MUNCHKIN, INC., A DELAWARE CORPORATION, Plaintiff-Appellant v. LUV N’ CARE, LTD., A LOUISIANA CORPORATION, ADMAR INTERNATIONAL, INC., A DELAWARE CORPORATION, Defendants-Appellees
2019-1454
United States Court of Appeals for the Federal Circuit
Decided: June 8, 2020
Appeal from the United States District Court for the Central District of California in No. 2:13-cv-06787-JEM, Magistrate Judge John E. McDermott.
TRAVIS W. MCCALLON, Lathrop GPM LLP, Kansas City, MO, argued for plaintiff-appellant. Also represented by LUKE MERIWETHER.
EDWARD DAVID MANZO, Husch Blackwell LLP, Chicago, IL, argued for defendants-appellees. Also represented by PHILIP DALE SEGREST, JR.; HARTWELL POWELL MORSE, III, Luv n’ Care, Ltd., Monroe, LA.
Before DYK, TARANTO, and CHEN, Circuit Judges.
Munchkin, Inc. filed a lawsuit in the United States District Court for the Central District of California against Luv n’ Care, Ltd. and Admar International, Inc. (collectively, LNC) for trademark infringement and unfair competition claims based on LNC‘s spillproof drinking containers. A year later, the district court granted Munchkin leave to amend the complaint to include new trademark infringement claims, trade dress infringement claims, and patent infringement claims based on U.S. Patent No. 8,739,993 (the ‘993 patent) which is directed to a spillproof drinking container. While the litigation was ongoing, Munchkin voluntarily dismissed all of its non-patent claims with prejudice and then its ‘993 patent was held unpatentable through an inter partes review (IPR) initiated by LNC at the Patent Trial and Appeal Board (the Patent Board). After we summarily affirmed the Patent Board‘s decision, Munchkin, Inc. v. Luv n’ Care, Ltd., 702 F. App‘x 982 (Fed. Cir. 2017), Munchkin also dismissed its patent infringement claims.
The district court subsequently granted LNC‘s motion for attorney‘s fees under
Munchkin appeals, contending that the district court‘s determination that this was an “exceptional” case lacks a proper foundation because LNC‘s fee motion insufficiently presented the required facts and analysis needed to establish that Munchkin‘s patent, trademark, and trade dress infringement claims were so substantively meritless to render the case exceptional. We agree with Munchkin. None of these issues was fully adjudicated before the court on the merits, and given the limited arguments LNC made in support of its fee motion, we hold that the district court abused its discretion in granting the motion and we reverse the exceptional-case determination.
BACKGROUND
Munchkin‘s lawsuit against LNC, filed on September 16, 2013, initially contained only trademark and unfair competition claims based on a version of Munchkin‘s CLICK LOCK logo for spillproof cups, which is a registered trademark. Munchkin‘s claims were directed against LNC‘s CLIK IT! brand spillproof cups. The district court referred to Munchkin‘s trademark as the “original logo.”
Munchkin later filed a motion to amend the complaint, seeking to replace the original CLICK LOCK logo as the basis for its trademark and unfair competition claims with a different version of the CLICK LOCK logo (the current logo). The current and original CLICK LOCK logos are very similar in appearance, both prominently featuring the words “CLICK LOCK,” “LEAK-PROOF TECHNOLOGY,” AND “100% GUARANTEE.” Compared to the original CLICK LOCK logo, the current CLICK LOCK logo repositioned the words “100% GUARANTEE” from the top of the logo to the middle of the logo. In its motion to amend, Munchkin indicated that it had recently applied to register the current CLICK LOCK logo with the Patent and Trademark Office (USPTO). The amended complaint also added trade dress infringement claims, alleging that the overall appearance of Munchkin‘s spillproof drinking cup was a protectable trade dress. In addition, Munchkin sought to add a count of patent infringement, claiming that LNC‘s spillproof cups infringed Munchkin‘s ‘993 patent.
