Trademark Bullies Beware: Fifth Circuit Jettisons Bad Faith Requirement for Lanham Act Fees

by Paul Alan Levy

When I saw the Popehat Signal a few years ago, seeking counsel to help Todd DeShong fend off a lawsuit in federal court in Texas claiming that he defamed Clark Baker on his "HIV Innocence Group Truth blog, which criticizes Baker for profiting through charlatanism (Baker claims that HIV status is unrelated to AIDS), I was tempted to pass on the case.   After all, we generally don't take cases in which defamation is the main issue, and although we were interested in the contention that DeShong infringed the trademark on Baker's “HIV Innocence Project” by using the domain names "” and "," we had already won that issue in the Fifth Circuit back in 2004 we had already established in the Fifth Circuit, in defending a gripe site owner who was sued for a site about “Trendmaker Homes” that a non-commercial gripe site about a trademark holder may use the trademark in the site's domain name.  Consequently, the trademark issue was not novel in the jurisdiction.

But a ground-breaking issue was lurking in the case: the Fifth Circuit was one of several courts holding that, because the Lanham Act only provides for awards of attorney fees in “exceptional” trademark cases, a prevailing defendant cannot be awarded fees unless he not only shows that the plaintiff sued in bad faith, but proves bad faith by “clear and convincing evidence.”  That sort of standard makes it very hard for online speakers to find pro bono trademark counsel, and of course if non-commercial gripers have to pay tens of thousands of dollars in attorney fees just to maintain a web site that readily comes to the attention of Internet searchers looking for information about the companies about which they have complained, they have already lost.

The facts of Baker v. DeShong presented an excellent vehicle for urging the Fifth Circuit to change its approach to Lanham Act fees,

hence making it easier for online critics to defend themselves against silly lawsuits motivated by unhappiness about their criticism much more than any genuine concerns about consumer confusion in the marketplace.  Not only was the trademark claim foreclosed by Fifth Circuit precedent, but Baker and his “Office of Scientific and Medical Justice” (the owner of the “HIV Innocence” mark) had lost a UDRP claim before a panel that had found reverse domain name hijacking.  I expected that we would have to take a fee appeal en banc to get this result, but the wait would be worth it.  With that aim, we joined a team of other lawyers, spearheaded by Gill Sperlein, who would take the lead on the defamation claims.    Public Citizen's task was to argue the trademark issue.  

The federal court in Dallas readily dismissed the trademark claims on the face of the complaint, then declined to retain jurisdiction over the state-law defamation claims; in that way, the trial judge avoiding having to address DeShong’s anti-SLAPP motion.  But even though our path to overruling the Fifth Circuit's rule got easier when the Supreme Court held, in Octane Fitness, that the term "exceptional cases" in the Patent Code is not limited to lawsuits brought in bad faith, the trial judge was unwilling to buck clear Fifth Circuit precedent:  he denied our fee motion relying on the Fifth Circuit’s bad faith standard. Today, however, the Fifth Circuit held that its previous bad faith standard (and its requirement of clear and convincing evidence) has been effectively superseded by the Supreme Court’s ruling in Octane Fitness.  Henceforth, "an exceptional case is one where (1) in considering both governing law and the facts of the case, the case stands out from others with respect to the substantive strength of a party’s litigating position; or (2) the unsuccessful party has litigated the case in an 'unreasonable manner.'"

The decision will not likely lead to fee recovery, either for Public Citizen or for the team of private counsel who worked with us, because both Baker and his incorporated vehicle OMSJ filed for bankruptcy while the appeal was pending (that tactic delayed resolution of the appeal for a year).  But DeShong’s free speech rights have been vindicated and we have given other victims of trademark bullying an easier path to finding pro bono counsel who  can take cases like this in an expectation of getting an award of fees once they prevail.

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