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Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc.

United States District Court, D. South Dakota, Western Division

March 20, 2017

STURGIS MOTORCYCLE RALLY, INC., Plaintiff,
v.
RUSHMORE PHOTO & GIFTS, INC.; JRE, INC., CAROL NIEMANN; PAUL A. NIEMANN; BRIAN M. NIEMANN, and WAL-MART STORES, INC., Defendants, AND RUSHMORE PHOTO & GIFTS, INC.; JRE, INC., CAROL NIEMANN; PAUL A. NIEMANN; and BRIAN M. NIEMANN, Counterclaimants,
v.
STURGIS MOTORCYCLE RALLY, INC., Counterclaim Defendant.

          ORDER ON ATTORNEYS' FEES

          JEFFREY L. VIKEN CHIEF JUDGE

         INTRODUCTION

         On October 30, 2015, after a ten-day jury trial, the jury returned a unanimous verdict in SMRI's favor on the following counts: (1) registered trademark infringement, (2) unregistered trademark infringement; (3) trademark dilution; (4) deceptive trade practices; (5) violations of the Anti-Cybersquatting Consumer Protection Act; (6) false advertising; and (7) unfair competition. (Docket 264). In its verdict, the jury unanimously found in favor of SMRI on its claims of infringement of the registered STURGIS®, STURGIS BIKE WEEK®, and Composite Design marks and of the unregistered STURGIS MOTORCYCLE RALLY™ and STURGIS RALLY & RACES™ marks (jointly referred to as “SMRI's Marks”). (Docket 263). The jury also unanimously found in favor of SMRI on its claim of dilution of the famous STURGIS® mark. Id. The court entered judgment on those claims in favor of SMRI on December 2, 2015. (Docket 269).

         On January 4, 2016, SMRI filed a motion for attorneys' fees as the prevailing party at trial, together with supporting documentation. (Dockets 280-83). Defendants filed an objection to plaintiff's motion. (Docket 351). SMRI filed a reply brief in support of its' motion. (Docket 370).

         On May 17, 2016, the court filed an order granting defendants' motion to compel SMRI to respond to post-trial discovery. (Docket 344). On June 10, 2016, defendants filed a motion for attorneys' fees as the prevailing parties on the motion to compel discovery. (Dockets 359-61). SMRI filed an objection to defendants' motion. (Docket 367). Defendants filed a reply brief in support of their motion. (Docket 380).

         On March 10, 2017, the court entered an order granting in part defendants' motion (Docket 275) for judgment as a matter of law and granting in part defendants' motion (Docket 276) for application of equitable defenses. (Docket 420). The order vacated the money judgment in favor of SMRI against JRE, Inc., the RPG Defendants and Wal-Mart. Id. at p. 63 (referencing Docket 269 ¶ 1). The order barred SMRI from recovery of money damages prior to the date of the jury verdict, that is, October 30, 2015. Id. at p. 63. The order left intact SMRI's ownership of the trademarks based on the verdict. Id. at p. 62. The court resolves the motions for attorneys' fees in this order.

         ANALYSIS

         SMRI'S MOTION FOR FEES AND COSTS

         The Lanham Act permits a prevailing plaintiff in a trademark infringement case to recover attorney's fees and costs.

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover . . . the costs of the action. . . . The court in exceptional cases may award reasonable attorney fees to the prevailing party.

15 U.S.C. § 1117(a). If the use of a counterfeit mark is involved in the litigation, “the court shall, unless the court finds extenuating circumstances, . . . [award] a reasonable attorney's fee, if the violation consists of

(1) intentionally using a mark or designation, knowing such mark or designation is a counterfeit mark . . . in connection with the sale, offering for sale, or distribution of goods or services; or
(2) providing goods or services necessary to the commission of a violation specified in paragraph (1), with the intent that the recipient of the goods or services would put the goods or services to use in committing the violation. . . .

15 U.S.C. § 1117(b).

         “[P]laintiffs and defendants are to be treated alike, but attorney's fees are to [be] awarded to prevailing parties only as a matter of the court's discretion.” Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863, 876 (8th Cir. 1994) (internal citation and quotation marks omitted). “[T]he Lanham Act . . . permits rather than mandates an award of fees.” Id. The court's discretion to award fees “is limited to exceptional cases.” Id. (citing 15 U.S.C. § 1117(a)). “Courts have defined the characteristics of exceptional cases with adjectives suggesting egregious conduct by a party.” Id. at 877. “[A]n exceptional case is one in which [a party's] action was groundless, unreasonable, vexatious, or pursued in bad faith. . . . [E]xceptional behavior in this context [is] ‘malicious, fraudulent, deliberate, or willful.' ” Id. (citation omitted). “Succinctly put, an exceptional case within the meaning of [Section 1117(a)] is one in which one party's behavior went beyond the pale of acceptable conduct.” Id.

