The Gameologist Group, LLC v. Scientific Games International, Inc. et al
Filing
90
MEMORANDUM OPINION AND ORDER: re: 78 MOTION for Attorney Fees. filed by Scientific Games International, Inc., Scientific Games Corporation, Inc. The Court has considered all of the arguments of the parties. To the extent not specifically addressed above, the remaining arguments are either moot or without merit. For the reasons explained above, the defendants' motion for attorney's fees is denied. The Clerk is directed to close Docket No. 78. (Signed by Judge John G. Koeltl on 4/26/2012) (jfe)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
THE GAMEOLOGIST GROUP, LLC,
Plaintiff,
- against -
09 Civ. 6261 (JGK)
MEMORANDUM OPINION AND
ORDER
SCIENTIFIC GAMES INTERNATIONAL,
INC., and SCIENTIFIC GAMES
CORPORATION, INC.,
Defendants.
────────────────────────────────────
JOHN G. KOELTL, District Judge:
The plaintiff, the Gameologist Group, LLC (“Gameologist” or
“the plaintiff”), brought this action against the defendants,
Scientific Games International, Inc. and Scientific Games
Corporation, Inc. (collectively, “Scientific” or “the
defendants”), alleging claims of trademark infringement, false
designation of origin and unfair competition, and false
advertising under the Lanham Act, 15 U.S.C. § 1051 et seq., as
well as several claims under New York law.
In October 2011,
this Court granted the defendants’ motion for summary judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure and
dismissed all of the plaintiff’s claims.
See Gameologist Grp.,
LLC v. Scientific Games Int’l, Inc., No. 09 Civ. 6261, 2011 WL
5075224, at *20 (S.D.N.Y. Oct. 25, 2011).
The defendants now
move for attorney’s fees and costs pursuant to Rule 54 of the
Federal Rules of Civil Procedure.
I.
The following facts are undisputed, unless otherwise
indicated.
Gameologist is a limited liability company that was formed
to develop several gaming concepts, including a concept for a
casino table game called “Bling Bling.”
5075224, at *2-3.
Gameologist, 2011 WL
In 2005 and 2010, respectively, the U.S.
Patent and Trademark Office issued trademark registrations to
Gameologist’s original Managing Member, Jeffrey McGill, for the
mark “BLING BLING 2002” for “entertainment in the nature of
online three dice casino games” and for “casino games and
equipment therefor, namely, board games.”
Id. at *2.
In December 2003, Gameologist entered into a license
agreement with representatives of MDI Entertainment, LLC, a
company that had been acquired by defendant Scientific Games
International.
Id. at *3.
The agreement granted MDI rights to
use the plaintiff’s mark in connection with lottery tickets.
Id.
In April 2004, MDI and the plaintiff agreed to cancel the
license agreement.
Id.
The defendants, who manufacture lottery tickets and provide
lottery-related services to state lottery commissions throughout
the United States and abroad, have sold several thousand instant
lottery tickets to state lottery commissions that feature the
word “bling.”
Id. at *5.
These tickets were developed and
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launched between 2007 and 2010, at least three years after the
termination of the license agreement between MDI and the
plaintiff.
Id.
The plaintiff claims that the defendants stole
the plaintiff’s “Bling Bling” concept following termination of
the license agreement with MDI and used these ideas for the
defendants’ own commercial benefit by producing lottery tickets
featuring the term “bling.”
The defendants stated at oral
argument on the summary judgment motion that they had knowledge
of the plaintiff’s mark at the time they created the lottery
tickets in question.
(Hr’g Tr. 6-7, Sept. 27, 2011.)
The plaintiff has not entered into any license agreement
with any party other than MDI for use of the plaintiff’s mark in
connection with lottery-related goods or any other goods or
services.
Gameologist, 2011 WL 5075224, at *4.
The plaintiff
has never successfully marketed a “Bling Bling” lottery ticket
to a state lottery commission or released a product with the
“Bling Bling” mark in the lottery industry.
Id.
The only
product that the plaintiff actually has sold featuring the mark
“BLING BLING 2002” is a board game of which four sales are
documented, although the plaintiff claims that additional sales
were made in unrecorded transactions in cash.
Id. at *5.
The plaintiff brought this action alleging claims of
trademark infringement, false designation of origin and unfair
competition, and false advertising under the Lanham Act, 15
3
U.S.C. § 1051 et seq., as well as claims of unfair competition,
passing off, breach of contract, unjust enrichment, and quantum
meruit under New York law.
In October 2011, this Court granted
the defendants’ motion for summary judgment and dismissed all of
the plaintiff’s claims.
