Beijing Daddy's Choice Science and Technology Co., Ltd. v. Pinduoduo Inc.

Background

Beijing Daddy’s Choice Science and Technology Co., Ltd. brought claims against Pinduoduo Inc. and affiliated companies, collectively called “PDD,” for contributory infringement and unfair competition under the Lanham Act and New York law. The court previously granted PDD’s motion to dismiss on personal-jurisdiction grounds. The current opinion addressed only PDD’s request for attorneys’ fees and costs.

The underlying dispute involved PDD’s e-commerce platform, which the court said was designed to serve merchants and consumers in China. The court described a transaction in which the plaintiff’s agent persuaded one merchant to ship authentic but unauthorized “Daddy’s Choice” diapers to New York after attempts to arrange such a shipment through other merchants failed. The shipment required false shipping and telephone information, manufactured transactions, and circumvention of the platform’s pricing and shipping features. The court said the operative complaint alleged only one sale to a U.S. consumer and that this sale occurred under contrived circumstances.

Fee standard and parties’ arguments

Section 35(a) of the Lanham Act allows a court to award reasonable attorneys’ fees to the prevailing party in an “exceptional case.” The court explained that an exceptional case is one that stands out because of the strength of a party’s position or the unreasonable way the case was litigated. Relevant considerations include frivolousness, motivation, objective unreasonableness, and whether compensation or deterrence supports an award.

PDD argued that the plaintiff’s personal-jurisdiction allegations were objectively unreasonable, that the plaintiff concealed important details about the transaction, that the timing of the lawsuit suggested an effort to disrupt PDD’s U.S. initial public offering, and that fees would promote compensation and deterrence. The plaintiff argued that personal-jurisdiction law concerning interactive e-commerce platforms was developing, that it had brought the case to protect its U.S. trademark rights, and that it was not a repeat Lanham Act plaintiff.

Exceptional-case finding

The court found that PDD was the prevailing party even though the earlier dismissal rested on personal jurisdiction rather than the merits. It concluded that the dismissal changed the parties’ legal relationship because it closed the court to the plaintiff’s claims.

The court held that the case was exceptional. It reasoned that the plaintiff pursued trademark claims in the United States despite knowing that shipments through PDD’s platform could not be made under commercially sensible conditions without deliberate circumvention. The court found the action frivolous because the complaint did not allege a U.S. shipment through the platform other than the transaction created through the plaintiff’s investigation. It also found the plaintiff’s decision not to disclose information showing the implausibility of its allegations to be, at best, highly misleading. The court declined to adopt PDD’s specific theory about disrupting the initial public offering but said the circumstances created skepticism about the plaintiff’s motivation. It further found that manufacturing contacts with the forum strongly supported an exceptional-case finding.

Amount of the award

PDD initially requested $514,782.90 in attorneys’ fees and $25,837.21 in costs, for a total request of $540,620.11. The court found the requested hourly rates reasonable. It reduced the requested fees by 30%, however, to account for work that was unnecessary or excessive, including work on an initial motion to dismiss that was never filed, research that took more time than necessary, and assigning multiple lawyers to some tasks without evident justification.

The resulting attorneys’ fee award was $360,348.03. The court also approved the requested $25,837.21 in costs, including legal research, word processing, and translation expenses. The court therefore granted PDD’s Motion for Attorneys’ Fees and Costs in the amount of $386,185.24 and directed the Clerk of Court to terminate the motion and close the case.