federal Circuit had adopted a two-part test for determining when a case qualified as exceptional, requiring that the claim asserted be both objectively baseless and brought in subjective bad faith. We rejected that test *1933on the ground that a case presenting "subjective bad faith" alone could "sufficiently set itself apart from mine-run cases to warrant a fee award." 572 U.S., at ----, 134 S.Ct., at 1757. So too here. The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.
The Seagate test aggravates the problem by making dispositive the ability of the infringer to muster a reasonable (even though unsuccessful) defense at the infringement trial. The existence of such a defense insulates the infringer from enhanced damages, even if he did not act on the basis of the defense or was even aware of it. Under that standard, someone who plunders a patent-infringing it without any reason to suppose his conduct is arguably defensible-can nevertheless escape any comeuppance under § 284 solely on the strength of his attorney's ingenuity.
But culpability is generally measured against the knowledge of the actor at the time of the challenged conduct. See generally Restatement (Second) of Torts § 8A (1965) ("intent" denotes state of mind in which "the actor desires to cause consequences of his act" or "believes" them to be "substantially certain to result from it"); W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts § 34, p. 212 (5th ed. 1984) (describing willful, wanton, and reckless as "look[ing] to the actor's real or supposed state of mind"); see also Kolstad v. American Dental Assn., 527 U.S. 526, 538, 119 S.Ct. 2118, 144 L.Ed.2d 494 (1999) ("Most often ... eligibility for punitive awards is characterized in terms of a defendant's motive or intent"). In Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007), we stated that a person is reckless if he acts "knowing or having reason to know of facts which would lead a reasonable man to realize" his actions are unreasonably risky. Id., at 69, 127 S.Ct. 2201 (emphasis added and internal quotation marks omitted). The Court found that the defendant had not recklessly violated the Fair Credit Reporting Act because the defendant's interpretation had "a foundation in the statutory text" and the defendant lacked "the benefit of guidance from the courts of appeals or the Federal Trade Commission" that "might have warned it away from the view it took." Id., at 69-70, 127 S.Ct. 2201. Nothing in Safeco suggests that we should look to facts that the defendant neither knew nor had reason to know at the time he acted.*
Section 284 allows district courts to punish the full range of culpable behavior. Yet none of this is to say that enhanced damages must follow a finding of egregious misconduct. As with any exercise of discretion, courts should continue to take into account the particular circumstances of each case in deciding whether to award damages, and in what amount. Section 284 permits district courts to exercise *1934their discretion in a manner free from the inelastic constraints of the Seagate test. Consistent with nearly two centuries of enhanced damages under patent law, however, such punishment should generally be reserved for egregious cases typified by willful misconduct.
2
The Seagate test is also inconsistent with § 284 because it requires clear and convincing evidence to prove recklessness. On this point Octane Fitness is again instructive. There too the Federal Circuit had adopted a clear and convincing standard of proof, for awards of attorney's fees under § 285 of the Patent Act. Because that provision supplied no basis for imposing such a heightened standard of proof, we rejected it. See Octane Fitness, 572 U.S., at ----, 134 S.Ct., at 1758. We do so here as well. Like § 285, § 284"imposes no specific evidentiary burden, much less such a high one." Ibid. And the fact that Congress expressly erected a higher standard of proof elsewhere in the Patent Act, see 35 U.S.C. § 273(b), but not in § 284, is telling. Furthermore, nothing in historical practice supports a heightened standard. As we explained in Octane Fitness, "patent-infringement litigation has always been governed by a preponderance of the evidence standard." 572 U.S., at ----, 134 S.Ct., at 1758. Enhanced damages are no exception.
3
Finally, because we eschew any rigid formula for awarding enhanced damages under § 284, we likewise reject the Federal Circuit's tripartite framework for appellate review. In Highmark Inc. v. Allcare Health Management System, Inc., 572 U.S. ----, 134 S.Ct. 1744, 188 L.Ed.2d 829 (2014), we built on our Octane Fitness holding to reject a similar multipart standard of review. Because Octane Fitness confirmed district court discretion to award attorney fees, we concluded that such decisions should be reviewed for abuse of discretion. Highmark, 572 U.S., at ----, 134 S.Ct., at 1747.
