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LHO Chicago River, L.L.C. v. Perillo

United States Court of Appeals, Seventh Circuit

November 8, 2019

LHO Chicago River, L.L.C., Plaintiff-Appellee,
v.
Joseph Perillo, et al., Defendants-Appellants.

          Argued September 26, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. l:16-cv-6863 - Charles P. Kocoras, Judge.

          Before Bauer, Manion, and St. Eve, Circuit Judges.

          Manion, Circuit Judge.

         Defendants appeal the denial of their request for Lanham Act attorney fees following the plaintiff's voluntary dismissal of its trademark infringement suit. The lone question here is whether the Supreme Court's decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014)-a patent case-should guide district courts faced with Lanham Act attorney fees applications. Most of our sister circuits have answered that question in the affirmative, but we have never addressed the issue. The opportunity now presents itself, and for all the reasons herein, we join our sister circuits in holding that Octane controls and remand for further consideration.[1]

         I. Background

         LHO Chicago River, L.L.C., owns an upscale, downtown Chicago hotel that underwent a branding change in February 2014 when the establishment became "Hotel Chicago," a signature Marriott venue. Around May 2016, Joseph Perillo and his three associated entities-Rosemoor Suites, LLC, Portfolio Hotels & Resorts, LLC, and Chicago Hotel, LLC[2]-opened their own "Hotel Chicago" only three miles from LHO's site. LHO then sued Defendants for trademark infringement and unfair competition under the Lanham Act, 15 U.S.C. § 1125(a), and for trademark infringement and deceptive trade practices under Illinois state law. The litigation dragged on for more than a year until LHO moved to voluntarily dismiss its claims, with prejudice. The district judge granted LHO's motion and entered judgment on February 21, 2018.

         Defendants made a post-judgment request for attorney fees pursuant to 15 U.S.C. § 1117(a), which permits the district court to award reasonable fees to the prevailing party in "exceptional cases." In their attorney fees briefing, the parties identified two distinct standards for determining such exceptionality: (1) this Circuit's prevailing standard, that a case is exceptional under § 1117(a) if the decision to bring the claim constitutes an "abuse of process"; and (2) the more relaxed totality-of-the-circumstances approach under the Patent Act that the Supreme Court announced in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014). When Defendants moved for attorney fees, we had not yet provided guidance on Octane's applicability in this context, though several of our sister circuits had extended Octane to the Lanham Act. It comes as no surprise then, that when the district judge ruled on Defendants' request, he acknowledged Octane but nevertheless adhered to our "abuse-of-process" standard. The judge found LHO had not brought an exceptional case warranting attorney fees.[3] Defendants appeal.

         II. Discussion

         The Lanham Act contains the following fee-shifting language: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a). Our current standard for identifying "exceptional" trademark cases comes from Burford v. Accounting Practice Sales, Inc., 786 F.3d 582, 588 (7th Cir. 2015), and Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, 626 F.3d 958, 963-66 (7th Cir. 2010).[4] Burford and Nightingale hold a case "exceptional" under § 1117(a) if it amounts to an "abuse of process." Burford, 786 F.3d at 588 (citing Nightingale, 626 F.3d at 963-64). An abuse of process occurs when a claim is: (1) "objectively unreasonable because it is one a rational litigant would pursue only because it would impose disproportionate costs on his opponent" (in other words, extortionate in nature); or (2) when a party brings a frivolous claim with the purpose of obtaining an advantage external to the litigation, "'unrelated to obtaining a favorable judgment.'" Id. (quoting Nightingale, 626 F.3d at 966).

         The Patent Act contains an identical provision: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. Addressing § 285 in 2014, the Supreme Court determined:

[A]n "exceptional" case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances.

Octane, 572 U.S. at 554. Among the circumstances for consideration, the Court pointed to a nonexclusive set of factors it identified earlier when addressing the Copyright Act's similar fee-shifting provision. See id. at 554 n.6 (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). Those factors 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." Id. (internal quotation marks and citation omitted).

         The Court reached this holding by construing the term "exceptional" in accordance with the word's ordinary meaning. Octane, 572 U.S. at 553-54. In particular, while highlighting the identical language shared by the Patent and Lanham Acts, the Court relied on Noxell Corp. v. Firehouse No. 1 Bar-B-Que Rest., a trademark case in which the D.C. Circuit interpreted the term "exceptional" in ยง 1117(a) to mean "uncommon" or "not ...


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