Farouk Systems Inc v. FHI Heat, Inc., et al

Filing 68

MEMORANDUM AND ORDER granting 62 Renewed MOTION for Attorney Fees. It is ORDERED that defendants shall recover from Plaintiff their reasonable and necessary attorneys' fees in the amount of $46,065.56 incurred in connection with the Copyright Act claim and $268,533.51 incurred in connection with the trade dress infringement claim under the Lanham Act. (Signed by Judge Nancy F Atlas) Parties notified. (wbostic, 4)

United States District Court
Southern District of Texas

ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
§
§
§
v.
§
§
AG GLOBAL PRODUCTS, LLC d/b/a §
FHI HEAT LLC, et al.,
§
Defendants.
§

October 14, 2016
David J. Bradley, Clerk

FAROUK SYSTEMS, INC.,
Plaintiff,

CIVIL ACTION NO. H-15-0465

MEMORANDUM AND ORDER
This case is before the Court on the Motion for Attorney’s Fees and Costs
(“Motion for Fees”) [Doc. # 62] filed by Defendants AG Global Products, LLC d/b/a
FHI Heat LLC (“AG”) and Shauky Gulamani, to which Plaintiff Farouk Systems Inc.
(“Farouk”) filed a Response [Doc. # 66], and Defendants filed a Reply [Doc. # 67].
Having carefully reviewed the full record and governing legal authorities, the Court
grants the Motion for Fees.
I.

BACKGROUND
Farouk and AG both manufacture and sell hair care products. Farouk Shami is

the founder of Farouk. Gulamani was the President of Farouk until 2010, when he
resigned and became President and Chief Executive Officer of AG.

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

Farouk markets many of its hair care appliances under the trademark CHI.
Farouk uses various red and black color combinations on many of its CHI products.
AG sells a heated hair brush under the name “Stylus” that is black with a red oval
along the edge of the handle. Farouk alleged in this case that AG’s use of the red and
black color scheme constituted trade dress infringement. Farouk alleged also that AG
and Gulamani posted images on the Internet that constitute copyright infringement.
By Memorandum and Order [Doc. # 51] entered April 5, 2016, the Court
granted summary judgment in Defendants’ favor. Taxable costs in the amount of
$14,929.67 were assessed against Farouk.
Farouk filed a Notice of Appeal [Doc. # 56]. Prior to the deadline for filing its
appellant’s brief, Farouk dismissed its appeal voluntarily.
After the dismissal of Farouk’s appeal, Defendants renewed their Motion for
Fees that had previously been denied without prejudice pending appeal. Defendants
seek to recover $46,065.56 in attorney’s fees incurred in connection with the
copyright infringement claim,1 and $268,533.51 in fees incurred in connection with
1

In the Motion for Fees, Defendants state that they seek to recover attorneys’ fees in
the amount of $46,065.59 on the Copyright Act claim. This appears to be a
typographical error. The evidence supporting the claim reflects $46,065.56 as the
amount incurred on the Copyright Act claim, and the total amount referenced in the
Motion for Fees is $314,599.07, indicating that $46,065.56 is the correct amount for
(continued...)

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

2

the trade dress claim. Defendants do not seek to recover fees incurred in connection
with Farouk’s breach of contract claim. Farouk in its Response objects to an award
of fees, but does not challenge the reasonableness of the amount requested. The
Motion for Fees has been fully briefed and is now ripe for decision.
II.

REQUEST FOR FEE AWARD UNDER COPYRIGHT ACT
The Copyright Act provides that a district court “may . . . award a reasonable

attorney’s fee to the prevailing party.” 17 U.S.C. § 505. Although the district court
has broad leeway under § 505 to determine whether to award fees, the Supreme Court
has established several guidelines for the Court. A district court may not simply
award fees as a matter of course but, instead, must make a case-by-case assessment.
See Fogerty v. Fantasy, Inc., 510 U.S. 517, 533 (1994). Additionally, the district
court “may not treat prevailing plaintiffs and prevailing defendants any differently.”
See Kirtsaeng v. Wiley, __ U.S. __, 136 S. Ct. 1979, 1985 (June 16, 2016) (citing
Fogerty, 510 U.S. at 527). The district court should give “substantial weight to the
objective reasonableness of the losing party’s position,” but must also “give due
consideration to all other circumstances relevant to granting fees.” Id. at 1983. The
“other

1

circumstances”

include

“frivolousness,

(...continued)
the Copyright Act claim.