The same conclusion follows naturally from our holding here. Section 284 gives district courts discretion in meting out enhanced damages. It "commits the determination" whether enhanced damages are appropriate "to the discretion of the district court" and "that decision is to be reviewed on appeal for abuse of discretion." Id., at ----, 134 S.Ct., at 1748.
That standard allows for review of district court decisions informed by "the considerations we have identified." Octane Fitness, 572 U.S., at ----, 134 S.Ct., at 1756 (internal quotation marks omitted). The appellate review framework adopted by the Federal Circuit reflects a concern that district courts may award enhanced damages too readily, and distort the balance between the protection of patent rights and the interest in technological innovation. Nearly two centuries of exercising discretion in awarding enhanced damages in patent cases, however, has given substance to the notion that there are limits to that discretion. The Federal Circuit should review such exercises of discretion in light of the longstanding considerations we have identified as having guided both Congress and the courts.
III
For their part, respondents argue that Congress ratified the Seagate test when it passed the America Invents Act of 2011 and reenacted § 284 without pertinent change. See Brief for Respondents in No. 14-1513 27 (citing Lorillard v. Pons, 434 U.S. 575, 580, 98 S.Ct. 866, 55 L.Ed.2d 40 (1978) ). But the language Congress reenacted unambiguously confirmed discretion *1935in the district courts. Congress's retention of § 284 could just as readily reflect an intent that enhanced damages be awarded as they had been for nearly two centuries, through the exercise of such discretion, informed by settled practices. Respondents point to isolated snippets of legislative history referring to Seagate as evidence of congressional endorsement of its framework, but other morsels-such as Congress's failure to adopt a proposed codification similar to Seagate -point in the opposite direction. See, e.g., H.R. 1260, 111th Cong., 1st Sess. § 5(e) (2009).
Respondents also seize on an addition to the Act addressing opinions of counsel. Section 298 provides that "[t]he failure of an infringer to obtain the advice of counsel" or "the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed." 35 U.S.C. § 298. Respondents contend that the reference to willfulness reflects an endorsement of Seagate 's willfulness test. But willfulness has always been a part of patent law, before and after Seagate . Section 298 does not show that Congress ratified Seagate 's particular conception of willfulness. Rather, it simply addressed the fallout from the Federal Circuit's opinion in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (1983), which had imposed an "affirmative duty" to obtain advice of counsel prior to initiating any possible infringing activity, id., at 1389-1390. See, e.g., H.R.Rep. No. 112-98, pt. 1, p. 53 (2011).
At the end of the day, respondents' main argument for retaining the Seagate test comes down to a matter of policy. Respondents and their amici are concerned that allowing district courts unlimited discretion to award up to treble damages in infringement cases will impede innovation as companies steer well clear of any possible interference with patent rights. They also worry that the ready availability of such damages will embolden "trolls." Trolls, in the patois of the patent community, are entities that hold patents for the primary purpose of enforcing them against alleged infringers, often exacting outsized licensing fees on threat of litigation.
Respondents are correct that patent law reflects "a careful balance between the need to promote innovation" through patent protection, and the importance of facilitating the "imitation and refinement through imitation" that are "necessary to invention itself and the very lifeblood of a competitive economy." Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989). That balance can indeed be disrupted if enhanced damages are awarded in garden-variety cases. As we have explained, however, they should not be. The seriousness of respondents' policy concerns cannot justify imposing an artificial construct such as the Seagate test on the discretion conferred under § 284.
