Ferraris v . Azimuth CV-99-066-M 07/24/02
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Ferraris Medical, Inc.,
Plaintiff
v. Civil N o . 99-66-M
Opinion N o . 2002 DNH 140
Azimuth Corporation,
Defendant
O R D E R
Having successfully defended the suit brought against it by
Ferraris Medical, Inc. (“Ferraris”), the defendant, Azimuth
Corporation (“Azimuth”), now seeks an award of attorneys’ fees,
as well as costs.
This case was tried to the bench. As discussed in the
court’s decisional order, Opinion N o . 2001 DNH 181C, plaintiff’s
claims related to Azimuth’s manufacture and sale of surgical head
harnesses - devices used by anesthesiologists to secure face
masks and related tubing to the heads of patients during medical
procedures. Azimuth once purchased head harnesses from Ferraris
for resale under Azimuth’s own “SunMed” logo. Numerous other
resellers in that market also purchased identical surgical head
harnesses from Ferraris for resale, marking them with their own
distinct logos.
Azimuth later decided that it could do better by
manufacturing its own harnesses, or having them manufactured by
others, so it terminated its relationship with Ferraris. The
harnesses Azimuth subsequently sold were essentially design
copies of those it previously obtained from Ferraris. Azimuth
continued to apply its SunMed logo to the harnesses and continued
to advertise them in its catalogue in the same manner it
advertised the harnesses previously supplied by Ferraris.
Azimuth did, however, use a different photograph in its
catalogue; it no longer used the photograph of Ferraris-
manufactured harnesses but, instead, displayed a new photograph
of its own harnesses. Nevertheless, the layout was identical,
displaying the harnesses by available sizes.
No doubt upset that Azimuth stopped purchasing Ferraris
harnesses for resale, and worse, that it was manufacturing,
advertising, and selling virtual copies of its harnesses,
Ferraris obtained legal counsel and brought suit. Ferraris sued
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Azimuth for, among other things, unfair competition, injury to
business reputation, copyright infringement, trade dress
infringement, and service mark appropriation. Although Ferraris
couched its complaint in terms of nearly every conceivable legal
cause of action that might arguably apply, it essentially pressed
trade dress and copyright infringement claims, as well as a weak
service mark appropriation claim.
Several points made in the court’s earlier dispositive order
ought to be reiterated here. First, Ferraris held no design or
other patent rights in the surgical head harnesses it
manufactured and sold to various resellers, like Azimuth.
Second, Ferraris had no factual or legal basis upon which to
claim copyright protection in the photographic display or
depiction Azimuth used in its catalogue advertisements of its own
SunMed harnesses - that depiction was plainly and unarguably in
the public domain, as Ferraris knew or should well have known.
Third, Ferraris had no registered trade mark rights in the
harnesses as designed or as marked with the SunMed logo when it
filed suit. Fourth, Ferraris had no legitimate legal or factual
basis to assert “service mark” protection in the photographic
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display used by Azimuth, and no basis whatever for claiming that
Azimuth somehow appropriated a service mark belonging to
Ferraris. In addition, the trial evidence revealed (and this was
not a close or even arguable point) that Ferraris had no legal or
factual basis upon which to claim that its harness design was
either non-functional or had acquired secondary meaning,
essential prerequisites to claiming unregistered trade dress
protection. See Wal-Mart Stores, Inc. v . Samara Bros., Inc., 529
U.S. 205 (2000); I.P. Lund Trading ApS v . Kohler Co.,
163 F.3d 27
(1st Cir. 1998). 1
Given these circumstances, Azimuth says it ought to be
awarded attorneys’ fees incurred in defending what amounted to a
frivolous lawsuit. The court agrees.
