The U.S. Court of Appeals for the Ninth Circuit has now held that a showing of bad faith is not necessary for a case to be considered "exceptional" within meaning of 15 U.S.C. § 1117(a), justifying an award of attorney fees. Earthquake Sound Corp. v. Bumper Industries, Case Nos. 00-16532, 01-15121 (9th Cir. Dec. 16, 2003).
Earthquake Sound and Bumper Industries compete in the business of selling car and audio equipment. Earthquake Sound began using the Earthquake mark in 1988. In 1990, Bumper—having learned of Earthquake Sound’s commercial success using the mark—began selling competing products using the mark "Carquake." Earthquake Sound sued for trademark infringement. Following entry of summary judgment of infringement, the district court awarded Earthquake Sound attorney fees, noting that "Bumper willfully, deliberately, and knowingly infringed" the Earthquake mark.
On appeal, Bumper challenged the fee award, pointing out that there had been no express finding of bad faith and claiming that evidence of good faith should have precluded summary judgment. The evidence of good faith, according to Bumper, included (1) its subjective belief the apparent differences between the two marks would preclude a finding of infringement; and (2) its reliance on the decision by the U.S. Patent and Trademark Office to pass Bumper’s intent-to-use application for "Carquake" on to publication.
The Court largely sidestepped these arguments, noting along the way that the issue of infringement was not close and observing "Bumper only obtained approval to publish its application—there was no adversarial contest regarding infringement." The Court simply held: "The issue is not necessarily one of bad faith: willful or deliberate infringement will suffice." The Court focused on the recorded facts to find Bumper’s infringement willful and deliberate because the "Earthquake" mark was strong and Bumper knew of it for many years before publishing its "Carquake" mark; the parties were in the same market; Bumper was aware of customer confusion; Earthquake Sound repeatedly notified Bumper of the infringement; and Bumper reneged on its agreement to stop using the mark.
In his concurring opinion, Judge Ferguson took pains to underscore his view that "willful and deliberate" in the context of an attorney fee award does not mean voluntary and intentional conduct. He would have made clear that something more than a voluntary act must be shown, such as a deliberate intent to deceive or bad faith.
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