* * *
Section 284 gives district courts the discretion to award enhanced damages against those guilty of patent infringement. In applying this discretion, district courts are "to be guided by [the] sound legal principles" developed over nearly two centuries of application and interpretation of the Patent Act. Martin, 546 U.S., at 139, 126 S.Ct. 704 (internal quotation marks omitted). Those principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement. The Seagate test, in contrast, unduly confines the ability of district courts to exercise the discretion conferred on them. Because both cases before us were decided under the Seagate framework, we vacate the judgments of the Federal Circuit and *1936remand the cases for proceedings consistent with this opinion.
It is so ordered.
Justice BREYER, with whom Justice KENNEDY and Justice ALITO join, concurring.
I agree with the Court that In re Seagate Technology, LLC, 497 F.3d 1360 (C.A.Fed.2007) (en banc), takes too mechanical an approach to the award of enhanced damages. But, as the Court notes, the relevant statutory provision, 35 U.S.C. § 284, nonetheless imposes limits that help produce uniformity in its application and maintain its consistency with the basic objectives of patent law. See U.S. Const., Art. I, § 8, cl. 8 ("To promote the Progress of Science and useful Arts"). I write separately to express my own understanding of several of those limits.
First, the Court's references to "willful misconduct" do not mean that a court may award enhanced damages simply because the evidence shows that the infringer knew about the patent and nothing more. Ante, at 1933 - 1934. " '[W]illfu [l]' is a 'word of many meanings whose construction is often dependent on the context in which it appears.' " Safeco Ins. Co. of America v. Burr, 551 U.S. 47, 57, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007). Here, the Court's opinion, read as a whole and in context, explains that "enhanced damages are generally appropriate ... only in egregious cases ." Ante, at 1932 (emphasis added); ante, at 1934 (Enhanced damages "should generally be reserved for egregious cases typified by willful misconduct" (emphasis added)). They amount to a " 'punitive' " sanction for engaging in conduct that is either "deliberate" or "wanton." Ante, at 1931 - 1932; compare Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 508, 84 S.Ct. 1526, 12 L.Ed.2d 457 (1964) ("bad-faith infringement"), and Seymour v. McCormick, 16 How. 480, 488, 14 L.Ed. 1024 (1854) ("malicious pirate"), with ante, at 1932 - 1934, and n. 1 ("objective recklessness"). The Court refers, by way of example, to a " 'wanton and malicious pirate' who intentionally infringes another's patent-with no doubts about its validity or any notion of a defense-for no purpose other than to steal the patentee's business." Ante, at 1932. And while the Court explains that "intentional or knowing" infringement "may" warrant a punitive sanction, the word it uses is may, not must . Ante, at 1932 - 1933. It is "circumstanc[e]" that transforms simple knowledge into such egregious behavior, and that makes all the difference. Ante, at 1933 - 1934.
Second, the Court writes against a statutory background specifying that the "failure of an infringer to obtain the advice of counsel ... may not be used to prove that the accused infringer wilfully infringed." § 298. The Court does not weaken this rule through its interpretation of § 284. Nor should it. It may well be expensive to obtain an opinion of counsel. See Brief for Public Knowledge et al. as Amici Curiae 9 ("[O]pinion[s] [of counsel] could easily cost up to $100,000 per patent"); Brief for Internet Companies as Amici Curiae 13 (such opinions cost "tens of thousands of dollars"). Such costs can prevent an innovator from getting a small business up and running. At the same time, an owner of a small firm, or a scientist, engineer, or technician working there, might, without being "wanton" or "reckless," reasonably determine that its product does not infringe a particular patent, or that that patent is probably invalid. Cf. Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. ----, ----, 133 S.Ct. 2107, 2117, 186 L.Ed.2d 124 (2013) (The "patent['s][own] descriptions highlight the problem[s] with its claims"). I do not say *1937that a lawyer's informed opinion would be unhelpful. To the contrary, consulting counsel may help draw the line between infringing and noninfringing uses. But on the other side of the equation lie the costs and the consequent risk of discouraging lawful innovation. Congress has thus left it to the potential infringer to decide whether to consult counsel-without the threat of treble damages influencing that decision. That is, Congress has determined that where both "advice of counsel" and "increased damages" are at issue, insisting upon the legal game is not worth the candle. Compare § 298 with § 284.
