Election of Statutory Damages May Be Bar to Attorney's Fee Award
The Ninth Circuit Court of Appeals held in December that a plaintiff in a trademark counterfeiting case who elects to recover statutory damages is not entitled to recover attorney’s fees under Section 35(b) of the Lanham Act. Unlike Section 35(a), which only allows an award of attorney’s fees upon a finding that the case is “exceptional,” Section 35(b) provides for attorney’s fees to be granted as a matter of course, absent extenuating circumstances, in a case of willful counterfeiting:
“In assessing damages under subsection (a) of this section, the court shall, unless the court finds extenuating circumstances, enter judgment for three times such profits or damages, whichever is greater, together with a reasonable attorney's fee, in the case of any violation … that consists of intentionally using a mark or designation, knowing such mark or designation is a counterfeit mark.”
Focusing on the clause “[i]n assessing damages under subsection (a),” the Ninth Circuit in K and N Engineering, Inc. v. Bulat, 2007 WL 4394416 (9th Cir. Dec. 18, 2007), held that the Section 35(b) presumption in favor of attorney’s fees does not apply if the plaintiff elects statutory damage because statutory damages are provided for by subsection (c), rather than assessed “under subsection (a).” The court did not decide whether a plaintiff that elects statutory damages also waives its right to recover attorney’s fees under the "exceptional case" standard of Section 35(a).
A plaintiff who elects statutory damages can still try to recover its attorney's fees "through the back door." As the court noted in Gucci America, Inc. v. Duty Free Apparel, Ltd., 315 F.Supp.2d 511 (S.D.N.Y. 2004), a counterfeiting plaintiff’s attorney’s fees may be “a persuasive measure towards determining statutory damages.” Thus, evidence regarding the plaintiff’s attorney’s fees should be submitted to the court as evidence in support of a significant statutory damage award, and the court should take such fees into consideration when it sets the amount of statutory damages.