Court Affirms Nike Will Pay Millions for Opponent’s Legal Fees After ‘Outrageous’ Conduct

In a significant ruling, a Pennsylvania federal judge has upheld a decision ordering Nike to pay over $5 million in attorney's fees to Lontex Corp. The court found that Nike's conduct during the trademark infringement lawsuit was "exceptional" and warranted the award of legal fees. This article explores the background of the case, the key factors leading to the court's decision, and the potential implications for Nike and other companies.

The dispute between Lontex and Nike centered around the use of the phrase "Cool Compression" in Nike's product names and marketing materials. Lontex, the holder of a registered trademark for "Cool Compression" in athletic compression apparel, sued Nike for trademark infringement in 2018. The case went to trial, and a jury found Nike liable for willful trademark infringement and contributory infringement, awarding Lontex $142,000 in compensatory damages and $365,000 in punitive damages.

The District Court subsequently trebled the compensatory damages to $426,000 and awarded Lontex nearly $5 million in attorney's fees, deeming the case "exceptional" under the Lanham Act. Nike appealed the findings and the damages awarded, while Lontex cross-appealed the dismissal of its counterfeiting claim and the denial of profit disgorgement.

The Third Circuit Court of Appeals reviewed the case and affirmed the District Court's findings on trademark infringement, willfulness, and the trebling of damages. However, the Court vacated the award of attorney's fees, finding that the District Court relied on broad policy considerations rather than specific facts of the case. The Court remanded the issue of attorney's fees for further proceedings.

In the latest development, Judge Michael M. Baylson affirmed special master Jane Greenspan's report and recommendation, finding that Nike's conduct was "exceptional" and warranted the award of attorney's fees. The court cited several instances of Nike's "overly aggressive" pretrial conduct, including its failure to comply with court orders, filing a "very broad motion for summary judgment," and threatening to "kill" Lontex's business over the litigation.

The court's decision sends a strong message to Nike and other companies that aggressive and unreasonable litigation tactics will not be tolerated. The award of attorney's fees serves as a deterrent and encourages companies to engage in fair and reasonable litigation practices. This ruling may also influence other companies' approaches to trademark infringement cases, as they may now be more inclined to settle disputes out of court to avoid similar consequences.

In conclusion, the court's affirmation of the decision ordering Nike to pay over $5 million in attorney's fees to Lontex serves as a reminder that companies must act responsibly and fairly in legal disputes. The ruling highlights the importance of adhering to court orders, engaging in reasonable litigation tactics, and avoiding aggressive and unnecessary conduct that may result in significant financial penalties.