5th Circ. Issues New Standard for Attorney Fees in Trademark Cases

SAN FRANCISCO—A lot of people understand that using a company’s trademark to identify the company you are criticizing or critiquing is not a trademark violation. After all, how are you supposed to tell people you think XYZ Airline sucks without mentioning the name of the airline? Certainly, a lawyer should understand this issue and properly advise his client before bringing a trademark claim to try to silence a critic. Therefore, it was no surprise when a Texas district court dismissed a case in which AIDS denialist Clark Baker and his organization, the Office of Military and Scientific Justice (OMSJ), sued Jeffrey DeShong for using the company’s trademark on a website criticizing Baker and his organization. Although the lawyer should have known this was a frivolous claim, the judge was reluctant to go one step further and order an award of attorneys’ fees against Baker and OMSJ. Today,in Baker v. Deshong (Case No. 14-11157, Doc. No. 00513489438—5th Cir. May 3, 2016) the Fifth Circuit Court of Appeals ruled that the district court got it wrong. Under 15 U.S.C. § 1117(a) of the Lanham Act, a court should award attorneys’ fees to the prevailing party in an “exceptional” case. The issue on appeal, involved how to determine if a case is exceptional. Specifically, the Court of Appeal held that the district court applied the wrong standard when it required DeShong to show clear and convincing evidence that Baker brought the case bad faith. Instead, the court should have followed guidance from the Supreme Court in Octane Fitness, LLC v. Icon Health and Fitness, Inc., 134 S. Ct. 1749 (2014). Although the Octane Fitness opinion dealt with attorney fees in patent cases, the Fifth Circuit held that the same principles apply in a trademark case. Under the new standard, “an exceptional case is one where (1) in considering both governing law and the facts of the case, the case stands out from others with respect to the substantive strength of a party’s litigating position; or (2) the unsuccessful party has litigated the case in an ‘unreasonable manner.’” The Third and Fourth Circuit Courts of Appeal had already adopted this standard. The Fifth Circuit remanded the case to the district court directing it to apply the less burdensome standard. This ruling will likely have a significant impact on speech. First, lawyers will be much more reluctant to bring a bogus trademark claim, just because they don’t like what a critic has to say. They will have to decide if they can prove an alternative claim, such as defamation. However, those claims are not often any more attractive to potential plaintiffs since the First Amendment and state anti-SLAPP laws offer significant protections to individuals who engage in public criticism. Nonetheless, arrogant plaintiffs will continue to bring bogus trademark claims. Therefore, the second effect the case will have may be more important. With a more lenient standard for awarding attorney fees, defendants who have been unfairly sued will have an easier time in locating counsel willing to defend them on a pro bono basis, knowing that they have a good chance of obtaining an award for the fees the lawyer would normally charge. This is a good day for free speech in a circuit where such decisions don’t come often. In speaking with AVN, Sperlein added, "We're not likely to collect a fee here, since it was a pro bono case. But it's particularly rewarding to have had the opportunity to protect free speech since the speaker was criticizing someone who's an HIV denialist, who's engaged in promoting really dangerous ideas that really called out for other people to speak out about. It was particularly rewarding for me as an attorney to protect Jeffrey DeShong's right to criticize this guy's remarks."  D. Gill Sperlein is a San Francisco-based First Amendment attorney who is also of counsel to the Randazza Legal Group in Las Vegas. He and Paul Levy of Public Citizen represented Jeffery DeShong.