GoForIt Entertainment, LLC v. Digimedia.com L.P. et al

Filing 153

MEMORANDUM OPINION AND ORDER denying 149 Motion for Attorney Fees filed by Scott Day, Digimedia.com Management Inc, CyberFusion.com LP, Digimedia.com LP, HappyDays Inc. (Ordered by Chief Judge Sidney A Fitzwater on 6/23/2011) (Chief Judge Sidney A Fitzwater)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
GOFORIT ENTERTAINMENT, LLC,
Plaintiffcounterdefendant,
VS.
DIGIMEDIA.COM L.P., et al.,
Defendantscounterplaintiffs.

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§ Civil Action No. 3:08-CV-2011-D
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§

MEMORANDUM OPINION
AND ORDER
The instant motion for attorney’s fees and expenses under 15
U.S.C. § 1117(a) presents the question whether the moving parties
have established by clear and convincing evidence that this is an
exceptional case.

Concluding that they have not met this high

standard, the court denies the motion.
I
The pertinent background facts and procedural history of this
lawsuit are set out in a prior opinion and need not be repeated at
length.

See

GoForIt Entm’t, LLC v. DigiMedia.com

L.P., 750

F.Supp.2d 712, 717-21 (N.D. Tex. 2010) (Fitzwater, C.J.) (“GEL I”).
The court will add what is necessary to understand today’s ruling.
In GEL I the court granted summary judgment in favor of
defendants-counterplaintiffs (“defendants”) DigiMedia.com L.P.,
CyberFusion.com L.P., HappyDays, Inc., Digimedia.com Management,
Inc., and Scott Day as to all claims asserted against them by
plaintiff-counterdefendant GoForIt Entertainment, L.L.C. (“GEL”).

Id. at 743.

The court later entered a default judgment in favor of

defendants on their counterclaims.

The court awarded as a part of

the damages for one counterclaim (the reverse domain name hijacking
claim under 15 U.S.C. § 1114(2)(D)(iv)) the amount of attorney’s
fees incurred from the commencement of this lawsuit until June 22,
2009,1 when defendants’ domain names were unlocked and the damages
from reverse domain name hijacking ceased.2

Defendants now move

under 15 U.S.C. § 1117(a) for an award of $399,262.31 in attorney’s
fees and expenses incurred after June 22, 2009, and for additional
attorney’s fees and expenses if there is an appeal.

GEL has not

responded to the motion.
II
15 U.S.C. § 1117(a) provides that reasonable attorney’s fees
may be awarded to plaintiffs or defendants in exceptional cases. 15
U.S.C. § 1117(a)(3) (“The court in exceptional cases may award
reasonable attorney fees to the prevailing party.”).

This court

determines in its sound discretion whether a case is exceptional.
See Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1390 (5th Cir.
1996) (citing Texas Pig Stands, Inc. v. Hard Rock Cafe Int’l, 951
F.2d 684, 696-97 (5th Cir. 1992)).

The prevailing party must

1

Entitlement to these attorney’s fees is neither the subject
of nor called into question by today’s decision.
2

See GEL I, 750 F.Supp.2d at 718-20, 724 (explaining terms
such as “domain name,” “Wildcard DNS,” “third level domains,” and
“domain name registrar,” which are used throughout this opinion as
well).
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demonstrate the exceptional nature of the case by clear and
convincing evidence.

Id. (citing CJC Holdings, Inc. v. Wright &

Lato, Inc., 979 F.2d 60, 65 (5th Cir. 1992)).

To demonstrate that

a case is exceptional “require[s] a showing of a high degree of
culpability on the part of the infringer, for example, bad faith or
fraud.”

Texas

Pig

Stands,

951

F.2d

at

697

(rejecting

fee

application where actions did not approach “deliberate pirating” or
“egregious conduct”); Moore Business Forms, Inc. v. Ryu, 960 F.2d
486, 492 (5th Cir. 1992) (applying standard of “high degree of
culpability” to deny award of attorney’s fees).

The court must

consider all of the facts and circumstances when assessing whether
a case is exceptional.

See Bd. of Supervisors for La. State Univ.

