Fee award justified in case involving fraud on the PTO

Amusement Art, LLC v. Life is Beautiful, LLC, 2017 WL 2259672, No. 2-14-cv-08290

(C.D. Cal. May 23, 2017)

Initial ruling discussed here.  Defendant LIB hosts the Life is Beautiful festival in Las Vegas, Nevada—an annual event that features music, art, food, and other programming. One of the logos initially associated with the event was an image of a heart made of splattered paint. Amusement Art is owned by artist Thierry Guetta and his wife Debora Guetta. Guetta’s first solo art exhibition, held in 2008, was entitled “Life is Beautiful” and Guetta incorporated that phrase into some of his artwork. Guetta also previously produced artwork depicting a heart accented by splattered paint. Amusement Art sued for trademark and copyright infringement and related claims.

After the lawsuit began, LIB determined that a number of the statements of use Amusement submitted to the PTO to receive “Life is Beautiful” registrations were false. Although Amusement voluntarily surrendered 8 of its registrations, it continued to claim a 2014 registration in connection with festivals and art events.  The court granted LIB’s motion for summary judgment on all claims and its counterclaims for cancellation.  As for the trademark claims based on “Life is Beautiful,” the court found them barred by the doctrine of unclean hands.  For trademark claims based on the heart design, the design didn’t function as a mark, nor did Amusement show that the design was valid and protectable.  On the copyright claim, no rational jury could find the two images were “virtually identical,” “as is required when asserting a copyright claim based on a ubiquitous image such as a heart design.”

Here, the court granted LIB’s fee request as to the Lanham Act claims, but not the copyright claim, reducing its request through various deductions to a bit over $922,000 in total, out of a request for roughly twice that.  Applying Octane Fitness, the court reasoned that a party’s bad motivation or fraudulent conduct is “archetypal” conduct warranting fee-shifting under the Lanham Act.  Thus, fraud on the PTO is routinely deemed to be exceptional.  Given the extent of the fraudulent conduct in this case, the court found that LIB was entitled to recover for fees incurred in connection with the “Life is Beautiful” trademark claims.  The infringement claims were initially based on eight fraudulently-obtained registrations where Amusement claimed the use of the “Life is Beautiful” mark in connection with 257 categories of goods, but it obtained the registrations by staging photographs and submitting false declarations. Amusement responded that it surrendered the eight fraudulently-obtained registrations and that the infringement claim was ultimately premised on a ninth registration that was not fraudulently-obtained. Nope.  Amusement “attempted to fraudulently ‘secure a monopoly over most plausible uses of the phrase “Life is Beautiful” without actually investing any resources into developing the goodwill of their brand.’ Plaintiff then subjected others to the burden of litigation on the basis of all of those marks.”  Its abandonment of the fraudulently obtained marks didn’t clean its hands, nor did it make this case unexceptional.

LIB argued that the weakness of the heart design infringement claim also justified a fee award. Amusement’s 30(b)(6) witness stated that she considered the heart design a copyright image rather than a trademark image. Also, there was a lack of evidence substantiating Amusement’s claim that the limited use of the design in Guetta’s artwork rose to the level of a protectable trademark. The court agreed that the claim was “exceptionally weak.” Even if the court ignored the corporate representative’s statement, Amusement submitted “no evidence of actual use of the mark as a trademark and no evidence that the mark would be recognized by a consumer as a source identifier. … [T]his case is not one where there was inadequate evidence to create a triable issue but rather almost no evidence.”

However, the court denied fees on the copyright claim.  LIB pointed to the absence of any evidence of direct copying and the visual differences between the images.  Amusement did own a valid copyright, though, and “the evidence suggests this action was brought in good faith to protect that copyright. Moreover, although the court concluded that a copyright claim pertaining to a ubiquitous image such as this heart design must be evaluated under the virtually identical standard, it was not unreasonable for Plaintiff to urge a less stringent standard.” There were in fact similarities between the images, even if not enough to create a triable issue of fact. Nor were deterrence interests served by awarding fees, since owners of valid copyrights “are entitled to bring enforcement actions against images that bear visual similarity to their copyrighted design.”

As for apportioning the time spent between Lanham Act and other claims, including congruent state law claims, much of the work related to all the claims.  Moreover, the parties addressed the state law claims for unfair competition and common law trademark infringement only as derivative of the Lanham Act claims.  Ultimately, the court concluded that work related to the Lanham Act claim made up 60% of the total reasonable attorneys’ fees here.