Supreme Court Instructs Courts On How and When to Award Attorney Fees under the Copyright Act (Kirtsaeng v. Wiley)

by Nancy Wolff, DMLA Counsel and Brittany Kaplan, Cowan, DeBaets, Abrahams & Sheppard LLPAttorney’s fees under the Us Copyright Act are discretionary with the court, and not awarded as a matter of course. The last time the Supreme Court examined attorney’s fees under the Copyright Act was in 1994 in Fogerty v. Fantasy, Inc., 510 U. S. 517 (1994) where it provided factors for the lower courts to consider and confirmed that defendants, as well as plaintiffs could seek fees as a prevailing party.In the recent case that reached the Supreme Court, the publisher John Wiley & Sons, Inc. brought a copyright infringement action against Supap Kirtsaeng, a citizen of Thailand who studied math at Cornell University. Kirtsaeng saw an opportunity to make money when he realized that Wiley sold identical English-language textbooks in both countries, but for a much lower price in Thailand. Kirtsaeng could do the math and asked relatives to purchase the textbook in Thailand and send them to him in the United States for resale to American students, at a tidy profit.Both the District Court and Second Circuit found in favor of Wiley. Kirtsaeng appealed to the U.S. Supreme Court, which reversed the lower courts’ decisions, determining that Kirtsaeng was protected by the Copyright Act’s “first-sale” doctrine despite the fact that the textbooks at issue had been manufactured abroad. This was a previously unsettled area of law under the Copyright Act. As a prevailing party, Kirtsaeng sought an award of more than $2 million in attorney’s fees under the Copyright Act’s fee-shifting provision, 17 U.S.C. § 505. The District Court denied Kirtsaeng’s application, holding that Wiley, although the losing party, had taken reasonable legal positions. The Second Circuit affirmed and Kirstaeng appealed to the Supreme Court.Copyright Act Section 505:Under Section 505 a court may award reasonable attorney’s fees to a prevailing party. While the Act provides no precise rule or formula, the Supreme Court in Fogerty identified several factors for courts to consider including frivolousness, motivation, objective unreasonableness, and the need in particular circumstances “to advance considerations of compensation and deterrence.” The Supreme Court also stated that a lower court may not award attorney’s fees as a matter of course, and may not treat prevailing plaintiffs and prevailing defendants differently.The Supreme Court’s Decision:Acknowledging that further guidance regarding attorney’s fees would be useful, the Supreme Court sought the proper approach in considering the propriety of fee awards under Section 505 that would best advance of the objectives of the Copyright Act—namely, enriching the general public through access to creative works by striking a balance between rewarding and protecting creators while also enabling others to make use of existing content. Wiley proposed placing substantial weight on the objective reasonableness of a losing party’s position; in contrast, Kirtsaeng proposed giving special consideration to whether a lawsuit meaningfully clarified copyright law by resolving important legal issues.The Court agreed that Wiley’s test encourages parties with strong positions to assert their rights. Under this approach, a copyright holder whose rights have been infringed would have good reason to bring and maintain a lawsuit, even if available damages are small. Similarly, a party defending against a meritless infringement claim would be incentivized to maintain a strong defense. Conversely, applying Kirtsaeng’s test would not produce any similarly sure benefits. While perhaps advancing the public interest, Kirtsaeng’s test would not necessarily encourage parties to litigate close cases because “the hallmark of hard cases is that no party can be confident if he will win or lose,” and the potential for fee shifting raises high stakes even higher. Even where a court, after ruling on the merits is able to assess whether the losing party advanced an unreasonable claim or defense, it cannot necessarily know whether its decision will have broad legal significance. In that sense, the Court found Wiley’s approach to be “more administrable.”The Court warned that while objective reasonableness may be an important factor in assessing fee awards, it should not be “controlling.” In other words, courts should consider all factors relevant to granting fees—for instance, a party’s litigation misconduct, or the necessity of deterring repeated instances of copyright infringement or repeated instances of overly aggressive copyright infringement claims. The Court further explained that a fee award may be appropriate even when the losing party advanced a reasonable claim or defense if, considering “all the circumstances,” a fee award would further “the Copyright Act’s essential goals.” The Supreme Court did not suggest the lower court was wrong in declining Kirtsaeng’s fee award but sent the case back for reconsideration based on its clarification that all factors should be considered.Takeaway:The Court’s decision offers some further guidance to lower courts assessing fee applications under the Copyright Act, which may lead to greater uniformity of lower court decisions. Specifically the Supreme Court observed that courts within the Second Circuit have come dangerously close to establishing a presumption against granting fees when a claim or defense is found to be reasonable, but warned that such an approach “goes too far.” Parties litigating in the future should expect a more nuanced and possibly complex fee award analysis, and should not presume that fees necessarily will (or will not) be awarded based solely on the reasonableness of the losing party’s position.