Amazing Spaces Inc v. Storage
| Decision Date | 04 January 2011 |
| Docket Number | CIVIL ACTION NO. H-08-0629 |
| Parties | AMAZING SPACES, INC., Plaintiff, v. METRO MINI STORAGE, et al., Defendants |
| Court | U.S. District Court — Southern District of Texas |
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The plaintiff, Amazing Spaces, Inc., sued the defendants and counter-plaintiffs, Metro Mini Storage and Landmark Interest Corporation, alleging trademark, trade dress, and copyright infringement and dilution of a design consisting of a raised five-pointed star set in a circle, the "Star Symbol." Amazing Spaces registered the design as a service mark with the United States Patent Office and uses it on self-storage facilities that it operates in the Houston, Texas area. Metro is also in the self-storage business and uses a similar star-in-a-circle design. Landmark has built facilities for Amazing Spaces using the Star Symbol and for Metro using a similar design. After discovery that was focused on whether the Star Symbol was "trademarkable, " this court granted the defendants' motion for summary judgment. This court reached that result in a lengthy opinion that concluded that under the applicable law and record, the Star Symbol was not a valid service mark because it was neither inherently distinctive and had not acquired distinctiveness through a secondary meaning. Amazing Spaces, Inc. v. Metro Mini Storage, 665 F. Supp. 2d 727 (S.D. Tex. 2009). On appeal, the Fifth Circuit also issued a lengthy opinion, affirming the conclusion that the Star Symbol did not warrant protection as a valid service mark. Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 235-250 (5th Cir. 2010). The appellate court reversed the grant of summary judgment on trade dress and copyright and remanded for resolution of the additional claims. Id. at 250-52. In remanding, the Fifth Circuit noted that this court was "free to consider" the defendants' request for cancellation of the Amazing Spaces Star Symbol trademark. Id. at 250.
On remand, Amazing Spaces moved to dismiss, with prejudice, its remaining claims, as well as the affirmative counterclaims asserting that the trademark was fraudulently obtained under Rule 41(a)(2) of the Federal Rules of Civil procedure. (Docket Entry No. 85). Metro and Landmark did not oppose dismissal of both the remaining claims and the affirmative counterclaims, with prejudice, but asked for attorneys' fees and costs expended in the litigation, including the appeal, on the basis that Amazing Spaces pursued the litigation in bad faith. (Docket Entry No. 86). Amazing Spaces responded that it had a legitimate, good-faith basis for filing and pursuing the case and that the defendants have failed to make the showing necessary for a fee award under either the Lanham Act, 15 U.S.C. § 1117(a), or 28 U.S.C. § 1927. (Docket Entry No. 91). Metro and Landmark filed a reply. (Docket Entry No. 92). Metro and Landmark have also reasserted their motion for cancellation of the trademark, which this court granted. (Docket Entry No. 90).
For the reasons explained below, based on a careful analysis of the record and the applicable law, this court concludes that Metro and Landmark have failed to meet their burden of showing that Amazing Spaces should be required to pay the attorneys' fees incurred in this case. Their motion for attorneys' fees is denied. The motion to dismiss is granted, with prejudice. Final judgment is entered by separate order.
Rule 41(a)(2) is "a discretionary procedural rule that explicitly allows a district court to impose terms and conditions upon a voluntary dismissal 'as the court deems proper.'" Bridgeport Music v. Universal-MCA Music Publ., 481 F.3d 926, 931 (6th Cir. 2007) (quoting Fed. Rule Civ. P. 41(a)(2)). When plaintiffs move to dismiss voluntarily without prejudice under Rule 41(a)(2), courts commonly award costs and attorneys' fees to defendants. Mort. Guar. Ins. Corp v. Richard Carylon Co., 904 F.2d 298, 300 (5th Cir. 1990) ); Spar Gas, Inc. v. AP Propane, Inc., 972 F.2d 348, 1992 WL 172129, at *3 (6th Cir. July 22, 1992) (unpublished) (citing Smoot v. Fox, 353 F.2d 830 (6th Cir. 1965)). On the other hand, attorneys' fees and expenses are generally not awarded where plaintiffs move to voluntarily dismiss with prejudice. Degussa Admixtures, Inc. v. Burnett, 471 F. Supp. 2d 848, 852 (W.D. Mich. 2007) (citing cases); 9 Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 2366, at 536-38 (3d ed. 2008) ( ). Many courts have acknowledged, however, that attorneys' fees may be appropriate under some independent statutory authority. Degussa, 471 F. Supp. 2d at 852-53 (citing cases); Wright & Miller § 2366, at 540 (citing cases). Other courts have found that exceptional circumstances may justify an award of costs. Degussa, 471 F. Supp. 2d at 853 (citing cases); Wright & Miller § 2366, at 539 (citing cases).