Third, as the Court explains, enhanced damages may not "serve to compensate patentees" for infringement-related costs or litigation expenses. Ante, at 1929 - 1930. That is because § 284 provides for the former prior to any enhancement. § 284 (enhancement follows award of "damages adequate to compensate for the infringement"); see ante, at 1929 - 1930. And a different statutory provision, § 285, provides for the latter. Ibid. ; Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. ----, ---- - ----, 134 S.Ct. 1749, 1756, 188 L.Ed.2d 816 (2014) (fee awards may be appropriate in a case that is " 'exceptional' " in respect to "the unreasonable manner in which [it] was litigated").
I describe these limitations on enhanced damages awards for a reason. Patent infringement, of course, is a highly undesirable and unlawful activity. But stopping infringement is a means to patent law's ends. Through a complex system of incentive-based laws, patent law helps to encourage the development of, disseminate knowledge about, and permit others to benefit from useful inventions. Enhanced damages have a role to play in achieving those objectives, but, as described above, that role is limited.
Consider that the U.S. Patent and Trademark Office estimates that more than 2,500,000 patents are currently in force. See Dept. of Commerce, Patent and Trademark Office, A. Marco, M. Carley, S. Jackson, & A. Myers, The USPTO Historical Patent Files: Two Centuries of Invention, No. 2015-1, p. 32, fig. 6 (June 2015). Moreover, Members of the Court have noted that some "firms use patents ... primarily [to] obtai[n] licensing fees." eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (KENNEDY, J., concurring). Amici explain that some of those firms generate revenue by sending letters to " 'tens of thousands of people asking for a license or settlement' " on a patent " 'that may in fact not be warranted.' " Brief for Internet Companies as Amici Curiae 12; cf. Letter to Dr. Thomas Cooper (Jan. 16, 1814), in 6 Writings of Thomas Jefferson 295 (H. Washington ed. 1854) (lamenting "abuse of the frivolous patents"). How is a growing business to react to the arrival of such a letter, particularly if that letter carries with it a serious risk of treble damages? Does the letter put the company "on notice" of the patent? Will a jury find that the company behaved "recklessly," simply for failing to spend considerable time, effort, and money obtaining expert views about whether some or all of the patents described in the letter apply to its activities (and whether those patents are even valid)? These investigative activities can be costly. Hence, the risk of treble damages can encourage the company to settle, or even abandon any challenged activity.
To say this is to point to a risk: The more that businesses, laboratories, hospitals, and individuals adopt this approach, the more often a patent will reach beyond its lawful scope to discourage lawful activity, and the more often patent-related demands will frustrate, rather than "promote,"
*1938the "Progress of Science and useful Arts." U.S. Const., Art. I, § 8, cl. 8; see, e.g., Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1327 (C.A.Fed.2011) (patent holder "acted in bad faith by exploiting the high cost to defend [patent] litigation to extract a nuisance value settlement"); In re MPHJ Technology Invs., LLC, 159 F.T.C. 1004, 1007-1012 (2015) (patent owner sent more than 16,000 letters demanding settlement for using "common office equipment" under a patent it never intended to litigate); Brief for Internet Companies as Amici Curiae 15 (threat of enhanced damages hinders "collaborative efforts" to set "industry-wide" standards for matters such as internet protocols); Brief for Public Knowledge et al. as Amici Curiae 6 (predatory patent practices undermined "a new and highly praised virtual-reality glasses shopping system"). Thus, in the context of enhanced damages, there are patent-related risks on both sides of the equation. That fact argues, not for abandonment of enhanced damages, but for their careful application, to ensure that they only target cases of egregious misconduct.
