Segment Consulting Management, Ltd. et al v. Bliss Nutraceticals, LLC et al
OPINION AND ORDER: The Defendants Bliss Nutraceticals, LLC, Faruq Patel, Shabana Patel, and Phillip Jones's Petition for Attorneys Fees and Non-Taxable Costs 348 is DENIED, and the Plaintiffs Motion to Stay 355 is DENIED as moot. Signed by Judge Thomas W. Thrash, Jr. on 9/15/2022. (jra) (Additional attachment(s) added on 9/16/2022: # 1 Corrected Main Document) (jeh).
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
BLUE MOUNTAIN HOLDINGS LTD.
a British Columbia, Canada Company,
CIVIL ACTION FILE
BLISS NUTRACETICALS, LLC
a Georgia Limited Liability Company,
OPINION AND ORDER
This is an action for trademark infringement. It is before the Court on
Defendants Bliss Nutraceticals, LLC, Faruq Patel, Shabana Patel, and Phillip
Jones’s Petition for Attorney’s Fees and Non-Taxable Costs [Doc. 348] and the
Plaintiffs’ Motion to Stay [Doc. 355]. For the reasons set forth below,
Defendants Bliss Nutraceticals, LLC, Faruq Patel, Shabana Patel, and Phillip
Jones’s Petition for Attorney’s Fees and Non-Taxable Costs [Doc. 348] is
DENIED, and the Plaintiffs’ Motion to Stay [Doc. 355] is DENIED as moot.
This case arises from the manufacture and sale of kratom-based powder,
capsule, and beverage products that allegedly infringe on the registered
trademark “VIVAZEN.” The Plaintiffs Lighthouse Enterprises, Inc. and Blue
Mountain Holdings Ltd. claim to hold all equitable and legal interests in the
VIVAZEN mark. However, in a summary judgment order dated June 27, 2022
(the “Order”), this Court held that Lighthouse had abandoned its trademark
rights by issuing Blue Mountain a naked license—called the “Brand Sale
Agreement”—to use the mark. See Blue Mountain Holdings Ltd. v. Bliss
Nutraceticals, LLC, 2022 WL 2316386, at *6 (N.D. Ga. June 27, 2022). On that
basis, the Court determined that neither Lighthouse nor Blue Mountain could
pursue any trademark infringement claims against Defendants Bliss
Nutraceticals, LLC, Faruq Patel, Shabana Patel, or Phillip Jones (collectively,
“Bliss Nutra”). See id. The Court then entered judgment in favor of Bliss Nutra
on all claims and closed the case. As the prevailing party, Bliss Nutra moves
to recover its attorney’s fees and non-taxable costs in the amount of $476,000
under Federal Rule of Civil Procedure 54(d) and Section 35(a) of the Lanham
Act, 15 U.S.C. § 1117(a). In opposition, the Plaintiffs ask the Court to stay the
Petition for Attorney’s Fees and Non-Taxable Costs pending resolution of the
Plaintiffs’ Motion for Reconsideration. Having denied the Motion for
Reconsideration in full, the Court denies the Motion to Stay as moot and turns
its attention now to Bliss Nutra’s fee request.
Section 35(a) of the Lanham Act authorizes a district court to award
reasonable attorney’s fees to the prevailing party in “exceptional” trademark
cases. 15 U.S.C. § 1117(a). Interpreting an identical provision in the Patent
Act, the Supreme Court defined an exceptional case as 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.” Octane Fitness, LLC v.
ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014); see also Tobinick v.
Novella, 884 F.3d 1110, 1117-18 (11th Cir. 2018) (incorporating the exceptional
case standard set forth in Octane Fitness into fee requests under the Lanham
Act). Whether a particular case stands out from the others is a question
committed to the district court’s discretion on a case-by-case basis. See Octane
Fitness, 572 U.S. at 554. This inquiry should consider the totality of the
circumstances, including factors such as “frivolousness, motivation, objective
unreasonableness (both in the factual and legal components of the case) and
the need in particular circumstances
advance considerations of
compensation and deterrence.” Id. at 554 n.6 (citation omitted).
