10-14-2016 | Intellectual Property

Return of Textbook Case Allows Supreme Court to Clarify Standards in Awarding Attorney’s Fees in Copyright Cases

By: David Breiner

In June, the Supreme Court once again issued a ruling involving textbook giant John Wiley & Sons, Inc. (“Wiley”) and Supap Kirtsaeng (“Kirtsaeng”) a student who earned a considerable profit by purchasing Wiley’s textbooks from his native Thailand and reselling them on eBay. In 2013, Kirtsaeng emerged victorious when the Court found that the “first-sale doctrine”, a doctrine that allows subsequent purchasers to sell copies of copyrighted material, applied to Kirtsaeng’s case since Wiley had previously sold its books overseas. As a result, Kirtsaeng was free to purchase the books that Wiley sold in Thailand and resell them in the United States for a higher price. In the most recent suit, the Court considered whether Kirtsaeng was entitled to attorney’s fees. Kirtsaeng relied on 17 U.S.C. § 505:

In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.

(emphasis added). In Fogerty v. Fantasy, Inc. (“Fogerty”) the Supreme Court ruled that the statutory language of 17 U.S.C. § 505 requires a case-by-case analysis where in the court uses its discretion to award attorney’s fees. The Court also offered several factors for lower courts to consider, including frivolousness and objective unreasonableness, when exercising their discretion. Despite this guidance, courts across the country have not been consistent in awarding attorney’s fees in copyright lawsuits. The return of Kirtsaeng gave the Supreme Court the opportunity to establish that the courts’ discretion must be informed by some standard which promotes the objective of the Copyright Act (“Act”).

The objective of the Act is to “enrich[] the general public through access to creative works.” In order to promote that purpose, the statute must find the balance between “encouraging and rewarding authors’ creations while also enabling others to build on that work.” Fee awards should encourage litigation that advances these aims. Wiley and Kirtsaeng offered two different standards they believed would channel court’s discretion to promote the goals of the Act. Wiley argued courts should give substantial weight to the “objective (un)reasonableness of a losing party’s litigating position” while Kirtsaeng believed substantial weight should be given to the “lawsuit’s role in settling significant and uncertain legal issues.”

Ultimately, the Supreme Court agreed with Wiley’s argument that objective reasonableness should be given the most weight when determining fee shifting. This approach encourages those with genuinely reasonable infringement claims and those with genuinely meritorious defenses to infringement allegations to litigate regardless of the cost of attorney’s fees. Those without worthy claims or defenses may choose to not bring suit at all or may choose to end litigation quickly before attorney’s fees climb too high.

The Court held that Kirtsaeng’s argument – that fees should be awarded when a case settles “significant legal issues” – is too uncertain to encourage the litigation of copyright infringement. Relying on fee shifting alone is not enough of an incentive to encourage parties to litigate claims, especially if the parties are conservative risk takers. The uncertainty of Kirtsaeng’s approach is furthered by the fact that courts cannot easily foresee whether a case will meaningfully clarify the law at the time the decision is made.

Despite agreeing with Wiley, the Supreme Court unanimously decided to vacate the appellate court’s decision which denied Kirtsaeng attorney’s fees. The lower court did, however, give substantial weight to the objective reasonableness of Wiley’s litigation position. This is because objective reasonableness is only a part, albeit an important part, of fee shifting considerations. The Supreme Court found the Court of Appeals’ language indicated “that finding reasonableness raises a presumption against granting fees.” This presumption ventures dangerously close to the formulaic approach cautioned in Fogerty. Instead courts must also “tak[e] into account all other relevant factors” when making a decision, “[t]hat means in any given case a court may award fees even through the losing party offered reasonable arguments (or conversely, deny fees even though the losing party made unreasonable ones).”

Moving forward, it seems that courts will be more likely to implement the case-by-case analysis connoted in the statutory language. However, this approach also makes less certain that losing parties with an objectively reasonable litigation position will not have to pay the other side’s attorney’s fee. Both courts and litigants will be forced to take a comprehensive look at the relevant factors before making fee-shifting decisions.