One final point: The Court holds that awards of enhanced damages should be reviewed for an abuse of discretion. Ante, at 1934 - 1935. I agree. But I also believe that, in applying that standard, the Federal Circuit may take advantage of its own experience and expertise in patent law. Whether, for example, an infringer truly had "no doubts about [the] validity" of a patent may require an assessment of the reasonableness of a defense that may be apparent from the face of that patent. See ante, at 1932. And any error on such a question would be an abuse of discretion. Highmark Inc. v. Allcare Health Management System, Inc., 572 U.S. ----, ----, n. 2, 134 S.Ct. 1744, 1748, n. 2, 188 L.Ed.2d 829 (2014) ("A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law" (internal quotation marks omitted)).
Understanding the Court's opinion in the ways described above, I join its opinion.
31.8 Sony BMG Music Entertainment v. Tenenbaum 31.8 Sony BMG Music Entertainment v. Tenenbaum
31 (20)
SONY BMG MUSIC ENTERTAINMENT, et al., Plaintiffs, Appellees, v. Joel TENENBAUM, Defendant, Appellant.
No. 12-2146.
United States Court of Appeals, First Circuit.
June 25, 2013.
*68K.A.D. Camara, with whom Camara & Sibley LLP, Paul J. Pape, Nicolas M. Rou-leau, Pape Barristers PC and Charles R. Nesson were on brief, for appellant.
Paul D. Clement, with whom Erin E. Murphy, Bancroft PLLC, Jennifer L. Par-iser, Recording Industry Association of America, Matthew J. Oppenheim, Oppen-heim & Zebrak, LLP, Timothy M. Reynolds and Bryan Cave LLP were on brief, for appellees Sony BMG Music Entertainment; Warner Bros. Records, Inc.; Arista Records LLC and UMG Recordings, Inc.
Jeffrey Clair, Attorney, Appellate Staff, Civil Division, U.S. Department of Justice, with whom Stuart F. Delery, Acting Assistant Attorney General, Carmen Milagros Ortiz, United States Attorney, and Scott R. McIntosh, Attorney, Appellate Staff, were on brief, for appellee United States.
Robert Alan Garrett, R. Reeves Anderson, and Arnold & Porter LLP on brief for the Motion Picture Association of America, Inc., Amicus Curiae.
Before LYNCH, Chief Judge, TORRUELLA and HOWARD, Circuit Judges.
Joel Tenenbaum illegally downloaded and distributed music for several years. A group of recording companies sued Ten-enbaum, and a jury awarded damages of $675,000, representing $22,500 for each of thirty songs whose copyright Tenenbaum violated. Tenenbaum appeals the award, claiming that it is so large that it violates his constitutional right to due process of law. We hold that the award did not violate Tenenbaum’s right to due process, and we affirm.
I. Background
From 1999 to at least 2007, Tenenbaum downloaded and distributed copyrighted music without authorization, using various *69peer-to-peer networks.1 Tenenbaum knew that his conduct was illegal, but he pressed on, ignoring warnings from his father, his college, and recording companies. In 2007, Sony BMG Music Entertainment, Warner Bros. Records Inc., Arista Records LLC, Atlantic Recording Corporation,2 and UMG Recordings, Inc. (together, “Sony”), sued Tenenbaum under the Copyright Act, 17 U.S.C. § 101 et seq., for statutory damages and injunctive relief. Sony pursued claims for thirty copyrighted works, although Tenenbaum had apparently distributed far more. During discovery, Tenenbaum lied about his activities, blaming unidentified burglars and a foster child living in his parents’ home, among others. Only at trial did Tenenbaum admit that he had distributed as many as five thousand songs.
