Federal Court Decisions in the Advertising Law, Marketing Law and Commercial Speech Areas

RBI's motion granted in part, and $22,291.73 in attorney fees and $14,571.10 in taxable costs, for a total award of $36,862.83 awarded.

[Opinion]: Naomi Reice Buchwald, United States District Judge.

Memorandum And Order

National Distillers Products Co., LLC ("National") brought this trademark action against Refreshment Brands, Inc. ("RBI") and several other defendants, arising out of RBI's marketing and sale of a "vodka cooler" called Glacier Bay. fn1 Following a bench trial which held on February 5-8, 2002, we found for defendants on all counts. National Distillers Prods. Co., LLC v. Refreshment Brands, Inc., 198 F. Supp. 2d 474 (S.D.N.Y. 2002). Now, RBI moves to recover a portion of the attorney fees and non-taxable costs it incurred in defending this action pursuant to Section 35(a) of the Lanham Act, as well as all of its taxable costs pursuant to Fed. R. Civ. P. 54(d)(1), Local Civ. R. 54.1, and 28 U.S.C. Sections 1920 and 1821. For the reasons stated below, we grant RBI's motion in part, and award $22,291.73 in attorney fees and $14,571.10 in taxable costs, for a total award of $36,862.83.

fn1 National distills and sells "Teton Glacier" vodka.

DISCUSSION

I. Attorney Fees

RBI seeks to recover attorney fees under Section 35(a) of the Lanham Act, which provides, in pertinent part, that "the court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. Section 1117 (a). In the Second Circuit, the prevailing party must make a showing of "fraud or bad faith" on the part of its opponent to obtain fees under this statute. Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 195 (2d Cir. 1996); IMAF, S.p.A. v. J.C. Penney Co., Inc., 810 F. Supp. 96, 100 (S.D.N.Y. 1992). Where, as here, the prevailing party is a defendant, the cases demonstrate that the plaintiff's pursuit of patently frivolous claims is circumstantial evidence of bad faith. Compare IMAF, 810 F. Supp. at 100 (awarding attorney fees to a prevailing defendant where plaintiff's suit "utterly lacked a solid legal foundation") and Viola Sportswear v. Mimum, 574 F. Supp. 619, 620-21 (E.D.N.Y. 1983) (granting attorney fees to defendants where, upon completion of discovery, "it was clear beyond cavil, if it had not been before, that the plaintiff's claim was without any basis in fact," plaintiff's refusal to discontinue the action led the court to "speculate about the motives which prompted this suit and in doing so[, found] none that are laudable") with Stephen W. Boney, Inc. v. Boney Servs., Inc., 127 F.3d 821, 827 (9th Cir. 1997) (denying attorney fee award where plaintiff's "case was not frivolous and raised debatable issues of law and fact") and Yeshiva Univ. v. New Eng. Educ. Inst., Inc., 631 F. Supp. 146, 149 (S.D.N.Y. 1986) ("there is no precedent for awarding defendants attorney's fees where the plaintiff's claim on the merits is not only advanced in good faith, but actually presented a close question for the jury"). RBI relies upon this line of cases to prove National's bad faith, fn2 and we consider each allegedly frivolous claim in turn. fn3

fn2 RBI does not offer any other grounds for a finding of bad faith, such as the use of trademark litigation for an ulterior competitive motive. See, e.g., Mennen Co. v. Gillette Co., 565 F. Supp. 648, 657 (S.D.N.Y. 1983) (awarding attorney fees under Section 35(a) where there was "a substantial overtone in this case to warrant an inference that this suit was initiated as a competitive ploy").

fn3 In a letter dated November 6, 2001, defendants sought leave to move for partial summary against these claims. At a conference held before the Court the next day, we recommended that the parties consider proceeding to a bench trial in lieu of motion practice. The parties subsequently entered into a stipulation by which National withdrew its demand for a jury trial, defendants withdrew their request to move for summary judgment, and the parties consented to a bench trial. Stipulation and Order dated November 29, 2001 ("11/29 Stip."). Therefore, National's assertion that RBI "could have moved to dismiss claims it thought were without basis, or [] moved for summary judgment," and its failure to do so forecloses the argument that National "caused" it to incur excess fees and costs, is not persuasive. Pl.'s Opp. at 3-4. Significant as well is the fact that the November 6 letter placed National on notice in advance of trial of those claims which defendants believed were most readily subject to challenge.

