The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
One of the least-endearing features of the U.S. legal system is the "American Rule"—the default rule requiring all parties to civil litigation to bear their own costs (including lawyer's fees), win or lose, unless there's a special statutory fee-shifting provision applicable to the case. (Contrasted with the "English Rule," under which the default is that the loser pays the winner's fees unless a specific statutory provision provides otherwise.)
Among other undesirable consequences, the American Rule encourages, or even invites, a particularly nasty form of litigation bullying: filing lawsuits with little or no hope of prevailing in order either to extract a settlement payment ("I'll take $X to go away, which is less than the $10X you'll have to spend defending the case") or to force a defendant to "cease and desist" from perfectly lawful behavior that the plaintiff would like to eliminate ("Our pockets are much deeper than yours, and your lawyer's fees will bankrupt you long before we run out of dough").
Louis Vuitton Malletier, the high-fashion handbag and accessory manufacturer/distributor, owns one of the most valuable trademarks on the planet—the well-known LV "toile" logo, #14 on Forbes' trademark value list, worth around $28 billion. It is, as it candidly acknowledged in a recent court filing, an "active and aggressive enforcer" of its rights in the logo—a euphemism, in the eyes of many observers, for "trademark bully." (See Techdirt's characterization of LV's "ridiculous trademark bullying" here.)
LV's hyper-aggressive pursuit of alleged trademark infringers has included what is surely the poster child of trademark bullying—LV's ridiculous assertion that Penn Law School's Student Intellectual Property Group's use of the distinctive LV pattern in its posters for a symposium it was holding on "fashion law" was "egregious action [that] is not only a serious willful infringement and knowingly dilutes the LV Trademarks, but also may mislead others into thinking that this type of unlawful activity is somehow 'legal' or constitutes 'fair use'"- details here.
The latest episode involved a suit against "My Other Bag," whose canvas tote bags have the text "My Other Bag" in large letters on one side, and drawings meant to invoke the iconic handbags of luxury designers (including LV) on the other—an obvious play on the old "My other car is a …" bumper sticker joke. (See pictures of the MOB bags here.)
A couple of weeks ago, U.S. District Judge Jesse Furman of the Southern District of New York dismissed LV's claim that this use by MOB was "diluting" and infringing its trademark.
Louis Vuitton is, by its own description, an 'active and aggressive' enforcer of its trademark rights…. In some cases, however, it is better to 'accept the implied compliment in [a] parody' and to smile or laugh than it is to sue….[This] is such a case. MOB's use of Louis Vuitton's marks in service of what is an obvious attempt at humor is not likely to cause confusion or the blurring of the distinctiveness of Louis Vuitton's marks; if anything, it is likely only to reinforce and enhance the distinctiveness and notoriety of the famous brand. Accordingly, … MOB is entitled to summary judgment on all of Louis Vuitton's claims …
The decision is undoubtedly correct (see Rebecca Tushnet's excellent analysis here), and a small blow for common sense in a field of law in which common sense often does not prevail.
And things get more interesting. Public Citizen has agreed to represent MOB in an action asking the court to award MOB its attorney's fees (which amounted to more than $350,000, a sum exceeding the company's entire revenues last year). The federal trademark statute, the Lanham Act, does allow courts to award attorney's fees in "exceptional" cases, and though the Second Circuit has taken the position that a case can be deemed "exceptional" only where the losing party was acting "in bad faith," Public Citizen's brief argues that this high bar was lowered by the Supreme Court in its recent decision in the Octane Fitness case, which construed a similar provision allowing fee awards for "exceptional" patent cases in circumstances that go well beyond bad faith.
In addition, and perhaps more importantly, Public Citizen argues that the court should consider not merely the groundless nature of LV's claims in this case, but also LV's prior conduct as a "serial trademark bully," in determining whether a fee award is appropriate.
Awards of attorney fees can not only encourage critics of big companies to stand up to bullying, but also encourage public-spirited lawyers to follow the example of Philpott and Korzenik and stand up for such companies pro bono. The prospect of having to pay several-hundred-thousand dollars in attorney fees to a small company that a bully hoped to victimize (trademark cases are notoriously expensive) can also make the bullies think twice about bringing baseless claims. …
The bullying tactics on display in this litigation reflects are nothing new for Louis Vuitton: this company has long been identified as a shameless trademark bully. See Grinvald, Shaming Trademark Bullies, 2011 Wis. L. Rev. 625, 652 fn. 156 (2011).
To a company such as Louis Vuitton, it almost doesn't matter if its litigation of particular cases like this one is unsuccessful, because the chilling effect remains. When small companies, or artists, or others, receive threats, they cannot be sure that they will have the resources to litigate toe-to-toe with a litigant with the size and ferociousness of Louis Vuitton, and they have to worry that, as happened to MOB here, they may lose business as retailers hesitate to carry their product because they are afraid of facing litigation, or even peremptory seizures, themselves. Louis Vuitton doesn't need to win to have its way. As in this case, it doesn't even need to have evidence of actual confusion or real harm; it doesn't need to be able to establish even a single factor to the satisfaction of a court. Many victims cave because they cannot afford to fight. Plaintiff's status as a serial abuser of the trademark laws brings considerations of deterrence into play as an additional basis for treating this lawsuit as exceptional.