Green v. Fornario ( 2007 )

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
5-8-2007
Green v. Fornario
Precedential or Non-Precedential: Precedential
Docket No. 06-2649
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-2649
TYLER GREEN,
Appellant
v.
GREG FORNARIO;
TYLER GREEN SPORTS
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 04-cv-01159)
District Judge: Honorable Robert F. Kelly
Submitted Under Third Circuit LAR 34.1(a)
April 23, 2007
Before: McKEE and AMBRO, Circuit Judges
ACKERMAN,* District Judge
(Opinion filed May 8, 2007)
John M. Elliott, Esquire
John P. Elliott, Esquire
Elliott, Greenleaf, and Siezikowski, P.C.
925 Harvest Drive
Union Meeting Corporate Center V, Suite 300
Blue Bell, Pennsylvania 19422
Counsel for Appellant
Gregory M. Castaldo, Esquire
Schiffrin & Barroway, LLP
280 King of Prussia Road
Radnor, Pennsylvania 19087
Counsel for Appellees
OPINION OF THE COURT
AMBRO, Circuit Judge
*
Honorable Harold A. Ackerman, United States District
Judge for the District of New Jersey, sitting by designation.
2
We decide whether the District Court abused its
discretion in declining to award attorneys’ fees to a prevailing
party in an unfair competition suit. This is a discretionary
decision, and it turns on whether the Court believes that the case
is, in the words of the Lanham Act, “exceptional.” In holding
that the Court did not abuse its discretion here, we emphasize
that the term “exceptional” is not, as the plaintiff seems to
suggest, a throwaway. Rather, it calls for a district court to
determine whether it finds a defendant’s conduct particularly
culpable—enough to alter the general American rule that parties
to litigation pay their own attorneys’ fees. We therefore affirm.
I. Facts and Procedural History
A. Tyler Green
Tyler Green is a former pitcher for the Philadelphia
Phillies. He was drafted by the Phillies in 1991—the tenth
overall pick—following a stellar college career at Wichita State
University that included two College World Series appearances.
After spending just one year with its Triple-A farm team, Green
joined the Phillies for the 1993 season. Plagued by injuries from
the get-go, Green was able to play only three full seasons in the
Major Leagues. The apex of his career was a 1995 trip to the
All Star Game.
Following his retirement from professional baseball in
2000, Green has stayed in the Philadelphia area. He is the
3
pitching coach for the nationally acclaimed Germantown
Academy varsity baseball team. Local media have covered his
coaching work extensively. In addition, he regularly appears on
regional television and radio baseball programs, and he
participates in a variety of Phillies-related charitable events.
From this evidence, Green no doubt retains some name
recognition in the greater Philadelphia community.
B. Greg Fornario and Tyler Green Sports
Greg Fornario ran a business called Tyler Green Sports.
A former bartender at a Philadelphia-area sports bar, Fornario
decided in the late 1990s to start a sports handicapping business.
Handicappers are the stock analysts of the sports gambling
world: they provide information to sports bettors. According to
Fornario, he saw this as an easy way to make money, and so he
acquired an 800 number, took out an ad in the paper, and waited
for the calls to come in. There was a mix-up, however, with his
800 number, and so he discontinued the business after running
the advertisement for only one day. He had no financing and
was in no position to advance the business additional money
from his personal assets.
Fornario did, however, market this short-lived venture as
Tyler Green Sports. He testified that the business was never
affiliated with anyone named Tyler or Green. Rather, he
purportedly came up with “Green” because handicapping
businesses, he said, typically have some reference to money in
4
their names. Green is, of course, the color of money, so it fit.
Fornario then tried to come up with something “catchy” to put
with Green. He settled on Tyler, he claimed, because he is an
Aerosmith fan, and Stephen Tyler is the group’s lead singer.
Thus, Tyler Green Sports. He testified that at the time he had
never heard of Tyler Green the baseball player. He admitted,
however, to being a fan of all sports except hockey. The
Philadelphia teams have no allure for him, as he is a New York
native. He described himself as a “diehard” Yankees fan.
While all of this is more than a mite shaky, it is Fornario’s story,
and he is sticking to it.
In 2000, Fornario, his handicapping business long
defunct, resumed using the name Tyler Green Sports in trade.
This time, he used it as the name of an entertainment promotion
company. Specifically, the company made money by coming up
with event ideas, putting them together, and selling them to
venues. For example, it promoted a number of Philadelphia
Eagles’ pep rallies by lining up player appearances, taking care
of decorations and advertising, and selling the pre-packaged
events to sports bars. It also did traditional party planning. The
company used the website http:///www.tylergreensports.com to
advertise its services. Fornario incorporated the company in
Pennsylvania, and registered to it the name Tyler Green Sports.
