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IP/Entertainment Case Law Updates

K & N Engineering, Inc. v. Bulat, et al., USCA Ninth Circuit

The U.S. Court of Appeals for the Ninth Circuit held that an award of statutory damages for trademark counterfeiting under 15 U.S.C. § 1117(c) precludes an award of attorney’s fees under 15 U.S.C. § 1117(b).

The plaintiff, an aftermarket auto parts manufacturer, sued the defendants for selling decals bearing the plaintiff’s logo. The plaintiff sued for trademark infringement under 15 U.S.C §§ 1114(1) and 1125(a); trademark counterfeiting under 15 U.S.C. § 1114(1)(a); trademark dilution under 15 U.S.C. § 1125(c); and related state law statutory and common law causes of action. The plaintiff also elected to seek statutory damages under 15 U.S.C. § 1117(c). The district court granted the plaintiff’s summary judgment motion on all claims and awarded the plaintiff statutory damages of $20,000 and attorney’s fees of $100,000.

On appeal, the defendants argued that the plaintiff’s election to receive statutory damages under 15 U.S.C. § 1117(c) precludes an award of attorney’s fees under § 1117(b).

Relying on the plain meaning of the statute, the Ninth Circuit explained that § 1117 lays out an integrated scheme for plaintiffs in trademark infringement actions to recover damages and attorney’s fees. Under § 1117(a), a plaintiff seeking actual damages for trademark infringement is entitled to reasonable attorney’s fees only in “exceptional cases.” However, when counterfeit marks are involved, § 1117(b) is also applicable. Under this subsection, a plaintiff seeking actual damages under § 1117(a) is entitled to three times the actual damages plus reasonable attorney’s fees in every case, except when there are “extenuating circumstances.”

A plaintiff may eschew actual damages under § 1117(a) and elect to seek statutory damages under § 1117(c). Section 1117(c) provides: “In a case involving the use of a counterfeit mark (as defined in section 1116(d) of this title) in connection with the sale, offering for sale, or distribution of goods or services, the plaintiff may elect, at any time before final judgment is rendered by the trial court, to recover, instead of actual damages and profits under subsection (a) of this section, an award of statutory damages for any such use in connection with the sale, offering for sale, or distribution of goods or services in the amount of — (1) not less than $500 or more than $100,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just; or (2) if the court finds that the use of the counterfeit mark was willful, not more than $1,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just.”

The appeals court noted that section 1117(c) makes no provision for attorney’s fees; nor does § 1117(b) authorize such fees for a plaintiff seeking statutory damages under § 1117(c). “Section 1117(b)’s attorney’s fees provision applies only in cases with actual damages under § 1117(a). In this case, K&N elected to recover statutory damages under § 1117(c). Because of K&N’s election, the court did not assess or award K&N actual damages or profits under § 1117(a). Therefore, there is no statutory basis to award K&N attorney’s fees under § 1117(b).” The court affirmed the district court’s grant of summary judgment on the trademark infringement, counterfeiting and dilution claims and the award of statutory damages in the amount of $20,000 but reversed the award of attorney’s fees.