Seventh Circuit Describes Test for Attorney's Fee Awards

A manufacturer of infrared light therapy devices was entitled to an award of its attorney’s fees incurred in successfully defending against a Lanham Act false advertising claim brought by a provider of home health care services, the U.S. Court of Appeals in Chicago has decided. The case was “exceptional” for purposes of the fee-shifting provision of Sec. 35(a) of the Act.

A Lanham Act case is “exceptional,” the court said, if the losing party was the plaintiff and was guilty of abuse of process in suing, or if the losing party was the defendant and had no defense yet persisted in the trademark infringement or false advertising for which the party was being sued, in order to impose costs on his or her opponent. It would be enough to justify an award if the party seeking it could show that the opponent’s claim or defense was objectively unreasonable –that is, that it was a claim or defense that a rational litigant would pursue only because it would impose disproportionate costs on the opponent. Pursuit of a claim or defense that is extortionate in character, if not necessarily in provable intention, would be enough to make a case “exceptional,” the court explained.

The complaining provider asserted that the manufacturer’s sales representative had falsely represented that the manufacturer’s lamp had been approved by the Food and Drug Administration for treatment of peripheral neuropathy. The device was, in fact, FDA-approved for that purpose. Even if it had not been, lack of such approval would not prohibit a physician or other health care provider from prescribing the device to patients as a treatment for that condition. Therefore, the provider’s Lanham Act claim had no possible merit, according to the court. Moreover, a district court had found that the provider made the claim in an attempt to coerce a price reduction from the manufacturer. By bringing a frivolous claim in order to obtain an advantage unrelated to obtaining a favorable judgment, the provider committed an “abuse of process,” the court concluded.

Nightingale Home Healthcare, Inc., 7th Cir., ¶61,725.