Derma Pen, LLC v. 4Everyoung Limited, 060821 FED10, 19-4114

Docket Nº19-4114
Opinion JudgeLUCERO, SENIOR CIRCUIT JUDGE.
Party NameDERMA PEN, LLC, Plaintiff-Appellant, v. 4EVERYOUNG LIMITED; BIOSOFT (AUST) PTY LTD, d/b/a DermapenWorld; EQUIPMED INTERNATIONAL PTY LTD, d/b/a DermapenWorld; STENE MARSHALL, d/b/a DermapenWorld, Defendants. DERMA PEN IP HOLDINGS, LLC, Movant-Appellant, JOEL MARSHALL; SASHA MARSHALL; DP DERM, LLC, Movants-Appellees.
AttorneyDick J. Baldwin (Michael D. Zimmerman, Troy L. Booher, Taylor P. Webb with him on the briefs), Zimmerman Booher, Salt Lake City, Utah, and Kevin A. Turney, Salt Lake City, Utah, on the brief for Appellants. S. Ian Hiatt (Jefferson W. Gross with him on the brief), Gross & Rooney, Salt Lake City, U...
Judge PanelBefore HARTZ, Circuit Judge, LUCERO, Senior Circuit Judge, and EID, Circuit Judge.
Case DateJune 08, 2021
CourtUnited States Courts of Appeals, United States Court of Appeals (10th Circuit)

DERMA PEN, LLC, Plaintiff-Appellant,

v.

4EVERYOUNG LIMITED; BIOSOFT (AUST) PTY LTD, d/b/a DermapenWorld; EQUIPMED INTERNATIONAL PTY LTD, d/b/a DermapenWorld; STENE MARSHALL, d/b/a DermapenWorld, Defendants.

DERMA PEN IP HOLDINGS, LLC, Movant-Appellant,

JOEL MARSHALL; SASHA MARSHALL; DP DERM, LLC, Movants-Appellees.

No. 19-4114

United States Court of Appeals, Tenth Circuit

June 8, 2021

Appeal from the United States District Court for the District of Utah (D.C. No. 2:13-CV-00729-DN-EJF)

Dick J. Baldwin (Michael D. Zimmerman, Troy L. Booher, Taylor P. Webb with him on the briefs), Zimmerman Booher, Salt Lake City, Utah, and Kevin A. Turney, Salt Lake City, Utah, on the brief for Appellants.

S. Ian Hiatt (Jefferson W. Gross with him on the brief), Gross & Rooney, Salt Lake City, Utah, for Appellees.

Before HARTZ, Circuit Judge, LUCERO, Senior Circuit Judge, and EID, Circuit Judge.

LUCERO, SENIOR CIRCUIT JUDGE.

After years of trademark litigation, Plaintiff-Appellant Derma Pen, LLC ("Derma Pen") was granted a permanent injunction against Stene Marshall and three related corporations that he had formed. Shortly thereafter, Derma Pen moved for a contempt order against Stene Marshall, alleging that he had violated the injunction. Derma Pen also sought a contempt order against Stene Marshall's brother and sister-in-law, Joel and Sasha Marshall, and DP Derm, LLC, a corporation Joel and Sasha own (collectively, the "Related Parties"). Movant-Appellant Derma Pen IP Holdings LLC ("DPIPH"), Derma Pen's successor in interest, joined Derma Pen's motion shortly before the contempt hearing. In its motion, Derma Pen asserted that the Related Parties had acted in concert with Stene Marshall to violate the injunction. The Related Parties prevailed in the contempt proceeding and subsequently moved for attorney's fees under the Lanham Act, 15 U.S.C. § 1117(a), which allows a district court to award fees to a prevailing party in an "exceptional case" arising under the Act. The court granted the motion for fees, and Derma Pen and DPIPH appeal from that award.1

In its award of attorney's fees to the Related Parties, the trial court relied upon a statutory provision in the Patent Act as interpreted by the Supreme Court in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014). We are called upon to decide whether the term "exceptional case" in the Patent Act differs in meaning from the same term used in the Lanham Act to a degree that requires reversal. We conclude that the exceptional case standard in the Lanham Act parallels the standard in the Patent Act and affirm.

I

In 2013, Derma Pen sued Stene Marshall and three corporations that he had formed, alleging infringement of the "DERMAPEN" trademark (the "Mark"). On May 8, 2017, as part of the judgment in this action, Derma Pen was granted a permanent injunction prohibiting the defendants and "their officers, agents, servants, employees, attorneys, licensees, and anyone in active concert or participation with, aiding, assisting, or enabling Defendants" from using the Mark.

Several months later, on November 3, 2017, Derma Pen filed an ex parte motion for an Order to Show Cause (OSC) for contempt, asserting that Stene Marshall was violating the injunction. Derma Pen also alleged that Stene was acting in concert with the Related Parties to violate the injunction and included them as parties in the OSC.

On June 8, 2018, the district court ordered Stene Marshall and the Related Parties to appear before it regarding the alleged violations of the injunction. A hearing was held on July 6, 2018, and the parties were ordered to stipulate to a scheduling order for limited discovery. The scheduling order required Derma Pen to identify the provisions of the injunction the Related Parties violated and to provide contact information of those with discoverable information to support its allegations. Derma Pen routinely failed to meet its discovery obligations, causing the Related Parties to file six discovery motions over a four-month period and leading to sanctions on Derma Pen.

Complicating the analysis, Derma Pen no longer had the rights to the Mark at the time of the contempt proceeding. DPIPH was formed in 2015, acquired the rights to the Mark shortly thereafter, and was subsequently joined to the underlying litigation. Although DPIPH remained a party to the litigation, it did not seek to join Derma Pen's motion for an OSC until December 7, 2018-roughly ten days prior to the scheduled evidentiary hearing and after a court order directing it to state on the record whether it was seeking to enforce the injunction against the Related Parties. DPIPH's motion to join the contempt proceeding was subsequently granted.

After holding an evidentiary hearing in December 2018, the district court issued a decision on February 14, 2019, holding Stene Marshall in contempt of the injunction but concluding the Related Parties had not acted in concert with Stene Marshall and had not violated the injunction. The Related Parties subsequently moved for attorney's fees incurred in the contempt proceeding under the Lanham Act, which allows a prevailing party to recover fees in an "exceptional case." 15 U.S.C. § 1117(a). Applying the definition of "exceptional case" set forth in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014), the district court granted the motion and awarded the Related Parties $190, 328 in fees.

The district court concluded that this case was exceptional based on the totality of five factors: (1) Appellants "produced no evidence of damages" (emphasis in original), (2) "the evidence showed Derma Pen had no right to enforce the injunction," (3) "the evidence showed that [the] trademark was abandoned," (4) "monetary sanctions were imposed on" Appellants for repeated failures to comply with discovery orders, and (5) Appellants were "entitled to no relief against the [Related Parties]."

An appeal is brought by Derma Pen and DPIPH.

II

We review orders granting or denying attorney's fees under the Lanham Act for abuse of discretion. King v. PA Consulting Grp., Inc., 485 F.3d 577, 592 (10th Cir. 2007). However, we "review the underlying legal principles de novo." Id. "A district court abuses its discretion when it renders an arbitrary, capricious, whimsical, or manifestly unreasonable judgment." Burke v. Regalado, 935 F.3d 960, 1011 (10th Cir. 2019) (citation omitted).

A

The Lanham...

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