To justify its proposed addition of patent and trade dress claims to the case, Munchkin explained that the ‘993 patent had recently issued and that Munchkin had recently become aware of its potential trade dress rights for the configuration of its spillproof drinking cup. For the new trademark claims, Munchkin alleged that it had made a series of minor design changes in its branding, leading to focusing on the slightly altered mark in its current CLICK LOCK logo. These minor design changes led Munchkin to file an application to register the current CLICK LOCK logo on May 7, 2014. LNC opposed Munchkin‘s motion, pointing out that Munchkin had provided the current CLICK LOCK logo in an exhibit attached to the initial complaint, and that Munchkin knew or should have known about any claims pertaining to that mark when it filed its original complaint. J.A. 605-06. Despite these arguments, the district court granted Munchkin‘s motion to amend the complaint, finding no bad faith, undue prejudice to LNC, or any proof of futility as to the new claims. Order Granting Plaintiffs’ Motion for Leave to File First Amended Complaint, Munchkin, Inc. v. Luv n’ Care, Ltd., No. 2:13-cv-06787-JEM,
As the case progressed, LNC sought a claim construction that would support its invalidity contentions based on two prior art references that both disclose a mechanism for locking a cap to a bottle, U.S. Patent No. 3,101,856 (Whiteman) and U.S. Patent No. 4,230,232 (Atkins). But, in its Markman order, the district court disagreed with LNC‘s preferred construction and instead adopted Munchkin‘s narrower, proposed construction for the claim term “a platform is disposed on the shoulder” to mean “[a] structural feature distinct from the shoulder and the container body and disposed on the shoulder to change the contour of the shoulder.” Claim Construction Order, Munchkin, Inc. v. Luv n’ Care, Ltd., No. 2:13-cv-06787-JEM, at 14 (C.D. Cal. Aug. 27, 2015), ECF No. 101 (Claim Construction Order).
Subsequently, LNC filed an IPR petition at the Patent Board challenging the ‘993 patent, which the Patent Board instituted. Before the Patent Board instituted the IPR, Munchkin dropped all of its non-patent claims in the district court litigation, claiming it wanted to streamline the litigation to focus just on its patent infringement claim. Order Granting Defendants’ Motion for Attorney‘s Fees, Munchkin, Inc. v. Luv n’ Care, Ltd., No. 2:13-cv-06787-JEM, at 2, 7-8 (C.D. Cal. May 2, 2018) (Munchkin).
During the IPR, in contrast to the district court, the Patent Board adopted LNC‘s broader claim construction, under the broadest reasonable interpretation standard, and subsequently found the ‘993 patent‘s claims unpatentable in a final decision. Munchkin appealed, and we summarily affirmed. Munchkin, Inc., 702 F. App‘x 982. After our affirmance of the Patent Board‘s unpatentability decision, Munchkin dropped the patent claim in the district court.
LNC then filed a motion for attorney‘s fees under
In its review of Munchkin‘s trademark claim, the district court criticized Munchkin for switching the basis for its trademark infringement claim from the original CLICK LOCK logo to the current CLICK LOCK logo, when both logos had been identified in the initial complaint and Munchkin still continued to use both CLICK LOCK logos in commerce. Munchkin at 7. Even though the district court had previously allowed Munchkin to amend its complaint to replace the original CLICK LOCK logo with the current CLICK LOCK logo, the district court, in its fee order, nonetheless regarded this sequence of events as confusing and making “clear the substantive weakness of Munchkin‘s trademark related claims based on the current logo.” Id.
For the trade dress claims, the district court credited LNC‘s assertion that, prior to the market introduction of Munchkin‘s cup products with the alleged trade dress configuration, there were many other cups that already exhibited the same features, but the district court opinion did not discuss or identify any specific cups or features. Id. The opinion simply stated that “LNC asserts it was able to produce prior art cup samples and catalogs evidencing that many of the alleged features of
As to the patent infringement claim, the district court concluded that Munchkin should have realized its patent infringement claim was substantively weak after receiving LNC‘s invalidity contentions and LNC‘s IPR petition, both of which relied on the same Whiteman and Atkins prior art references. Id. at 8-9. The district court, however, did not analyze the relative merit of Munchkin‘s validity theory, nor did it acknowledge that LNC‘s invalidity positions in both documents were premised on a claim construction that the district court had rejected in its Markman order. LNC also alleged that Munchkin, during prosecution of the ‘993 patent, withheld from the USPTO information regarding Playtex‘s Twist ‘N Click cups, of which Munchkin was aware through an earlier, unrelated litigation between Munchkin and Playtex. In LNC‘s view, the Playtex prior art cups were highly material to the validity of the ‘993 patent and Munchkin had concealed them from the court as well as the USPTO during the patent examination process.1 Id. at 9. The district court, without analysis, agreed, finding that this was “another indication of substantive weakness.” Id. In sum, the district court concluded that “Munchkin was objectively unreasonable in persisting in all out litigation” in the face of “these red flag warnings” as to the ‘993 patent‘s validity. Munchkin at 10. Munchkin appealed. We have jurisdiction pursuant to
DISCUSSION
Under both the Patent Act and the Lanham Act, “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.”
