K and N Engineering v. Bulat

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
K AND N ENGINEERING, INC., a 
California corporation,
Plaintiff-Appellee,
v. No. 06-55393
SARAH BULAT, individually, d/b/a  D.C. No.
CV-04-09707-AHM
Incline Design, a/k/a Incdesign;
STEVEN DALE WANDEL, OPINION
individually, a/k/a Incdesign, d/b/a
Incline Design,
Defendants-Appellants.

Appeal from the United States District Court
for the Central District of California
A. Howard Matz, District Judge, Presiding
Argued and Submitted
September 24, 2007—Pasadena, California
Filed December 18, 2007
Before: Thomas G. Nelson, Sandra S. Ikuta, and
N. Randy Smith, Circuit Judges.
Opinion by Judge Ikuta
16493
K AND N ENGINEERING v. BULAT 16495
COUNSEL
Ryan M. Fountain, Mishawaka, Indiana, for the defendants-
appellants.
Sam M. Muriella, Attlesey, Thomlinson & Clark, LLP, Tus-
tin, California, for the plaintiff-appellee.
OPINION
IKUTA, Circuit Judge:
In this case we are asked to decide whether an award of
statutory damages for trademark counterfeiting under 15
U.S.C. § 1117(c) precludes an award of attorney’s fees under
15 U.S.C. § 1117(b).1
I
For several decades, appellee K&N Engineering, Inc.
(“K&N”) has been engaged in the design, manufacture, and
distribution of aftermarket automotive air filters, air intake
kits, and related products. K&N’s stylized logo, the basis for
two of K&N’s registered trademarks, appears on decals
included with many of K&N’s products. K&N has separately
distributed decals bearing its logo to enthusiasts through an
internet promotion.
On or about October 14, 2004, K&N became aware that
appellants Sarah Bulat and Steve Wandel were selling unau-
thorized decals bearing the K&N logo on eBay. Appellants
created vinyl decals in the shape of the K&N logo and sold
89 sets of these decals (two decals per set) for a total of $267.
1
In a separate memorandum disposition issued today, we affirm the dis-
trict court’s summary judgment and award of statutory damages in favor
of K&N.
16496 K AND N ENGINEERING v. BULAT
After contacting appellants, K&N filed a complaint in the
Central District of California alleging trademark infringement
under 15 U.S.C §§ 1114(1) and 1125(a); trademark counter-
feiting under 15 U.S.C. § 1114(1)(a); trademark dilution
under 15 U.S.C. § 1125(c); and related state law statutory and
common law causes of action. K&N also elected to seek stat-
utory damages under 15 U.S.C. § 1117(c). The district court
granted K&N’s summary judgment motion on all claims and
entered judgment in favor of K&N. Pursuant to 15 U.S.C.
§ 1117(c)(1) and (b) respectively, the district court awarded
K&N statutory damages of $20,000 and attorney’s fees of
$100,000. Appellants timely appealed both the summary
judgment and the attorney’s fees award.
II
On appeal of the attorney’s fees, appellants argue that
K&N’s election to receive statutory damages under 15 U.S.C.
§ 1117(c) precludes an award of attorney’s fees under
§ 1117(b).2 We review the district court’s award of attorney’s
fees under 15 U.S.C. § 1117(b) for an abuse of discretion,
Rolex Watch, U.S.A., Inc. v. Michel Co., 179 F.3d 704, 711
(9th Cir. 1999), and review the district court’s legal analysis
and statutory interpretation de novo. Richard S. v. Dep’t of
Developmental Servs., 317 F.3d 1080, 1086 (9th. Cir. 2003).
“A district court abuses its discretion if its ruling on a fee
motion is based on an inaccurate view of the law . . . .” Id.
at 1085-86 (internal quotation marks omitted).
III
“Statutory interpretation begins with the plain language of
the statute. If the text of the statute is clear, this court looks
2
Appellants did not raise this argument to the district court. We exercise
our discretion to review this issue because it involves a purely legal ques-
tion of statutory interpretation, and the pertinent record has been fully
developed. See Bolker v. Comm’r, 760 F.2d 1039, 1042 (9th Cir. 1985).
