Craft Smith v. EC Design

Filing 229

MEMORANDUM DECISION AND ORDER denying 204 Motion for Attorney Fees and Costs. Signed by Judge Dee Benson on 10/1/2019. (jds)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
CRAFT SMITH, LLC, a California limited
liability company,
Plaintiff,
vs.
EC DESIGN, LLC, a California limited
liability company,
Defendant.
EC DESIGN, LLC, a California limited
liability company,
Counterclaimant,

MEMORANDUM DECISION AND
ORDER

Case No. 2:16-cv-01235-DB
Judge Dee Benson

vs.
CRAFT SMITH, LLC, a California limited
liability company, and MICHAELS
STORES, INC., a Delaware corporation,
Counterclaim Defendants.
Before the court is an application for an award of attorney fees and expenses filed by
Craft Smith. (Dkt. No. 204.) The motion has been fully briefed by both parties, and the court
has considered the facts and arguments set forth in those filings. Pursuant to civil rule 7-1(f) of
the United States District Court for the District of Utah Rules of Practice, the court elects to
determine the motion on the basis of the written memoranda and finds that oral argument would
not be helpful or necessary. DUCivR 7-1(f).

BACKGROUND
In late 2016, EC Design sent a demand letter to Craft Smith and Michaels alleging that
their new products infringed on EC Design’s copyright. (See Dkt. No. 223 at 4.) Craft Smith
then filed a declaratory judgment action in Utah on December 8, 2016. (Dkt. No. 2.) EC Design
filed a copyright infringement suit in California on January 6, 2017. (Dkt. No. 223 at 4.) That
action was stayed pending the resolution of the Utah case, and EC Design filed a counterclaim
for copyright and trade dress infringement in Utah on July 13, 2017. (Dkt. No. 41.) The claims
were consolidated in the United States District Court for the District of Utah.
On May 17, 2019, nearly three years after the initial dispute arose, this court granted
summary judgment in favor of Craft Smith and Michaels, finding that EC Design did not have a
valid copyright claim. (Dkt. No. 193.) The court held that EC failed to prove infringement
under any of the asserted copyright or trade dress theories. (Id.)
Two months later, Craft Smith filed a motion for attorney fees under both the Lanham
Act and the Copyright Act. (Dkt. No. 204.) EC Design opposed the motion, and the matter is
now submitted to the court for decision.
DISCUSSION
I.

Copyright Act
The Copyright Act provides that “the court may also award a reasonable attorney’s fee to

the prevailing party as part of the costs.” 17 U.S.C. § 505. District courts have broad discretion
on whether and when to grant an award of attorney fees under the Copyright Act. See, e.g.,
Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (rejecting the argument that attorney fees under
the Copyright Act should be awarded to the prevailing party as a matter of course); Applied

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Innovations, Inc. v. Regents of Univ. of Minn., 876 F.2d 626, 638 (8th Cir. 1989) (“The decision
whether to award attorney's fees in copyright cases is committed to the sound discretion of the
district court”); 4 Nimmer on Copyright § 14.10 (2019) (“The word ‘may’ unmistakably
connotes discretion . . .”). Unsuccessful plaintiffs should not generally be penalized where
litigation is not vexatious but rather involved novel questions of statutory interpretation. See
Edward B. Marks Music Corp. v. Continental Record Co., 222 F.2d 488 (2d Cir.), cert. denied,
350 U.S. 861 (1955); Applied Innovations, Inc. v. Regents of University of Minnesota, 876 F.2d
626 (8th Cir. 1989). Factors that courts may consider in determining whether to award
prevailing party attorney fees under the Copyright Act include “frivolousness, motivation,
objective unreasonableness (both in factual and in legal components of case) and the need in
particular circumstances to advance considerations of compensation and deterrence.” Fogerty,
510 U.S. at 535 (1994) (quoting Lieb v. Topstone Industries, Inc. 788 F.2d 151, 156 (3d Cir.
1986)).
Here, EC Design had a registered copyright on its LifePlanner. (Dkt. No. 193 at 9.)
Craft Smith and Michaels created a planner with a similar design and layout to compete with
EC’s planner. (Id. at 3.) While the court ultimately held that Craft Smith’s product did not
infringe on EC’s copyright and that EC’s asserted compilation was not protectable expression,
EC’s suit was not frivolous or unreasonable. (Id. at 22.) The court does not find that an award
of attorney’s fees would serve the ends of compensation or deterrence. Accordingly, the court
declines to award attorney fees under the Copyright Act.

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II.

Lanham Act
Under the Lanham Act, “[t]he court in exceptional cases may award reasonable attorney

fees to the prevailing party.” 15 U.S.C. § 117(a). “Being the prevailing party is not, by itself,
enough to justify an award of attorney fees. Moreover, even in exceptional cases, the award of
attorney fees is vested in the discretion of the district court.” Nat'l Ass'n of Prof'l Baseball
Leagues, Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143, 1146 (10th Cir. 2000). The United
States Court of Appeals for the Tenth Circuit has noted that no one factor is determinative in
deciding whether a case is “exceptional,” but factors may include “(1) its lack of foundation, (2)
the plaintiff’s bad faith in bringing the suit, [or] (3) the unusually vexatious or oppressive manner
in which it is prosecuted.” Id. at 1147. If the case has underlying merit but is pursued in a
“meritless or improper manner,” attorney fees may also be appropriate. Id. at 1149.
In addressing the Lanham Act claim raised by the EC Design, this court found that EC’s
asserted trade dress was descriptive. (Dkt. No. 193 at 26.) It also found that Craft Smith
intentionally copied many elements of EC’s product. (Id. at 34.) After examining the
undisputed facts, however, the court ultimately held that EC Design failed to raise a genuine
issue of material fact regarding inherent distinctiveness or secondary meaning, and Craft Smith
therefore did not infringe on EC’s trade dress. (Id. at. 36.) The court did not find that the trade
dress claim was brought in bad faith or lacked any foundation. In short, nothing about the
substance of this case was “exceptional.” Craft Smith further alleges that EC Design pursued the
case in an improper manner by filing a separate action in California (where both Craft Smith and
EC Design are headquartered), by the timing of its compilation claim, and by various actions
during discovery. (Dkt. No. 204 at 4-9.) None of the alleged litigation misconduct amounts to a

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pursuit of the case in a “meritless or improper” manner. Very Minor Leagues, 223 F.3d at 1149.
The court therefore declines to award attorneys’ fees under the Lanham Act.1
CONCLUSION
Craft Smith has failed to establish an entitlement to attorneys’ fees pursuant to either the
Lanham Act or the Copyright Act. As such, Plaintiffs’ Motions for award of attorneys’ fees and
costs are DENIED.
DATED this 1st day of October, 2019.

BY THE COURT:

Dee Benson
United States District Judge

1

Both parties cite the Supreme Court’s Patent Act ruling in Octane Fitness for support. See Octane Fitness, LLC v.
ICON Health & Fitness, Inc., 572 U.S. 545 (2014). Although several federal circuits have applied this ruling to
cases under the Lanham Act, the Tenth Circuit has not yet done so. Under Octane Fitness, however, the result is the
same. Octane Fitness merely overruled the Federal Circuit’s narrow reading of “exceptional” and emphasized that it
should be interpreted consistent with the statutory text. In that case, the Supreme Court noted that “an ‘exceptional’
case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position .
. . or the unreasonable manner in which the case was litigated.” Id. at 554. As discussed infra, this case was not
substantively exceptional or litigated in an unreasonable manner, and therefore does not merit an award of attorney
fees under the Lanham Act.

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