In granting summary judgment dismissing
the plaintiff’s Lanham Act claims, this Court concluded that the
plaintiff’s mark was not entitled to trademark protection
because the plaintiff had failed to raise a genuine issue of
material fact either that the plaintiff engaged in sufficient
use of its mark in commerce, id. at *9, or that the defendants’
use of the term “bling” in connection with lottery tickets was
likely to cause consumer confusion, id. at *17.
The defendants then brought the present motion seeking an
award of attorney’s fees and costs pursuant to section 35 of the
Lanham Act, 15 U.S.C. § 1117(a); 28 U.S.C. § 1927; Rule 11 of
the Federal Rules of Civil Procedure; the inherent authority of
the Court; and New York General Business Law § 360-m.
The
defendants assert that they have incurred attorney’s fees of
$952,603.25 and costs of $24,204.70.
II.
The defendants first move for attorney’s fees and costs
under section 35 of the Lanham Act, which provides that “[t]he
court in exceptional cases may award reasonable attorney fees to
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the prevailing party.”
15 U.S.C. § 1117(a).
“Such fees are
available only in ‘exceptional cases,’ which generally means
that fees will be awarded to the defendant only if the plaintiff
filed the action in bad faith.”
Nike, Inc. v. Already, LLC, 663
F.3d 89, 99 (2d Cir. 2011); see also Patsy’s Brand, Inc. v.
I.O.B. Realty, Inc., 317 F.3d 209, 221 (2d Cir. 2003); Gordon &
Breach Sci. Publishers S.A. v. Am. Inst. of Physics, 166 F.3d
438, 439 (2d Cir. 1999) (per curiam).
The defendants argue that a finding of bad faith is
appropriate here because the plaintiff’s claims were so
frivolous as to compel the conclusion that the plaintiff brought
this action for an improper purpose.
While it is true that bad
faith can be inferred when a plaintiff’s claims are entirely
baseless, see Altvater Gessler-J.A. Baczewski Int’l (USA) Inc.
v. Sobieski Destylarnia S.A., No. 06 Civ. 6510, 2011 WL 2893087,
at *5 (S.D.N.Y. July 14, 2011) (collecting cases), “the mere
fact that a plaintiff ultimately did not succeed in its Lanham
Act claims does not dictate an inference of bad faith,”
Farberware Licensing Co., LLC v. Meyer Mktg. Co., Ltd., No. 09
Civ. 2570, 2009 WL 5173787, at *2 (S.D.N.Y. Dec. 30, 2009),
aff’d, 428 F. App’x 97 (2d Cir. 2011) (summary order); see also
Gordon, 166 F.3d at 439.
Instead, when “courts have found bad
faith based on the meritlessness of a plaintiff’s claims, ‘[t]he
circumstances were generally such . . . that a court could draw
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no inference other than that the actions had been brought for
improper purposes.’”
Farberware, 2009 WL 5173787, at *2
(quoting Multivideo Labs, Inc. v. Intel Corp., No. 99 Civ. 3908,
2000 WL 502866, at *2 (S.D.N.Y. Apr. 27, 2000)).
In this case, while the plaintiff did not succeed, the
plaintiff’s claims were not so completely without merit as to
compel the conclusion that these claims were brought in bad
faith.
Although the Court granted the defendants’ motion for
summary judgment, the plaintiff’s claims were not so baseless
that the Court was able to dispose of them without the benefit
of substantial proceedings.
Instead, the Court held oral
argument on the summary judgment motion, received additional
briefing on certain issues, and ultimately required an extensive
analysis to dispose of the issues presented on the motion.
These are not the hallmarks of a purely frivolous filing.
Moreover, there is no reason to doubt the plaintiff’s
subjective belief in the merit of its claims.
See Momentum
Luggage & Leisure Bags v. Jansport, Inc., No. 00 Civ. 7909, 2001
WL 1388063, at *7 (S.D.N.Y. Nov. 8, 2001) (denying motion for
attorney’s fees where, “although plaintiff’s Lanham Act claims
were meritless, there is little reason to doubt that plaintiff
believed it owned trademark rights in the word ‘Momentum’”),
aff’d 45 F. App’x 42 (2d Cir. 2002) (summary order); Multivideo,
2000 WL 502866, at *2 (denying motion for attorney’s fees when,
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“although [the plaintiff’s] Lanham Act claim was completely
devoid of merit, there is no reason to doubt that [the
plaintiff] believed it had been and would continue to be harmed
by [the defendant’s] statements”).
Throughout the course of
these proceedings, the plaintiff has consistently advanced the
argument that the defendants used the plaintiff’s “Bling Bling”
concept for their own commercial advantage following the
termination of the plaintiff’s license agreement with MDI.
