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Dropbox, Inc. v. Thru Inc.

United States District Court, N.D. California

March 8, 2017

DROPBOX, INC., Plaintiff,
v.
THRU INC., Defendant.

          ORDER GRANTING PLAINTIFF'S MOTION FOR ATTORNEYS' FEES DOCKET NO. 153

          EDWARD M CHEN, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Plaintiff Dropbox brought this action for declaratory relief to establish its exclusive right to the trademark “Dropbox.” Thru brought counterclaims for trademark infringement under the Lanham Act. This Court granted summary judgment for Dropbox on Thru's counterclaims, Docket Nos. 135 (“Order”) & 146, and accordingly entered judgment in favor of Dropbox on all claims, Docket No. 149. Dropbox now moves for attorneys' fees under 15 U.S.C. § 1117(a). The Court GRANTS the motion.

         II. DISCUSSION

         A. Dropbox's Entitlement to a Fee Award

         1. The Exceptional Case Standard

         Title 15 U.S.C. § 1117(a) provides that a district court “in exceptional cases may award reasonable attorney fees to the prevailing party” in a trademark action. The Supreme Court has recently held that an “exceptional” case “is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1756 (2014). “[A] case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.” Id. “District courts may determine whether a case is 'exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id.

         As an initial matter, Thru contends that Octane Fitness did not alter the standard for awarding attorneys' fees in trademark cases, and that this Court should accordingly follow prior Ninth Circuit precedent, according to which “[e]xceptional circumstances can be found when the non-prevailing party's case is unreasonable, vexatious, or pursued in bad faith.” Classic Media, Inc. v. Mewborn, 532 F.3d 978, 990 (9th Cir. 2008). But as Dropbox rightly points out, the Ninth Circuit en banc has since held otherwise, explaining that “Octane Fitness . . . ha[s] altered the analysis of fee applications under the Lanham Act.” SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179, 1181 (9th Cir. 2016) (en banc). The Circuit explicitly “overrule[d] [its] precedent to the contrary.” Id. Dropbox is therefore correct that Octane Fitness provides the correct standard, and the Court should determine whether this case is “one that stands out from others” in light of the totality of the circumstances.

         2. Discussion

         Dropbox argues that this case is exceptional in this sense for three reasons. First, Thru's claims were substantively meritless because Thru was guilty of laches as a matter of law, and the evidence supporting this determination indicates that Thru acted in bad faith in delaying bringing suit. Second, Thru failed to develop evidence showing that its rights to the trademark were senior to Officeware's rights (and, as a corollary, those of Dropbox, which acquired Officeware's rights as part of a settlement agreement). Third, Thru's litigation conduct was unreasonable because it acted in bad faith in moving to dismiss Dropbox's complaint on the ground that there was no controversy between the parties, and further because its conduct in discovery was unreasonable.

         a. Laches

         The Court agrees that this case “stands out from others” based on the bad faith exhibited by Thru both before litigation, which led to this Court's application of laches, and during the litigation itself. First, and most significantly, this Court found that Thru's claims were barred by laches based on overwhelming evidence in the record that (1) Thru knew of Dropbox's allegedly infringing use of its trademark years earlier than Thru had claimed during this litigation; (2) Thru had no valid justification for delaying pursuit of its claims, as Thru chose not to challenge Dropbox's trademark registration in 2011 when a number of other claimants, including Officeware, asserted their own rights to the trademark while Thru stood idly by; and (3) Thru's delay in asserting its putative rights to the mark was part of a deliberate scheme to increase the value of its claims by leveraging an anticipated initial public offering from Dropbox. See Order at 4-8. As the Court stated in granting summary judgment to Dropbox, “[i]f there is a paradigmatic set of facts that warrants laches, this is it.” Id. at 9.

         In Universal Elecs., Inc. v. Universal Remote Control, Inc., No. SACV 12-00329 AG (JPRx), 2015 U.S. Dist. LEXIS 91403, at *14 (C.D. Cal. Mar. 10, 2015), the court similarly found a case was “exceptional” under Octane Fitness in part because the losing party's claims were barred by laches. There, the argument for laches was less compelling than in this case. In Universal Elecs., the court denied summary judgment on the ground of laches; it was only after hearing all of the evidence at trial that it found laches applied. In ruling on the motion for fees, the Court noted that they delay “was created by Plaintiff, and in spite of it, Plaintiff inflicted the cost of defending a claim that Defendant” infringed Plaintiff's patent. Id. Similarly, in this case the Court faulted Thru for “'sleep[ing] on [its] rights, ' allowing multiple other parties to expend significant resources litigating over rights that Thru believes it owns, only to belatedly pursue the victorious party.” Docket No. 97 at 7. Also, Universal Elecs. relied in part on emails disclosed in discovery which revealed the plaintiff's improper motivation for undertaking the litigation. Similarly, in this case, Thru's emails revealed its bad faith attempt to delay prosecution of the case in order to increase its leverage over Dropbox.

         In opposition to the instant motion, Thru attempts to relitigate the laches question, arguing again that it reasonably delayed bringing suit because it did not initially see Dropbox as a direct competitor and because it later concluded that filing a petition to cancel Dropbox's trademark registration was preferable to initiating a lawsuit. Thru provides no new reason to revisit the ...


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