1
The only relevant evidence on this point was produced by
Azimuth, which established, through the expert opinion testimony
of an anesthesiologist, that the surgical harness design was
decidedly functional: round holes in the head piece allowed for
uniform expansion as well as aeration of the scalp; tapered
straps facilitated secure fastening and uniform fit. Moreover,
since Ferraris itself affixed logos belonging to numerous other
resellers on its harnesses, which were then sold in the same
market as Ferraris’s harnesses, but under different names,
Ferraris could hardly have thought, in good faith, that its
harness design acquired secondary meaning – that i s , some
recognized understanding among consumers in the relevant market
that Ferraris manufactured the harnesses sold under the various
private labels.
4
Lanham Act
Under the Lanham Act, “[t]he court in exceptional cases may
award reasonable attorneys fees to the prevailing party.” 15
U.S.C. § 1117(a). While bad faith is not a necessary
precondition to an award, it will suffice, as will willfulness
short of bad faith, when equitable considerations justify an
award and the case is “exceptional.” See Tamko Roofing Products,
Inc. v . Ideal Roofing C o . Ltd.,
282 F.3d 2 3 , 32 (1st Cir. 2002).
“It is the totality of the circumstances, rather than a
particular item alone, that suffices for an award of attorneys’
fees.”
Id., at 3 3 .
In this case, Azimuth prevailed, entitling it to recover
fees if the case is exceptional and plaintiff’s suit was
oppressive. See S Industries, Inc. v . Centra 2000, Inc., 249
F.3d 625 (7th Cir. 2001). “A suit is oppressive if it lacked
merit, had elements of an abuse of process claim, and plaintiff’s
conduct unreasonably increased the cost of defending against the
suit.”
Id., at 627 (citation omitted).
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Plaintiff’s suit was “oppressive” in that its Lanham Act
claims were completely lacking in merit, to the point of being
frivolous. As to its trade dress claim, Ferraris knew it had to
prove both non-functionality and acquisition of secondary meaning
in order to prevail, Wal-Mart Stores, Inc., supra; I.P. Lund,
supra, yet it offered no evidence of non-functionality, and even
failed to convey any reasonable basis for thinking its harness
design was anything but functional. The court can only conclude
that neither Ferraris nor its legal counsel adequately
investigated the facts.
With regard to its federal service mark claim, plaintiff
knew that its federal service mark application had been
abandoned. It also necessarily knew that its state service mark
claim was without merit, since it never used the mark in
connection with the sale of services. In fact, the defendant
never used the mark (which consisted of a drawing) in any manner
at all. As to its unfair competition claim, plaintiff utterly
failed to offer any evidence of public deception, an essential
element. See Pacamor Bearings, Inc. v . Minebea Co., Ltd., 918 F.
Supp. 491, 500 (D.N.H. Cir. 1996).
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Moreover, as defendant correctly points out, plaintiff (or,
its counsel) pursued the litigation in a manner that left all
involved wondering just what its claims actually were, and
generally created unnecessary work for both defendant and the
court in trying to determine (and respond to) plaintiff’s ever-
emergent theories.
Plaintiff also consistently failed to timely comply with
procedural requirements, utterly failing, for example, to
disclose information supporting its damages claims prior to
trial, as directed. Overall, while civil enough in his handling
of the case, plaintiff’s counsel generally behaved in an obscure
and indefinite manner to the point of successfully masking what
turned out to be unsupported and meritless claims when he was
finally required to put on his case.
Copyright Act
The Copyright Act also provides for an award of attorneys’
fees, but under less strict standards. Under Section 505 of the
Act, a district “court in its discretion may allow the recovery
of full costs by or against any party . . . . The court may also
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award a reasonable attorney’s fee to the prevailing party as part
of the costs.” 17 U.S.C. § 505.