While the plaintiff was incorrect in believing that it was
entitled to relief on this basis, a flawed understanding of the
law is not a sufficient basis for a finding of bad faith.
See
Multivideo, 2000 WL 502866, at *3 (pursuit of a “fatally flawed”
legal theory is not alone sufficient to demonstrate bad faith).
There is no reason to doubt that the plaintiff’s belief, however
misguided, in the merit of its claims, rather than any improper
purpose, was what motivated the filing of this action.
Accordingly, a finding of bad faith is not warranted in this
case, and the defendants’ motion for attorney’s fees pursuant to
section 35 of the Lanham Act is denied.
III.
The defendants next seek attorney’s fees and costs pursuant
to 28 U.S.C. § 1927 and pursuant to the Court’s inherent
authority to manage its own proceedings.
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Under § 1927, a court
may impose sanctions on an attorney “who so multiplies the
proceedings in any case unreasonably and vexatiously . . . .”
28 U.S.C. § 1927.
In addition, courts have inherent power to
award attorney’s fees against a party who has “acted in bad
faith, vexatiously, wantonly, or for oppressive reasons.”
Chambers v. Nasco, Inc., 501 U.S. 32, 44-45 (1991) (internal
quotation marks and citations omitted).
“To impose sanctions
under either [§ 1927 or the court’s inherent authority], the
trial court must find clear evidence that (1) the offending
party’s claims were entirely meritless and (2) the party acted
for improper purposes.”
Agee v. Paramount Commc’ns, Inc., 114
F.3d 395, 398 (2d Cir. 1997); see also Eisemann v. Greene, 204
F.3d 393, 395-96 (2d Cir. 2000).
Thus, a finding of bad faith
is a prerequisite to an award of attorney’s fees under either
authority.
Agee, 114 F.3d at 398.
For the reasons explained
above, a finding of bad faith is not warranted in this case. 1
1
The defendants argue that a showing of bad faith is not
necessary here because the Court may assess attorney’s fees
pursuant to its inherent authority without a showing of bad
faith when the behavior at issue involves an attorney’s
“negligent or reckless failure to perform his or her
responsibility as an officer of the court.” United States v.
Seltzer, 227 F.3d 36, 41 (2d Cir. 2000). The defendants contend
that plaintiff’s counsel engaged in such negligent or reckless
behavior here by failing to conduct a reasonable investigation
into the merits of the case before filing this action. However,
in Seltzer, the Court of Appeals for the Second Circuit made
clear that a finding of bad faith is only unnecessary when the
attorney behavior subject to sanction “involves [the] violation
of a court order or other misconduct that is not undertaken for
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Accordingly, the defendants’ motion for attorney’s fees pursuant
to § 1927 and the Court’s inherent authority is denied.
IV.
The defendants next move for attorney’s fees and costs
pursuant to Rule 11 of the Federal Rules of Civil Procedure.
Rule 11 provides, in pertinent part, that, by presenting a
“pleading, written motion, or other paper” to the Court, an
attorney “certifies that to the best of the person’s knowledge,
information, and belief, formed after an inquiry reasonable
under the circumstances”:
(1)
it is not being presented for any improper purpose,
such as to harass, cause unnecessary delay, or
needlessly increase the cost of litigation;
(2)
the claims, defenses, and other legal contentions are
warranted by existing law or by a nonfrivolous
argument
for
extending,
modifying,
or
reversing
existing law or for establishing new law . . . .
Fed. R. Civ. P. 11(b).
Rule 11 “imposes an affirmative duty on
each attorney to conduct a reasonable inquiry into the viability
of a pleading before it is signed.”
Gutierrez v. Fox, 141 F.3d
the client’s benefit.” Id. at 42. Here, even assuming that
plaintiff’s counsel did negligently or recklessly fail to
conduct a proper pre-filing investigation, such behavior was
undertaken as part of counsel’s role in representing the client
and thus a showing of bad faith is a prerequisite to the
imposition of sanctions. Even if bad faith were not required,
this is not a case where the Court would exercise its discretion
to impose sanctions as part of its power to manage its own
affairs.
9
425, 427 (2d Cir. 1998) (quoting Eastway Constr. Corp. v. City
of New York, 762 F.2d 243, 253 (2d Cir. 1985)).
In order to
determine if Rule 11 sanctions are appropriate, the Court must
apply an “objective standard of reasonableness” to determine if
the attorney has conducted a “reasonable inquiry” into the basis
of the arguments advanced.
MacDraw, Inc. v. CIT Grp. Equip.
Fin., Inc., 73 F.3d 1253, 1257 (2d Cir. 1996); Bowman Imp./Exp.,
Ltd. v. F.J. Elsner & Co. N. Am. Ltd., No. 02 Civ. 3436, 2003 WL
21543522, at *1 (S.D.N.Y. July 9, 2003).