Before registering the name, he testified that he engaged an
attorney to do a trademark search. According to Fornario, this
search revealed that the name Tyler Green Sports was not
registered to any business or person. Tyler Green Sports never
5
achieved significant commercial success.
C. This Litigation
In October 2003 Tyler Green’s agent Rex Gary
discovered that a local business was using the name Tyler Green
Sports. After investigating its activities, he phoned the company
and spoke to Fornario. He confirmed that the business was not
affiliated with anyone named Tyler or Green, and on that basis
demanded that Fornario cease trading under the name. When
Fornario declined, Green’s attorneys sent formal cease and
desist letters in February and March 2004.1 Following the
1
While cease and desist letters are understandably neither
warm nor friendly, we cannot help but note that Green’s were
particularly combative. For example, in his February 20, 2004,
letter, Green’s counsel advised Fornario that he would “refer[]
[Fornario’s] conduct to the appropriate criminal authorities.”
This is curious, as the Lanham Act is a purely civil statute.
There is a parallel criminal counterfeiting statute, but to be
“counterfeit” a mark must be similar to a registered trademark.
18 U.S.C. § 2320(e)(1)(A)(ii). Here, no registered trademark is
involved. To be sure, unfair competition is a serious tort, but we
see nothing in this record that approaches criminal conduct, nor
do we see any evidence that Green’s counsel followed up (or
had any intention of following up) on this threat. It is worth
noting that lawyers should take threatening criminal
prosecution—particularly in a letter to an uncounseled
individual—very seriously. To do so where no criminal
reference is objectively possible or subjectively contemplated is
6
second letter, Fornario offered to stop using the name in return
for $3,000. According to Green’s attorneys, Fornario
represented that this figure corresponded with the money he had
spent on Tyler Green Sports-labeled merchandise. Fornario, on
the other hand, contends that it was merely an opening
settlement offer. The evidence shows that Fornario did not
spend even ten percent of that amount on merchandise. Green
balked at the offer and filed suit in the District Court.
In his answer, Fornario denied liability and asserted a
counterclaim of libel against Green and his attorneys.
Specifically, Fornario alleged that accusing him in the February
2004 letter of using Tyler Green’s name to “sell alcohol and
sex” libelously insinuated that he was involved in, to be
euphamistic, “Mrs. Warren’s profession.”2 Green responded
with a Rule 11 motion, and Fornario withdrew the counterclaim.
Within two weeks of the answer, Fornario signed a consent
decree in which he agreed to stop using the name Tyler Green
in trade. The action continued on the issues of damages, costs,
a most unwise tactic. See Philadelphia Bar Ass’n Prof’l
Guidance Comm., Guidance Inquiry No. 89-17, 1989 WL
253283 (Sept. 1989) (discussing danger of threatening
uncounseled individual with criminal prosecution under
Pennsylvania professional ethics code).
2
See generally GEORGE BERNARD SHAW, MRS.
WARREN’S PROFESSION (William-Alan Landes, ed., Players
Press 1991) (1893).
7
and attorneys’ fees.
Green proceeded with discovery, but his efforts trailed
off, and the District Court dismissed the case for failure to
prosecute in January 2006. On Green’s motion, the Court
reinstated it and, on the basis of the record evidence, awarded
costs. The Court refused, however, to award attorneys’ fees,
and Green appeals that denial to us.3
II. Whether This Case Is Exceptional
Though best-known as the law that regulates trademark
infringement, the Lanham Act, 15 U.S.C. §§ 1051–1141, also
prohibits other forms of unfair competition.4 Specifically,
§ 1125 creates civil liability for misdescribing goods in
commerce, importing mislabeled goods, diluting the value of a
famous mark, and cybersquatting.5 15 U.S.C. § 1125(a)–(d).
3
The District Court had jurisdiction under 28 U.S.C.
§ 1331. Our jurisdiction is based on 28 U.S.C. § 1291.
4
The initial version of the Lanham Act, Pub. L. No. 87-
772, 76 Stat. 769 (1946), did not provide for all of these causes
of action. In keeping with general use, however, we use the
term “Lanham Act” to refer collectively to it and its subsequent
amendments.
5
In general, cybersquatting is the act of registering, in
bad faith and to garner profit, on the internet a domain name so
8
Here, Green asserted claims of misdescription, dilution, and
cybersquatting.
