Scentsy, Inc. v. B.R. Chase, LLC.
| Decision Date | 26 August 2013 |
| Parties | SCENTSY, INC., an Idaho corporation, Plaintiff, v. B.R. Chase, LLC., a Utah limited liability company; and HARMONY BRANDS, LLC., a Utah limited liability company, Defendants. |
| Court | U.S. District Court — District of Idaho |
The Court has before it Harmony Brands, LLC's Motion for Attorneys' Fees and Costs (Dkt. 134). The motion is fully briefed and at issue. The Court has determined that oral argument would not significantly assist the decisional process and will therefore consider the matters without a hearing. Being familiar with the record and having considered the parties' briefing, the Court will grant the motion and award $396,207.50 in fees and costs to Harmony against Scentsy.
Both Scentsy, Inc. ("Scentsy") and Harmony Brands, LLC. ("Harmony") manufacture scented wax and wax warmer products. On May 26, 2011, Scentsy filed suit contending that Harmony had infringed Scentsy's copyright and trade dress rights in a number of its warmers. (Dkt. 1). After both sides engaged in extensive discovery,Harmony moved for summary judgment. On April 30, 2013, the Court entered its Memorandum and Decision Order (Dkt. 125) granting summary judgment to Harmony.
Harmony then filed its pending motion for attorneys' fees in the amount of $364, 976.00, and for costs in the amount of $31, 231.50, claiming that the attorney fee recovery provisions of the Copyright Act and the Lanham Act justify awarding Harmony its reasonably incurred costs and fees. (Dkt. 134). Scentsy filed a response arguing that Harmony's fee request is inappropriate and should be denied. (Dkt. 149).
The Lanham Act provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a). "A case may be considered exceptional when a plaintiff's case is groundless, unreasonable, vexatious, or pursued in bad faith." Applied Information Sciences Corp. v. eBay, Inc., 511 F.3d 966, 973 (9th Cir. 2007) (internal citation and quotation omitted). The decision to award fees under the Latham Act lies within the discretion of the court. Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1409 (9th Cir. 1993). In general, attorney's fees are awarded to the prevailing party under the Lanham Act if (1) the prevailing party can show bad faith on the part of the opposing party or (2) there was an absence of "debatable issues of law and fact" in support of the opposing party's claims. Stephen W. Boney, Inc. v. Boney Servs., 127 F.3d 821, 827 (9th Cir. 1997).
Section 505 of the Copyright Act gives courts discretion to "allow the recovery of full costs" and "reasonable attorney's fee to the prevailing party." 17 U.S.C. § 505. The Ninth Circuit stated that a court should exercise its discretion in light of several non-exclusive considerations, including (1) the degree of success obtained; (2) frivolousness; (3) objective unreasonableness "both in the factual and legal arguments in the case"; (4) motivation; and (5) the need "to advance considerations of compensation and deterrence." Jackson v. Axton, 25 F.3d 884, 890 (9th Cir. 1994) (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)).
In weighing these factors, "[c]ourts should keep in mind the purpose[] of the Copyright Act," which is to "promote creativity for the public good." Id. Though a court's discretion may be influenced by the plaintiff's culpability, "blameworthiness is not a prerequisite to awarding fees to a prevailing defendant." Fantasy, Inc. v. Fogerty, 94 F.3d 553, 558 (9th Cir. 1996). Overall, "[f]aithfulness to the purposes of the Copyright Act is . . . the pivotal criterion." Id.
The Lanham Act and the Copyright Act provide different standards for awarding attorney's fees. The standard for awarding fees under the Lanham Act is "significantly stricter than the standard" for the Copyright Act. FASA Corp. v. Playmates Toys, Inc.,108 F.3d 140, 143 (7th Cir. 1997). Therefore, the Court will analyze the two portions of Scentsy's case separately.
Harmony argues that the Court should find this case exceptional and award attorney's fees under the Lanham Act. Harmony asserts that Scentsy's trade dress claims were groundless, unreasonable, and pursued in bad faith. After a review of the record, the Court finds that this case meets the Lanham Act's "exceptional case" standard.