The Petition raises two grounds for the Court to make an “exceptional
case” finding and award attorney’s fees to Bliss Nutra. The first is that the
Plaintiffs pursued their trademark infringement claims even after learning
that Lighthouse had forfeited its rights in the VIVAZEN mark. (Bliss Nutra’s
Br. in Supp. of Bliss Nutra’s Pet. for Att’y’s Fees, at 7-8.) The second is that the
Plaintiffs ignored Bliss Nutra’s repeated settlement offers while continuing to
litigate their baseless claims (and drive up litigation expenses). (Id. at 8-10.)
The Court addresses—and ultimately rejects—both claims in turn.
According to Bliss Nutra, the depositions of Blue Mountain’s and
Lighthouse’s corporate representatives (taken on August 23 and August 25,
2021, respectively) made clear that Lighthouse had exercised no quality control
over Blue Mountain’s operations. (Id. at 7.) Therefore, the argument goes, the
Plaintiffs knew that Lighthouse had abandoned the VIVAZEN mark through
naked licensing, and the Plaintiffs should have dropped their lawsuit against
Bliss Nutra at that time. (Id. at 7-8.) But the Court’s analysis of naked
licensing on summary judgment was not as cut-and-dry as Bliss Nutra
suggests. In fact, before addressing the merits, the Court first had to resolve
the Plaintiffs’ claim of res judicata. That is, the Plaintiffs argued that Bliss
Nutra’s defense was barred by an earlier (failed) trademark cancellation action
against Lighthouse. See Blue Mountain Holdings, 2022 WL 2316386, at *3.
Next, there was a question as to whether the Plaintiffs had entered into a
license at all or rather an assignment of the VIVAZEN mark. That issue was
hotly contested between the parties, with some provisions in the Brand Sale
Agreement (including the name itself) supporting the Plaintiffs’ position of an
assignment. See id. at *4-5. Finally, the parties also disputed what standard
should govern naked licensing, a question which was complicated by the
relative scarcity of Eleventh Circuit guidance. Here again, the Plaintiffs cited
authority (though dated and in the minority) supporting their position that a
contractual right to control quality, even absent actual control, creates a valid
license. (Pls.’ Br. in Opp’n to Bliss Nutra’s Mot. for Summ. J., at 20.)
For these reasons, the Court cannot say that the Plaintiffs’ corporate
depositions rendered their trademark infringement claims so frivolous or
objectively unreasonable that their only recourse was to abandon the case
altogether. Although the Court disagreed with the Plaintiffs at each step of the
naked licensing analysis, this fact alone does not warrant an award of
attorney’s fees under the Lanham Act. See Healthmate Int’l, LLC v. French,
2017 WL 4987651, at *2 (W.D. Mo. Oct. 31, 2017) (“The fact that the Court
disagreed with [the non-prevailing party’s] analysis does not make the case
exceptional; to hold otherwise would make every case in which a party loses
‘exceptional’ and destroy the distinction between the Lanham Act’s fee
provision and other fee-shifting provisions that merely require that a party
prevail to recover fees.”); Small v. Implant Direct Mfg. LLC, 2014 WL 5463621,
at *3 (S.D.N.Y. Oct. 23, 2014) (“Mere assertions that a party’s arguments were
without merit are generally unavailing” to show objective baselessness.).
Indeed, courts have declined to grant attorney’s fees where, as here, a claim
“required the application of a fact-intensive, multifactor analysis, making it
difficult for [the parties] to predict the likelihood of success on the merits.”
Engage Healthcare Comms., LLC v. Intellisphere, LLC, 2019 WL 1397387, at
*4 (D.N.J. Mar. 28, 2019) (quoting Louis Vuitton Malletier, S.A. v. My Other
Bag, Inc., 2018 WL 317850, at *2 (S.D.N.Y. Jan. 8, 2018)).