The imposition of Rule
11 sanctions is discretionary and should be reserved for extreme
cases, and “all doubts should be resolved in favor of the
signing attorney.” 2
K.M.B. Warehouse Distribs., Inc. v. Walker
Mfg. Co., 61 F.3d 123, 131 (2d Cir. 1995); Bowman, 2003 WL
21543522, at *1.
In this case, although the plaintiff’s claims were not
meritorious, they were not so objectively unreasonable as to
warrant the imposition of sanctions.
Even after the conclusion
of discovery, it cannot be said that it was “patently clear that
[the plaintiff’s claims] ha[d] absolutely no chance of success
2
While the defendants argue that the Court must impose sanctions
upon a finding that Rule 11(b) has been violated, the 1993
amendments to Rule 11 made the imposition of sanctions for a
Rule 11(b) violation discretionary rather than mandatory. See
Fed. R. Civ. P. 11(c)(1) (“If . . . the court determines that
Rule 11(b) has been violated, the court may impose an
appropriate sanction . . . .” (emphasis added)); Knipe v.
Skinner, 19 F.3d 72, 78 (2d Cir. 1994).
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under the existing precedents . . . .”
254.
Eastway, 762 F.2d at
While the plaintiff’s assertions regarding use in commerce
and likelihood of confusion certainly were weak, these standards
are fact-dependent in their application, and the plaintiff could
reasonably have believed that it had some chance of success,
albeit minimal, on its claims.
See Fishoff v. Coty Inc., 634
F.3d 647, 654 (2d Cir. 2011) (“The fact that a legal theory is a
long-shot does not necessarily mean it is sanctionable.”).
Thus, the defendants’ motion for sanctions under Rule 11 is
denied. 3
V.
Finally, the defendants contend that they are entitled to
an award of attorney’s fees and costs under § 360-m of the New
York General Business Law.
However, it is plain that § 360-m is
intended to provide remedies for plaintiffs who are injured by a
defendant’s willful infringement of their mark, rather than for
parties who claim that their adversaries acted wrongfully in the
3
It is also unclear whether the defendants complied with Rule
11’s “safe harbor” provision, which requires that a motion for
sanctions be served on the opposing party at least 21 days prior
to the filing of the Rule 11 motion with the Court, in order to
give the opposing party an opportunity to withdraw or correct
the pleading at issue. Fed. R. Civ. P. 11(c)(2). A court is
required to deny a Rule 11 motion if the moving party does not
comply with the “safe harbor” requirements. See Perpetual
Secs., Inc. v. Tang, 290 F.3d 132, 142 (2d Cir. 2002); Hadges v.
Yonkers Racing Corp., 48 F.3d 1320, 1328 (2d Cir. 1995).
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conduct of the litigation.
See N.Y. Gen. Bus. L. § 360-m
(detailing remedies for “[a]ny owner of a mark registered under
this article” and providing that the Court may “enter judgment
for an amount not to exceed three times such profits and damages
[that the defendant derived from the “wrongful manufacture, use,
display or sale” of any counterfeits or imitations of the
plaintiff’s mark] and/or reasonable attorneys’ fees of the
prevailing party in such cases where the court finds the other
party committed such wrongful acts with knowledge or in bad
faith”).
Moreover, section 360-m applies only to owners of
marks registered with the New York Secretary of State.
See N.Y.
Gen. Bus. L. §§ 360-d, 360-m; Marvel Entm’t, Inc. v. Kellytoy
(USA), Inc., 769 F. Supp. 2d 520, 528 (S.D.N.Y. 2011) (“Remedies
are available under § 360-m only to those owners of marks
registered with the New York Secretary of State.”).
The
defendants do not contend that they own marks registered with
the New York Secretary of State or that the plaintiff willfully
infringed these marks.
The defendants point to no similar case
where a defendant has been awarded attorney’s fees where a
plaintiff failed to succeed on its claim for a violation of
§ 360-m. 4
Thus, § 360-m does not provide a basis for the
4
If the Court had any discretion to award attorney’s fees to a
defendant as a “prevailing party” under § 360-m, for the reasons
already explained, the Court would not exercise that discretion
to award attorney’s fees to the defendants.
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defendants to recover attorney's fees and costs.
CONCLUSION
The Court has considered all of the arguments of the
parties.
To the extent not specifically addressed above, the
remaining arguments are either moot or without merit.
For the
reasons explained above, the defendants' motion for attorney's
fees is denied.
The Clerk is directed to close Docket No. 78.
SO ORDERED.
Dated:
New York, New York
April.;(, 2012
John G. Koeltl
States District Judge
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