In weighing an award of fees, the court should consider a
number of factors, including “frivolousness, motivation,
objective unreasonableness (both in the factual and legal
components of the case) and the need in some cases to advance
considerations of compensation and deterrence.” Lotus
Development Corporation v . Borland International, Inc., 140 F.3d
7 0 , 73 (1st Cir. 1998) (quoting Fogerty v . Fantasy, Inc.,
510
U.S. 517, 534 n . 19 (1994)). At the heart of the court’s inquiry
are equitable considerations. And, while frivolous claims or
claims brought in bad faith certainly will support an award of
fees, even a “plaintiff’s decision to bring a weak, if
nonfrivolous, case and to argue for an unreasonable extension of
copyright protection are relevant concerns” that may support a
fee award. Matthews v . Freedman,
157 F.3d 2 5 , 29 (1st Cir. 1998)
(citing Fogerty,
510 U.S. at 526-27, and Edwards v . Red Farm
Studio Co.,
109 F.3d 8 0 , 82-83 (1st Cir. 1997)). “Depending on
other circumstances, a district court could conclude that the
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losing party should pay even if all of the arguments made were
reasonable.” Matthews, 157 F.3d at 2 9 .
Plaintiff started out on the wrong foot when it brought its
copyright infringement claim without first registering its
copyright. It compounded that misstep when it claimed copyright
protection in a work (its catalogue and the photographic
depiction of its surgical harnesses) that plainly was in the
public domain and not subject to copyright protection (facts
within its knowledge, and which unquestionably should have been
easily ascertained by counsel). Although defense counsel
continually pointed out these problems, plaintiff nevertheless
proceeded with its meritless claims, causing defendant to incur
additional needless defense costs. Ferraris had neither an
arguable factual nor a legal basis to assert those claims.
It seems reasonably evident that plaintiff’s motivation in
pursuing these unsupported claims was rooted in an effort to
deter competition by Azimuth. Plaintiff seemed to be engaged in
an effort to obtain, under the Lanham Act or the Copyright Act,
that which it could not obtain otherwise - patent protection.
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It’s goal seemed always to be acquisition of monopolistic control
over the manufacture and sale of surgical harnesses with the
features of those it sold, but it had no legal or factual basis
to support a design or other patent claim. In short, its
motivation was tinged with bad faith.
Finally, it seems reasonably clear that while plaintiff’s
conduct was not so thoroughly objectionable as that engaged in by
the plaintiff in S Industries, Inc., supra, still, it was
objectionable to the point of warranting an award of fees to
advance considerations of compensation and deterrence. Defendant
should not have been required to divert the significant time,
attention, and resources required to defend a case that plaintiff
(or its counsel) well knew, or well ought to have known, was both
factually and legally unsupportable. Defendant was well within
its rights to manufacture and sell surgical harnesses employing
functional design features that were not protected by any patent,
particularly when its harnesses were clearly embossed with its
distinct logo signifying the origin of those products. Defendant
was also well within its rights in advertising its harnesses
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using a depiction that was in the public domain and in which
plaintiff had no protected interest.
Plaintiff’s persistence was all the more objectionable
because defendant’s counsel took pains at every turn to engage
plaintiff’s counsel in discussions of the facts and law aimed at
informing plaintiff of the unsupported and unsupportable nature
of its claims. Yet, plaintiff slogged o n , sometimes seeming to
recognize the futility of its endeavor, and sometimes vaguely
alluding to evidence (never forthcoming) that would support its
case.
Other Claims
Plaintiffs other claims were equally (and derivatively)
unsupportable and, necessarily, unsupported. Detailed analysis
is not necessary, because although plaintiff made an effort to
fractionalize its basic claims into as many discrete legal
theories as it could conjure u p , the case was substantially
founded upon the Lanham and Copyright Acts. The basic claim –
that defendant infringed on some intellectual property right of
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plaintiff - was inextricably intertwined with all of the claims
asserted in this case.
Fee Award
The court determines that Azimuth is entitled to an award of
reasonable attorneys’ fees under both the Lanham Act and the
Copyright Act. It is the prevailing party and this is an
exceptional case. Plaintiff’s suit was oppressive in that the
claims advanced completely lacked merit, were legally
unsupportable and factually unsupported, were brought in bad
faith in that plaintiff sought to hinder and impede competition
without a legitimate basis for doing s o , and plaintiff’s action
unreasonably and oppressively imposed burdens of defense,
including substantial and unnecessary costs, upon Azimuth.
