Octane Standard for Attorney’s Fees Applies to Lanham Act and Patent Act Cases

Federal CircuitRomag Fasteners, Inc. v. Fossil, Inc., (Fed. Cir. Aug. 9, 2017) (Before Newman, Dyk, and Hughes, J.) (Opinion for the court, Dyk, J.) (Concurring in part and dissenting in part, Newman, J.)

Romag owns a patent and trademark directed to magnetic snap fasteners. Romag licensed the patent and trademark to a Chinese manufacturer that supplies magnetic snaps in handbags distributed by Fossil. Romag sued Fossil for patent and trademark infringement and a violation of the Connecticut Unfair Trade Practices Act (“CUTPA”) after one batch of Fossil’s handbags appeared to have counterfeit magnetic snaps. The jury found Fossil liable for patent and trademark infringement and for violating the CUTPA. The Federal Circuit affirmed the patent and trademark infringement verdicts. After that appeal, Romag sought attorney’s fees under the Patent Act, Lanham Act, and the CUTPA. The district court awarded attorney’s fees under all but the Lanham Act. Fossil appealed the award of fees and Romag cross-appealed the denial of fees under the Lanham Act. The Federal Circuit vacated and remanded.

Romag argued that the district court erred in not awarding attorney’s fees under the Lanham Act and that the Octane standard applies under both the Patent Act and the Lanham Act. Before Octane, attorney’s fees were only recoverable in an “exceptional case” under the Lanham Act if there was strong evidence of bad faith or of willful infringement by the defendant. Octane held that, “an ‘exceptional case’ is simply one that stands out from others with respect to the substantive strength of a party’s litigation position (considering both the governing law and facts of the case) or the unreasonable manner in which the case was litigated.” The Third, Fourth, Fifth, Sixth, and Ninth Circuits have held that Octane applies to awards of attorney’s fees under both the Lanham Act and the Patent Act, and no circuit has declined to apply Octane to Lanham Act cases. Additionally, the language of the Lanham Act and the Patent Act for attorney’s fees is identical. The Federal Circuit concluded that the standard for attorney’s fees set forth in Octane applies to cases under the Lanham Act and remanded for the district court to determine whether attorney’s fees should be awarded.

Fossil argued that the district court erred in awarding attorney’s fees to Romag under the Patent Act. Under Octane, attorney’s fees may be awarded if a party’s arguments are objectively unreasonable or if the case was litigated in bad faith. In response to Romag’s patent infringement claims, Fossil pursued invalidity defenses based on anticipation and obviousness. Fossil ultimately decided not to pursue those defenses because the damages for the patent infringement claim were small. The district court awarded attorney’s fees to Romag after it concluded that Fossil only abandoned its invalidity defenses after trial. However, the record established that Fossil actually withdraw those defenses before trial. As a result, the district court erred in awarding attorney’s fees based in part on its erroneous finding of fact.

Fossil also presented moved for partial summary judgment of indefiniteness. The district court denied the motion, holding that the patent claims are definite. It also found that Fossil made a “woefully inadequate showing” of indefiniteness and that its arguments “bordered on frivolous.” The Court disagreed, finding that Fossil’s indefiniteness argument was not objectively unreasonable. Summary judgment was denied because Fossil’s indefiniteness argument was precluded by the court’s claim construction. Thus, the district court erred in awarding attorney’s fees. Additionally, the court awarded fees to Romag while declining to consider that it had sanctioned Romag for unreasonable delay. The Federal Circuit noted that under Octane, district courts must consider the totality of the circumstances in awarding attorney’s fees. The Court remanded for the district court to determine whether attorney’s fees should be awarded in light of the errors identified in its decision.

Judge Newman concurred in part and dissented in part. She agreed with the majority that the Supreme Court’s standard for attorney’s fees in Octane should apply to trademark cases under the Lanham Act. She disagreed, however, that the district court abused its discretion in awarding attorney’s fees on the patent issues. Judge Newman found that Fossil “pressed its invalidity theories, including anticipation and obviousness arguments, until the eve of trial,” thereby prolonging the litigation and increasing the cost of the lawsuit.

The Supreme Court’s “objectively unreasonable” standard for attorney’s fees set forth in Octane applies to infringement cases under the Lanham Act and the Patent Act. In attorney’s fee disputes, courts must consider the totality of the circumstances, including the conduct of both parties.

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  1. Paul F. Morgan August 19, 2017 10:17 am

    Handbags with magnetic snaps? Great way to render useless credit cards slid in and out past those magnets?

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