Donut Joe's, Inc. v. Beiersdoerfer et al

Filing 80

MEMORANDUM OPINION AND ORDER GRANTING 74 MOTION for Attorney Fees. The Court furthermore ORDERS Interveston to submit evidence on the fees incurred and the value and reasonableness of its services within fourteen (14) days of entry of this Order. Donut Joe's will then have seven (7) days to file any opposition to Interveston's evidence. Signed by Judge Virginia Emerson Hopkins on 7/7/2015. (JLC)

FILED
2015 Jul-07 PM 01:30
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
DONUT JOE’S, INC.,

)
)
Plaintiff,
)
)
v.
) Case No.: 2:13-CV-1578-VEH
)
INTERVESTON FOOD SERVICES, )
LLC d/b/a DONUT CHEF,
)
)
Defendant.
)

MEMORANDUM OPINION AND ORDER
I.

INTRODUCTION
This case is now before the court on a motion for attorney’s fees (“the Motion”)

by Interveston Food Services, LLC (“Interveston”). (Doc. 74). Interveston filed the
Motion on May 5, 2015, following the court’s grant of summary judgment in favor
of Interveston as to all claims in this action. Donut Joe's, Inc. v. Interveston Food
Servs., LLC, No. 2:13-CV-1578-VEH, 2015 WL 1840431 (N.D. Ala. Apr. 22, 2015).
In accordance with Federal Rule of Civil Procedure 54(d)(2)(C), which permits the
court to “decide issues of liability for fees before receiving submissions on the value
of services,” the Motion seeks only a determination of Donut Joe’s, Inc.’s (“Donut
Joe’s”) liability for attorney’s fees and other additional fees under § 35(a) of the
Lanham Act (15 U.S.C. § 1117(a)). (Doc. 74 at 1).

Donut Joe’s has responded in opposition to the motion. (Doc. 77). Interveston
has filed a reply brief. (Doc. 78). Therefore, the matter is now under submission. For
the following reasons, the court holds that Donut Joe’s is liable for attorney’s fees in
this case.
II.

PROCEDURAL HISTORY
Donut Joe’s commenced this action by filing a Complaint with this court on

August 27, 2013. (Doc. 1). The Complaint alleged federal and state-law claims against
Werner Beiersdoerfer; Michael Kenneth Flowers (“Flowers”); Donut Chef; Brock
Beiersdoerfer; Heavenly Donut Co.; and Kimberly Beiersdoerfer. Three defendants
— Werner Beiersdoerfer, Flowers, and Interveston — answered the Complaint on
September 27, 2013. (Doc. 7). Attached to their Answer was a counterclaim charging
Donut Joe’s with breach of contract and fraud. (Id. at 8-17). These three defendants
also filed a Motion To Dismiss. (Doc. 8). On that same day, Brock and Kimberly
Beiersdoerfer separately filed a Motion To Dismiss. (Doc. 10). On October 11, 2013,
Donut Joe’s filed the following documents: an Answer to the defendants’
counterclaims; responses to the two Motions To Dismiss; and a Motion To Dismiss
the counterclaims. (Docs. 11-14).
On December 18, 2013, the court issued a Memorandum Opinion concluding
that it lacked supplemental jurisdiction over all of the parties’ state-law claims. (Doc.
2

27). The court accordingly dismissed without prejudice the state-law claims filed by
Donut Joe’s and the state-law counterclaims filed by Werner Beiersdoerfer, Flowers,
and Interveston. (Id. at 12).
On the same date, the court entered a Show Cause Order asking Donut Joe’s
to remedy certain deficiencies in its Complaint. (Doc. 28). The court particularly noted
that the Complaint did not formally name Interveston as a party. (Id. at 1). It therefore
ordered Donut Joe’s to either file an amended complaint or to explain:
•

why the case should not be dismissed for failure to join a necessary
party under Federal Rule of Civil Procedure 19; and

•

why Donut Joe’s was pursuing federal trademark infringement
claims against individual members of a limited liability company
rather than against the company exclusively.

(Id. at 1-2).
Donut Joe’s responded to the order by filing an Amended Complaint on January
1, 2014. (Doc. 29). On January 15, 2014, Donut Joe’s asked the court to dismiss
Brock Beiersdoerfer from the action. (Doc. 31). The court dismissed Brock
Beiersdoerfer as a party on January 17, 2014. (Doc. 35). On January 28, 2014, the
court dismissed Heavenly Donut Company as a party for failure to serve process.
(Doc. 40). On January 15, 2014, Interveston filed its Answer to the Amended
Complaint. (Doc. 32). Werner Beiersdoerfer and Flowers filed a Motion To Dismiss.
(Doc. 33). The court granted their motion and dismissed all claims against them on
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April 24, 2014. (Doc. 43).
On January 15, 2015, Interveston, the sole remaining defendant, moved for
summary judgment. (Doc. 54). On April 22, 2015, the court granted summary
judgment in favor of Interveston on all remaining claims and dismissed the case with
prejudice. Donut Joe's, Inc, 2015 WL 1840431.
III.

