Saturday, February 06, 2016

Is A "Prevailing Party" Really Entitled To Attorneys Fees Under the Copyright Act? SCOTUS To Decide

$2 Million In Pro Bono Legal Fees At Issue In Copyright First Sale Doctrine Case

On January 15, 2016, the U.S. Supreme Court granted a petition for certiorari based on the following preamble and question presented:

Section 505 of the Copyright Act provides that a “court may … award a reasonable attorney’s fee to the prevailing party” in a copyright case. 17 U.S.C. § 505. The Ninth and Eleventh Circuits award attorneys’ fees when the prevailing party’s successful claim or defense advanced the purposes of the Copyright Act. The Fifth and Seventh Circuits employ a presumption in favor of attorneys’ fees for a prevailing party that the losing party must overcome. Other courts of appeals primarily employ the several “nonexclusive factors” this Court identified in dicta in Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994). And the Second Circuit, as it did in this case, places “substantial weight” on whether the losing party’s claim or defense was “objectively unreasonable.” Matthew Bender & Co. v. W. Publ’g Co., 240 F.3d 116, 122 (2d Cir. 2001).

The question presented is: What is the appropriate standard for awarding attorneys’ fees to a prevailing party under § 505 of the Copyright Act?

The case that gave rise to this question Kirtsaeng v. John Wiley & Sons, Inc.   The Kirtsaeng case is an extraordinarily important case involving the "first sale doctrine" under the Copyright Act.  The first sale doctrine is basically that once a copyright owner sells a work that contains the copyrighted material, the copyright owner cannot restrict further sales.  This is why you can freely buy and sell used books or DVDs without asking the copyright owner's permission.

Kirtsaeng lawfully purchased textbooks in his native Thailand that had been published in Thailand by a licensee of John Wiley & Sons.  He imported them into the United States.  John Wiley & Sons argued that the first sale doctrine did not apply to works manufactured abroad.  Kirtsaeng lost at the district court and in the Second Circuit.  The U.S. Supreme Court reversed, finding that the first sale doctrine applied to copyrighted works first sold outside the United States.

More Kirtsaeng detail on Wikipedia here.

Copyright Litigation Blog's April 17, 2011 post (supporting Judge Murtha's dissenting view) that the first sale doctrine applied to Kirtsaeng here.

Here is the case page at SCOTUS Blog for the March 19, 2013 SCOTUS Kirtsaeng decision.  SCOTUS Blog has links to the oral arguments, a great resource for advocates.

Here is the case page for the January 15, 2016 grant of certiorari.  This case is of tremendous import for anyone practicing in the field of copyright law and is likely to have an important and lasting impact on whether or not copyright owners and users, [whether plaintiffs or defendants] will obtain attorneys fees for advancing meritorious claims or defenses.

In this case, the Orrick law firm took on the case pro bono and later sought over $2 million for representing Kirtsaeng.   As the petition points out, due to Orrick's representation, Kirtsaeng was victorious against all odds (having lost at the district court and again at the Second Circuit).  The petition clearly shows how the circuit courts of appeals view awards of attorneys fees in a dramatically different light.  The petition argues that the Second Circuit's view of awards of attorneys fees, where the "objective unreasonableness" of the non-prevailing party's claims or defenses is considered the paramount factor, is markedly different and changes the result.  In the Ninth Circuit there is a presumption that the prevailing party should obtain fees and the other circuits are somewhere in between.  The petition further argues that forum shopping is encouraged.

As I recently discussed here, the U.S. Department of Commerce has advocated changes in the Copyright Act related to awards of statutory damages under the Copyright Act.   As I recently discussed here, cases involving copyright claims have dramatically increased in the last year, with very significant numbers of cases filed outside the Second Circuit.   The Second Circuit had 1,198 filings, the Ninth Circuit had 2,678, the Fifth Circuit 2,534 and the Third Circuit 2,107.