Agric. & Mech. Coll. v. Smack Apparel Co., 550 F.3d 465, 491 (5th
Cir. 2008) (determining that defendant’s violation of Lanham Act in
bad faith precluded it from asserting laches defense but did not
amount to malicious, fraudulent, or willful conduct justifying
attorney’s fees, because case involved novel issues, and bringing
claim or defense might not have been in bad faith, even if
violation was in bad faith); Scott Fetzer Co. v. House of Vacuums
Inc., 381 F.3d 477, 490 (5th Cir. 2004) (“To demonstrate that a
case is exceptional, in turn, the defendant must show that the
plaintiff brought the case in bad faith.”) (citation omitted); cf.
Robin Singh Educ. Servs. Inc. v. Excel Test Prep, 291 Fed. Appx.
620, 621 & n.2 (5th Cir. 2008) (per curiam) (concluding that, to
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demonstrate that case is exceptional, prevailing defendant in Fifth
Circuit, unlike in other circuits, must show that plaintiff brought
action in bad faith).

“A party has not acted in bad faith simply

by predicating its legal claim on a controversial and unsettled
legal theory.”

Scott Fetzer, 381 F.3d at 490 (citing Procter &

Gamble Co. v. Amway Corp., 280 F.3d 519, 531-32 (5th Cir. 2002));
cf. CJC Holdings, 979 F.2d at 66 (“A district court normally should
not find a case exceptional where the party presents what it in
good faith believes may be a legitimate defense.”).
III
Defendants contend that the case is exceptional because GEL
brought the lawsuit in bad faith.

They maintain that GEL acted in

bad faith when it induced defendants’ domain name registrar to lock
all of their domain names by making a blanket request for all
defendant-owned domain names to be frozen rather than limiting the
request to domain names where its case for infringement was
strongest. Defendants posit that GEL’s requests to the domain name
registrar demonstrate that GEL’s actual intent in filing this
lawsuit was to “(1) unfairly hinder [their] ability to compete in
the marketplace, (2) provide otherwise non-existent credibility to
GEL’s website and business . . . and (3) conduct discovery in an
effort to learn and emulate [their] successful business model.”
Ds. Mot. 5.

In support, defendants quote passages from GEL I in

which the court denied GEL’s motion for summary judgment as to

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defendants’ reverse domain name hijacking counterclaim.

In GEL I

the court held that a reasonable jury could find that GEL acted in
bad faith in requesting that the domain name registrar lock the use
and transfer of all defendant-owned domain names, thereby finding
that GEL violated the reverse domain name hijacking statute.
I, 750 F.Supp.2d at 741.

GEL

As the court will explain, defendants’

reliance on GEL I is misplaced, and they have not otherwise
established by clear and convincing evidence that this case is
exceptional.3
In GEL I the relevant question before the court only required
that

it

determine

at

the

summary

judgment

stage

whether

a

reasonable jury could find by a preponderance of evidence that GEL
made a knowing and material misrepresentation that a domain name
was identical to or confusingly similar to a mark.

Defendants’

application for attorney’s fees under 15 U.S.C. § 1117(a), however,
requires that they establish by clear and convincing evidence that
GEL acted in bad faith.

It does not follow inexorably that the

same evidence that would enable a reasonable jury to find by a
preponderance

of

evidence

that

GEL

3

knowingly

made

baseless

In their motion, defendants also cite GEL’s failure to
establish at the summary judgment stage that the sham exception to
the Noerr-Pennington doctrine did not apply. The Noerr-Pennington
doctrine, however, was asserted as an affirmative defense to
defendants’ Texas common law counterclaim for tortious interference
with contract.
See GEL I, 750 F.Supp.2d at 742.
Accordingly,
defendants cannot establish a right to relief under 15 U.S.C.
§ 1117(a) on this basis.
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cyberpiracy or service mark infringement claims constitutes clear
and convincing evidence that GEL knowingly made baseless claims.
This is because the clear and convincing evidence standard is
considerably more onerous than is the standard for establishing a
genuine fact issue that precludes summary judgment.