A claim is unreasonable and groundless under the Lanham Act when there is "no reasonable or legal basis to believe in success on the merits." Secalt S.A. v. Wuxi Shenxi Const. Mach. Co., Ltd., 668 F.3d 677, 687-88 (9th Cir. 2012) (citing Cairns v. Franklin Mint Co., 292 F.3d 1139, 1156 (9th Cir. 2002); see also Earthquake Sound Corp. v. Bumper Indus., 352 F.3d 1210, 1216 (9th Cir. 2003) (). Scentsy's trade dress claims required Scentsy to prove three elements: "(1) that its claimed dress is nonfunctional; (2) that its claimed dress serves a source-identifying role either because it is inherently distinctive or has acquired secondary meaning; and (3) that the defendant's product . . . creates a likelihood of consumer confusion." Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001). When Scentsy filed its claim against Harmony, there was no reasonable basis to believe in success at establishing any of the three elements.
First, Scentsy could not present evidence that its fourteen warmers were nonfunctional. As outlined in the Court's Memorandum and Decision Order (Dkt. 125), Scentsy's claimed trade dress is aesthetically functional: the design elements have utilitarian advantage, alternative designs are part of the wax warmer business, and, if anything, Scentsy's advertising touts the beauty of the products—which is a utilitarian feature for scented wax warmers. Scentsy warmers require aesthetically pleasing dress in order to perform their essential decorative function. Given the functional nature of Scentsy's trade dress, its claim was groundless.
Second, Scentsy could not have established a debatable issue of fact as to whether its trade dress serves a source-identifying role. Scentsy's claim involved fourteen warmers of varying shapes, sizes, and design. Scentsy has not pointed to any style or feature of any of the fourteen warmers that is source identifying. The fact that Scentsy produces so many different styles of warmers makes it appear that there is no "consistent definable style or image that [is] source identifying" on any of its warmers. Scentsy, Inc. v. Performance Manufacturing, Inc. Case No. CV08-553-S-EJL, at *23 (D. Idaho April 3, 2009) (). Without evidence of a source-identifying role, Scentsy's claim was groundless and unreasonable.
Third, Scentsy was unreasonable to believe it could establish confusion in the marketplace resulting from Harmony's products and packaging. Harmony and Scentsy'swarmers have different names, packaging, and logos. Additionally, they are sold in a different manner in the marketplace—Harmony sells its warmers at retail stores and Scentsy sells through Scentsy consultants. There is nothing to indicate that consumers, encountering Harmony warmers as packaged and advertised in the marketplace, would confuse Harmony warmers with Scentsy warmers. When Scentsy brought a similar trade dress claim in this District, Judge Lodge stated that "the Court simply cannot see the confusion between the two." Scentsy, Inc. v. Performance Manufacturing, Inc. Case No. CV08-553-S-EJL, at *23 (D. Idaho April 3, 2009). Given Judge Lodge's prior opinion, Scentsy should have known its confusion argument was groundless.
Taking into account all three elements of a trade dress claim, Scentsy had "no reasonable or legal basis to believe in success on the merits." Secalt, 668 F.3d at 687-88. Thus, Scentsy's trade dress claims were groundless and unreasonable. This finding is sufficient to establish an exceptional case under the Lanham Act. Stephen W. Boney, 127 F.3d at 827. Accordingly, the Court need not address bad faith, and the Court will award Harmony's reasonable attorneys' fees accrued in defense of Scentsy's trade dress claims.
Harmony also argues that the Court should award its attorneys' fees accrued in defense of Scentsy's copyright claims. Taking into account the factors outlined by the Ninth Circuit in Jackson, 25 F.3d at 890, and the purposes of the Copyright Act, the Court finds Harmony is entitled to its reasonable attorneys' fees.
The first factor, the degree of success obtained, weighs in Harmony's favor. Harmony won on all of Scentsy's claims, including its copyright claims.
The next two factors, frivolousness and objective unreasonableness, do not favor either party. A claim is frivolous if "the result is obvious, or the arguments of error are wholly without merit.' Wilcox v. Commissioner, 848 F.2d 1007, 1009 (9th Cir. 1988). Scentsy's argument that Harmony engaged in direct copying was meritless and the result was obvious. A simple view of Scentsy's copyrighted warmers and Harmony's warmers which Scentsy asserts infringed on them reveals similarities but no duplication. MDO at 8, Dkt. 125. Scentsy's argument that Harmony's warmers were substantially similar was, however, a closer call. Although the Court determined that no jury would conclude in Scentsy's favor, "[d]eterminations about substantial similarity are rarely obvious." Pasillas v. McDonald's Corp., 927 F.2d 440, 444 (9th Cir. 1991). Losing on this argument does not make Scentsy's argument frivolous. Given the slight similarities between the warmers and Scentsy's broad copyright protection, Scentsy's substantial similarity...
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