The Department of Commerce White Paper discussed important differences of opinions in how copyrights should be licensed, whether the fair use doctrine works or not, how to foster creativity in a world where digital appropriation is central to the creative process, and how to fairly punish infringers and reward copyright owners.  The issues roiling the copyright world will likely excite a great deal of passion around the Kirtsaeng case, even though it revolves around the usually unsexy topic of attorneys fees.  Starving artists can't afford attorneys and can rarely prove damages.  If the chance of recovering legal fees is low, these folks won't have representation.  On the other hand, assessing legal fees against non-prevailing parties seeking to assert speech-related rights may have an undue chilling effect and could effectively impose-criminal like penalties for forms of speech.  And copyright owners ought to have some degree of certainty that the reasonable exploitation of their works will be facilitated when they are in the right.   The current system does not seem to meet the needs of many important constituents.

My book Copyright Litigation Handbook (Thomson Reuters Westlaw 2015-2016) has separate chapters addressing damages and attorneys fees.   Copyright Litigation Handbook is designed to guide a legal practitioner from the client interview and investigation through to a final judgment.  Many practitioners underestimate the complexities and risks relating to attorneys fees. 

Orrick's petition for certiorari makes a pretty strong argument that John Wiley had been (incorrectly) shaking down grad students like Kirtsaeng for years and that Kirtsaeng's case has stopped that practice, furthering the purposes of the Copyright Act and clarifying important points of law.
 Copyright law, fine art and navigating the courts. All practice, no theory.Copyright Litigation Handbook (Thomson Reuters Westlaw 2015-2016) by Raymond J. Dowd
 Copyright Litigation Handbook on Westlaw

Monday, February 01, 2016

Creativity, Copyright Trolls and Proposed Changes To The Copyright Act's Statutory Damages Provisions

Department of Commerce Recommends Changes To the Copyright Act

The Department of Commerce's Internet Task Force on Copyright Policy, Creativity and Innovation in the Digital Economy has issued a White Paper on Remixes, First Sale Doctrine and Statutory Damages.   The Task Force pretty much concludes that everything is hunky dory with remixes and that the market and educational programs will sort things out.  Ditto on the first sale doctrine.

But with statutory damages, the Task Force has made some significant recommendations, seemingly troubled by the Tenenbaum and Rasset-Thomas outlandishly high jury awards, on the one hand, and copyright trolls on the other.  On yet another hand, the task force had concerns about stifling innovation where a new service or technology might be subjected to huge liabilities in an area where the question of infringement was unsettled.

The Task Force recommended three amendments to the Copyright Act to address
some of the concerns presented: 
1.incorporating into the Copyright Act a list of factors for courts and juries to consider when determining the amount of a statutory damages award.
2. changes to the copyright notice provisions that would expand eligibility for the lower
“innocent infringement” statutory damages awards.
3. in cases involving non-willful secondary liability for online services offering a large number of works, courts be given discretion to assess statutory damages other than on a strict per-work basis.

The Task Force proposes a new clause in subsection Section 504(c)526 as follows:
FACTORS TO CONSIDER -- In making any award under this subsection, a court shall
consider the following nonexclusive factors in determining the appropriate amount of the
(1) The plaintiff’s revenues lost and the difficulty of proving damages.
(2) The defendant’s expenses saved, profits reaped, and other benefits from the
(3) The need to deter future infringements.
(4) The defendant’s financial situation.
(5) The value or nature of the work infringed.
(6) The circumstances, duration, and scope of the infringement, including whether it
was commercial in nature.
(7) In cases involving infringement of multiple works, whether the total sum of
damages, taking into account the number of works infringed and number of
awards made, is commensurate with the overall harm caused by the infringement.
(8) The defendant’s state of mind, including whether the defendant was a willful or
innocent infringer.
(9) In the case of willful infringement, whether it is appropriate to punish the
defendant and if so, the amount of damages that would result in an appropriate

My book Copyright Litigation Handbook 2015-16 Chapter 17 Damages and Profits reviews federal court procedures and case law related to statutory damages and proving damages and profits.   Chapter 18 Attorneys Fees and Costs may also be helpful.  The full table of contents here.

The White Paper is worth reading as a summary of current debates over copyright law as it relates to the internet.   The Electronic Frontier Foundation put out an analysis worth reading here with a nice-sounding title, but seemed to be disappointed with the recommendations on remixes and first sale.

 Copyright law, fine art and navigating the courts. All practice, no theory.Copyright Litigation Handbook (Thomson Reuters Westlaw 2014-2015) by Raymond J. Dowd
 Copyright Litigation Handbook on Westlaw