The Lanham Act provides that "[t]he court in exceptional cases may award reasonableattorney's fees to the prevailing party." 15 U.S.C. § 1117(a). The prevailing party must demonstrate the exceptional nature of the case by clear and convincing evidence. CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60, 65 (5th Cir. 1992); Scott Fetzer Co. v. House of Vacuums, Inc., 381 F.3d 477, 490 (5th Cir. 2004). A district court may also shift reasonable fees to "[a]ny attorney... who... multiplies the proceedings in any case unreasonably and vexatiously." 28 U.S.C. § 1927. Both § 1117(a) and § 1927 are analyzed below to determine whether they make attorneys' fees appropriate in this case despite the plaintiff's motion for dismissal with prejudice under Rule 41(a)(2).
In Procter & Gamble Co. v. Amway Corp., 280 F.3d 519 (5th Cir. 2002), the Fifth Circuit noted that most of the § 1117(a) cases involving fee awards were cases in which the plaintiff had prevailed. Because the court had rarely interpreted the requirements for a prevailing defendant to recover fees under § 1117(a), the court reviewed the relevant legal principles:
Courts permit prevailing plaintiffs to recover attorneys' fees under § 1117(a) if the defendant maliciously, fraudulently, deliberately, or wilfully infringes the plaintiff's mark. Tex. Pig Stands, Inc. v. Hard Rock Cafe Int'l, Inc., 951 F.2d 684, 696-97 (5th Cir. 1992). The prevailing plaintiff must show "a high degree of culpability" by the defendant. Id. at 697. We have used "bad faith" as a short-hand for conducting this inquiry, Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 556 (5th Cir. 1998), but we also have instructed district courts to consider all the facts and circumstances to determine whether a case is exceptional, id. at 555.
We have not articulated a very precise standard for determining when to award a prevailing defendant attorneys' fees. In Fuji Photo Film Co., Inc. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591, 601-02 (5th Cir. 1985), we affirmed the refusal togrant fees based on a finding that the plaintiff had brought the action in good faith, but we did not address the role of the objective merits of the plaintiff's suit in determining the existence of "exceptional" status....
in the context of prevailing plaintiffs, we have considered the existence or nonexistence of reasonable legal defenses probative of good or bad faith. The vast majority of circuits have developed a separate test for prevailing defendants under § 1117(a) and permit district courts to consider directly the objective merits of the suit. Fuji Photo precludes us from doing so, but district courts nonetheless should consider the merits and substance of the civil action when examining the plaintiffs' good or bad faith.
in the Fifth Circuit, under § 1117(a), to recover attorneys' fees, "[t]he prevailing party must demonstrate the exceptional nature of the case by clear and convincing evidence.'" Id. at 527. To demonstrate that a case is exceptional, a prevailing defendant must show that the plaintiff broughtthe case in bad faith. See Robin Singh Educ. Servs. Inc. v. Excel Test Prep., 291 F. App'x 620, 621 (5th Cir.); Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1390 (5th Cir. 1996); Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 490 (5th Cir. 2004); Procter & Gamble Co., 280 F.3d at 527-28 & n. 12; Fuji Photo, 754 F.2d at 601-02. An exceptional case involves acts that can be called "malicious, " "fraudulent, " "deliberate, " or "willful." Seven-Up, 86 F.3d at 1390.
Metro and Landmark argue that bad faith is demonstrated by the following evidence:
the "ubiquitous" nature of the raised star in a circle design in Texas;
the use of a design similar to the Star Logo by other self-storage businesses;
evidence that Amazing Spaces knew of such use before it registered its trademark;
as a result, the statement by the president of Amazing Spaces to the U.S. Patent and Trademark Office that "to the best of her knowledge and belief, no other person, firm, corporation, or association has the right to use said mark in commerce, either in identical form or in such near resemblance thereto as to be likely, when applied to the goods and services of such other person, to cause confusion, or cause mistake, or to deceive" was false;
the lack of evidence in this litigation of actual or likely confusion between other storage business using the star and Amazing Spaces;
the claim by Amazing Spaces in this suit that the Texas Star ...
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