The Lanham Act allows a prevailing plaintiff to recover
costs, along with damages and profits, as a matter of course. 15
U.S.C. § 1117(a). But it allows a recovery of attorneys’ fees
only in “exceptional” cases. 15 U.S.C. § 1117(a) (“The court in
exceptional cases may award reasonable attorney fees to the
prevailing party.”).
Determining whether a case is exceptional is a two-step
process. First, the District Court must decide whether the
defendant engaged in any culpable conduct. Ferrero U.S.A.,
Inc. v. Ozak Trading, Inc., 952 F.2d 44, 47 (3d Cir. 1991). We
have listed bad faith, fraud, malice, and knowing infringement
as non-exclusive examples of the sort of culpable conduct that
could support a fee award. Id.; see also Securacomm
similar to a distinctive mark that it is confusing. A popular
subgenera of cybersquatting—termed typosquatting—involves
registering a domain name that is but a letter or two off from a
distinctive mark (e.g., registering http://www.yhoo.com to catch
people mistyping the popular search engine
http://www.yahoo.com). See generally Shields v. Zuccarini, 254
F.3d 476 (3d Cir. 2001) (providing an overview of the Lanham
Act’s prohibition of cybersquatting); Christopher G. Clark, The
Truth in Domain Names Act of 2003 and a Preventative
Measure To Combat Typosquatting, 89 CORNELL L. REV. 1476
(2004).
9
Consulting, Inc. v. Securacom, Inc., 224 F.3d 273, 280 (3d Cir.
2000). Moreover, the culpable conduct may relate not only to
the circumstances of the Lanham Act violation, but also to the
way the losing party handled himself during the litigation.
Securacomm, 224 F.3d at 282. Second, if the District Court
finds culpable conduct, it must decide whether the
circumstances are “exceptional” enough to warrant a fee award.
See Ferrero, 952 F.2d at 49 (noting that the court may consider
factors other than the defendant’s culpable conduct, such as the
closeness of the liability question and whether the plaintiff
suffered damages). In sum, a district court may not award fees
without a finding of culpable conduct, but it may decline to
award them despite a finding of culpable conduct based on the
totality of the circumstances.
Here, Green alleges two basic categories of culpable
conduct: (1) Fornario’s knowing infringement, and (2) his bad-
faith failure to stop at Green’s request. We deal with each in
turn.
A. Knowing Infringement
Green alleges that Fornario knew his name and
intentionally used it to profit from Green’s goodwill. Fornario,
of course, denies this, and in its Memorandum Opinion the
District Court was unwilling to infer Fornario’s culpable
knowledge and intent from Green’s regional recognition. That
Fornario did not intentionally trade on Green’s name is a finding
10
of fact, so we can overturn it if it is clearly erroneous. See
ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 971
(D.C. Cir. 1990). Under that standard, we only set aside factual
findings when we are “‘left with the definite and firm conviction
that a mistake has been committed.’” Concrete Pipe & Prods. of
Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508
U.S. 602, 622 (1993) (quoting United States v. U.S. Gypsum
Co., 333 U.S. 364, 396 (1948)). In addition, it is worth noting
that Green, like any civil plaintiff, bears the burden of proving
culpable conduct as a necessary element of establishing that he
is eligible for a fee award.
At the time that he began using the trade name Tyler
Green Sports, Fornario had lived in the Phildelphia area for at
least five years and had spent considerable time around sports as
a fan, a bartender in a sports bar, and a nascent handicapper.
From this, he seems the sort of person who would know of a
pitcher on the Phillies’ team. Still, finding that he knew of
Green is not compelled by this record. Doing so here would
require discrediting Fornario’s testimony and deciding that
Green was famous enough that Fornario could not but know of
him. While Tyler Green was known regionally in his short
career and his post-retirement work continues to garner some
attention, we cannot conclude that the record evidence of his
recognition means that Fornario must have known of him.
Because the District Court’s resolution of this disputed issue of
fact was not clearly erroneous, we cannot disturb it
notwithstanding our suspicions about Fornario’s explanation for
11
his trade name.
B. Bad Faith Refusal To Cease and Desist
A defendant’s refusal to comply with cease and desist
letters in bad faith is no doubt a legitimate means of establishing
an “exceptional” case. In general, putative defendants have
every right to decline pre-litigation requests without adverse
consequences, but they must do so in good faith—that is,
believing that they have a colorable claim of right to engage in
the challenged behavior. See Northern Light Tech., Inc. v.
Northern Lights Club, 236 F.3d 57, 65 (1st Cir. 2001)
(approving district court’s use of defendant’s disregard of
legitimate cease and desist letters as evidence of bad faith).
