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Supreme Court Injects Uncertainty Into Attorney’s Fee Awards in Copyright Cases

June 23, 2016

The day after it liberalized the standard for awarding enhanced damages in patent cases, a unanimous Supreme Court, in an opinion authored by Justice Kagan, substantially broadened lower courts’ discretion in granting attorney’s fees in copyright litigation.

The Court’s decision came in Kirtsaeng v. John Wiley & Sons, Inc., a case that has been litigated for eight years and resulted in a precedent-setting interpretation of the first-sale doctrine by the Court in 2013. After Kirtsaeng prevailed against Wiley’s claims of copyright infringement, he returned to the district court and sought more than $2 million in attorney’s fees. He lost there and before the Second Circuit Court of Appeals, both courts ruling that the objective reasonableness of Wiley’s position outweighed any competing factors that might have justified an award of fees.

On this appeal, the Supreme Court was called upon to interpret Section 505 of the Copyright Act, which provides that the district court “may … award a reasonable attorney’s fee to the prevailing party.” Unfortunately, the statute is silent as to the factors that are to guide the court’s discretion in deciding whether to do so. In resolving the case, the Court looked to which of the parties’ arguments “advances the Copyright Act’s goals,” namely, “enriching the general public through access to creative works.”

Initially, the Court appeared to side with Wiley’s argument that the objective reasonableness of a losing plaintiff’s or defendant’s position should be determinative, rather than Kirtsaeng’s contention that substantial weight should be given to a “lawsuit’s role in settling significant and uncertain legal issues” as a means of encouraging “useful copyright litigation.”

But the Court stopped short of embracing Wiley’s position, holding that “objective reasonableness can be only an important factor in assessing fee applications–not the controlling one.” Instead, the broad discretion granted the trial court requires it to consider “a range of considerations beyond the reasonableness of litigating positions.” For example, the court may take into account such factors as litigation misconduct, repeated instances of infringement or overaggressive assertion of copyright claims in determining whether to shift fees.

Applying this standard, the Court concluded that the Second Circuit may have gone too far in the direction of making the objective reasonableness of a party’s position determinative. While it was careful to state that it was not prejudging the issue, it directed the district court to reconsider Kirtsaeng’s fee application, “giving substantial weight to the reasonableness of Wiley’s litigating position, but also taking into account all relevant factors.”

By placing more emphasis on the trial court’s discretion in deciding whether to award attorney’s fees in Copyright Act litigation, the Court has injected a substantial degree of uncertainty into parties’ decision-making processes when they are considering whether to litigate or settle these cases. The factors identified by the Court are by no means exhaustive, and it is conceivable that conflicting decisions on similar facts will be rendered in different federal circuits. This decision makes it even more critical that parties faced with copyright litigation–whether as plaintiff or defendant–consult with competent counsel to assess their exposure to attorney’s fees in bringing or defending a case.