A. Claims for False Advertising and Cancellation of BATF Approval

National asserted a claim against RBI for false advertising claiming that the latter's use of the words "vodka" and "premium" in its advertising, labeling, and/or packaging were false and misleading in violation of Section 43(a) of the Lanham Act. National alleged, first, that RBI's use of "vodka" was misleading in that full strength vodka ordinarily contains 20%-30% alcohol, while Glacier Bay is only 5.9% alcohol and, second, that the vodka used by RBI was not of sufficient quality to merit the title "premium," and that RBI's use of this term was therefore misleading. These claims were voluntarily withdrawn by National in the middle of the trial. RBI states that National's "abandonment of these claims underscores the fact that they were meritless," Def.'s Mem. at 4, while National counters that its "efforts to simplify [the] trial [should be] applauded, not punished" by awarding fees to RBI. Pl.'s Opp. at 7. We think that these claims, though not particularly strong, were not so frivolous as to evidence bad faith. Furthermore, while one might not applaud National for waiting to withdraw this claim until the trial was underway, its responsive argument is well taken. We should not discourage a litigant from voluntarily withdrawing a weak claim, even during trial, by the specter of a future attorney fee award based on that very withdrawal. Accordingly, we decline to award attorney fees on these claims. fn4

fn4 We also decline to award attorney fees on the claim for cancellation of BATF approval for largely the same reasons. National withdrew this claim by stipulation more than two months before trial, and we will not punish them for doing so. See 11/29 Stip.

B. Claim for Trade Dress Infringement

National brought a claim for trade dress infringement against RBI under Section 43(a) of the Lanham Act. RBI asserts that this claim had "'no real substance'" and, accordingly, seeks attorney fees incurred in defending against it. Def.'s Mem. at 5-6 (quoting Mennen, 565 F. Supp. at 657. While we found that National failed to meet its burden on this claim, National Distillers, 198 F. Supp. 2d at 485, it was far from frivolous because both Teton Glacier's and Glacier Bay's labels include a drawing of snow-covered mountains on a metallic banner background, and both use the word "Glacier" in a Roman font. As such, we decline to award attorney fees on this claim.

C. Claims for Trademark Dilution

National also brought claims under Section 43(c) of the Lanham Act and New York General Business Law Section 360-1 for trademark dilution. As we stated in our earlier Opinion, to prevail on the Lanham Act claim, National was obliged to demonstrate that its mark is "famous," and in order to succeed on its state law claim, National had to prove that its mark "truly [has a] distinctive quality or which has acquired a secondary meaning in the mind of the public." National Distillers, 198 F. Supp. 2d at 486. These claims were indeed, as RBI contends, baseless and unfounded. Even before bringing this suit, National was, or should have been, aware that Teton Glacier, its only product, was neither famous nor endowed with secondary meaning. See id. at 480-81 (discussing National's negligible advertising efforts and Teton Glacier's minuscule market share). This was not a close question: Teton Glacier is nowhere near as famous as it must be in order to support a dilution claim under either state or federal law. Indeed, National admitted as such when its attorney stated during trial that "I certainly believe that our dilution count is not likely to succeed based on the case law as to fame." Trial Transcript at 420. Accordingly, National's pursuit of this claim through trial can fairly be described as vexatious and evidence of bad faith. We therefore award RBI attorney fees for the amount reasonably spent defending these dilution claims. Based on the time records submitted by RBI, fn5 we award $2,000.00 in attorney fees and $300.00 in Westlaw bills fn6 expended on this claim, for a total of $2, 300.00. fn7

fn5 We have carefully scrutinized the evidence proffered by RBI on the amount of attorney fees expended in defending the various claims at issue here, and we find the billing rate and number of hours to be well-documented and reasonable. See Ewing Decl. P 4 (stating hourly billing rate for partners is $350-$405, for associates, $215-$295, and for paralegals, $170); id. P 7 (describing methodology to reduce time charges for "mixed" entries). Accordingly, the various aspects of our award are based directly on the billing entries submitted by RBI, without deduction. See Blue Cross & Blue Shield of N.J., Inc. v. Philip Morris, Inc., 190 F. Supp. 2d 407, 429 (E.D.N.Y. 2002) (where "the fee sought is honest, is well-supported by the record as the court observed it, is made by ethical lawyers whose credibility the court accepts, and comports with the law and facts of this case," "there is no reason to reduce [such] honest and valid claims").