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

3

motivation,

objective

unreasonableness[,] and the need in particular circumstances to advance
considerations of compensation and deterrence.” Id. at 1985 (quoting Fogerty, 510
U.S. at 534 n.19). “[I]n any given case, a court may award fees even though the losing
party offered reasonable arguments (or, conversely, deny fees even though the losing
party made unreasonable ones).” Id. at 1988. Based on an individualized assessment
of this case, the Court exercises its discretion under § 505 to award Defendants their
attorneys’ fees incurred in defending against Plaintiff’s Copyright Act claim.
Plaintiff alleged that AG copied two images from Farouk’s Facebook page and
that Gulamani posted a photograph of himself on his personal LinkedIn home page.
The Court gives substantial weight to the objective unreasonableness of Farouk’s
position in connection with these allegations in the copyright infringement claim. As
noted in the Court’s Memorandum and Order granting summary judgment for
Defendants, it was undisputed that Farouk created the two images on its Facebook
page by copying a quotation and images from Shutterstock, a provider of royalty-free
images. In Image No. 1, the Farouk employee combined an unaccredited quotation
with images of a comb, scissors, and brush from Shutterstock. In Image No. 2, the
Farouk employee combined a quote from Picasso with a banner reading “Snips of
Wisdom” and the image of a pair of scissors. Even if the images were copyrightable
compilations, the copyright protection extended only to the original material

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

4

contributed by the Farouk employee, not to the preexisting material borrowed from
other sources. See 17 U.S.C. § 103(b). It was undisputed that each of the elements
of Image No. 1 was copied from another source, and it was obvious that AG’s version
of Image No. 1 was not a copy of Farouk’s Image No. 1. In Image No. 2, the original
elements added by a Farouk employee were the “Snips of Wisdom” and the image of
the scissors. It is readily apparent from comparing the images that neither of these
elements is included in the allegedly infringing image used by AG. Farouk’s position
that AG infringed any protected copyright in Images No. 1 and No. 2 was objectively
unreasonable, and was unsupported by a comparison of the images and by clearly
established legal authority.
With reference to the photograph of Gulamani that he posted on his personal
LinkedIn profile page, there was no evidence that Farouk possessed a valid copyright
for the photograph. It was undisputed that the photograph was taken of Gulamani by
a third-party photographer. Farouk neither asserted nor presented evidence that the
photographer transferred his rights to the photograph to Farouk in a written
assignment as required by 17 U.S.C. § 204(a). Farouk’s position that it held a
protectable copyright interest in the photograph because it was taken while Gulamani
was employed by Farouk was objectively unreasonable. It is clear that the “work for
hire” provision of the Copyright Act grants copyright protection under certain

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

5

circumstances to an employer where the person creating the work is an employee. See
17 U.S.C. § 201(b). There is no similar provision where the subject of the work, not
the creator of the work, is the employee.
In addition to giving substantial weight to the objective unreasonableness of
Farouk’s position on its copyright infringement claim, the Court has considered other
circumstances relevant to the fee award decision. Farouk’s position on the copyright
claim was not only objectively unreasonable, it was frivolous. A basic comparison
of Farouk’s Images No. 1 and No. 2 with the accused images used by Defendants
demonstrated clearly that there was no copyright infringement. Farouk’s assertion
that the “work for hire” provision of the Copyright Act granted it a copyright for the
photograph taken of Gulamani by an independent, third-party photographer was
likewise frivolous under clear copyright law.
Additionally, Defendants have presented evidence and the Court finds that
Farouk had an improper motive for filing this lawsuit against Gulamani, Farouk’s
former President and current competitor. Defendants presented evidence of animosity
between Gulamani and Farouk’s founder and current President Farouk Shami that was
so intense that Shami confronted and threatened Gulamani at a trade show.
Based on an individualized assessment of this case, giving substantial weight
to the objective unreasonableness of Plaintiff’s Copyright Act claim but also giving

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

6

due consideration to other relevant circumstances, the Court exercises its discretion
under § 505 to award Defendants their reasonable attorneys’ fees incurred in
connection with the copyright infringement claim.
III.

