171 F. Supp. 3d 340
M.D. Penn.2016Background
- In 2009 HI Hotel Group and its members (Zaver, S. Patel) entered a Motel 6 franchise agreement with Accor/G6 for a Carlisle, PA property; by Sept. 2011 HI breached and rebranded the motel but continued use of Motel 6 marks.
- HI sold the property to 1450 Hospitality on Sept. 28, 2011; 1450 Hospitality (members Shah, I. Patel) operated using Motel 6 signs, forms, and receipts without authorization; franchise terminated Nov. 2, 2011.
- Plaintiffs (G6 entities) sued for trademark infringement and breach of contract; parties later stipulated corporate defendants infringed under the Lanham Act; jury awarded actual damages to HI ($81,000) and 1450 Hospitality ($125,000) and found several individual defendants personally liable and some wilful.
- Plaintiffs sought treble damages, attorney’s fees, costs, and prejudgment interest under 15 U.S.C. § 1117(b) and (a) and contractual fee provisions; defendants opposed trebling and additional fees.
- Court held §1117(b) treble/mandatory fees inapplicable because unauthorized use of a genuine mark by holdover franchisees is not "counterfeiting" under the statute; but found the case "exceptional" under §1117(a) and contractual provisions and awarded reasonable attorneys’ fees and costs (but denied trebling under §1117(a) and prejudgment interest).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether unauthorized post-termination use of genuine Motel 6 marks is "counterfeiting" under 15 U.S.C. §1117(b) | §1117(b) applies because sale of inauthentic services under an authentic mark is counterfeiting; holdover franchisees are counterfeiters | Defendants opposed additional damages but did not address §1117(b) in detail | Denied: §1117(b) inapplicable; unauthorized use of a genuine mark by holdover franchisees is not "counterfeiting" under the statute |
| Whether treble damages under §1117(a) are warranted | Plaintiffs asked trebling under §1117(a) based on circumstances and wilfulness | Defendants opposed extra damages | Denied: court found circumstances did not justify treble damages under §1117(a) |
| Whether the case is "exceptional" warranting attorneys’ fees under 15 U.S.C. §1117(a) | Plaintiffs argued litigation delays, discovery failures, and jury finding of willfulness made the case exceptional | Defendants disputed additional fees | Granted: court found case "exceptional" under post-Octane/Fair Wind standard and awarded reasonable fees and costs (except Zaver via Lanham Act, but Zaver liable under contract fee provisions) |
| Whether prejudgment interest is available under the Lanham Act | Plaintiffs sought prejudgment interest due to wilful infringement and prolonged litigation | Defendants opposed | Denied: §1117(a) does not authorize prejudgment interest absent counterfeiting; court declined to award it |
Key Cases Cited
- Georgia-Pac. Consumer Prods. LP v. von Drehle Corp., 781 F.3d 710 (4th Cir. 2015) (distinguishes §1117(a) and §1117(b) remedies and discusses trebling/fees for counterfeiting)
- U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185 (6th Cir. 1997) (holds holdover franchisee’s use of an original trademark is unauthorized infringement but not "counterfeiting" under §1117(b))
- State of Idaho Potato Comm’n v. G & T Terminal Packaging, Inc., 425 F.3d 708 (9th Cir. 2005) (examines counterfeiting definition and treats counterfeiting differently from mere unauthorized use)
- Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014) (imports Octane Fitness standard to Lanham Act §1117(a), allowing broader exceptional-case analysis)
- Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014) (Supreme Court decision liberalizing the "exceptional" standard for fee-shifting under patent law, adopted analogously for Lanham Act fee awards)