fn6 While RBI refers to its Westlaw bills as a "non-taxable cost," the Second Circuit has held that "computer research is merely a substitute for an attorney's time that is compensable under an application for attorneys' fees and is not a separately taxable cost." United States ex rel. Evergreen Pipeline Constr. Co. v. Merritt Meridian Constr. Corp., 95 F.3d 153, 173 (2d Cir. 1996). We therefore award RBI the amount of its Westlaw bills as "attorney fees" under Section 35(a) of the Lanham Act, rather than as a "cost."

fn7 The affidavit and records submitted in support of this award do not clearly distinguish between time spent defending against the dilution claims and the trade dress infringement claim, which we previously found to be nonfrivolous. Thus, while RBI sought $3,695 in fees and $456.01 in Westlaw bills, we reduced this amount in order to separate out the work devoted to the dilution claims.

D. Reverse Confusion

As part of its claim for trademark infringement, National argued on the eve of trial fn8 for a finding of "reverse confusion." See Pl.'s (Proposed) Findings of Fact and Conclusions of Law. We permitted National to go forward on this theory, but informed it that we would adjourn the trial and give RBI an opportunity to engage in additional discovery if it appeared that the theory would succeed. fn9 See Trial Transcript at 13, 27-28. Later during the trial, National voluntarily withdrew its reverse confusion theory because it acknowledged that, given RBI's advertising expenditures, it "could not have, in effect, saturated the market," id. at 419, as is generally required to prove a trademark infringement claim founded on reverse confusion. See note 9, supra. National's counsel further acknowledged that "I think we can comfortably state that there is not a reverse confusion matter here." Trial Transcript at 419. Although National did not receive RBI's financial statements until shortly before trial, and after it posited this theory in its (Proposed) Findings of Fact and Conclusions of Law, the relatively low level of RBI's advertising and marketing expenditures was disclosed as early as July 24, 2001, when National deposed both of RBI's principals. Reply Decl. of Bruce R. Ewing Exs. D, E, F. From this point forward, National knew, or should have known, that a reverse confusion theory was untenable. As its pursuit of this legal theory until the middle of trial evidences National's bad faith, RBI is entitled to attorney fees expended in defending against these claims, and in moving in limine to preclude National from relying on this theory. We therefore award RBI $4,699.00 in attorney fees and $2,471.34 in Westlaw bills fn10 expended on this claim, for a total of $7,170.34.

fn8 The First time the Court, and, apparently, RBI, became aware that National sought to prove reverse confusion at trial was upon receipt of Pl.'s (Proposed) Findings of Fact and Conclusions of Law. We received this document on January 25, 2002, and trial commenced on February 5, 2002.

fn9 Based on the parties' pretrial submissions, we had serious doubts as to National's ability to prove infringement via a reverse confusion theory. "Reverse confusion occurs where the junior user saturates the market with a similar trademark and overwhelms the senior user." Therma-Scan, Inc. v. Thermoscan, Inc., 2002 U. S. App. LEXIS 13816, F.3d , , 2002 WL 1466238, at *4 (6th Cir. 2002) (citing Ameritech, Inc. v. American Info. Techs. Corp., 811 F.2d 960, 964 (6th Cir. 1987)); Cohn v. Petsmart, Inc., 281 F.3d 837, 841 (9th Cir. 2002) (same); see Pl.'s (Proposed) Findings of Fact and Conclusions of Law P 110 (citing Ameritech, 811 F.2d at 961) (same). While National accurately stated that "[RBI's] sales have far exceed [National's]," this was not the pertinent inquiry. Pl.'s (Proposed) Findings of Fact and Conclusions of Law P 128. Rather, to succeed on a reverse confusion theory, a plaintiff must generally make a showing that defendant's junior mark is extremely well-known, not just that it is more well known than plaintiff's senior mark. Cf. Dreamwerks Prod. Group, Inc. v. SKB Studio, 142 F.3d 1127, (9th Cir. 1998) (reversing grant of summary judgment where plaintiff offered reverse confusion theory and "everyone--or most everyone--had heard of" defendant's mark).

fn10 See note 6, supra.