We review a district court‘s determination that a case is exceptional for abuse of discretion. Highmark Inc. v. Allcare Health Mgt. Sys., Inc., 572 U.S. 559, 561 (2014). A district court abuses its discretion when it makes “a clear error of judgment in weighing relevant factors or in basing its decision on an error of law or on clearly erroneous factual findings.” Bayer CropScience AG v. Dow AgroSciences LLC, 851 F.3d 1302, 1306 (Fed. Cir. 2017) (citing Highmark, 572 U.S. at 563 n.2). While we generally give great deference to a district court‘s exceptional-case determination, a district court nonetheless must “provide a concise but clear explanation of its reasons for the fee award.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983).
This case represents “an unusual basis for fees,” in that the district court‘s exceptional-case determination rests on an examination of issues—trademark infringement, trade dress validity, and patent validity—that were not fully litigated before the court. Thermolife Int‘l LLC v. GNC Corp., 922 F.3d 1347, 1356-57 (Fed. Cir. 2019). That fact alone, however, would not create a basis to deny a fee motion. In Thermolife, for example, we held that it was not an abuse of discretion to award attorney‘s fees to the defendant in light of the plaintiff‘s failure to conduct an adequate presuit infringement investigation, even though the infringement question had not been adjudicated before the asserted claims were held unpatentable. Id. We at the same time also made abundantly clear that district courts have wide latitude “to refuse to add to the burdens of litigation by opening up issues that have not been litigated but are asserted as bases for a fee award.” Id. at 1357 (citing Spineology, Inc. v. Wright Med. Tech., Inc., 910 F.3d 1227, 1230 (Fed. Cir. 2018)). But when the bases of an attorney‘s fee motion rest on issues that had not been meaningfully considered by the district court, as is the case here, “a fuller explanation of the court‘s assessment of a litigant‘s position may well be needed when a district court focuses on a freshly considered issue than one that has already been fully litigated.” Id. In the present case, the merits of the patent, trademark, and trade dress claims were all freshly considered issues for the district court, presented in the context of a fee motion, but LNC failed to make the detailed, fact-based analysis of Munchkin‘s litigating positions to establish they were wholly lacking in merit. The district court‘s opinion granting a fee award likewise lacked adequate support.
I. The Patent Infringement Claim
The district court determined that this case was exceptional, in part, because
Claim 1 of the ‘993 patent claims a “spillproof drinking assembly” having a container body and a neck that extends from the container body‘s upper end. ‘993 patent at claim 1. The claim further recites that the outer surface of the container body‘s upper end “extends below the neck radially outward to define a shoulder,” and that “a platform is disposed on the shoulder.” Id. Before both the district court and the Patent Board in the co-pending IPR, LNC‘s invalidity challenge focused on two prior art references, Whiteman and Atkins. A cornerstone of LNC‘s challenge was the need to garner a favorable, broad claim construction for the claim term “a platform is disposed on the shoulder” to ensure that the claims would be broad enough to read on the prior art references. In effect, the dispute centered on Munchkin‘s position that the claim “require[s] the neck to join the container body [such that] the platform cannot be disposed between the shoulder and the neck.” See Luv n’ Care, Ltd. v. Munchkin, Inc., No. IPR2015-00872, at 10 (P.T.A.B. Sept. 15, 2016) (internal quotations omitted). But LNC‘s construction did not contain such a requirement. The district court rejected LNC‘s construction in its Markman order and adopted Munchkin‘s narrower construction, considerably undermining LNC‘s invalidity theory based on Whiteman and Atkins.
The district court‘s decision awarding LNC its attorney‘s fees never adequately explains why Munchkin‘s validity position was unreasonable when the district court‘s claim construction ruling favored Munchkin and erected a serious hurdle to LNC‘s invalidity challenge. The district court attempted to sidestep this hurdle by dismissing its own Markman claim construction as merely a non-final, interim order. Munchkin at 11. But the possibility of reconsideration of the claim construction, whether by the district court or this court, is immaterial. The relevant question for purposes of assessing the strength of Munchkin‘s validity position is not whether its proposed construction is correct; rather the relevant question is whether it is reasonable. Stone Basket Innovations, LLC v. Cook Med. LLC, 892 F.3d 1175, 1180 (Fed. Cir. 2018); SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015). Here, neither the district court‘s opinion nor LNC‘s fee motion attempted to address, in any fact-intensive way, the relative strength and reasonableness of Munchkin‘s validity position. The fact that Munchkin‘s validity defense was keyed to its claim construction argument—an argument that the district court itself had accepted in its Markman order—made the need for a full and detailed explanation in this case for why Munchkin‘s litigating position was exceptionally weak all the more imperative.