REQUEST FOR FEE AWARD FOR TRADE DRESS CLAIM
Under the Lanham Act, the district court “in exceptional cases may award

reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a); Baker v.
DeShong, 821 F.3d 620, 622 (5th Cir. 2016). “[A]n exceptional case is one where
(1) in considering both governing law and the facts of the case, the case stands out
from others with respect to the substantive strength of a party’s litigating position; or
(2) the unsuccessful party has litigated the case in an “unreasonable manner.” Baker,
821 F.3d at 625 (citing Octane Fitness, LLC v. Icon Health and Fitness, Inc.,
__ U.S. __, 134 S. Ct. 1749, 1756 (2016)). The district court determines whether a
case is exceptional “in the case-by-case exercise of [its] discretion, considering the
totality of the circumstances.” Id. The movant is required to demonstrate the case’s
exceptional nature by a preponderance of the evidence, not by clear and convincing
evidence. Id. at 624.
The Court, considering the governing law and the facts of this case, finds that
this is an exceptional case warranting an award of attorneys’ fees incurred by
Defendant in connection with Plaintiff’s trade dress claim. Plaintiff claimed that its

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

7

use of the red and black color combination on its hair stying appliances was
protectable trade dress. As discussed in the Court’s Memorandum and Order granting
summary judgment for Defendants, Farouk’s use of the red and black color
combination was not used consistently as required for trade dress protection. See
Memorandum and Order, pp. 10-11.
Moreover, Farouk failed to present evidence that its red and black color
combination had acquired secondary meaning. See id. at 12-16. Importantly, Farouk
offered no consumer-survey evidence and offered no explanation for its decision not
to do so. Defendants’ unchallenged consumer-survey evidence demonstrated that only
5.9% of the 723 individuals interviewed in the survey associated a red and black color
combination with any one hair care company. Of those who associated the red and
black color combination with a single company, most associated the color
combination with Revlon or some other company. Indeed, only 1.7% of respondents
identified CHI/Farouk as the source of red and black hair styling products.
Additionally, as noted above, Defendants have presented evidence that Farouk
filed this lawsuit not to protect its red and black trade dress but, instead, to harass
Gulamani and AG, and to cause them to expend significant time and resources
defending against the frivolous claim. At the time the lawsuit was filed, Plaintiff had
no information that any consumers had been confused by the use of red and black on

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

8

AG’s “Stylus” product and the use of red and black on any Farouk product. Yet prior
to filing this lawsuit, Farouk attempted to coerce a large distributor of hair styling
appliances not to carry AG’s “Stylus” product. When that effort failed, Farouk Shami
confronted Gulamani at a trade show and threatened to sue him if AG continued to
market the “Stylus” product.
The substantive weakness of Plaintiff’s trade dress claim causes this case to
stand out from other trade dress cases. Based on this substantive weakness, coupled
with the evidence of improper motive, the Court finds that this is an exceptional case
and exercises its discretion to award Defendants their reasonable fees incurred in
defense of the trade dress claim.
IV.

CONCLUSION AND ORDER
Defendants have demonstrated entitlement to recover the fees they incurred in

connection with Plaintiff’s copyright and trade dress infringement claims. The Court
finds that the fees requested are reasonable and, indeed, Farouk does not argue
otherwise. As a result, it is hereby
ORDERED that Defendants’ Motion for Fees [Doc. # 62] is GRANTED. It
is further
ORDERED that Defendants shall recover from Plaintiff their reasonable and
necessary attorneys’ fees in the amount of $46,065.56 incurred in connection with the

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

9

Copyright Act claim and $268,533.51 incurred in connection with the trade dress
infringement claim under the Lanham Act.
SIGNED at Houston, Texas, this 14th day of October, 2016.

NAN Y F. ATLAS
SENIOR UNI
STATES DISTRICT JUDGE

P:\ORDERS\11-2015\0465MFeesCosts.wpd

161014.1407

10