The district court held as a matter of law that Tenenbaum had violated the Copyright Act, and a jury found that Ten-enbaum’s violations were willful. The court instructed the jury that the Copyright Act provides for damages between $750 and $150,000 for each willful violation. 17 U.S.C. § 504(c). The court also gave the jury a set of non-exhaustive factors that it might wish to consider in issuing its award, including the nature of the infringement; the defendant’s purpose and intent; the profit that the defendant reaped, if any, or the expense that the defendant saved; the revenue lost by the plaintiff as a result of the infringement; the value of the copyright; the duration of the infringement; the defendant’s continuation of infringement after notice or knowledge of copyright claims; and the need to deter this defendant and other potential infring-ers. The jury awarded Sony $22,500 for each of Tenenbaum’s thirty violations (15% of the statutory maximum), for a total award of $675,000. Tenenbaum moved for a reduction in the award, arguing that remittitur was appropriate and that the award was so high that it violated his right to due process. The court bypassed the issue of remittitur and held that the award violated due process, reducing it to $67,500. Sony BMG Music Entm’t v. Tenenbaum, 721 F.Supp.2d 85 (D.Mass. 2010). In doing so, the court relied on BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), in which the Supreme Court held that an excessive award of punitive damages can violate due process.
Sony appealed the reduction of the award. We vacated the district court’s judgment, holding that the principle of constitutional avoidance required the court to address the issue of remittitur before determining whether the award violated due process. Sony BMG Music Entm’t v. Tenenbaum (Tenenbaum II), 660 F.3d 487, 508-15 (1st Cir.2011). We also suggested that if the district court were to evaluate the constitutionality of the award on remand, it should rely not on Gore, but on St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 40 S.Ct. 71, 64 L.Ed. 139 (1919), in which the Supreme Court considered the constitutionality of an award of statutory damages. Tenenbaum II, 660 F.3d at 512-13.
On remand,3 the district court decided that remittitur was inappropriate and that the original award of $675,000 comported *70with due process, relying on Williams. Sony BMG Music Entm’t v. Tenenbaum (Tenenbaum III), No. 07-cv-11446, 2012 WL 3639053 (D.Mass. Aug. 23, 2012). Tenenbaum now appeals the decision on the constitutionality of the damage award, but not the decision on remittitur.
II. Analysis
This appeal presents two questions. First, what is the correct standard for evaluating the constitutionality of an award of statutory damages under the Copyright Act? Second, did the award of $675,000 violate Tenenbaum’s right to due process? We review these questions of law de novo. See Cooper Indus., Inc. v. Leatherman Tool Grp., Inc., 532 U.S. 424, 436, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001).
A. Evaluating the Constitutionality of Statutory Damages
In Williams, the Supreme Court considered a challenge to an Arkansas statute that subjected railroads to penalties of 50 to 300 dollars, plus costs, for each offense of charging passengers fares that exceeded legal limits. See Williams, 251 U.S. at 64, 40 S.Ct. 71. After the St. Louis, I.M. & S. Railroad collected from two passengers a fare of 66 cents more than the law allowed, the passengers brought suit pursuant to the statute. Id. Each passenger obtained a judgment of 75 dollars plus fees — an award within the statutory range. Id. The railroad challenged the statutory award as unconstitutionally excessive under the Due Process Clause. Id. The Court rejected the railroad’s due process argument, holding that a statutory damage award violates due process only “where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” Id. at 66-67, 40 S.Ct. 71.
Gore and its progeny, which Tenenbaum argues should apply here, address the related but distinct issue of when a jury’s award of punitive damages is so excessive that it violates due process. See Gore, 517 U.S. at 574, 116 S.Ct. 1589. In Gore, the Court, animated by the principle that due process requires that civil defendants receive fair notice of the severity of the penalties their conduct might subject them to, id., identified three “guideposts” for a court’s consideration of whether a punitive damage award is so excessive that it deprives a defendant of due process: (1) the degree of reprehensibility of the defendant’s conduct, id. at 575-80, 116 S.Ct. 1589, (2) the ratio of the punitive award to the actual or potential harm suffered by the plaintiff, id. at 580-83, 116 S.Ct. 1589, and (3) the disparity between the punitive award issued by the jury and the civil or criminal penalties authorized in comparable cases, id. at 583-85, 116 S.Ct. 1589.
