IP Law Daily, TRADEMARK—D. Nev.: Groupon awarded $325,000 in attorney fees for defending unreasonable infringement case, (Jul 12, 2022)

By Deirdre Kennedy, J.D.

The court found that litigation tactics used by a Law Vegas skydiving business created an “exceptional case,” which allowed attorney fees to be awarded.

In a trademark infringement suit brought by a skydiving company against Groupon for using the skydiving company’s trademark on its website the federal district court in Nevada has granted Groupon’s motion for attorney fees under the Lanham Act. The court found that the skydiving company’s manner of litigating the case was unreasonable and rose to the level of an “exceptions case” warranting an award of attorney fees under the Lanham Act’s fee shifting provision (Las Vegas Skydiving Adventures LLC v. Groupon, Inc., July 11, 2022, Gordon, A.).

Las Vegas Skydiving Adventures LLC (LVSA) was in the business of providing skydiving services to individuals who wished to skydive while tethered to an experienced parachutist. It offered those services under the mark FYROSITY. Groupon, Inc. was in the business of providing discount vouchers for use with affiliated businesses. In 2018, an airport used its Facebook page to congratulate one of LVSA’s customers on her first tandem skydive, and included in the post the caption, “Closer to Vegas. Don’t know if it’s on Groupon.” Groupon, through its Facebook page, then commented on the post and provided a link to a page on its website generated with the search terms “skydive Fyrosity”. This page indicated that there were no matching deals and instead showed other skydiving providers who were affiliated with Groupon. LVSA sued Groupon, alleging five causes of action: (1) monopolization via pricing; (2) monopolization via intellectual property misuse; (3) registered trademark infringement; (4) misappropriation of commercial properties under Nevada common law and (5) unjust enrichment under Nevada common law. In October 2019, the trial court dismissed the monopolization claims for lack of antitrust standing, and on February 28, 2022, the court held that LVSA was unable to show a genuine dispute of material fact with regard to Groupon’s use of its trademark. Groupon then filed a motion for attorney fees

Attorney fees under the Lanham Act. The court noted that the Lanham Act allows for awards of attorney fees to prevailing parties in “exceptional cases.” Although “exceptional” is not defined in the Act, the Supreme Court, examining identical language in the Patent Act, has held that “an “exceptional” case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.” The Ninth Circuit has adopted that standard for claims under the Lanham Act. Some of the factors that a court can consider in determining if a case is exceptional include frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case), and the need in particular circumstances to advance considerations of compensation and deterrence.

The court determined that LVSA litigated this case in an unreasonable manner. Its claims were tenuous at best, which “should have been apparent from the outset to its counsel”, who had litigated numerous such lawsuits. For example, one of the elements of a trademark infringement claim is customer confusion, of which LVSA had no evidence when it entered litigation.

Despite the weakness of its case, LVSA engaged in nearly two years of aggressive discovery. During and after the discovery period, it filed numerous motions, all of which were denied in whole or part. LVSA filed at least five objections to orders or motions for reconsideration of orders, including two motions for reconsideration of an order dismissing some of its claims. At least once, the court chastised LVSA’s counsel for not following court orders and expressed its concerns that significant and expensive discovery was being conducted for “a relatively minor case as far as . . . financial impact goes.” The court noted that there is a difference between zealous advocacy and objectively unreasonable litigation tactics, stating that LVSA crossed that line.

Motivation. In examining LVSA’s motivation for the litigation, it appeared that LVSA litigated so aggressively because of its animus towards Groupon. One witness testimony included the statement that “Groupon has been destroying [his] industry for 11 years.” In addition, LVSA had recently filed another lawsuit against Groupon, alleging among other things trademark infringement, monopolization, and state law claims. It is improper to use litigation to seek retribution for another’s legal business activities, the court said.

Compensation and deterrence. A court also may consider compensation and deterrence in evaluating the case’s exceptionalness. In this case, compensation was not a significant factor as Groupon is a global, publicly traded entity that apparently has not been put in financial distress by the large fees it incurred in this case. However, the court noted that even large entities should not be forced to bear hefty legal fees defending against abusive lawsuits.

Deterrence was a bigger factor here as the court hoped to deter LVSA from repeating its unreasonable litigation tactics in its new lawsuit against Groupon. It noted that LVSA went beyond zealous advocacy by engaging in objectively unreasonable litigation tactics and strategies. LVSA unnecessarily multiplied the fees and costs that Groupon was forced to incur and wasted the court’s time and resources. Having determined the case exceptional under the Lanham Act, the court awarded attorney fees to Groupon.

Fees awarded. In determining a reasonable attorney fee award, a court will assess the reasonableness of an hourly rate, taking into account the experience, skill, and reputation of the attorneys requesting fees. A reasonable hourly rate should reflect the prevailing market rates of attorneys practicing in the forum community for “similar services by lawyers of reasonably comparable skill, experience and reputation.” Here, the court found that the rates charged by Groupon’s counsel were higher than the prevailing rates for such professionals in the Las Vegas legal market.

While LVSA did not object to the reasonableness of the hours charged by Groupon’s counsel, it did object to Groupon’s failure to apportion its fees between the Lanham Act claim and LVSA’s other claims. Generally, a party may not recover fees in a Lanham Act case for work performed on non-Lanham Act claims. The court attempted to apportion the fees between LVSA’s Lanham Act claim and its other claims.

Excluding the antitrust claims, all of LVSA’s claims arose from the same incident. The state law claims for misappropriation of commercial properties and unjust enrichment relied on Groupon’s alleged misuse of LVSA’s trademark.

The court, therefore, reduced the fee request to account for more reasonable hourly rates and to partially apportion the Lanham Act claim from the state law claims, awarding Groupon $325,000 in attorney fees.

Joint and several fees. Groupon’s request that the fee award be made joint and several against both LVSA and its counsel was denied. While the court had serious concerns about LVSA’s litigation tactics, it was unclear how much of the litigation strategy was driven by counsel or LVSA’s animus against Groupon. The court decided that while it was not appropriate in this circumstance to award fees against counsel, that decision should not be interpreted as an approval of counsel’s actions. The court noted that if these tactics were to be repeated in the future, an award against counsel might be appropriate.

The Case is No. 2:18-cv-02342-APG-VCF.

Attorneys: Craig George Bourke (Gibson Lexbury LLP) for Las Vegas Skydiving Adventures LLC. Mark E. Ferrario (Greenberg Traurig, LLP) for Groupon, Inc.

Companies: Las Vegas Skydiving Adventures LLC; Groupon, Inc.

Cases: Trademark NevadaNews