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Scentsy, Inc. v. B.R. Chase, LLC

United States District Court, Ninth Circuit

August 26, 2013

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.

MEMORANDUM DECISION AND ORDER

B. LYNN WINMILL, Chief District Judge.

INTRODUCTION

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.

BACKGROUND

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).

LEGAL STANDARD

1. The Lanham Act Fees Provision

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).

2. The Copyright Act Fees Provision

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.

ANALYSIS

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.

1. Scentsy's Trade Dress Claims

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) (holding that a "dilution of trademark claim was groundless and unreasonable because it had no legal basis"). 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 ...


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