Ferraris v. Azimuth

2002 DNH 140

• Court: District Court, D. New Hampshire
• Decided: July 24, 2002
• Docket: CV-99-066-M
• Status: Published

Opinion

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

2 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

3 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).

5 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).

6 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

7 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

8 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.

9 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

10 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

11 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

12 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

13 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

14 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.

15 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.