The court has reviewed the supporting affidavit and detailed
fee statements submitted by defense counsel. As discussed below,
additional information is required before a reasonable fee amount
can be determined. Once again, however, plaintiff’s objection to
the fee request, like many of its prior pleadings, is mostly
unresponsive, does not discuss the applicable law or controlling
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standards of review, and does not take specific issue with any
itemized entry in defense counsel’s detailed fee statements.
With regard to the amount claimed, plaintiff’s counsel says only
that “the asserted total fees sought to be recovered . . . in the
amount of $146,282.60 are clearly unreasonable.” Document N o .
92.
The fee request is generally detailed, though the reader is
required to calculate hourly rates for various persons who are
identified only by initials - some may be assumed by the
calculated rate to be paraprofessionals, but that is not
confirmed anywhere. The fee request also seems to include expert
witness fees incurred that are probably not recoverable. See
West Virginia Univ. Hospitals, Inc. v . Casey, 499 U.S. 83 (1991).
Additional explanation and detail would be helpful, and is
necessary to a proper computation.
Several collateral developments over the past months
involving plaintiff’s counsel, as well as the need for additional
information regarding defendant’s fee request, suggest the value
of an interim step before resolving the fee claim. In September
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of 2001, plaintiff’s counsel, George Kersey, was suspended from
the practice of law in New Hampshire for three months (the New
Hampshire Supreme Court imposed that reciprocal discipline based
on counsel’s earlier suspension in Massachusetts). Because he
did not comply with the terms of the New Hampshire suspension
order, plaintiff’s counsel was later suspended indefinitely,
pending disbarment proceedings. See Kersey’s Case, LD-2001-006
(N.H. May 6, 2002). This court has, in turn, imposed reciprocal
discipline under our Local Rules, and plaintiff’s counsel is no
longer privileged to practice in this court. James E . Townsend,
Esq. was appointed by the New Hampshire Supreme Court to collect
Mr. Kersey’s files, and to take steps necessary to protect the
interests of Mr. Kersey’s clients.
Since the fee application could be better developed (hourly
rates, identity of service providers, elimination of duplicate
work or redundant attendance at depositions or court proceedings,
e t c . ) , and because Attorney Townsend, or other counsel on behalf
of plaintiff, ought to be provided a fair opportunity to review
and consider the specifics of the fee application, as well as to
respond in a meaningful way, the court will defer consideration
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of the recoverable fee amount for forty-five (45) days from the
date of this order.
During that period the court expects that plaintiff and
defendant, with the assistance of counsel, will realistically
discuss the matter with a view toward reaching agreement on a
reasonable fee award. Defendant should understand that
compromise is in order, given the substantial amount claimed, the
nature of the claims asserted, and the likelihood that close
inspection will undoubtedly result in substantial reductions
under the applicable discretionary standard of review. (As noted
above, for example, defendant likely cannot recover expert
witness fees beyond cost of attendance).
A telephone conference will be scheduled shortly to discuss
further briefing and to set dates for submission of an expanded
fee application and response. Until advised otherwise, the court
will assume that Attorney Townsend will be representing plaintiff
until the matter is finally resolved.
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Conclusion
Defendant’s motion for attorneys’ fees (document n o . 88) is
granted in part and denied in part. It is granted to the extent
a fee award will be entered, but denied with respect to the
amount requested. A telephonic status conference will be
scheduled in the near future to establish a further briefing
schedule.
SO ORDERED.
Steven J. McAuliffe
United States District Judge
July 2 4 , 2002
cc: James E . Townsend, Esq.
George E . Kersey, Esq.
Anne S . Mason, Esq.
Kevin J. Carroll, Esq.
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