Reserve Media, Inc. v. Efficient Frontiers, Inc.

Filing 385

ORDER DENYING MOTION FOR ATTORNEYS FEES AND NON-TAXABLE COSTS 375 by Judge Dean D. Pregerson. (lc)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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RESERVE MEDIA, INC.,

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Plaintiff,

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v.
EFFICIENT FRONTIERTS, INC.,

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Defendants.

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Case No. 2-15-cv-05072-DDP (AGRx)
ORDER DENYING MOTION FOR
ATTORNEYS’ FEES AND NONTAXABLE COSTS
[Dkt. 375]

Presently before the court is Plaintiff and Counter-Defendant Reserve Media,

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Inc.’s (“Reserve”) Motion for Attorneys’ Fees and Non-Taxable Costs. After reviewing

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the parties’ submissions and hearing oral argument, the court DENIES the Motion adopts

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the following Order.

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I. BACKGROUND

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The court assumes the parties’ familiarity with the factual background of this case,

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which has been set forth in greater detail in the court’s prior summary judgment Order.

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(See Dkts. 235, 296, 359.) In brief, Efficient Frontiers, Inc. (“EFI”) is a company that offers

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software products to companies in the hospitality industry. (First Amended

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Counterclaim (“FAC”) ¶¶ 4, 15-17.) EFI’s products assist with catering and event-

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management, restaurant table management, and dining reservations. (FAC ¶¶ 17-19.) EFI

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also claims rights to a number of trademarks, all of which contained the word “reserve.”

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This included registered trademark such as the RESERVE INTERACTIVE design and

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word marks, RESERVE Q marks, RESERVE ANYWHERE, RESERVE CLOUD marks. It

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also included several common-law trademarks and service marks that EFI claims to have

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used in connection with its products and services as early as 2005 and no later than 2011,

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including ReServe It; ReServe University; ReServe It 2.0; ReServe Gateway; and ReServe

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Cloud.

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Reserve Media, Inc. (“Reserve”) is a startup company focusing on restaurant

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technology, which was founded in 2014. (Dkt. 296 at 2.) According to the founders, the

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company aims to compete with consumer-facing software companies that facilitate

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restaurant reservations. (Id.) The company offers products and services using the mark

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“Reserve” and “Reserve for Restaurants.”

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This suit arose out of a trademark dispute between EFI and Reserve. After

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learning about Reserve’s business in 2014, EFI sent Reserve a cease-and-desist letter for

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attempting to use a mark that infringes on EFI’s marks “Reserve Interactive and its

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variations.” (Id.) The parties attempted to negotiate their trademark dispute but Reserve

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ultimately filed for declaratory relief seeking a determination that its use of the “Reserve”

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mark does not infringe on EFI’s trademark rights. (Complaint ¶ 14.) EFI responded with

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a counterclaim asserting federal and state causes of action for trademark infringement

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and unfair competition. (FAC ¶¶ 34-60.)

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By both parties’ accounts, the case went through an involved discovery process.

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(Compare Mot. 3, 7-8 with Opp’n 4-5.) Each side made sizable document production

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requests, took or defended a total of eighteen fact and expert depositions, and filed

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several partially successful discovery motions. After the close of discovery, Reserve

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moved for summary judgment on the claims that the RESERVE INTERACTIVE mark

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was not protectable as a matter of law, there was no willful infringement, and there were
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no damages. (See Dkt. 105.) While the first summary judgment motion was pending,

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Reserve sought leave to file a second summary judgment motion as to seven additional

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marks. (See Dkt. 108.) Although the more efficient course may have been to file a single

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motion addressing all of the marks, the court granted leave in part to narrow issues for

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trial. (See Dkt. 237.) The court granted in part both Reserve’s first and second summary

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judgment motions. (See Dkts. 235, 296.) Together, the two Orders concluded that eight of

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the ten marks at issue in this case were not valid and protectable as a matter of law

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because they were descriptive and lacked secondary meaning. (See id.) The court also

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found no triable question as to Reserve’s willful infringement of any mark. (Id.) At this

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juncture, the court determined that the most efficient use of judicial resources would be

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for the parties to brief whether there were any triable issues as to the last two EFI marks

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and ordered briefing accordingly. After reviewing the final round of summary judgment

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briefs, the court granted judgment in favor of Reserve and ordered cancellation of EFI’s

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registered marks. (Dkt. 359.) During the course of summary judgment briefing, the

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parties filed thirteen motions in limine—eight by Reserve and five by EFI. EFI has since

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filed a notice of appeal in this suit. (Dkt. 376.)

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Reserve now moves for attorneys’ fees and non-taxable costs under the Lanham

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Act in the amount of $1,081,683.89.