         In 2011, the United States Court of Appeals for the Eighth Circuit held “that when a defendant's unlawful conduct was willful and deliberate, the court may well determine that this is the type of ‘exceptional' case for which an award of attorney's fees is appropriate.” Community of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ's Church, 634 F.3d 1005, 1013 (8th Cir. 2011) (internal citation and some quotation marks omitted). Bad faith on the part of an infringing defendant is not a prerequisite for the court to find a case exceptional and award attorneys' fees. Id. “[T]he district court's decision on whether to award attorneys' fees [is reviewed] under an abuse-of-discretion standard.” Id.

         In 2014, the United States Supreme Court held “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.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., U.S., 134 S.Ct. 1749, 1756 (2014) (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994)). In exercising its equitable discretion, a trial court “may determine whether a case is ‘exceptional' . . . considering the totality of the circumstances.” Id. The Supreme Court explained that under the Copyright Act, “district courts could consider a ‘nonexclusive' list of ‘factors, ' including ‘frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.' ” Id. at 1756 n.6 (citing Fogerty, 510 U.S. at 534 n.19). “Under the standard announced today, 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.” Id. at 1756-57. “[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. . . . [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, ' . . . suffices to mark a case as ‘exceptional.' ” Id. at 1757 (brackets in original) (citing Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant, 771 F.2d 521, 526 (C.A.D.C. 1985) (“exceptional” in the Lanham Act's identical fee-shifting provision, 15 U.S.C. § 1117(a), means “uncommon” or “not run-of-the-mill”). “[W]hether a case is ‘exceptional' [is committed] to the discretion of the district court, that decision is to be reviewed on appeal for abuse of discretion.” Highmark Inc. v. Allcare Health Management Systems, Inc., __ U.S.__, 134 S.Ct. 1744, 1748 (2014) (referencing Octane Fitness, LLC, 134 S.Ct. 1749).

         Although Octane Fitness, LLC, was a patent infringement case, its' definition of “exceptional” applies to trademark infringement cases. See Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303, 315 (3d Cir. 2014) (“We believe that the Court was sending a clear message that it was defining ‘exceptional' not just for the fee provision in the Patent Act, but for the fee provision in the Lanham Act as well.”); Georgia-Pac. Consumer Products LP v. von Drehle Corp., 781 F.3d 710, 721 (4th Cir. 2015), as amended (Apr. 15, 2015) (same); Baker v. DeShong, 821 F.3d 620, 623 (5th Cir. 2016) (same); Slep-Tone Entertainment Corp. v. Karaoke Kandy Store, Inc., 782 F.3d 313, 318 (6th Cir. 2015) (same); SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., 839 F.3d 1179, 1181 (9th Cir. 2016) (“We agree with the majority of our sister circuits and conclude that Octane Fitness and Highmark have altered the analysis of fee applications under the Lanham Act. Therefore, district courts analyzing a request for fees under the Lanham Act should examine the ‘totality of the circumstances' to determine if the case was exceptional, . . . exercising equitable discretion in light of the nonexclusive factors identified in Octane Fitness and Fogerty, and using a preponderance of the evidence standard.”).

         SMRI seeks $1, 311, 764 in attorneys' fees and related expenses, discovery expenses of $18, 067.06 and travel expenses of $33, 347.10, for a total of $1, 363, 178.16 (jointly referred to as “fees.”). (Docket 280 at p. 1). SMRI asserts defendants' conduct was “willful and deliberate, ” making this an “exceptional case” warranting assessment of fees under § 1117(a). Id. at p. 2 (citing Community of Christ Copyright Corp., 634 F.3d at 1013) (additional citation omitted). Plaintiff argues that it “achieved success on the merits on every claim that it asserted in this litigation . . . . [and] achieved success on every counterclaim and affirmative defense asserted by Defendants.” (Docket 281 at p. 2). Even before the March 10, 2017 order, this statement by SMRI was not accurate. The jury found for the defendants on SMRI's infringement claim regarding the “TAKE THE RIDE TO STURGIS mark.” (Docket 263 at p. 4). Additionally, not all of defendants' counterclaims and ...


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