Will the Supreme Court Clarify the Standard for Awarding Attorneys’ Fees under §505 of the Copyright Act?

The Supreme Court has granted certiorari to address the standards to be applied in awarding attorney’s fees under  17 U.S.C.§505 of the Copyright Act. At issue is whether Supap Kirtsaeng, the prevailing defendant in a copyright lawsuit, should be awarded his attorney’s fees.  This is Mr. Kirtsaeng’s second trip to the Supreme Court. The  Court held in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013) that under the “first sale” doctrine (codified at 17 U.S.C. §109(a)), Kirtsaeng, as the lawful owner of the particular physical copy of the textbook purchased abroad, was permitted to resell that copy of the book in the United States without infringing Wiley’s copyright. On remand, judgment was entered in his favor.

Kirtsaeng then sought his attorneys’ fees under 17 U.S.C.§505 of the Copyright Act which provides that “the court in its discretion may allow the recovery of full costs by or against any party [and] the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.” The district court ruled that he was not entitled to attorney’s fees because, even though the litigation clarified the boundaries of copyright law and advanced the purposes of the Copyright Act, the result did not outweigh the fact that Wiley’s copyright claim was not “objectively unreasonable.”

The Petition for Certiorari frames the issue as: “What is the appropriate standard for awarding attorneys’ fees to a prevailing party under §505 of the Copyright Act?” Before the Court’s decision in  Fogerty v. Fantasy, Inc., 510 U.S. 517, 520-21 (1994), the courts of appeals were divided about whether §505 authorized courts to award attorneys’ fees to “prevailing plaintiffs … as a matter of course,” but only to “prevailing defendants … [who] show that the original suit was frivolous or brought in bad faith.” The Court rejected the dual standard and held that “[p]revailing plaintiffs and prevailing defendants are to be treated alike.”

The Petition asserts that the Ninth and Eleventh Circuits award attorneys’ fees when the prevailing party’s successful claim or defense advances the purposes of the Copyright Act. The  Fifth and Seventh Circuits employ a presumption in favor of attorneys’ fees for a prevailing party. Other circuits apply  the several “nonexclusive factors” the Court identified in dicta in Fogerty. Only the Second Circuit places “substantial weight” on whether the losing party’s claim or defense was “objectively unreasonable”  which, Petitioner argues, “makes the award of fees to prevailing parties the exception rather than the rule.”

It has been over 20 years since the Court decided Fogerty v. Fantasy, Inc.. Clarification of  the factors to be applied in awarding prevailing party attorney fees will be most beneficial to defendants. Whether or not a prevailing plaintiff is awarded fees, it is awarded damages or other relief. But if a defendant is not reasonably confident that it may be awarded its attorney’s fees for mounting a successful defense, the economic reality is that it may be forced into a nuisance settlement. A defendant that “prevails in copyright litigation vindicates the public’s interest in the use of intellectual property, but without an award of fees the prevailing defendant has only losses to show for the litigation.” FM Indus., Inc. v. Citicorp Credit Servs., Inc., 614 F.3d 335, 339-40 (7th Cir. 2010).

For more information on this topic, contact your Intellectual Property counsel at Smith, Gambrell & Russell, LLP.

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