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Supreme Court: Objective Reasonableness is a Material, But Not Dispositive, Factor in Copyright Attorney's Fees Awards
Practical Law Legal Update w-002-6862 (Approx. 4 pages)
Supreme Court: Objective Reasonableness is a Material, But Not Dispositive, Factor in Copyright Attorney's Fees Awards
by Practical Law Intellectual Property & Technology
| Published on 20 Jun 2016 • USA (National/Federal) |
In Kirtsaeng v. John Wiley & Sons, Inc., the US Supreme Court clarified the standard by which district courts are to determine whether to award attorney's fees in copyright infringement cases. In particular, the Court held that the objective reasonableness of the losing party's claims or defenses should be an important but not a dispositive factor in this decision.
On June 16, 2016, in Kirtsaeng v. John Wiley & Sons, Inc., the US Supreme Court vacated and remanded to the US District Court for the Southern District of New York the Second Circuit's decision to affirm the district court 's refusal to award Supap Kirtsaeng attorney's fees ( (S. Ct. June 16, 2016)). The Court held that the district court may not have realized that objective reasonableness of the losing party's claims need not be the dispositive factor in determining an award of attorney's fees in a copyright infringement case.
This case came before the Supreme Court again after the Court held in 2013 that the Copyright Act's first sale doctrine applied to copies lawfully made abroad (17 U.S.C. §§ 101 - 810). For more information on the underlying substantive copyright infringement claim, see Legal Update, Supreme Court: Copyright "First Sale" Doctrine Applies to Copies Lawfully Made Abroad.
After the matter was remanded and the district court entered judgment in favor of Kirtsaeng, Kirtsaeng, as the prevailing party, petitioned the district court for more than $2 million in attorney's fees. The district court, following Second Circuit precedent:
- Gave controlling weight to the objective reasonableness of John Wiley & Sons, Inc.'s claims.
- Denied Kirtsaeng's petition, finding that imposing a fee award against a copyright holder with an objectively reasonable litigation position would not promote the purposes of the Copyright Act.
The Second Circuit affirmed this ruling, holding the district court properly weighed the reasonableness of Wiley's position and did not abuse its discretion in deciding that the objective reasonableness of Wiley's claims trumped all other factors.
On appeal to the Supreme Court, both parties agreed that Section 505 of the Copyright Act allows courts great latitude in deciding whether to award attorney's fees and that the fee award decision should be one that best serves the purposes of the Copyright Act. However, they differed in significant ways regarding the standard that best accomplished this purpose:
- Wiley argued that giving substantial weight to the reasonableness of the losing party's position would best meet the Copyright Act's objectives.
- Kirtsaeng argued that the decision to award attorney's fees should turn on whether the lawsuit resolved an important and close case, and meaningfully clarified copyright law.
The Court reasoned that Wiley's approach would encourage useful copyright litigation because:
- The objective reasonableness test encourages parties with strong legal positions to stand on their rights, while deterring weakly-positioned parties from proceeding with litigation.
- The district court can better determine whether the losing party's position was unreasonable than whether that party's litigation position best served to clarify issues of copyright law.
Conversely, the Court further reasoned that Kirtsaeng's approach would not produce any sure results, and might even discourage parties from pursuing "meaningful copyright" cases if it meant that a court might decide a case wasn't important enough to warrant a fee award. The Court noted that Kirtsaeng's position was also flawed because it may not be readily apparent to a district court whether a case is of jurisprudential import.
Although the Court agreed that objective reasonableness is an important factor in assessing fee awards, it noted that:
- Other nonexclusive factors identified in Fogerty v. Fantasy, Inc., must also be considered:
- frivolousness;
- motivation; and
- the need in particular circumstances to advance considerations of compensation and deterrence.
- While the Second Circuit formally adopted objective reasonableness as a substantial consideration in determining attorney's fee awards, it emphasized this factor almost to the exclusion of all others, virtually raising a presumption against fee awards where reasonableness is found.
Accordingly, the Court vacated the Second Circuit's decision so that the district court could reevaluate Kirtsaeng's petition, giving substantial weight to Wiley's reasonableness, but also considering the other Fogerty factors.