August 10, 2017

Federal Circuit: The Second Circuit Would Agree with the Third, Fourth, Fifth, Sixth, and Ninth Circuits that Octane Fitness Applies to Lanham Act Claims

By Bryan K. Wheelock, Principal

In Romag Fasteners, Inc. v. Fossil, Inc., [2016-1115, 2016-1116, 2016-1842] (August 9, 2017), the Federal Circuit vacated and remanded the district court’s award of attorneys fees to Romag under 35 U.S.C. § 285 but not under the identically worded 15 U.S.C. § 1117(a).

Romag has successfully sued defendants for infringement of U.S. Patent No. 5,722,126 and U.S. Trademark Reg. No. 2,095,367.  Under the Patent Act and the Lanham Act, “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285; 15 U.S.C. § 1117(a).

Applying the Octane standard, the district court found that Romag was entitled to attorney’s fees under § 285 of the Patent Act because Fossil did not “withdraw [anticipation and obviousness] defenses with prejudice until after trial,” and because Fossil’s “patent invalidity defense of indefiniteness bordered on frivolous.”  With respect to the Lanham Act, the district court applied the prevailing Second Circuit precedent with respect to 15 U.S.C. § 1117(a) that “allows recovery of a reasonable attorney’s fee only on evidence of fraud or bad faith.”

Before Octane, the Second Circuit allowed recovery of attorney’s fees under 15 U.S.C. § 1117(a) only if there was bad faith or willful infringement on the part of the defendants.  However, the Federal Circuit found that there is intervening relevant Supreme Court authority which, we think, would lead the Second Circuit to follow other circuits which have held that the Octane standard applies to the Lanham Act.

The Federal Circuit noted that since Octane was decided, the Third, Fourth, Fifth, Sixth, and Ninth Circuits have all held that Octane applies to Lanham Act Cases as well, and that no circuit has specifically considered Octane and then declined to apply it to the Lanham Act. Thus the Federal Circuit concluded that the Second Circuit would hold that, in light of Octane, the Lanham Act should have the same standard for recovering attorney’s fees as the Patent Act.  Thus, the Federal Circuit vacated the denial of attorneys fees, and remanded the case.

On the issue of attorneys fees on the patent infringement claim, the Federal Circuit likewise vacated the award.  The Federal Circuit noted that a district court must consider the totality of circumstances, including the conduct of the prevailing party that is seeking attorney’s fees.  The Federal Circuit found that the district court erred in declining to consider, in connection with its totality of circumstances analysis, Romag’s earlier litigation misconduct. Romag’s misconduct cannot be disregarded on the theory that failure to award fees is equivalent to double-sanctioning Romag.  In fact the Federal Circuit said that the fact that Romag’s misconduct has already been sanctioned should be weighed more heavily, rather than be excluded, in the 35 U.S.C. § 285 analysis.

This Federal Circuit remanded the case to the district court to consider the Lanham Act and the Patent Act attorney’s fees and the claimed expert fees under the correct standard, free of the errors it identified.