Ty, Inc., creator of the popular "Beanie Babies" plush toys, prevailed on a trademark infringement and unfair competition claim against two defendants, and moved for attorneys' fees based on the contention that this was an "exceptional case." The Lanham Act provides that the "court in exceptional cases may award reasonable attorney fees to the prevailing party." The general rule is that each party to a trademark infringement suit is responsible for its own fees. However, fee-shifting is appropriate in certain "exceptional cases."
While the statute does not define the term "exceptional case," the Seventh Circuit has held that this includes acts of infringement characterized as malicious, fraudulent, deliberate, or willful. There needs to be, at least, a finding of willful infringement in order for the exceptional case doctrine to apply. Willfulness may be found if the infringer knows that its conduct is infringing upon another's rights or if the infringer has acted in reckless disregard to the trademark owner's rights, i.e. suspecting wrongdoing and deliberately failing to investigate (also known as "willful blindness").
The Court found that the defendants' infringement was indeed willful and this case was, thus, exceptional. It based this finding on the fact that the defendants admitted to modeling their product after the Beanie Babies knowing of the success and reputation of Ty's marks. Defendants also used hang tags similar to the hang tags on the Beanie Babies products to market their similar product. They further proceeded without the advice of counsel even after receiving a likelihood of confusion refusal from the U.S. Patent & Trademark Office to register a similar mark, as well as receiving a cease and desist letter from Ty. The Court, thus, granted Ty's motion for attorney's fees.
Ty, Inc. v. Softbelly's, Inc., et al., (Slip Op.) 2007 WL 734394 (N.D. Ill., March 6, 2007).