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Verisign, Inc. v. XYZ.Com LLC

United States Court of Appeals, Fourth Circuit

May 29, 2018

VERISIGN, INCORPORATED, Plaintiff - Appellee,
v.
XYZ.COM LLC; DANIEL NEGARI, Defendants - Appellants.

          Argued: March 20, 2018

          Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:14-cv-01749-CMH-MSN)

         ARGUED:

          Derek Newman, NEWMAN DU WORS LLP, Seattle, Washington, for Appellants.

          Randall Karl Miller, VENABLE LLP, Tysons Corner, Virginia, for Appellee.

         ON BRIEF:

          Jason B. Sykes, NEWMAN DU WORS LLP, Seattle, Washington, for Appellants.

          Nicholas M. DePalma, VENABLE LLP, Tysons Corner, Virginia, for Appellee.

          Before WYNN, FLOYD, and HARRIS, Circuit Judges.

          FLOYD, Circuit Judge

         This case arises out of a denial of a motion for an award of attorney fees under the Lanham Act, 15 U.S.C. § 1117(a), which allows a court to award "reasonable attorney fees to the prevailing party" in "exceptional cases." For the reasons that follow, we hold that a prevailing party need only prove an exceptional case by a preponderance of the evidence, rather than by clear and convincing evidence, as the district court below required. We further clarify that a prevailing party need not establish that the losing party acted in bad faith in order to prove an exceptional case. Therefore, we vacate the district court's denial of the motion for attorney fees and remand for the district court's consideration of the motion under the appropriate legal and evidentiary standards.

         I.

         A.

         The facts of this case and the underlying Lanham Act claims are described in detail in our previous opinion affirming the district court's grant of summary judgment to Appellant XYZ.COM LLC ("XYZ"). See Verisign, Inc. v. XYZ.COM LLC, 848 F.3d 292 (4th Cir. 2017). In short, XYZ and Appellee Verisign, Inc. ("Verisign") both sell internet domain names, and are competitors in the top-level domain industry.[1] Verisign operates the .com and .net domains, and in 2014, XYZ began registering domain names ending in .xyz. Verisign sued XYZ, a newcomer to the industry, and its Chief Executive Officer, Daniel Negari, for violations of the Lanham Act. Verisign alleged false advertising based on a false "gold rush" scheme, pursuant to which XYZ and Negari allegedly falsely and misleadingly inflated the number of customers who bought XYZ domain names on its launch day. Verisign alleged that XYZ and Negari falsely claimed that it had sold hundreds of thousands of domain names ...


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