Here, the district court correctly chose to apply the Williams standard. By its own terms, Williams applies to awards of statutory damages, which the jury awarded in this case, while Gore applies to awards of punitive damages, which the jury did not award. Gore did not overrule Williams, and the Supreme Court has not suggested that the Gore guideposts should extend to constitutional review of statutory damage awards. The concerns regarding fair notice to the parties of the range of possible punitive damage awards, which underpin Gore, are simply not present in a statutory damages case where the statute itself provides notice of the scope of the potential award. Moreover, Gore’s second and third guideposts cannot logically apply to an award of statutory damages under the Copyright Act. The second due process guidepost requires a comparison between the award and the harm to the plaintiff, but a plaintiff seeking statutory damages *71under the Copyright Act need not prove actual damages. F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 233, 73 S.Ct. 222, 97 L.Ed. 276 (1952). The third guidepost requires a comparison between the award and the authorized civil and criminal penalties in comparable cases. Because an award of statutory damages is by definition an authorized civil penalty, this guidepost would require a court to compare the award to itself, a nonsensical result. Therefore, we conclude, as have other courts, that the standard articulated in Williams governs the review of an award of statutory damages under the Copyright Act. See Capitol Records, Inc. v. Thomas-Rasset, 692 F.3d 899, 907 (8th Cir.2012); Zomba Enters., Inc. v. Panorama Records, Inc., 491 F.3d 574, 587 (6th Cir.2007).
B. Constitutionality of the Award Against Tenenbaum
To determine whether “the penalty prescribed [against Tenenbaum] is so severe and oppressive as to be wholly dispropor-tioned to the offense and obviously unreasonable,” Williams, 251 U.S. at 66-67, 40 S.Ct. 71, we will examine the purpose of statutory damages under the Copyright Act, as well as Tenenbaum’s behavior.
Statutory damages under the Copyright Act are designed not only to provide “reparation for injury,” but also “to discourage wrongful conduct.” F.W. Woolworth Co., 344 U.S. at 233, 73 S.Ct. 222. As we explained in Tenenbaum II, in 1999 Congress increased the minimum and maximum statutory awards under the Copyright Act because of new technologies that would allow Internet users to steal copyrighted works. 660 F.3d at 500. At trial, Sony presented evidence that Ten-enbaum’s activities led to the same type of harm that Congress foresaw: loss of the value of its copyrights, reduced income and profits, and job losses. Id. at 502-03.
On appeal, Tenenbaum invites us to assume that he is “the most heinous of noncommercial copyright infringers.” We need not go so far as to accept his offer.4 The evidence of Tenenbaum’s copyright infringement easily justifies the conclusion that his conduct was egregious. Tenenb-aum carried on his activities for years in spite of numerous warnings, he made thousands of songs available illegally, and he denied responsibility during discovery. Much of this behavior was exactly what Congress was trying to deter when it amended the Copyright Act. Therefore, we do not hesitate to conclude that an award of $22,500 per song, an amount representing 15% of the maximum award for willful violations and less than the maximum award for non-willful violations, comports with due process.
Tenenbaum argues that the award of $675,000 violates due process because it is not tied to the actual injury that he caused, which he estimates to be no more than $450, or the cost of 30 albums at $15 each. But this argument asks us to disregard the deterrent effect of statutory damages, the inherent difficulty in proving damages in a copyright suit, and Sony’s evidence of the harm that it suffered from conduct such as Tenenbaum’s. More importantly, the Supreme Court held in Williams that statutory damages are not to be measured this way:
Nor does giving the penalty to the aggrieved [party] require that it be confined or proportioned to his loss or damages; for, as it is imposed as a punishment for the violation of a public law, the Legislature may adjust its amount *72to the public wrong rather than the private injury, just as if it were going to the state.
251 U.S. at 66, 40 S.Ct. 71; see also Thomas-Rasset, 692 F.3d 899 at 909-10 (rejecting, in a case with similar facts, the district court’s conclusion that “statutory damages must still bear some relation to actual damages”). For these reasons, we find Tenenbaum’s arguments unpersuasive.5
III. Conclusion
For the reasons stated above, the jury’s award of $675,000 did not violate Tenenb-aum’s right to due process. The judgment of the district court is affirmed.