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Toys R Us Wins Attorney Fees in ‘Exceptional’ IP Action

June 27, 2022 | Posted in : Exceptional Case, Practice Area: IP Litigation

A recent Law 360 story by Dani Kass, “Toy R Us Wins $1.6M Atty Fees in Failed Toy Pencil IP Suit” reports that Toys R Us has won more than $1.6 million in attorney fees after beating litigation in Florida federal court that a toy chalk holder sold in its stores violated intellectual property owned by Lanard Toys Ltd.

U.S. District Judge Marcia Morales Howard on Wednesday adopted a magistrate judge's report and recommendation for $1.63 million in fees, alongside another $21,000 in costs, saying a "significant fee award is warranted," particularly for failed Lanham Act claims.

"This is an exceptional case, one that stands out from others both due to the significant flaws in the legal theories advanced and in the overly aggressive and uncivil way it was litigated," Judge Howard said.

That uncivil litigation included the court having "twice admonished Lanard's lead counsel for lack of civility and professionalism," including sending emails to opposing counsel with text including: "spare me your pious and self-serving cant, and stick to your knitting as local counsel," according to the first of U.S. Magistrate Judge Patricia D. Barksdale's two reports and recommendations.

The case dates back to March 2014, but in March 2019, Judge Howard granted Toys R Us, Dollar General Corp. subsidiary Dolgencorp LLC and Ja-Ru Inc. — who all have the same counsel — summary judgment, which the Federal Circuit affirmed in May 2020.

Both courts found that a toy chalk holder designed to look like a giant No. 2 pencil doesn't infringe Lanard's design patent or trade dress, and that Lanard's copyright covering the item is invalid, because it does not qualify as a work of art.

Judge Barksdale had recommended that Toys R Us deserved fees for the Lanham Act trade dress claims, and unfair competition under both the Lanham Act and the Florida Deceptive and Unfair Trade Practices Act, but not for the patent and copyright claims. However, she stopped short of recommending Toys R Us get its requested $2.5 million.

Judge Howard on Wednesday rejected Lanard's bid to further cut fees by changing how they were calculated "given the common facts and related legal theories underlying all four claims, much of the time spent defending this action cannot feasibly be allocated to any particular claim."

In objecting to Judge Barksdale's report, Lanard argued that it has been punished enough, and that "a seven-figure award is excessive and amounts to an undue punishment." For example, the company said it has lost $2 million paying for its own attorneys, "two large retail customers" and the invalidation of its IP. The district court judge wasn't persuaded.

"Plaintiff appears to contend that its conduct in this case was reasonable given that when it initiated the case it had 'a registered patent and a registered copyright, and had uncovered evidence that defendants did use its product in the design process,'" Wednesday's order states. "Of course, those arguments do not address the more salient question of whether it was reasonable for plaintiff to assert trade dress and unfair competition claims absent any evidence of secondary meaning or consumer confusion."

Counsel for Toys R Us pointed to a footnote where Judge Howard said if she were to review the first report issued by the magistrate judge, she'd likely grant fees over the copyright claims, which "lacked merit in so many ways" and were more broadly an "overreach."

"The existence of a registered copyright notwithstanding, plaintiff's copyright infringement claim was a transparent attempt to seek 'protection over any and all expressions of the idea of a pencil-shaped chalk holder,'" the judge said.

Judge Howard added that the damages sought related to the copyright claim were also unacceptable.

"While the court did not reach the issue of damages, it is noteworthy that plaintiff combined an exceptionally weak copyright claim with a particularly expansive theory of damages without citation to a single case where any court awarded such damages or otherwise recognized the viability of such a theory," the footnote states.