VeriSign, Inc. v. XYZ.COM LLC
891 F.3d 481
4th Cir.2018Background
- XYZ.COM LLC (XYZ) prevailed on summary judgment against Verisign in Lanham Act false-advertising and disparagement claims related to XYZ’s .xyz launch and CEO statements. The Fourth Circuit previously affirmed that Verisign failed to show Lanham Act violations.
- After prevailing, XYZ sought attorney fees under 15 U.S.C. § 1117(a), which permits fees in “exceptional cases.” The district court denied fees.
- The district court applied a clear-and-convincing evidentiary standard and suggested a bad-faith or independently sanctionable-conduct requirement to find a case “exceptional.”
- XYZ appealed, arguing the proper standard is preponderance of the evidence and that bad faith need not be proven.
- The Fourth Circuit reviewed de novo the legal standard and for abuse of discretion the denial of fees, and vacated and remanded for reconsideration under the correct standards.
Issues
| Issue | Plaintiff's Argument (XYZ) | Defendant's Argument (Verisign) | Held |
|---|---|---|---|
| Proper evidentiary burden to prove an “exceptional case” under § 1117(a) | Preponderance of the evidence (Octane Fitness standard) | District court applied clear and convincing; defend that denial stands even if error | Preponderance of the evidence required; district court abused discretion by requiring clear and convincing and case remanded |
| Whether bad faith / independently sanctionable conduct is required | Not required; Octane Fitness permits fee awards without bad faith or sanctionable conduct | District court treated bad faith / sanctionable conduct as necessary | Bad faith / sanctionable conduct not required; objective baselessness not mandatory either; totality-of-circumstances governs |
| Applicability of Octane Fitness to Lanham Act fee awards | Octane Fitness applies because statutory language mirrors Patent Act | Verisign conceded preponderance but argued XYZ’s evidence speculative and insufficient | Fourth Circuit adopts Octane Fitness for Lanham Act and aligns with other circuits; remand for district court to reassess evidence under correct standard |
| Whether prior Fourth Circuit dual standard (Retail Services) remains | Retail Services’ differential treatment (plaintiff vs defendant) should be discarded | District court relied on Retail Services language | Retail Services’ dual standard is no longer sound; same Octane/Ga.-Pacific test applies to plaintiffs and defendants |
Key Cases Cited
- Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) (rejected clear-and-convincing requirement; preponderance standard and flexible ‘‘exceptional’’ inquiry)
- Georgia-Pacific Consumer Products LP v. von Drehle Corp., 781 F.3d 710 (4th Cir. 2015) (adopted Octane Fitness framework for § 1117(a) exceptional-case analysis)
- Verisign, Inc. v. XYZ.COM LLC, 848 F.3d 292 (4th Cir. 2017) (prior appeal affirming summary judgment for XYZ on Lanham Act claims)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (statutory fee language does not distinguish prevailing plaintiffs from defendants)
- Retail Servs., Inc. v. Freebies Publishing, 364 F.3d 535 (4th Cir. 2004) (pre-Octane case requiring bad faith for prevailing plaintiffs; partially abrogated by Octane/Ga.-Pacific)