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II. LEGAL STANDARD

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The Lanham Act permits courts to award reasonable attorneys’ fees in trademark

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cases only in “exceptional cases.” 15 U.S.C. § 1117(a). Historically, a case was considered

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exceptional only when a plaintiff had shown that a defendant had engaged in “malicious,

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fraudulent, deliberate or willful” infringement. Lindy Pen Co. v. Bic Pen Corp., 982 F.2d

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1400, 1409 (9th Cir. 1993). In Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct.

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1749 (2014), however, the Supreme Court held that an analogous standard under the

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Patent Act was “unduly rigid and impermissibly encumber[ed] the statutory grant of

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discretion to district courts.” Id. at 1755. Instead, the Court explained that “an

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‘exceptional’ case is simply one that stands out from others with respect to the
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substantive strength of a party’s litigating position (considering both the governing law

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and the facts of the case) or the unreasonable manner in which the case was litigated.” Id.

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at 1756. Since Octane Fitness, the Ninth Circuit has clarified that “district courts analyzing

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a request for fees under the Lanham Act should examine the ‘totality of the

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circumstances’ to determine if the case was exceptional.” SunEarth, Inc. v. Sun Earth Solar

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Power Co., 839 F.3d 1179, 1181 (9th Cir. 2016) (quoting Octane Fitness, 134 S. Ct. at 1756).

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Under the “totality of the circumstances” approach, district courts may consider a

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“‘nonexclusive’ list of ‘factors,’ including ‘frivolousness, motivation, objective

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unreasonableness (both in the factual and legal components of the case) and the need in

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particular circumstances to advance considerations of compensation and deterrence.’”

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Octane Fitness, 134 S. Ct. at 1756 n.6 (quoting Fogerty v. Fantasy Inc. 510 U.S. 517, 534 n.19

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(1994)). The burden of proof for establishing an entitlement to fees is preponderance of

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the evidence.

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III. DISCUSSION
The threshold issue raised by Reserve’s Motion is whether it is entitled to recover

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any fees under the Lanham Act. Reserve argues that both the substantive weakness of

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EFI’s position and its unreasonable litigation position counsel in favor of a fee award.

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Reviewing the litigation history of this case, however, the court does not find that this

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case “stands out from others.”
Beginning with its allegation that EFI’s position was substantively weak, Reserve

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primarily focuses on its degree of success in the litigation. Reserve notes that it prevailed

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on the argument that the majority of EFI’s marks were not protectable as a matter of law

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because they were descriptive and lacked secondary meaning, that there was no evidence

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of willful infringement, and that there was no likelihood of confusion as to the

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protectable marks. (Mot. 5-6.) 1 Of course, as even Reserve recognizes, the fact of

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While Reserve’s position in the instant Motion is that EFI had an exceptionally weak
case, the court notes that Reserve’s prior litigation strategy does not reflect a similar
view. Reserve initially moved for summary judgment as to only one mark. It later sought
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prevailing at summary judgment alone is insufficient to entitle party to fees under the

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Lanham Act. See Reply 4 (“Reserve never argued and does not contend that a case is

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‘exceptional’ under Octane Fitness simply because the plaintiff loses its case as EFI did

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here.”); see also, e.g., Cambrian Sci. Corp. v. Cox Commc’ns, Inc., 79 F. Supp. 3d 1111, 1114

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(C.D. Cal. 2015) (noting in the patent context that “[m]erely losing at summary judgment

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is not a basis for an exceptional case finding”). Accordingly, Reserve also contends that

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exceptional weakness of the case is evident from the finding by one of Reserve’s expert

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witnesses that consumer surveys revealed almost no evidence of confusion between EFI

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and Reserve’s marks and the fact that EFI did not secure an expert to opine on secondary

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meaning.
Although Reserve ultimately prevailed on its claim at summary judgment, EFI’s

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position in this matter was not unreasonably or exceptionally weak. First, the court notes

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that EFI was in the restaurant software business for nearly 18 years prior to Reserve’s

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entrance to the marketplace. During that time, the evidence submitted by EFI indicates

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that the company used a number of marks that contained the word “reserve” in

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connection with their suite of products and services. Moreover, a number of these marks

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were federally registered creating a presumption of validity. Further, EFI did submit

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evidence of some actual confusion from customers. See Yellow Cab Co. of Sacramento v.

