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American Eagle Outfitters, Inc. v. Lyle & Scott Limited

September 21, 2009

AMERICAN EAGLE OUTFITTERS, INC. AND RETAIL ROYALTY COMPANY, PLAINTIFFS,
v.
LYLE & SCOTT LIMITED AND HARRIS WATSON INVESTMENT LIMITED, DEFENDANTS.



The opinion of the court was delivered by: Hay, Chief Magistrate Judge

MEMORANDUM OPINION

Following this Court's grant of summary judgment (Doc. 249) in favor of American Eagle Outfitters, Inc. and Retail Royalty Co. (collectively "AE" or "the Plaintiffs") on a contract claim made against Lyle & Scott Limited and Harris Watson Investment Limited (collectively "L&S" or "the Defendants"), AE filed the pending Motion (Doc. 250) seeking an award of $2,600,000 in attorneys' fees and expenses.*fn1 Asserting its status as a prevailing party, AE contends that this case should be deemed "exceptional" within the meaning of the Lanham Act ("the Act"), 15 U.S.C. §1117(a), entitling it to a fee award. In the alternative, AE argues that it is entitled to attorneys' fees and costs under the provisions of Fed. R. Civ. P. 11, or pursuant to this Court's inherent equitable power to award attorneys' fees to a prevailing party where its opponent has acted in bad faith. The Motion will be denied.

I. BACKGROUND

Because the facts of this matter are well known to the parties and are recounted in the Opinion addressing the Plaintiffs' Motion for Summary Judgment, the Court sketches only those facts necessary to provide context for its disposition of the pending Motion.

The seeds of this litigation were sown in a September 2005 letter from the Managing Director of L&S to AE's CEO stating that L&S had learned that AE was marketing clothing bearing an eagle logo that was "so close to [the L&S] registered marks that there is a substantial risk of confusion as to the origin of your goods when offered for sale in Europe . . . [W]e would undoubtedly succeed in infringement proceedings against you." (Doc. 223 at 37). Negotiations between the parties' representatives began soon thereafter, and culminated in a January 2006 London meeting at which, according to AE, a binding coexistence agreement was reached, thereby eliminating the threat of trademark-related litigation.

When L&S later denied that there had been an agreement and demanded royalty payments in return for AE's unimpeded use of the eagle mark, AE filed suit seeking declaratory judgment as to the existence of an enforceable coexistence agreement and specific performance thereof. It also sought a declaratory judgment that AE had not infringed L&S's Eagle Design Trademark. (Doc. 1). In September 2006, AE amended its Complaint (Doc. 26) to include a claim for tortious interference - which was later dismissed - against the owners of L&S and its parent company. L&S answered the Amended Complaint on May 10, 2007, filing two trademark-related counterclaims. (Doc. 45). In November 2007, AE filed a Second Amended Complaint (Doc. 99) adding two trademark related counts. One year later, this Court granted summary judgment in favor of AE on its contract claims, obviating the need to reach the trademark issues.

The Court discusses seriatim the issues raised in AE's Motion.

II. DISCUSSION

A. The Fee Shifting Provision of the Lanham Act*fn2

1. AE's Status as a Prevailing Party

AE contends first that because it prevailed on its Motion for Summary Judgment, it is entitled to an award of attorneys' fees under the Lanham Act. In framing their arguments on this issue, the parties ignore a threshold question - whether the fee shifting provision of the Lanham Act applies at all. Although the parties and the Court have termed this matter a "trademark dispute," the grant of summary judgment focused only on state law issues of contract formation unrelated to the Lanham Act, except in a "but for"sense. That is to say, but for the threat that L&S would sue for trademark infringement, there would have been no need to negotiate an agreement. Given the Court's disposition of the contract claim, the Court was not required to reach, did not consider, and cannot, on the record before it, assess the merits of the Lanham Act claims.

AE attempts to force the contract dispute into the confines of the Lanham Act by arguing that the contract matter "was transformed into a Lanham Act trademark based action" when L&S "disavow[ed] the coexistence agreement and threaten[ed] to assert trademark infringement." (Doc. 258 at 2). AE's discussion of its status as a prevailing party on trademark based claims is brief and conclusory:

The principal thrust of discovery and legal work in this action was [AE]'s declaratory judgment for non-infringement and the counterclaim by L&S for trademark infringement. Thus the attorney's fees and costs incurred by [AE] were directed to the Lanham Act claims (including the complete bar to those claims provided by the coexistence agreement), as were all expert opinions. (Doc. 258 at 6). This argument ignores the fact that the Court's consideration of the contract dispute on summary judgment had nothing to do with the merits of the trademark claims. The Court of Appeals recognized as much when it reviewed the grant of summary judgment, correctly terming the matter "a contract case." Am. Eagle Outfitters, 2009 WL 2902250 at, *1. In these circumstances, AE cannot be considered a prevailing party under the Lanham Act and, therefore, is not entitled to take advantage of its fee shifting provision. AE does not cite authority to the contrary.

The Court's conclusion regarding the availability of attorneys' fees under the Act does not rest only on its prevailing party determination; even if it were reasonable to characterize AE as a prevailing party for purposes of the Lanham Act, the Court finds ...


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