Thus, did Fornario decline to stop using Green’s name knowing
that he had no right to use it, thereby wilfully refusing to comply
with the law? This is a question of Fornario’s subjective state
of mind. See Bishop v. Equinox Intern. Corp., 154 F.3d 1220,
1224 (10th Cir. 1998) (evaluating whether defendant
subjectively believed plaintiff had abandoned trademark before
using it in commerce). There is, as usual, no direct evidence of
Fornario’s bad state of mind, so the District Court would have
had to infer bad faith from the surrounding circumstances, and,
here again, it declined to do so. It ruled instead that Fornario’s
conduct was equally consistent with the belief that his use of the
trade name was legitimate.
Was that finding clearly erroneous? Boiled down,
12
Green’s argument seems to be that Fornario had no arguable
defense to his Lanham Act claims; thus, from the facts that (1)
Green alerted Fornario to his objections and (2) Fornario did
nothing, the Court should have inferred bad faith. To analyze
that argument, we must consider, as best we can on a limited
record, the strength of Green’s claims. It is important to point
out that we do this only to determine whether it is plausible that
Fornario thought that he had a colorable claim of right to use the
trade name. We analyze the three Lanham Act claims that
Green ended up bringing, keeping in mind, however, that the
cease and desist letters were not nearly specific enough to direct
Fornario to these precise claims.
We begin with Green’s § 1125(c) claim for diluting a
famous mark. In relevant part, that section provides:
Subject to the principles of equity, the owner of a
famous mark that is distinctive, inherently or
through acquired distinctiveness, shall be entitled
to an injunction against another person who, at
any time after the owner’s mark has become
famous, commences use of a mark or trade name
in commerce that is likely to cause dilution by
blurring or dilution by tarnishment of the famous
mark, regardless of the presence or absence of
actual or likely confusion, of competition, or of
actual economic injury.
13
15 U.S.C. § 1125(c)(1). The key requirement is that the mark be
famous, which the section defines as “widely recognized by the
general consuming public of the United States as a designation
of source of the goods or services of the mark’s owner.” 15
U.S.C. § 1125(c)(2)(A). This is a rigorous standard, as it
extends protection only to highly distinctive marks that are well-
known throughout the country. TCPIP Holding Co., Inc. v.
Haar Commc’ns, Inc., 244 F.3d 88, 99 (2d Cir. 2001). Without
going into more detail than this case requires, it seems several
steps short of probable that a person with such a brief, and
largely undistinguished, professional career limited to one team
in one area would have a name that is “widely recognized by the
general consuming public of the United States.” 15 U.S.C.
§ 1125(c)(2)(A). Thus it appears that Fornario had a colorable
defense to this claim.
We turn now to Green’s § 1125(d) cybersquatting claim.
That section—a relatively new addition to the Lanham
Act—prohibits registering a domain name that is confusingly
similar to a distinctive mark or dilutive of a famous mark with
“a bad faith intent to profit” from it. 15 U.S.C. § 1125(d)(1)(A).
For example, registering the site http://www.dupont.com with
the hope of selling it to E.I. du Pont de Nemours and Company
for an exorbitant price would be a quintessential act of
cybersquatting.
To determine bad faith in this context, Congress has
given us nine factors to consider:
14
(I) the trademark or other intellectual property
rights of the person, if any, in the domain name;
(II) the extent to which the domain name consists
of the legal name of the person or a name that is
otherwise commonly used to identify that person;
(III) the person’s prior use, if any, of the domain
name in connection with the bona fide offering of
any goods or services;
(IV) the person’s bona fide noncommercial or fair
use of the mark in a site accessible under the
domain name;
(V) the person’s intent to divert consumers from
the mark owner’s online location to a site
accessible under the domain name that could
harm the goodwill represented by the mark, either
for commercial gain or with the intent to tarnish
or disparage the mark, by creating a likelihood of
confusion as to the source, sponsorship,
affiliation, or endorsement of the site;
(VI) the person’s offer to transfer, sell, or
otherwise assign the domain name to the mark
owner or any third party for financial gain without
having used, or having an intent to use, the
15
domain name in the bona fide offering of any
goods or services, or the person’s prior conduct
indicating a pattern of such conduct;
(VII) the person’s provision of material and
misleading false contact information when
applying for the registration of the domain name,
the person’s intentional failure to maintain
accurate contact information, or the person’s prior
conduct indicating a pattern of such conduct;
(VIII) the person’s registration or acquisition of
multiple domain names which the person knows
are identical or confusingly similar to marks of
others that are distinctive at the time of
registration of such domain names, or dilutive of
famous marks of others that are famous at the
time of registration of such domain names,
without regard to the goods or services of the
parties; and
(IX) the extent to which the mark incorporated in
the person’s domain name registration is or is not
distinctive and famous . . . .
