Hard Rock Should Not Have to Pay Startup Attorney Fees

Hard Rock Cafe Inc. does not think it’s fair to pay the attorney fees of a startup after suing the young company for trademark infringement. Hard Rock Cafe is a chain of theme restaurants founded in 1971 that has expanded to include casinos, hotels, a park, and sports stadium.

RockStar Hotels launched in January 2017, but includes a healthy portfolio of properties. The meaning behind the RockStar name is not to convey a party atmosphere, but that the guests will be treated like celebrities. This distinct difference in meaning resonated with the United States District Court for the Southern District of Florida and Hard Rock’s motion for a preliminary injunction was denied. Now, RockStar Hotels is asking the Court to order Hard Rock Cafe to pay $462,000 to reimbursement the startup for its attorney fees.

Under the Trademark Act, attorney fees are recoverable by a party when the case is exceptional. Whether a case is exceptional depends on the totality of the circumstances, which considers the respective merits of the parties’ case and the manner in which a case is litigated. Because the Trademark Act does not allow the prevailing party to recover its attorney fees, an exceptional case finding is the only way a party that is being bullied by a trademark owner can recover the costs to defend itself.

In response to RockStar Hotel’s attorney fees petition, Hard Rock argued that it did the right thing and dropped its lawsuit after the court denied its request for a preliminary injunction. We are guessing it was hard for Hard Rock’s attorneys to say that with a straight face. However, without knowing all the details, it is hard to say Hard Rock’s lawsuit was completely without merit. The Hard Rock mark is used on hotels and on restaurants, which are related to hotel services.

The better question that Hard Rock should have asked itself is whether RockStar Hotels will either take business away from them or will harm its reputation such that it loses business from the negative association. Obviously, the answer to these two questions was no otherwise it would not have dropped the lawsuit. Losing at the preliminary judgment stage does not mean you are prevented from ultimately winning at trial.

Just because a lawsuit is unwise does not mean the plaintiff is a bully just because it is bigger than the defendant. What is more suspect is startup RockStar Hotel’s attorney fees petition for $462,000 when the case is only at the preliminary judgment stage. By the time a preliminary judgment motion is filed, not much has happened in the case, and responding to a preliminary motion is not a hundreds of thousands of dollars event.

4 Characteristics Trademark Bullies Generally Have in Common

Although there seems to be less publicity recently about trademark bullies, that does not mean they have gone away. Trademark bullying is alive and well, and the Associated Press recently published an article pointing the finder at universities as the newest members to this disfavored group. A few examples the article highlighted are:

  • Duke University opposed the registration of DUKE’S FOLLY for “wine” and “custom production of wine for others; providing information about wine-making”;
  • North Carolina State University objected to the use of WOLFPACK – the nickname for its sports teams – by a convenience store in Raleigh, NC called Wolfpack Mini Mart, and a California brewery’s use of Wolfpack to promote its wolf themed beers; and
  • Texas A&M University objected to Erik Nolte’s plans to produce a beer called the 12TH CAN.

The United States Patent and Trademark Office once defined a “trademark bully” as “a trademark owner that uses its trademark rights to harass and intimidate another business beyond what the law might be reasonably interpreted to allow.” Despite this definition, most people believe a trademark bully is any large company that is picking on a smaller company, but this is not always the case.  And while most “trademark bullies” do not have a specific intent to harass the other party, they do have an intention to intimidate their opponent.

The problem with bullies is that they cause their opponent to unnecessarily spend money and sometimes money they don’t have. Here are some characteristics to be on the lookout for to avoid a party that is likely a trademark bully:

  1. Does the person or party own numerous trademark registrations for the same mark?
  2. Do those marks exist in a crowded field?
  3. Does the correspondent information at the USPTO for the trademark owner’s marks identify a solo practitioner, small firm, or large firm with a reputation for aggressive litigation tactics? A common problem in the trademark bully area are lawyers that do not have a deep understanding of the likelihood of confusion factors.
  4. Has the trademark owner been involved in several proceedings before the Trademark Trial and Appeal Board?

A Deeper Dive on Trademark Infringement Damages

The phrase “trademark infringement” is nothing anyone wants to hear because it is often followed by the phrase “trademark infringement damages.” In other words, how much are you going to have to pay.

A big problem with any litigation including trademark infringement cases is how damages are calculated and what damages are available is generally a misunderstood concept. And when two parties have drastically different views on their respective potential liabilities, a big roadblock to settlement is created and a final court decision is often necessary to decide the issue. Parties do themselves so much good by early in a case honestly assessing their trademark infringement damages exposure. Only then can you make intelligent and sensible moves in settlement negotiations to resolve a dispute.

Monetary damages under the Trademark Act primarily come in two flavors:  (1) actual damages; and (2) an accounting of the defendant’s profits. An award of actual damages is a legal remedy, whereas an accounting of the defendant’s profits is an equitable remedy. Equitable relief is available only when a plaintiff’s legal remedies are inadequate. In other words, is a plaintiff’s actual trademark infringement damages are $200, but the defendant earned $100,000 in profits, then the plaintiff would be entitled to an accounting fo the defendant’s profits because it would be inequitable to allow the defendant to retain $100,000 in profits at a $200 expense to the plaintiff. But it is important to note that a plaintiff cannot recover twice both actual damages and an accounting of profits. Therefore, the cap in our example would be $100,000 to the plaintiff.

Because an accounting of profits is an equitable remedy, it is not automatic. In some cases, if an injunction forbidding future infringing acts satisfies the equities in the case, then an accounting of profits will be denied. Although a denial of profits under these circumstances has occurred, it is in the minority of cases.

If the case warrants because of the intentional nature of the defendant’s actions, the disparity in the merits between the parties in the case, or the manner in which one party conducts its self in the litigation, any monetary damage award may be increased by 3 times and an award of attorneys’ fees may be made as well.