IP Law Daily, TRADEMARK—E.D. Pa.: On remand, case against Nike for infringing COOL COMPRESSION again found ‘exceptional’, (Oct 17, 2024)

By Mina O. Capouet, J.D., LL.M.

Nike owed attorney fees to Lontex because Nike’s infringement of Lontex’s trademark for COOL COMPRESSION was “exceptional” under the Lanham Act.

A jury’s determination that athletic shoe and apparel maker Nike was liable for punitive damages for willfully infringing a smaller competitor’s mark, COOL COMPRESSION, favored deeming the case “exceptional” for purposes of an attorney fee award under the Lanham Act, according to the federal district court in Pennsylvania. Revisiting the question of exceptionality after a remand from the U.S. Court of Appeals for the Third Circuit, the district court also cited the substantive strength of the competitor’s litigating position and Nike’s “unreasonable” and “overly aggressive” pretrial conduct as reasons for its conclusion that the competitor was entitled to recover the fees it incurred in successfully pursuing its claims against Nike. The district court also decided that the competitor was entitled to supplement the fee award with the time spent on the post-remand briefs, plus interest (Lontex Corp. v. Nike, Inc., No. 2:18-cv-05623-MMB (E.D. Pa. Oct. 16, 2024)).

Background. Lontex manufactures and sells athletic apparel, marketing its products primarily to athletic teams, and is the owner of two COOL COMPRESSION trademarks related to that apparel. Nike also used the words “cool compression” in relation to some of the athletic clothing it manufactures and sells, both on labeling and in promotional materials. In December 2018, Lontex sued Nike for trademark infringement and contributory trademark infringement under the Lanham Act. A jury reached a verdict of liability on all issues for Lontex and found that Nike acted willfully, rejecting Nike’s “fair use” defense. After trial, the district court awarded attorney fees to Lontex, finding that the case qualified as “exceptional” under the Lanham Act’s fee shifting provision.

On July 10, 2024, the U.S. Court of Appeals for the Third Circuit affirmed the jury verdict against Nike for infringing upon Lontex’s COOL COMPRESSION mark. The Third Circuit, however, remanded the case to the district court on the limited question as to whether “the case was sufficiently ‘exceptional’ to allow the award of attorney fees.” The Third Circuit ruled that the district court erred in relying on certain factors for finding that the case was “exceptional” because all three reasons were rooted in broad policy considerations rather than facts specific to the case. The district court had stated three reasons for finding that the case was “exceptional”: (1) enforcement of trademark laws is important, (2) Lontex (“David”) was much smaller than Nike (“Goliath”), and (3) trademark cases are expensive to litigate, which meant that it was not realistic to expect the smaller company to pay the high legal bills.

District court decision – attorney fees. To determine whether the case merited the award of attorney fees, the court appointed a Special Master to review the record and prepare a Report and Recommendation (“R&R”). After reviewing the R&R, the court concluded that “it is just and fair that Nike pay Lontex a substantial fee for the entirety of its attorneys’ work in the case.”

In concluding that the case was “exceptional” for purposes of a Lanham Act fee award, the court relied on two factors: (1) the substantive strength of Lontex’s litigating position; and (2) Nike’s unreasonable litigation conduct. First, the court summarily found that Lontex’s litigating position was “exceptionally strong.” The court then concluded that Nike had litigated the case in an unreasonable manner, identifying “several aspects” in which “Nike’s conduct was unreasonable and unduly litigious.” The court noted a few instances in which Nike had made discovery “unduly complicated.” For example, the court found that Nike’s lengthy compliance with a Motion to Compel delayed the production of a witness by over six months. Further, Nike’s “very broad” Motion for Summary Judgment and briefing produced over six cartons of documents, which justified the appointment of a Master specializing in commercial litigation, intellectual property, and digital discovery issues. The court further called attention to a threatening comment made by a Nike official to Lontex.

Based on the totality of the circumstances, the court held that Lontex was entitled to an award of “substantial” attorney fees because “Nike litigated [the case] in an unreasonable manner” and the award did “justice in this case.” The court also allowed for the payment of attorney fees for the time spent on post-remand briefs, along with interest.

The Case is No. 2:18-cv-05623-MMB.

Judge: Baylson, M.

Attorneys: Ben L. Wagner (Troutman Pepper Hamilton Sanders LLP) for Lontex Corp. Gina L. Durham (DLA Piper LLP) for Nike, Inc.

Companies: Lontex Corp.; Nike, Inc.

Cases: Trademark PennsylvaniaNews