District Court will reconsider request for Verisign to pay legal fees stemming from lawsuit.

After winning its second Appeals Court case against Verisign, top level domain name registry .XYZ is renewing its request (pdf) for Verisign to pay attorney fees.

Here’s the background:

Verisign (NASDAQ:VRSN) sued XYZ for false advertising. A federal district court granted summary judgment in XYZ’s favor, and XYZ asked the court to award it legal fees of over $1 million. Verisign then appealed the original case and lost the appeal. The federal district court then ruled against awarding legal fees (beyond about $57,000 related to discovery.)

XYZ appealed the attorney fees decision. In May, the Appeals Court agreed with XYZ that the lower court did not consider the motion for fees correctly. It wrote:

…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.

That sent the case back to the lower court to apply the correct standard to XYZ’s motion for fees. On Saturday, XYZ filed its post-remand submission in support of its motion for fees.

XYZ gives a long list of reasons the case should be considered exceptional, including Verisign’s broad discovery requests, 25 depositions and 17 third-party subpoenas. XYZ wrote:

Why would a sophisticated company with competent legal counsel file such a flimsy case? XYZ said nothing about .com that hadn’t been said before, and Verisign’s own numbers showed .com registrations continued to grow even after XYZ’s statements. Why draw further attention to those statements by filing a lawsuit over them? Why drag that suit on as the odds of victory grew ever longer, all the while refusing to ever meaningfully discuss settlement? The reasonable inference is that Verisign’s primary motive wasn’t winning the lawsuit so much as sending a message, not only to XYZ but to all of the other new top-level domains that entered the market and presented Verisign with meaningful competition for the first time in decades.

The circumstantial evidence supports an inference that Verisign’s true motive in pursuing a claim this weak, this aggressively, was to drain XYZ’s resources, intimidate its principal, and send a message to its other new competitors. [redacted] Under these circumstances, fee-shifting is warranted to both deter such conduct going forward and to compensate XYZ for enduring, defending and defeating Verisign’s tenuous claims and faulty lawsuit.

XYZ spent over $1 million defending itself in the lawsuit.