Fourth Circuit Court Awards Attorney’s Fees and $20,000 in Statutory Damages in Cyber-squatting and Trademark-Infringement Lawsuit

July 12th, 2010

Employers Council on Flexible Compensation v. Kenneth Feltman; Anthony W. Hawks; Employers Council on Flexible Compensation, LTD.

In Emplrs Council on Flexible Comp. v. Feltman, 2010 U.S. App. LEXIS 12688 (4th Cir. Va. June 21, 2010), the U.S. Court of Appeals for the Fourth Circuit recently reaffirmed a district court ruling granting attorney’s fees and an award of statutory damages to plaintiff trademark owners of Employers Council on Flexible Compensation (ECFC).

Brief history of the parties involved;

Plaintiff ECFC is a nonprofit lobbying organization working on behalf of the maintenance and expansion of private employee benefit programs that was incorporated in 1981 in the District of Columbia and in 1999 registered the website “ecfc.org”.

Defendants in the case are Kenneth Feltman, Anthony Hawks, and Employers Council on Flexible Compensation LTD. Feltman worked as ECFC’s executive director until 1997. Although not formally an employee of ECFC after 1997, Feltman continued working on behalf of the ECFC through 2007 when the working relationship soured.

Feltman and Hawks discovered that the ECFC’s corporate charter had been revoked in September of 1998 because ECFC had failed to file certain reports the Department of Consumer and Regulatory Affairs (DCRA). Rather than notifying ECFC, in February 2008, Feltman and Hawks formed a for-profit corporation in the District of Columbia under the name Employers Council on Flexible Compensation, Ltd.

Feltman and Hawks also reserved with the DCRA the acronym “ecfc,” the trade name “Employers Council on Flexible Compensation,” and twenty-one variations of that name. Furthermore, in March 2008, Hawks applied to the United States Patent and Trademark Office to register the mark “Employers Council on Flexible Compensation,” as well as a  design mark identical to ECFC’s “ecfc” logo. Finally, Feltman and Hawks obtained the domain name ecfc.com, (remember that the ECFC had been using ecfc.org since 1999) and used that domain name to maintain a website that was nearly identical to that of ECFC.

The district court found that Defendants’ use of the ecfc mark was in bad faith and awarded attorney’s fees and statutory damages to Plaintiff ECFC;

The district court referenced authority from Section 35(a) of the Lanham Act to award reasonable attorney’s fees to ECFC. The Lanham Act authorizes a district court, in exceptional cases involving trademark-infringement or cyber-squatting, to award reasonable attorney fees to the prevailing party. The USCoA for the Fourth Circuit recognizes an exceptional case as any case where the defendant’s actions were malicious, fraudulent, willful or deliberate in nature. This malicious, fraudulent, willful or deliberate in nature characterization is used by the courts to describe when a party has acted ‘in bad faith.’

The court found that this ‘bad faith’ requirement for attorney’s fees was satisfied because, “Feltman and Hawks willfully and deliberately infringed on ECFC’s marks and reserved the name “Employers Council on Flexible Compensation” in order to prevent ECFC from reinstating itself under that name” (after ECFC’s corporate charter had been revoked).

In assessing statutory damages against Defendants, the court relied on authority from the Anti-cybersquatting Consumer Protect Act (ACPA). The ACPA authorizes the owner of a protected mark to bring an action against any person who “has a bad faith intent to profit from that mark” and “registers, traffics in, or uses a domain name that . . . is identical or confusingly similar to . . . that mark.” 15 U.S.C. § 1125(d)(1)(A). For violations of the ACPA, the court is authorized to award statutory damages between $1,000 and $100,000, instead of actual damages or profits for violations

The district court’s award to ECFC of $20,000 in statutory damages was justified by a number of Defendants’ actions;

Although there was only cited one actual instance of confusion between the two domain names (ecfc.com and ecfc.org) the court found Defendants’ sufficiently culpable based from the facts that;

“Feltman had exploited a long and close working relationship with ECFC; that the defendants had acted surreptitiously in registering their domain name, without first notifying ECFC of its corporate revocation; and that Hawks had only briefly researched whether ECFC had abandoned its legal rights in the marks “ecfc” and “Employers Council on Flexible Compensation.’”

The findings of the district court were reaffirmed by the U.S. Court of Appeals for the Fourth Circuit.

Recent court rulings awarding attorney’s fees and statutory damages make it much more practical for copyright and trademark owners to assert their rights in instances of trademark-infringement and cyber-squatting. Experienced Internet Lawyers are available to assist brand owners in protecting their intellectual property rights, you may be able to recover attorney’s fees and statutory damages under the Lanham Act and the ACPA, respectively.