Nor have

defendants adduced evidence to support their allegations that GEL
brought this lawsuit as a credibility-building strategy for its
website and business or that GEL abused the discovery process as a
stratagem to learn its competitors’ business tactics.

At best,

defendants can point to the weakness of GEL’s claims as support for
the

inference

that

GEL

acted

with

the

required

level

of

culpability.
For example, in GEL I the court acknowledged that, given the
definition of “domain name” in 15 U.S.C. § 1127, a reasonable jury
could find that, by accusing defendants of violating 15 U.S.C.
§ 1114(1) to lock defendants’ domain names despite knowing that no
court had previously interpreted “domain name” to include thirdlevel domain names, GEL knowingly misrepresented that defendants’
third-level

domain

names

were

confusingly similar to its mark.
court

concluded

registrar

to

that,
freeze

by
all

unlawfully

to

or

GEL I, 750 F.Supp.2d at 735.

The

requesting

identical

defendants’

defendant-owned

domain

domain

name

names——in

particular, the domain names that had no similarity to GEL’s marks
except by virtue of Wildcard DNS——without any evidence of actual

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confusion

or

actual

interaction

of

Wildcard

DNS

with

terms

resembling GEL’s marks——GEL may have acted in a manner that would
permit a reasonable jury to find that GEL used the lawsuit to shut
down a competitor’s domain names with the requisite bad intent for
the purposes of 15 U.S.C. § 1125(d).

Id. at 735-36. Nevertheless,

in the context of determining whether this is an “exceptional” case
under 15 U.S.C. § 1117(a), the court cannot conclude, for example,
that GEL acted in bad faith simply by predicating its legal claim
on a “controversial and unsettled legal theory.” Scott Fetzer, 381
F.3d at 490. The court therefore holds that defendants have failed
to establish by clear and convincing evidence that GEL acted with
the requisite level of culpability to support the finding that this
case is exceptional. Defendants have not persuaded the court under
the high clear and convincing evidence standard that GEL was not
pursuing a good faith, albeit mistaken, interpretation of “domain
name.” And although the court granted default judgment against GEL
on

the

15

U.S.C.

§

1125(d)

counterclaim,

the

court

did

not

determine whether GEL knowingly misrepresented that defendants
violated GEL’s rights in its marks.

Furthermore, even assuming

arguendo that GEL overreached by demanding that a domain name
registrar freeze domain names at a time when GEL knew that its case
was

weak

concerning

most

of

the

domain

names,

it

does

not

invariably follow, and defendants have not established by clear and
convincing

evidence,

that

GEL

engaged

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in

conduct

that

was

“malicious,” “fraudulent,” “deliberate,” or “willful.”

See Seven-

Up, 86 F.3d at 1390.
Although the court held at the summary judgment stage that the
discovery

in

the

case

had

revealed

no

evidence

of

consumer

confusion, this does not of itself suggest that GEL filed suit in
bad faith, with the full expectation that discovery would fail to
produce

evidence

of

confusing

similarity.

And

the

court

acknowledged in GEL I that, so far as it was aware, no federal
court had directly addressed the legality of Wildcard DNS. See GEL
I, 750 F.Supp.2d at 724 n.9.

Although the definition of “domain

name” may have alerted GEL to the unlikelihood of prevailing on
claims based on Wildcard DNS and third-level domain name similarity
to marks, defendants have not shown by clear and convincing
evidence that GEL acted in bad faith when pursuing a theory based
on unsettled law.

Without other evidence of bad faith aside from

the novelty of GEL’s claims in an unsettled area of law, defendants
have not met their burden of demonstrating by clear and convincing
evidence that GEL filed this lawsuit in bad faith.

Absent a

showing that the case is exceptional under 15 U.S.C. § 1117(a),
defendants are not entitled to attorney’s fees and expenses apart
from what the court has already awarded as damages under 15 U.S.C.
§ 1114(2)(D)(iv).

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*

*

*

For the reasons explained, defendants’ April 6, 2011 motion
for attorney’s fees and expenses is denied.
SO ORDERED.
June 23, 2011.

_________________________________
SIDNEY A. FITZWATER
CHIEF JUDGE

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