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Business Law FLASHPOINTS November 2019

November 15, 2019Print This Post Print This Post

Joseph Kish, Segal McCambridge Singer & Mahoney, Ltd., Chicago
312-644-3538 | E-mail Joseph Kish

Seventh Circuit: Analysis of Attorney’s Fee Requests Under Lanham Act Require Examination of Totality of Circumstances To Determine if Case Was Exceptional

LHO Chicago River, L.L.C. v. Perillo, No. 19-1848, 2019 WL 5851672 (7th Cir. Nov. 8, 2019), stems from a trademark infringement suit between two hotels in downtown Chicago (Hotel Chicago, owned by LHO Chicago River, L.L.C., and Hotel Chicago, owned by Joseph Perillo). LHO Chicago River voluntarily dismissed its trademark infringement claim against Joseph Perillo after a year of litigation. Perillo filed a postjudgment motion for attorneys’ fees under the Lanham Act, ch. 540, 60 Stat. 427 (1946), which the district court denied. Perillo appealed, and the issue before the court was whether the Supreme Court’s test for awarding attorneys’ fees in a patent case, as decided in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 188 L.Ed.2d 816, 134 S.Ct. 1749 (2014),should be extended to trademark infringement cases.

The Seventh Circuit applies the Octane test in place of the previous abuse of process test when deciding whether to award attorneys’ fees under the Lanham Act. Under the Octane test:

[A]n “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. 134 S.Ct. at 1756.

The court further elaborated a nonexclusive set of factors district courts can analyze 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.” 134 S.Ct. at 1756 n.6.

The defendant was initially denied attorneys’ fees because the district court declined to extend the Octane test to trademark infringement cases and instead analyzed the fee award under the previous abuse of power standard. The previous test came from Burford v. Accounting Practice Sales, Inc., 786 F.3d 582, 588 (7th Cir. 2015), and Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, 626 F.3d 958, 963 – 966 (7th Cir. 2010). The test held cases “exceptional” when there was an “abuse of process.” Burford, supra, 786 F.3d at 588. An “abuse of process” is further defined as a claim that is

(1) “objectively unreasonable because it is one a rational litigant would pursue only because it would impose disproportionate costs on his opponent” (in other words, extortionate in nature); or (2) when a party brings a frivolous claim with the purpose of obtaining an advantage external to the litigation, “ ‘unrelated to obtaining a favorable judgment.’ ” [Citation omitted.] Perillo, supra, 2019 WL 5851672 at *2.

The court chose to abandon the Burford/Nightingale standard due to the Supreme Court’s rejection of a “similarly rigid standard for an identical fee-shifting provision, and considering the Court’s reliance on trademark law” in deciding Octane. 2019 WL 5851672 at *3.

The case was vacated and remanded to the district court for analysis of whether to award attorneys’ fees under the Octane test.

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