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Yellow Cab of Elk Grove, Inc., 419 F.3d 925, 927 (9th Cir. 2005). While the court ultimately

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found that, notwithstanding the registrations, several of the EFI marks were not

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protectable as a matter of law, it was not unreasonable for EFI to attempt to police its

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rights against a new competitor in a related business domain who was using a mark with

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overlapping words. Indeed, had EFI failed to act on its claims, that failure could have

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resulted in further weakening the association between EFI’s marks and its particular

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businesses or, worse yet for EFI, a laches claim by future competitors. Likewise, the

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leave to file a successive motion as to several other marks and only on the court’s order
did Reserve move for summary judgment as to the final marks at issue in the case.
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court’s third summary judgment Order did express certain concerns about EFI’s expert

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findings as to actual confusion, (Dkt. 359 at 11,) but that was not a reflection of the

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weakness of EFI’s overall claim but instead the weakness of that particular expert’s

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testimony. Ultimately, as fellow district courts in this Circuit have concluded following

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Octane Fitness, “If a plaintiff has raised ‘debatable issues’ and can be found to have had a

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legitimate reason for bringing the lawsuit, it supports a finding that a case is not

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exceptional.” Caiz v. Roberts, No. CV 15-09044 RSWL (AGRx), 2017 WL 830386, at *4 (C.D.

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Cal. Mar. 2, 2017) (citing Nutrivita Laboratories, Inc. v. VBS Distribution Inc., 160 F. Supp. 3d

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1184, 1192 (C.D. Cal. 2016)).

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Reserve also argues that it is entitled to recover its fees because of the

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unreasonable manner in which EFI litigated the case. Here, too, the court finds that this

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case does not stand apart from others. First, Reserve asserts that EFI behaved

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unreasonably during discovery by propounding overbroad discovery requests that

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required Reserve to produce millions of pages of discovery. (Mot. 7.) EFI responds that

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Reserve chose to “dump” an unreasonable amount of documents in response to

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reasonable requests. (Opp’n 2.) From the parties’ exhibits, it appears that Reserve’s

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particular concern was with EFI’s request for production of “all documents” related to

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Reserve’s marketing and promotional activities. (Ruga Decl., Ex. B at 3-4.) While this was

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a broad request, EFI had substantiated its relevance to the infringement claim. The

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remainder of discovery practice reflects vigorous litigation by both parties.

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Next, Reserve contends that EFI had improper motives in litigating this trademark

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suit. (Mot. 8.) During discovery, Reserve found an email chain where EFI executives had

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read an article about Reserve’s launch and assumed that Reserve was connected with a

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founder of Uber. One executive commented, “Hopefully they are so far along that they

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have to pay us for the right to the name to the tune of seven figures.” (Mot. 8.) While

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unfortunate, the court, looking at the totality of the circumstances, finds that this

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statement is more in the order of stray remark. Accordingly, it does not factor heavily in

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the court’s analysis here.
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Reserve also contends that EFI behaved unreasonably in connection with its

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experts. In particular, Reserve contends that EFI retained unqualified experts, made two

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untimely filings as to expert reports, and filed an unnecessary cross-motion seeking

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confirmation that an expert Reserve had sought to exclude would be allowed to testify.

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(Mot. 8-9.) These allegations are within the bounds of ordinary expert practice in

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trademark cases. Each side is entitled to believe that the other side has an ineffective

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expert and to brief motions in limine on that point. Moreover, as the court noted in its

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third summary judgment Order, if EFI’s expert reports were indeed untimely, that could

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have affected the admissibility of the testimony, but the court expressly declined to

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decide the issue at that juncture. (See Dkt. 359 at 11.) Parties often make late disclosures

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and the court is left to exercise its discretion about how to respond to those mistakes.

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EFI’s actions here do not reflect a pattern of gamesmanship or unreasonable litigation

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tactics.

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Finally, Reserve argues that this case is exceptional because of EFI’s attempt to file

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a second action against a member of Reserve’s board of directors, Joseph Marchese, while

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this case was pending. See Efficient Frontiers, Inc. v. Marchese, No. CV 16-06920 DDP

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(AGRx), 2016 WL 7117243 (C.D. Cal. Dec. 6, 2016). This Court dismissed that case with

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prejudice under the doctrine against claim splitting. Id. at *4. The court expressly

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declined, however, to sanction EFI, reasoning that “the filing was not frivolous” and that

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there was some precedent for filing such a case. Id. The court finds no reason to reassess

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that conclusion here. EFI had a reasonable, though ultimately unavailing, basis for filing

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a separate suit against Marchese and the decision to file that suit does not renders its

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conduct in this case unreasonable.

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IV. CONCLUSION
For the reasons stated above, the court DENIES Plaintiff’s Motion for Attorneys’

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Fees.

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IT IS SO ORDERED.

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Dated: June 12, 2017
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DEAN D. PREGERSON
UNITED STATES DISTRICT JUDGE

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