Sunday, April 14, 2019

Second Circuit - Copyright Law - Attorneys Fees To Prevailing Parties Where Copyright & Trademark Claims Not Adjudged

Can a "prevailing party" in a copyright or trademark action obtain attorneys fees even if the victory had nothing to do with the Copyright Act or Lanham Act?   The Second Circuit, in a pair of recent decisions involving alleged infringement of test preparation materials, says "yes."

Manhattan Review Test Prep

In Manhattan Review LLC v. Yun - 2019 WL 1319813 and 2019 WL 1326528 the Second Circuit divided its opinion into two decisions, one of precedential value limited to the question of whether a "prevailing party" could collect attorneys fees and one by summary order dealing with the questions of whether attorneys fees were appropriate under the Copyright Act and Lanham Act.  This federal action arose in the wake of a failed state action.  In the state action based on various state law claims, the litigation turned on the corporate status of Manhattan Review LLC because its corporate status had been cancelled by the State of Delaware.   Manhattan Review's loss of corporate status led to dismissal of copyright and trademark claims brought derivatively on its behalf.   Manhattan Review's principal obtained a certificate of good standing and moved to vacate the dismissal.  The state court denied the motion to vacate.

Manhattan Review LLC and its principal filed the federal action for copyright and trademark infringement, failing to mention the state court action.  The court found the certificate of good standing did not nullify Delaware's cancellation and ruled against the plaintiffs on the grounds of collateral estoppel, finding that plaintiffs had received a full and fair opportunity to litigate.

The defendants sought, and were awarded attorneys fees and costs pursuant to section 505 of the Copyright Act and section 35(a) of the Lanham Act.   Plaintiff objected, arguing that the copyright and trademark claims had not been considered on the merits, making statutory awards of attorneys fees inapplicable.

The Second Circuit rejected the argument as foreclosed by the U.S. Supreme Court's 2016 decision in CRST Van Expedited, Inc. v. EEOC which decided that the "defendant may prevail even if the court's final judgment rejects the plaintiff's claim for a non-merits reason."

The Second Circuit's summary order dealt with the questions of whether attorneys fees were properly assessed under the Copyright Act and Lanham Act which afford district court judges discretion - and boundaries on their discretion - in awarding attorneys fees.  The Second Circuit affirmed the finding that plaintiffs' litigation positions were "objectively unreasonable and frivolous" and that "the failure to mention a relevant prior action indicates a lack of candor".   Accordingly, the Second Circuit concluded that approximately $49,000 in attorneys fees were appropriately awarded under the Copyright Act and as an "exceptional case" under the Lanham Act.

Chapter 18 of Copyright Litigation Handbook covers Attorneys Fees and Costs.  This decision illustrates that persisting in pursuing unsuccessful theories in copyright and trademark matters can be a dangerous pursuit.
 Copyright law, fine art and navigating the courts. Attorney and AuthorCopyright Litigation Handbook (Thomson Reuters Westlaw 2018-2019) by Raymond J. Dowd
 Copyright Litigation Handbook on Westlaw

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