APPLICABLE LAW
The Lanham Act allows courts to award reasonable attorney fees to prevailing

parties “in exceptional cases.” 15 U.S.C. § 1117(a). Historically, the Eleventh Circuit
has defined the Act’s language of “exceptional case” as “one that can be characterized
as malicious, fraudulent, deliberate and willful, or one in which evidence of fraud or
bad faith exists.” Tire Kingdom, Inc. v. Morgan Tire & Auto, Inc., 253 F.3d 1332,
1335 (11th Cir. 2001) (internal citations and quotation marks omitted). However, a
2014 Supreme Court interpreting identical language in the Patent Act has called this
definition of into question.
In Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014),
the Court interpreted the Patent Act’s attorney fee provision, which, identically to the
Lanham Act, states, “The court in exceptional cases may award reasonable attorney
fees to the prevailing party.” 35 U.S.C. § 285. The Court rejected as “unduly rigid”
the Federal Circuit’s standard, which allowed fees to be awarded against a patent
4

holder only if either (1) the patent holder committed misconduct during litigation or
securing of the patent, or (2) the patent holder brought the litigation in subjective bad
faith and the litigation was objectively baseless, i.e, so unreasonable that no
reasonable litigant could believe it would succeed. See Octane Fitness, 134 S. Ct.
1749, 1754 (2014) (summarizing the Federal Circuit’s previous case law). The Court
held that this standard was more restrictive than the ordinary meaning of
“exceptional,” and instead held:
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. District courts may
determine whether a case is “exceptional” in the case-by-case exercise
of their discretion, considering the totality of the circumstances.
Id. at 1756.
The Third and Fourth Circuits have since held that the standard in Octane
Fitness also applies to attorney fees awards under the Lanham Act. Fair Wind Sailing,
Inc. v. Dempster, 764 F.3d 303, 315 (3d Cir. 2014) (“We therefore import Octane
Fitness's definition of ‘exceptionality’ into our interpretation of § 35(a) of the Lanham
Act”); Georgia-Pac. Consumer Products LP v. von Drehle Corp., 781 F.3d 710, 721
(4th Cir. 2015), as amended (Apr. 15, 2015) (“[W]e conclude that there is no reason
not to apply the Octane Fitness standard when considering the award of attorneys fees
under § 1117(a)”). The Eleventh Circuit has not yet considered the applicability of
5

Octane Fitness to the Lanham Act, but several decisions from the Middle District of
Florida have agreed with the Third and Fourth Circuit that the Octane Fitness standard
should also govern motions for attorney fees under § 1117(a).1 These cases have
concluded that the Eleventh Circuit’s previous definition of “exceptional cases” was
more rigid and narrowly focused than the Supreme Court’s standard dictated in
Octane Fitness. See, e.g., BMW of N. Am. LLC v. Ismail Cuhadar, Case No.
6:14–cv–40–Orl–37DAB, 2014 WL 5420133, at *5 (M.D.Fla. July 10, 2014) (“[t]he
Eleventh Circuit standard of defining exceptional as malicious, fraudulent, deliberate
and willful cases . . . appears to be modified by Octane”).
The Court has not discovered any decisions to the contrary, i.e., holding that
Octane Fitness does not govern the interpretation of “exceptional cases” as used in the
Lanham Act.2 The court agrees with the other courts that have considered the question
that the standard in Octane Fitness also applies to the Lanham Act’s attorney fees
provision. The court finds particularly instructive the following reasoning from the
Third Circuit:

1

BMW of N. Am. LLC v. Ismail Cuhadar, Case No. 6:14–cv–40–Orl–37DAB, 2014 WL
5420133, at *2–*3 (M.D.Fla. July 10, 2014); RCI TM Corp. v. R & R Venture Grp., LLC, No.
6:13-CV-945-ORL-22, 2015 WL 668715, at *9 (M.D. Fla. Feb. 17, 2015); High Tech Pet
Products, Inc. v. Shenzhen Jianfeng Elec. Pet Prod. Co., No. 6:14-CV-759-ORL-22TB, 2015
WL 926023, at *1 (M.D. Fla. Mar. 4, 2015).
2

In its brief, Donut Joe’s does not even mention Octane Fitness; instead, it assumes the
Eleventh Circuit’s pre-Octane Fitness standard to remain in effect, unaltered. (See Doc. 7).
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Not only is § 285 [the Patent Act’s provision] identical to § 35(a) [the
Lanham Act’s provision], but Congress referenced § 285 in passing §
35(a). See S.Rep. No. 93–1400, at 2 (1974), reprinted in 1974
U.S.C.C.A.N. 7132, 7133. . . . Moreover, in its explication of the word
“exceptional,” the Octane Fitness Court . . . noted that the Lanham Act
fee provision is “identical” to § 285 of the Patent Act. Id. 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.
Fair Wind Sailing, Inc., 764 F.3d at 315. Additionally, the court recognizes that the
standard in Octane Fitness is broader than the previous Eleventh Circuit requirement
that a case be “malicious, fraudulent, deliberate and willful, or one in which evidence
of fraud or bad faith exists.” Tire Kingdom, 253 F.3d at 1335.
III.