K AND N ENGINEERING v. BULAT 16497
no further in determining the statute’s meaning.” United
States v. Mendoza, 244 F.3d 1037, 1042 (9th Cir. 2001)
(internal citations omitted); see also United States v. Ventre,
338 F.3d 1047, 1052 (9th Cir. 2003).
Reading § 1117 as a whole, the statute lays out an inte-
grated scheme for plaintiffs in trademark infringement actions
to recover damages and attorney’s fees. Under § 1117(a), a
plaintiff seeking actual damages for trademark infringement
is entitled to reasonable attorney’s fees only in “exceptional
cases.”3 “A trademark case is exceptional where the district
court finds that the defendant acted maliciously, fraudulently,
deliberately, or willfully.” Watec Co. v. Liu, 403 F.3d 645,
656 (9th Cir. 2005).
When counterfeit marks are involved, however, § 1117(b)
is also applicable.4 Under this subsection, a plaintiff seeking
actual damages under § 1117(a) is entitled to three times the
actual damages plus reasonable attorney’s fees in every case,
except when there are “extenuating circumstances.”
§ 1117(b).
3
15 U.S.C. § 1117(a) states, in pertinent part:
When a violation of any right of the registrant of a mark regis-
tered in the Patent and Trademark Office . . . shall have been
established in any civil action arising under this chapter, the
plaintiff shall be entitled . . . to recover (1) defendant’s profits,
(2) any damages sustained by the plaintiff, and (3) the costs of
the action. . . . The court in exceptional cases may award reason-
able attorney fees to the prevailing party.
4
15 U.S.C. § 1117(b) states, in pertinent part:
In assessing damages under [§ 1117(a)], the court shall, unless
the court finds extenuating circumstances, enter judgment for
three times such profits or damages, whichever is greater,
together with a reasonable attorney’s fee, in the case of any
[trademark infringement, or unauthorized use of marks relating to
the Olympics] that consists of intentionally using a mark or des-
ignation, knowing such mark or designation is a counterfeit mark
(as defined in section 1116(d) of this title), in connection with the
sale, offering for sale, or distribution of goods or services.
16498 K AND N ENGINEERING v. BULAT
[1] Finally, a plaintiff may eschew actual damages under
§ 1117(a) and elect to seek statutory damages under
§ 1117(c). Section 1117(c) provides:
In a case involving the use of a counterfeit mark (as
defined in section 1116(d) of this title) in connection
with the sale, offering for sale, or distribution of
goods or services, the plaintiff may elect, at any time
before final judgment is rendered by the trial court,
to recover, instead of actual damages and profits
under subsection (a) of this section, an award of stat-
utory damages for any such use in connection with
the sale, offering for sale, or distribution of goods or
services in the amount of—
(1) not less than $500 or more than
$100,000 per counterfeit mark per type of
goods or services sold, offered for sale, or
distributed, as the court considers just; or
(2) if the court finds that the use of the
counterfeit mark was willful, not more than
$1,000,000 per counterfeit mark per type of
goods or services sold, offered for sale, or
distributed, as the court considers just.
Section 1117(c) makes no provision for attorney’s fees; nor
does § 1117(b) authorize such fees for a plaintiff seeking stat-
utory damages under § 1117(c). Section 1117(b)’s attorney’s
fees provision applies only in cases with actual damages
under § 1117(a).5
[2] In this case, K&N elected to recover statutory damages
5
Because the fee award in this case was made pursuant to § 1117(b), we
do not reach the issue whether an election to receive statutory damages
under § 1117(c) precludes an award of attorney’s fees for exceptional
cases under the final sentence of § 1117(a).
K AND N ENGINEERING v. BULAT 16499
under § 1117(c). Because of K&N’s election, the court did not
assess or award K&N actual damages or profits under
§ 1117(a). Therefore, there is no statutory basis to award
K&N attorney’s fees under § 1117(b).
Notwithstanding the import of the statutory language, K&N
argues that Intel Corp. v. Terabyte International, Inc., 6 F.3d
614 (9th Cir. 1993), permits a plaintiff who has elected to
obtain statutory damages under § 1117(c) to obtain attorney’s
fees under § 1117(b). This argument is clearly wrong. Intel
considered the availability of the attorney’s fees allowed for
“exceptional cases” under § 1117(a), where the plaintiff was
awarded actual damages under § 1117(a). Intel, 6 F.3d at 620.
Section 1117(c) was not enacted until 1996, three years after
Intel was decided. See Anticounterfeiting Consumer Protec-
tion Act of 1996, Pub. L. No. 104-153, 110 Stat. 1386.
IV
[3] Because an election to receive statutory damages under
§ 1117(c) precludes an award of attorney’s fees under
§ 1117(b), we hold that the district court abused its discretion
in awarding K&N $100,000 in attorney’s fees. Because we
reach this conclusion, we need not address appellants’
remaining arguments that the fee award was improper.
REVERSED.