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S INDUS. v. DIAMOND MULTIMEDIA SYS.

August 19, 1998

S INDUSTRIES, INC., a Delaware Corporation, Plaintiff,
v.
DIAMOND MULTIMEDIA SYSTEMS, INC., d/b/a DIAMOND COMPUTER SYSTEMS, INC., MICRON ELECTRONIC, INC., ZEOS, COMPUTER CITY, INC., COMP USA, ELEK-TEK, CIRCUIT CITY, BEST BUY, and EGGHEAD SOFTWARE, Defendants.



The opinion of the court was delivered by: ANDERSEN

MEMORANDUM OPINION AND ORDER

 As the prevailing parties, Defendants petition the Court for the attorneys' fees and costs incurred in defending this lawsuit. For the following reasons, the petition is granted.

 I. BACKGROUND

 The facts of this lawsuit are more fully set out in the Court's January 20, 1998 Memorandum Opinion and Order. S Indus., Inc. v. Diamond Multimedia Sys., Inc., 991 F. Supp. 1012 (N.D. Ill. 1998). On June 5, 1996, S Industries filed suit against Diamond Multimedia Systems, Inc. ("Diamond") and Diamond's customers Micron Electronic, Inc., Zeos, Computer City, Inc., COMPUSA, Elek-Tek, Circuit City, Best Buy, and Egghead Software (collectively the "Defendants") alleging infringement of its purported STEALTH mark for computers and computer related goods.

 In its second amended complaint, S Industries brought claims under the Lanham Act for infringement of a registered trademark (Count I), false designation of origin (Count II), unfair competition (Count III), and dilution (Count IV). Additionally, S Industries alleged state law claims under the Illinois Consumer Fraud and Deceptive Trade Practices Act and the Illinois Uniform Deceptive Trade Practices Act (Count V) and the Illinois Counterfeit Trademark Act (Count VI).

 On January 20, 1998, we granted summary judgment in favor of Defendants and denied the cross motion of S Industries for summary judgment. Diamond Multimedia Sys., Inc., 991 F. Supp. at 1023-24. Additionally, we awarded Defendants the reasonable attorneys' fees and costs incurred for the defense of Counts I and IV. Id. As the prevailing parties on Counts II, III, and, V, we invited Defendants to submit a petition for the fees and costs incurred for the defense of these counts. Id. at 1024. State law did not authorize Defendants to receive fees and costs for Count VI. Id.

 As instructed, Defendants timely submitted a petition for fees and costs for Counts II, III, and V along with supporting declarations and schedules of fees and costs for Counts I - V. S Industries objects arguing that the fees are neither warranted nor reasonable.

 II. FEES AND COSTS ARE WARRANTED ON COUNTS II, III AND V

 The Lanham Act authorizes an award of attorneys' fees to the prevailing party in a trademark dispute "in exceptional cases." 15 U.S.C. § 1117. The Illinois Consumer Fraud and Deceptive Trade Practices Act also authorizes the court to award reasonable attorneys' fees and costs to a prevailing party. 815 ILCS 505/10a(c); Door Systems, Inc. v. Pro-Line Sys. Inc., 126 F.3d 1028, 1029-30 (7th Cir. 1997) (citations omitted). The matter is within the district court's discretion and the standard is "a generous one." FASA Corp. v. Playmates Toys, Inc., 108 F.3d 140, 143 (7th Cir. 1997).

 Under the Lanham Act and the Illinois Consumer Fraud and Deceptive Trade Practices Act, fees may be awarded to a prevailing defendant if the plaintiff's suit can fairly be regarded as oppressive. Door Systems, Inc., 126 F.3d at 1032. Bad faith is not the correct standard for determining whether a case is exceptional. Rather "the canonical formula in this and other circuits is malicious, fraudulent, deliberate, or willful." Id. at 1031 (citations omitted).

 We have already held that Counts I and IV are oppressive. Diamond Multimedia Sys., Inc., 991 F. Supp. at 1023-24. S Industries argues that Counts II, III, and V, and this lawsuit generally, are not oppressive "because there is no evidence that S Industries brought these counts or this action for any purpose other than the legitimate desire to preserve S Industries' rights to use the mark which is subject of this suit. . . ." (Response to Defs. Petition for Fees, p. 5). S Industries' assertion is unpersuasive. "A suit can be oppressive because of lack of merit and cost of defending even though the plaintiff honestly though mistakenly believes that he has a good case and is not trying to merely extract a settlement based on the suits nuisance value." Door Systems, Inc., 126 F.3d at 1032.

 Claims for unfair competition under the Illinois Consumer Fraud and Deceptive Trade Practices Act are resolved in the same manner as Lanham Act claims. D 56, Inc. v. Berry's, Inc., 955 F. Supp. 908, 920 (N.D. Ill. 1997). To have prevailed under these Acts, S Industries had to establish that it has a protectable mark, and if so, that Defendants' use of the mark brought about a likelihood of consumer confusion. Dunn v. Gull, 990 F.2d 348, 351 (7th Cir. 1993); Thompson v. Spring-Green Lawn Care Corp., 126 Ill. App. 3d 99, 104, 466 N.E.2d 1004, 1010, 81 Ill. Dec. 202 (1984).

 It is axiomatic that the right to a distinctive mark belongs to the person who first continuously uses the mark to identify or distinguish goods or services in commerce. "Only active use allows consumers to associate a mark with particular goods and notifies other firms that the mark is so associated." Zazu Designs v. L'Oreal, S.A., 979 F.2d 499, 503 (7th Cir. 1992). Trademark rights are acquired by adoption and use, not by registration.

 S Industries' claims of unfair competition under both the Lanham Act (Counts II and III) and the Illinois Consumer Fraud and Deceptive Trade Practices Act (Count V) are oppressive. These causes of action were not grounded on a plausible theory of ownership, let alone one even remotely supported by the law or the scant evidence presented by S Industries. S Industries' original complaint made no allegation that it used the STEALTH mark on computers and computer related goods. (Original Complaint, PP 14, 16). Although, S Industries amended its complaint to remedy this crucial omission, the evidence put forth by S Industries to support its claim that it actively and continuously attempted to or succeeded ...


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