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Hickory Farms, Inc. v. Snackmasters

April 2, 2008

HICKORY FARMS, INC., PLAINTIFF,
v.
SNACKMASTERS, INC., DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Hickory Farms, Inc., owner of the trademarks "Beef Stick" and "Turkey Stick," sued Snackmasters, Inc. for trademark infringement, unfair competition, and dilution under the Lanham Act, 15 U.S.C. §§ 1114, 1125(a) & 1125(c), and also asserted parallel state law claims arising out of Snackmasters' use of these terms for its products. Snackmasters counterclaimed for a declaratory judgment that both marks are generic and for cancellation of the registered "Beef Stick" trademark. The Court granted Snackmasters' motion for summary judgment, concluded that "Beef Stick" and "Turkey Stick" are generic terms, and directed the cancellation of Hickory Farms' "Beef Stick" registration. Hickory Farms, Inc. v. Snackmasters, Inc., 500 F. Supp. 2d 789 (N.D. Ill. 2007). The Court thereafter denied Hickory Farms' motion for reconsideration. Hickory Farms, Inc. v. Snackmasters, Inc., 509 F. Supp. 2d 716 (N.D. Ill. 2007). It then granted Snackmasters' motion for attorney's fees pursuant to the Lanham Act, 15 U.S.C. § 1117(a), which allows the imposition of reasonable attorney's fees to the prevailing party in "exceptional cases."

Snackmasters has submitted a fee petition seeking $286,748.25 in fees, $8,910.26 in non-taxable expenses, $21,956.14 in pre-judgment interest, and $38,339.20 in fees and costs relating to work on the fee petition. Hickory Farms objects to certain aspects of the petition and asks the Court to reduce Snackmasters' fee award by $63,129.50 (to a total of $223,618.75) and the cost award by $2,829.81 (to $3,090.35). In the alternative, Hickory Farms asks the Court to disallow Snackmasters' fee award in its entirety or, at minimum, to disallow fees claimed in connection with preparation of the fee petition. For the reasons set forth below, the Court awards Snackmasters $281,959.50 in attorney's fees and related non-taxable expenses of $8,910.26; an additional $37,757.93 for fees incurred in connection with this fee petition; and pre-judgment interest of $25,956.14.

I. Background

The facts of this case are set forth in the Court's May 29, 2007 Memorandum Opinion and Order granting Snackmasters' motion for summary judgment. The Court assumes familiarity with this and its other prior rulings in this case and restates only those salient details of the litigation that bear on the parties' dispute over attorney's fees.

Hickory Farms and Snackmasters both sell meat products under the names "Beef Stick" and "Turkey Stick." In February 2005, Snackmasters received a cease and desist demand from Hickory Farms objecting to Snackmasters' use of these product descriptors. Hickory Farms then owned, in addition to its registered "Beef Stick" mark, a lapsed registration for the mark "Hickory Farms Turkey Stick." When Hickory Farms attempted to renew this lapsed registration, Snackmasters filed an opposition with the Patent and Trademark Office ("PTO"), as a result of which the PTO did not re-register the mark. At the same time, Snackmasters filed with the PTO a petition to cancel Hickory Farms' "Beef Stick" mark. Snackmasters served discovery in both administrative proceedings, with the aim of establishing that the terms at issue were generic. Hickory Farms sought to suspend the administrative proceeding when it filed its complaint in this Court.

In March 2007, the Court granted Snackmasters' motion for summary judgment on all counts of Hickory Farms' complaint and Snackmasters' counterclaim. Hickory Farms appealed the Court's ruling to the U.S. Court of Appeals for the Seventh Circuit. Pursuant to Federal Rule of Appellate Procedure 33 and the corresponding Seventh Circuit rule, the parties have since engaged in talks, under the auspices of the Seventh Circuit's mediators, aimed at narrowing the issues for appeal and at reaching a settlement.

On September 19, 2007, the Court granted Snackmasters' motion for attorney's fees and denied as moot a related motion for sanctions under Federal Rule of Civil Procedure 11. In so ruling, the Court determined that Hickory Farms' lawsuit was lacking in merit, based in part on Hickory Farms' acquiescence in the use of the product descriptor "Beef Stick" by others over several years before it brought this lawsuit. The Court considered this acquiescence to be "an implicit concession that Hickory Farms lacked a protectable right in the term" and a position directly at odds with the premise of its action against Snackmasters. Hickory Farms, Inc. v. Snackmasters, Inc., Case No. 05 C 4541, Order of Sept. 17, 2007 at 2.

When the Court granted Snackmasters' motion for attorney's fees, it directed the parties to comply with the provisions of Local Rule 54.3 governing disclosures and submission of a joint statement and fee petition. Although Hickory Farms appears not to have made all the disclosures required by the rule, the parties have submitted a joint statement and have briefed the issues on which they disagree.

II. Discussion

The starting point for attorney's fee calculations is the so-called "lodestar" amount, which is the product of the number of billable hours reasonably expended on the litigation and a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983); Bankston v. State of Ill., 60 F.3d 1249, 1255-56 (7th Cir. 1995). The district court must "exclude from this initial fee calculation hours that were not 'reasonably expended'" on the litigation. Hensley, 461 U.S. at 434. Hensley requires a petitioner for fees to exercise "billing judgment," meaning that the petitioner must "exclude from a fee request hours that are excessive, redundant, or otherwise unnecessary." Id. The district court may then increase or decrease the lodestar amount according to various factors, notably the degree of success achieved by the petitioner in the underlying litigation. Id. at 436.