The district court was also led astray by LNC‘s argument that Munchkin was unreasonable in maintaining its patent infringement lawsuit once the Patent Board instituted the IPR on the ‘993 patent, because (1) published statistics at the time indicated that the Patent Board cancels some of a patent‘s instituted claims 85% of the time and cancels all of the instituted claims 68% of the time, (2) the Patent Board‘s final decision found all of the ‘993 patent‘s claims unpatentable, and (3) this court summarily affirmed that decision. These IPR statistics combined with the merits outcome are not enough, for they tell us nothing about the “substantive strength of [Munchkin‘s] litigating position (considering both the governing law and
Similarly, we find the district court‘s finding that the Playtex Twist ‘N Click cups represented “another indication of substantive weakness” of the ‘993 patent‘s validity to be wholly conclusory and cannot support a determination of exceptionality. The district court opinion, like LNC‘s fee motion, fails to offer any details explaining how these Playtex cups invalidate the patent claims, and why it would be unreasonable to suggest otherwise. The district court instead appeared to assume that Munchkin‘s failure to disclose the Playtex cups to the USPTO during patent examination alone was proof that Munchkin knew its validity position lacked merit. LNC‘s fee motion simply asserts that “Munchkin was more than aware that the validity of the ‘993 patent was seriously placed in question as a result of highly material prior art patents, bottle and Playtex Twist ‘N Click cup products that were not considered by the Patent Examiner during prosecution of the ‘993 patent application.” J.A. 3607. Whether styled as an invalidity or inequitable conduct theory, LNC‘s motion needed to go much further than this statement to meet its burden of proof. In fact, the Playtex cups were not even officially part of the record, as the district court had never ruled on LNC‘s motion to amend its invalidity contentions to add the Playtex cups. Such a superficial case cannot support a finding of exceptionality, even under the very deferential standard of review.
In sum, after reviewing the district court opinion and considering all the arguments, we conclude that no adequate case has been made for finding that Munchkin‘s position and conduct relating to its patent infringement claim support a determination that this case is “exceptional” under
The ultimate problem with the district court‘s finding that the trademark claims were “exceptional” under
Munchkin‘s dismissal of its claims with prejudice also does not establish, by itself, a finding that the merits were so substantively weak as to render the claims exceptional. There are numerous reasons, including Munchkin‘s asserted desire to streamline the litigation, to drop a claim, not just substantive weakness. We decline to adopt a categorical rule that a party‘s litigating position is presumptively so meritless as to stand out from the norm whenever it dismisses its claims with prejudice. Rather, the fee movant must still make a fact-based case for why the opposing party‘s position was unreasonable.
LNC presents for our consideration on appeal a comparison of its CLIK IT! logo with Munchkin‘s asserted CLICK LOCK logo to demonstrate that Munchkin‘s trademark infringement claim was wholly meritless. But the relevant likelihood of confusion factors require consideration of many factors, not just one. A unique challenge for LNC here, given that the trademark claim was never adjudicated, is that it must not only prove through its fee motion no likelihood of confusion between its mark and Munchkin‘s mark, but it must go further, and prove that Munchkin‘s position is substantively unreasonable. While that task may be particularly onerous, it is not insurmountable. See, e.g., Thermolife, 922 F.3d at 1357. But here, the district court never engaged in this likelihood of confusion analysis and we think for good reason: LNC‘s overall analysis was not sufficiently developed to be a basis for a fee award. Simply identifying visual differences between its CLIK IT! logo and Munchkin‘s current CLICK LOCK logo is not a full enough inquiry to demonstrate that Munchkin‘s trademark claim was unreasonable.
III. The Trade Dress Infringement Claims
Finally, the district court‘s finding that the trade dress claims were particularly weak lacks adequate support. Again, the district court allowed Munchkin to amend its complaint to include these claims. LNC never filed a motion to dismiss, and the merits of Munchkin‘s trade dress allegations were never adjudicated. In its fee order, the district court accepted
CONCLUSION
In view of the foregoing, we reverse the district court‘s grant of attorney‘s fees.
REVERSED