ANALYSIS
As grounds for finding this case to be exceptional, Interveston argues that

Donut Joe’s position “lacked any merit” and that its own position was substantively
strong. (Doc. 74 at 9-11). This argument has relevance under the first factor of Octane
Fitness, where the court is to consider the substantive strength of a party's litigating
position, taking into account both the governing law and the facts of the case. Octane
Fitness, 134 S.Ct. at 1756. In granting summary judgment against Donut Joe’s, the
court found that Donut Joe’s failed to raise questions of material fact on each of the
first two elements of a trademark infringement action: the possession of a protectable
mark and a likelihood of consumer confusion. Donut Joe's, Inc., 2015 WL 1840431
7

at *7, *9.
As a comparison, Interveston cites a case from the Southern District of N.Y.,
Cross Commerce Media, Inc. v. Collective, Inc., No. 13-CV-2754 KBF, 2014 WL
7323419 (S.D.N.Y. Dec. 16, 2014). In that case, the court awarded attorney fees to the
prevailing party on the grounds that the losing party lacked a protectable mark “and
never made any real effort to demonstrate otherwise.” Id. at *3. Specifically, the court
found that the losing party “failed to put forward any real evidence showing that its
mark was more than merely descriptive: it failed to submit any marketing materials,
survey research, or even an affidavit supporting suggestiveness.” Id. at *1.
Cross Commerce is indeed similar to the present case, where, as discussed in
the court’s memorandum opinion accompanying summary judgment, Donut Joe’s
offered extremely weak arguments to establish that its marks were protectable. Even
after Interveston moved for summary judgment on the ground that Donut Joe’s marks
were descriptive and lacked secondary meaning (and were therefore not protectable),
Donut Joe’s made no attempt either to argue that its marks fell into another category
(namely, suggestive or arbitrary) or to present any evidence that its mark possessed
secondary meaning.3 (See Doc. 66 at 18-19). Instead, it relied on the argument that the

3

Indeed, Donut Joe’s mentioned Interveston’s argument that Donut Joe’s marks lacked
secondary meaning and explicitly declined to address it, saying “analysis of this argument is
unnecessary.” (Doc. 66 at 19).
8

mere fact of registration by the Patent and Trademark Office gave its marks a
“presumption of validity” raising “a factual issue that must be determined by the trier
of fact.” (Id. at 17). This argument that registration automatically precludes summary
judgment lacks any legal support, has been rejected explicitly by at least five other
circuits, and is in tension with precedent in this circuit. See Donut Joe's, Inc., 2015
WL 1840431 at *7 (summarizing Eleventh Circuit precedent on Donut Joe’s
argument). Under these circumstances, the case does indeed qualify as “exceptional”
under the Octane Fitness standard.
The parties’ positions on the second element of Donut Joe’s claim reinforce this
conclusion. On that issue — the likelihood of consumer confusion — Donut Joe’s
made out a slightly stronger case, but its position was still substantially weaker than
Interveston’s on the issue. The court found that the two factors most important to the
consumer confusion test weighed heavily against Donut Joe’s. As to strength of the
marks, Donut Joe’s marks were quite weak due to their nature as descriptive marks
lacking secondary meaning, as well as widespread third-party use of the elements of
Dunut Joe’s marks. See Donut Joe's, Inc., 2015 WL 1840431 at *9. As to evidence of
actual consumer confusion, Donut Joe’s only presented evidence of, at most, five
instances of consumer confusion over a three year period. Id. Two of the remaining
(and less important) factors weighed slightly in Donut Joe’s favor, but, taken as a
9

whole, the factors did not come close to presenting a question of material fact on the
likelihood of consumer confusion. Id.
In its response to the pending Motion, Donut Joe’s argues against attorney fees
liability only under the previous Eleventh Circuit standard, and gives no argument
under the standard laid out in Octane Fitness. (See Doc. 77 at 5, stating “the current
standard in the Eleventh Circuit applicable to the Lanham Act’s award of attorneys
fees is laid down in Tire Kingdom”). Unfortunately for Donut Joe’s, a successful
defense under the Tire Kingdom test only shows that the case was not malicious,
fraudulent, deliberate and willful, and that no evidence of fraud or bad faith exists.
253 F.3d at 1335 (“‘an exceptional case’ is one that can be characterized as malicious,
fraudulent, deliberate and willful, or one in which evidence of fraud or bad faith
exists”) (internal citations and quotation marks omitted). This does not relate to the
first factor of Octane Fitness — the strength of the party’s litigating positions — and
so Donut Joe’s has not provided any arguments that address that factor
IV.

CONCLUSION
For all of the forgoing reasons, the court finds that this case is “exceptional”

under the Lanham Act, and that the Motion is therefore due to be GRANTED. The
court furthermore ORDERS Interveston to submit evidence on the fees incurred and
the value and reasonableness of its services within fourteen (14) days of entry of this
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order. Donut Joe’s will then have seven (7) days to file any opposition to Interveston’s
evidence.
DONE and ORDERED this 7th day of July, 2015.

VIRGINIA EMERSON HOPKINS
United States District Judge

11