Hickory Farms does not object to the hourly rates billed by Snackmasters' counsel. LR 54.3 Joint Statement ¶ 3. Rather, Hickory Farms objects to certain of the attorney hours for which Snackmasters seeks reimbursement.

A. Fees Incurred in TTAB Proceedings

Hickory Farms objects to fees of $7,971.25 and expenses of $925.27 reflecting work by Snackmasters' California counsel, R. Michael West, his associate Katherine Straight, and a paralegal employed by West on pre-litigation correspondence and administrative proceedings before the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office ("the TTAB proceedings"). Hickory Farms argues that because the TTAB proceedings were initiated by Snackmasters, and because no statute expressly authorizes the award of attorney's fees in administrative proceedings before the TTAB, these fees and associated expenses are not compensable in this case. Hickory Farms also argues that because Snackmasters chose voluntarily to pursue an administrative proceeding rather than litigate in federal court, its attorney's fees incurred in that proceeding should not be compensable. Finally, Hickory Farms argues that Snackmasters' lawyers' "researching and briefing on issues of the genericness of [Hickory Farms'] trademarks should have been [completed] before [the TTAB] proceedings were initiated . . . . and such work, not recoverable as attorneys' fees in that venue, should not be recoverable now . . . for essentially the same duplicated work." Hickory Farms Opp. Br. at 9.

Snackmasters counters that an award of fees for work done in connection with an administrative proceeding is a case-specific matter for the Court's discretion. It acknowledges that 15 U.S.C. § 1117(a) is silent on the question of fees for what it calls "related" TTAB proceedings but suggests that this silence does not foreclose the possibility of a fee award. Snackmasters' argument relies on 35 U.S.C. § 285, a similar fee award provision for patent-infringement suits, and PPG Indus., Inc. v. Celanese Polymer Specialties Co., 840 F.2d 1565 (Fed. Cir. 1998), in which the Federal Circuit held that a prevailing defendant was entitled to attorney's fees incurred in proceedings before the Patent and Trademark Office ("PTO") and the Board of Patent Appeals and Interferences. Snackmasters appears to argue that its filing of administrative proceedings is analogous to the forced participation of the defendant in PPG Industries in reissue proceedings before the PTO. It contends that because a registration for Hickory Farms' "Turkey Stick" would have issued, "entitling Hickory Farms to all the presumptions accorded a federal registration," and because Hickory Farms had already sent it a cease and desist demand, "Snackmasters as a practical matter had no option but to file the opposition" in the TTAB-and, as "a necessary adjunct," its petition to cancel the "Beef Stick" trademark. Snackmasters Fee Pet. at 11-12.

Snackmasters does not argue outright that the TTAB proceedings were mandatory. Rather, it contends that it satisfies the test of Webb v. Dyer County Bd. of Educ., 471 U.S. 234 (1985), for the award of fees stemming from non-mandatory, non-judicial proceedings because it can show that the work product generated for the TTAB proceedings was both useful and of a type ordinarily necessary in the litigation. Notably, Snackmasters contends that the evidence of third party use gathered for the TTAB proceedings was central to its summary judgment submission and that the "counterclaims on which it prevailed essentially are a continuation of the [TTAB] proceedings." Snackmasters Fee Pet. at 12.

Hickory Farms effectively concedes this last point when it contends that Snackmasters' lawyers' work on the genericness issue for the TTAB proceedings "should not be recoverable now . . . for essentially the same duplicated work." Hickory Farms Opp. Br. at 9. That is, Hickory Farms in effect acknowledges that research on genericness bore directly on this litigation. The Court agrees and determines that Snackmasters has met Webb's requirement that the work done in connection with the non-mandatory, non-judicial proceedings be both useful and of a type ordinarily necessary to the litigation. For this reason, the Court will award Snackmasters the $7,971.25 in fees and $925.57 in expenses stemming from the TTAB proceedings.

B. Fees Incurred for Internet Research

Hickory Farms objects to fees of $5,850.75, reflecting hours spent on Internet research by West, Snackmasters' Chicago counsel Susan Smart, Smart's partner John Bostjancich, and paralegals employed by both firms. Hickory Farms argues that the results of this research are unreliable. Hickory Farms also points to the Court's statement in its opinion granting Snackmasters' summary judgment motion that it "would have reached the same conclusion . . . even without consideration of the website uses that Snackmasters offered" to suggest that the Court did not rely on this evidence. Hickory Farms further contends the research was "mechanical," "essentially clerical in nature" and "easily delegable to non-professional assistance." Hickory Farms Opp. Br. at 9-10. Accordingly, it argues, it is inappropriate to charge an attorney's or paralegal's time for this work.

Snackmasters responds that the Internet research generated evidence of widespread third party use of the terms "Beef Stick" and "Turkey Stick" to sell products and that the relevance of this to the genericness issue is undisputed. Moreover, Hickory Farms authenticated these materials in response to Snackmasters' requests for admissions, and it also went so far as to send out dozens of cease and desist letters to entities responsible for some of these websites, purportedly on the basis of information brought to its attention for the first time by Snackmasters. Snackmasters also asserts that "the identification of evidence establishing the generic nature of the terms at issue was not a purely mechanical task and required attorney input." Snackmasters Reply Br. at 6. Indeed, it is more efficient, Snackmasters argues, for an attorney simply to print a website identified in this research process than to delegate that discrete task to ...


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