15 U.S.C. § 1125(d)(1)(B)(i).
Here, at least five of the nine factors appear to cut in
16
Fornario’s favor. It is undisputed that he used the name Tyler
Green in connection with a bona fide offering of services
(factors III and VI). In addition, there is no evidence that he
provided misleading contact information (factor VII), that he
registered multiple confusing domain names (factor VIII), or
that he intended to divert internet users from Tyler Green’s own
website (factor V). While applying the factors is a holistic, not
mechanical, exercise, see Lucas Nursery & Landscaping, Inc.
v. Gross, 359 F.3d 806, 811 (6th Cir. 2004), we have little
difficulty concluding that Fornario met the low threshold of
having a colorable defense to Green’s cybersquatting claim.
It appears that Green’s strongest claim was his § 1125(a)
claim for confusing misdescription. That section prohibits using
in commerce any name that is likely to cause confusion as to
sponsorship of or affiliation with one’s goods. 15 U.S.C.
§ 1125(a)(1)(A). Here, Green’s claim was that Fornario’s use
of his name created the false impression that he was affiliated
with, or otherwise approved of or sponsored, Fornario’s
business. Given the evidence of Green’s name recognition, we
believe that he would have had a good chance of succeeding on
this claim, as it is sensible to think that using the name of a
regionally known sports player in connection with a company
that hosts events at sports bars in that region would deceive
people.
At the same time, likelihood of confusion is a factual
issue, and we will not presume to know what evidence Fornario
17
could have produced had he found it prudent to continue
litigating the case. See A & H Sportswear, Inc. v. Victoria’s
Secret Stores, Inc., 237 F.3d 198, 207 (3d Cir. 2000) (noting
that likelihood of confusion is an issue of fact). His business
activities appear to have little to do with baseball.6 Moreover,
it is unclear just how well-recognized, even regionally, Green
was when Fornario acted. So the evidence produced at
discovery would be key. While possible, we are not convinced
that it is even probable that a retired player, with a career neither
long nor notable, would be well-known enough to render use of
his name in connection with a party and event-planning business
confusing to the typical consumer.7 Indeed, it is plausible that
Fornario’s use of Tyler Green’s name confused few consumers.
Thus, once again we cannot conclude that Fornario lacked a
colorable defense.
6
It is not clear from the record whether Fornario’s one-
day handicapping business provided information on baseball
games. There is nothing in the record suggesting that the
entertainment company had anything to do with baseball.
Rather, the only sport mentioned is football.
7
Here it is worth remembering that the primary purpose
of § 1125(a) is not to protect people (like Tyler Green) from
having their names used by others, but to protect consumers
from peddlers who use confusing, misdescriptive trade names.
See Island Insteel Sys., Inc. v. Waters, 296 F.3d 200, 209 (3d
Cir. 2004). Thus, the “touchstone” of a § 1125(a) claim is
likelihood of confusion. Id. at 204.
18
We do not know precisely why Fornario agreed to stop
using the name Tyler Green Sports so quickly. Likelihood of
success almost certainly went into the thought process, but, as
the District Court noted, Fornario probably also considered the
financial position of his business (precarious) and the value of
the trade name (minimal). Deciding to forgo costly litigation
struck the District Court as a reasonable strategic decision, and
we agree. In any event, given that Fornario met the low bar of
a colorable claim to use the name Tyler Green Sports, it was
reasonable for the District Court not to infer bad faith from his
refusal to stop at Green’s request. If anything, by settling
quickly Fornario saved Green (who, we note, does not press a
claim for damages) a great deal of trouble, and we are loathe to
discourage such decisions by using them to support an inference
of culpable conduct. Thus, we cannot conclude that the Distirct
Court clearly erred in declining to find that Fornario refused to
heed Green’s cease and desist letters in bad faith.
* * * * *
Green argues that Fornario knowingly sought to profit
from Tyler Green’s name recognition. But the District Court
found that Fornario did not know of Green when he began using
the trade name Tyler Green Sports, and that finding (no matter
our doubts) is not clearly erroneous. In addition, Green argues
in effect that upon receiving the first cease and desist letter,
Fornario immediately should have set off for Canossa. We
cannot agree. If Fornario maintained a good-faith belief that he
19
was rightfully using the trade name Tyler Green Sports, he was
entitled to decline pre-litigation requests and defend his position
as he saw fit. The District Court found that the evidence did not
support a finding of bad faith, and that determination also is not
clearly erroneous. Thus, we affirm the Court’s conclusion that
this case is not “exceptional” enough to merit an award of
attorneys’ fees to Green.
20