U.S. Supreme Court Rules "Objective Reasonableness Factor" Important in Awarding Attorney's Fees in Copyright Litigation
The U.S. Supreme Court’s recent unanimous decision in Kirtsaeng v. John Wiley & Sons Inc. (Kirtsaeng II) gives a district court broad discretion when awarding attorney’s fees under the statutory fee-shifting provision of the Copyright Act, 17 U.S.C. § 505. Particularly, a district court should give substantial weight to the objective reasonableness of the losing party’s position, but must also give due consideration to other factors relevant to granting attorney’s fees.
As background, Wiley sued Supap Kirtsaeng in 2008 for importing cheap foreign editions of Wiley’s textbooks and reselling them in the U.S. Although Wiley was initially successful in its claim, in Kirtsaeng v. John Wiley & Sons Inc., 133 S. Ct. 1351 (2013) (Kirtsaeng I), the Supreme Court held that the first sale doctrine of the Copyright Act under 17 U.S.C. § 109(a) could be invoked as a defense to a claim of copyright infringement based on the resale of copyrighted works produced abroad and imported into the U.S. However, Kirtsaeng’s victory was not inexpensive, and he sought to recover attorney’s fees of more than $2 million under Section 505. The district court denied Kirtsaeng’s claim by placing “substantial weight” on the objective reasonableness factor, finding that Wiley had taken reasonable positions during litigation. On appeal, the Second Circuit affirmed, holding that the district court did not abuse its discretion in placing greater emphasis on the objective reasonableness factor over other relevant factors.
Section 505 of the Copyright Act states that a district court, in its discretion, “may…award a reasonable attorney’s fees to the prevailing party,” but offers little guidance beyond that. The Supreme Court in Fogerty v. Fantasy Inc., 510 U. S. 517 (1994), recognized that Section 505 gives a district court broad leeway and provided factors to inform the district court’s fee-shifting decisions; namely, four “nonexclusive factors” including: “(1) frivolousness; (2) motivation; (3) objective unreasonableness concerning both the factual and legal components of the case; and (4) the need in particular circumstances to advance considerations of compensation and deterrence.” Circuit courts vary widely in the interpretation and application of Section 505 and these four “nonexclusive factors.” Some circuits give a presumption in favor of a fee award for a prevailing party; some circuits give no such presumption, but rather ask if the prevailing party’s claim or defense furthers the Copyright Act’s interest; other circuits place substantial weight on the objective reasonableness factor.
After considering the various approaches, the Supreme Court held that a district court must give substantial weight to the objective reasonableness factor because it best advances the well-settled objectives of the Copyright Act, which are to enrich the general public through access to creative works. Giving substantial weight to the objective reasonableness factor “encourages parties with strong legal positions to stand on their rights and deters those with weak ones from proceeding with litigation.” The Supreme Court emphasized, however, that “objective reasonableness can be only an important factor in assessing fee applications – not the controlling one.” The district court must take into account a range of considerations and may “award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones.)” The Supreme Court, recognizing that it was unclear if the district court appreciated the full scope of its discretion, remanded the matter to the district court to conduct the analysis consistent with its discussion of the attorney’s fee standard.
If you have any questions or wish to discuss how this decision impacts your business, please contact one of our Brinks Attorneys.