GEORGIA-PACIFIC CONSUMER PRODS. V. VON DREHLE CORP., NO. 13-2003

Decided: March 30, 2015 

The Fourth Circuit vacated, reversed in part, and remanded in part the judgment of the district court that von Drehle’s infringement justified a permanent, nationwide injunction, treble damages, attorney’s fees, and prejudgment interest.

Von Drehle produced paper towels that were capable of being used in Georgia-Pacific Consumer Products LP’s (“Georgia-Pacific”) proprietary paper-towel dispensers. In response, Georgia-Pacific launched three actions against von Drehle and its distributors alleging trademark violations. In the first two actions, the Western District of Arkansas and the Northern District of Ohio ruled against Georgia-Pacific’s claims. Both decisions were affirmed by the Eighth and Sixth Circuits, respectively. However, in the Eastern District of North Carolina, Georgia-Pacific prevailed. The Court found von Drehle’s infringement to be “willful and intentional,” and therefore issued treble damages, attorney fees, prejudgment interest, and a permanent, nationwide injunction prohibiting von Drehle from infringing Georgia-Pacific’s trademarks. Von Drehle appealed the district court’s remedies, arguing (1) the injunction was unduly broad geographically in light of the Eighth and Sixth Circuits’ rulings, (2) the court applied the wrong legal standard for trebling jury awards, (3) the court applied the wrong legal standard for awarding attorney fees, and (4) the court applied the wrong legal standard for awarding prejudgment interest.

The Fourth Circuit agreed with all of von Drehle’s arguments.  First, the Court held that the District Court abused its discretion by applying a nationwide injunction. The Court noted that to enforce an injunction in circuits that had ruled against Georgia-Pacific would be an affront to the jurisdiction of those courts and that comity required the Court to limitthe injunction to the Fourth Circuit.

Second, the Court held that the District Court applied the wrong standard to treble damages. The District Court relied upon the Larsen “willful and intentional” standard, which applies only to recovery under § 1117(b) for the knowing and intentional use of a counterfeit trademark. The Court found Larsen to be inapplicable because von Drehle was not accused of using a counterfeit mark.  The Court also found § 1117(a) to be inapplicable because the damages trebled were based upon profits, whereas § 1117(a) allows for trebling damages only for actual damages.

Third, the Court held that the District Court erred in finding “exceptional” circumstances to grant attorney’s fees because the District Court conflated von Drehle’s willful and intentional conduct with the proper standard, which requires willful and intentional infringement. The Court noted that the Supreme Court’s decision in Octane Fitness provided guidance that attorney’s fees are appropriate where the non-prevailing party’s position is either frivolous or objectively unreasonable. The Court found von Drehle’s position to be reasonable, in spite of the finding of infringement, and therefore rejected attorney’s fees.

Finally, the Court rejected prejudgment interest on similar grounds as its rejection of treble damages and attorney’s fees. Because von Drehle did not use a counterfeit mark, nor were there exceptional circumstances, the Court found no circumstances to justify prejudgment interest. Accordingly, the Court vacated, reversed, and remanded the District Court’s order.

Full Opinion

Robert I. Smith, III

 

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