Further, when considering the objective reasonableness of a trademark
infringement case, courts have generally emphasized the plaintiff’s knowledge
and motivation prior to filing suit or early in the litigation. See Engage
Healthcare, 2019 WL 1397387, at *5 (“[C]ourts interpreting [exceptional] cases
have generally looked to the motivation behind the claims at the outset of the
litigation, and whether the claims, when filed, are frivolous or objectively
unreasonable.”). “[C]ourts are more likely to award fees where a party knew or
willfully ignored evidence of his claims’ meritlessness, where such
meritlessness could have been discovered by basic pre-trial investigation, or
where such meritlessness is made clear to the court early in the litigation.”
Small, 2014 WL 5463621, at *3 (collecting cases). This comports with the policy
rationale for the Lanham Act’s fee provision, which is (in relevant part) “to
afford protection to defendants against unfounded suits brought by trademark
owners for harassment and the like.” Noxell Corp. v. Firehouse No. 1
Bar-B-Que Restaurant, 771 F.2d 521, 524 (D.C. Cir. 1985) (citation omitted).
Here, Bliss Nutra does not argue that the Plaintiffs’ case was baseless from
the outset or designed to harass their competitors. To the contrary, Bliss Nutra
stipulated to an injunction early in the case that forbid it from using the word
VIVAZEN on its products and website; that order remains in effect as part of
the final judgment. (Consent Order [Doc. 26] ¶¶ c-e.) Also, it is unclear when
the Plaintiffs were even put on notice of Bliss Nutra’s naked licensing defense.
Before the summary judgment briefing, Bliss Nutra’s position was that
Lighthouse had abandoned the VIVAZEN mark through non-use, not naked
licensing. (Pls.’ Br. in Opp’n to Bliss Nutra’s Pet. for Att’y’s Fees, Ex. 16 at
11-12.) This further undermines the notion that the Plaintiffs should have
recognized the Brand Sale Agreement as a naked license (and foreseen the
demise of their case) immediately following their corporate depositions.
Next, Bliss Nutra argues that attorney’s fees are warranted because it
made several unanswered overtures to settle this case with the Plaintiffs.
(Bliss Nutra’s Br. in Supp. of Bliss Nutra’s Pet. for Att’y’s Fees, at 8-9.) But at
least one court has declined to consider settlement negotiations under the
exceptional case standard. See Healthmate Int’l, 2017 WL 4987651, at *2. This
Court tends to agree that garden-variety settlement discussions—or even one
party’s refusal to engage in settlement discussions—do not, without more,
elevate a case to “exceptional” status. In any event, it appears that Bliss Nutra
cherry-picks (and thus overstates) evidence of the Plaintiffs’ recalcitrance.
True, Bliss Nutra filed multiple “Offers of Judgment” on the docket that, as far
as the Court can tell, garnered no response from the Plaintiffs. (Offers of
Judgment [Docs. 168, 173, 179].) And the Plaintiffs also apparently ignored
five written settlement offers made by Bliss Nutra’s counsel between February
and June 2022. (Brooke Decl. ¶ 5.) However, long before these communications,
the Plaintiffs and Bliss Nutra agreed to mediate the case “in a good-faith and
expeditious manner,” and those efforts failed, though not due to any alleged
bad faith on the Plaintiffs’ part. (Consent Order [Doc. 26] ¶ f; Status Report
and Request for Preliminary Injunction Hearing [Doc. 50], at 2.) After that
experience, the Plaintiffs may have reasonably concluded that further
settlement discussions would be futile. The Court thus will not award
attorney’s fees on this basis.
For the foregoing reasons, Defendants Bliss Nutraceticals, LLC, Faruq
Patel, Shabana Patel, and Phillip Jones’s Petition for Attorney’s Fees and
Non-Taxable Costs [Doc. 348] is DENIED, and the Plaintiffs’ Motion to Stay
[Doc. 355] is DENIED as moot.
SO ORDERED, this
day of September, 2022.
THOMAS W. THRASH, JR.
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?