E. Other Fees Sought

A few matters remain to be addressed. First, RBI seeks to recover attorney fees for the time spent addressing frivolous claims in its Amended Answer. Of the seven new claims asserted by National in its Amended Complaint, we have found that only the federal dilution claim was sufficiently frivolous to evidence bad faith. fn11 We therefore award RBI one-seventh of the amount it seeks, $2,430.00, or $347.14. Second, RBI requests remuneration for time spent addressing frivolous claims in its Pre-Trial Proposed Findings of Fact and Conclusions of Law. Of the seventy seven pages included therein, only seven were devoted to a claim we have deemed frivolous, namely those alleging dilution under state and federal law. We accordingly award RBI 9% of the amount it seeks, $36,945.50, or $3,325.10. Third, RBI properly seeks fees for the time expended in moving for attorney fees. See Reed v. A.W. Lawrence & Co., Inc., 95 F.3d 1170, 1184 (2d Cir. 1996). As RBI has succeeded on only about half of its fee application, see supra, we award it half of the amount it seeks for making the instant motion, $12,601.50, or $6,300.75, and Westlaw charges, $557.54, or $278.77, for a total of $6,579.52. Finally, RBI seeks to recover fees incurred in submitting a Reply Declaration in response to National's opposition to its motion for fees and costs. Again, we will award half of the amount sought, $5,319.25, or $2,569.63.

fn11 The Amended Complaint offers a theory of forward confusion in support of its claim for trademark infringement. Am. Compl. PP 20-21 (alleging that consumers are likely to "erroneously believe that Defendants' product emanates from or is endorsed . . . [by] Plaintiff . . . to reap the benefit of Plaintiff's goodwill"). The first time National proposed a reverse confusion theory was in its (Proposed) Findings of Fact and Conclusions of Law. See Part I.D, supra.

II. Taxable Costs

Finally, RBI seeks to recover costs from National pursuant to Fed. R. Civ. P. 54(d)(1), Local Civ. R. 54.1, and 28 U.S.C. Sections 1920 and 1821. These amounts are allowed "as of course" to RBI as the prevailing party. Fed. R. Civ. P. 54(d)(1). The only dispute as to the proper award is how much of the deposition and trial transcripts were "necessarily obtained for used in the case." 28 U.S.C. Section 1920(2) (emphasis supplied); see Pl.'s Opp. at 10. This necessity requirement is, however, liberally construed. See, e.g., Shannon v. Fireman's Fund Ins. Co., 156 F. Supp. 2d 279, 304 (S.D.N.Y. 2001) (citing Anderson v. City of N.Y., 132 F. Supp. 2d 239, 246 (S.D.N.Y. 2001)). We recall that RBI introduced one deposition transcript into evidence and frequently referred to deposition testimony in its cross examination of National's witnesses at trial. Accordingly, we award RBI the full amount of taxable costs it seeks, including costs relating to depositions, which is $14,571.10.

CONCLUSION

For the reasons stated above, we award RBI $22,291.73 in attorney fees and $14,571.10 in taxable costs. The Clerk is respectfully directed to enter judgment in favor of RBI, fn12 and against National, in the amount of $36,862.83 plus interest accruing from this date.

fn12 RBI is "solely responsible for bearing all of the defense costs" in this case. Def.'s Mem. at 1. Accordingly, judgment should only be entered in favor of RBI, and not the other defendants.

IT IS SO ORDERED.

July 29, 2002

NAOMI REICE BUCHWALD

UNITED STATES DISTRICT JUDGE