June 28, 2016

When Are You Entitled to Attorney’s Fees in a Copyright Infringement Case? The Supreme Court Provides the Answer (Kind of)

5 min

In the Supreme Court's second round reviewing the Kirtsaeng v. John Wiley case ("Kirtsaeng II"), the Court was expected to clarify when a prevailing party in a copyright infringement suit is entitled to attorney's fees. The waters were muddy with conflicting standards set in different jurisdictions. The Court, while moving the ball forward, did not provide any bright lines. The Court still leaves it primarily up to the trial court’s discretion with a few added guidelines as to when attorney's fees are proper.

By way of background, generally speaking in the United States, a party is not entitled to get its attorney's fees paid by the opposing side even if it wins, except if the remedy is specifically provided for by statute. A number of statutes have such provisions for prevailing parties. The Copyright Act is one of them, but not without limitation. First, if you are the plaintiff, or the party suing for copyright infringement, you can only get attorney's fees if, prior to the commencement of the infringement, you had a copyright registration (or at a minimum in some jurisdiction applied for one). Second, even if you had filed for a registration, some courts said it was within the court's discretion as to whether or not to award fees. Other jurisdictions said an award of attorney's fees was presumptive for a prevailing plaintiff. On the other hand, if you are the one being sued for copyright infringement, even if you prevail in defeating the claim, an award is still within the discretion of a trial court (and you could potentially be limited to a prorated amount if the copyright claim was only one of the asserted claims).

In Kirtsaeng I, a Thai student got into a dispute with a U.S. publisher, John Wiley, over whether or not the Thai student was allowed to export from Thailand, authorized non-infringing textbooks, to sell in the United States. The same books sell for much less in Thailand, and he was selling the books that he got when he went home to Thailand for vacation to his friends back on campus in the U.S. for less than the bookstore to help cover his tuition costs (textbook arbitrage).

The issues in Kirtsaeng I were very complicated because the Copyright Act had an internal conflict, specifically between the "First Sale Doctrine," which states that you are entitled to resell a copy of a work after you have legitimately purchased it, and on the other side there is the right of a copyright owner to control the importation of copies of its works into the United States. The Supreme Court in Kirtsaeng I ruled that the first sale doctrine prevailed and, as a result, the student won. As the prevailing party, he then asked the court for about $2 million dollars in attorney’s fees from the publisher, John Wiley. The trial court in New York denied the request and the Second Circuit upheld the ruling. The Second Circuit rule was that, if a claim or defense was "objectively reasonable," then the prevailing party could not get attorney's fees.

In Kirtsaeng II, the Supreme Court held that "objective reasonableness" should be the principal guiding element, but not the only factor to consider. Rather, it held that courts, in addition to the principal factor of "objective reasonableness," must look at other factors. It said they should look at things such as a party's litigation misconduct, for instance, no matter how reasonable the party's claims. The trial court may look to deter repeated instances of copyright infringement or over-aggressive assertions of copyright claims, even if the losing position was reasonable in a particular case. Ultimately, the Supreme Court remanded the case under review back to the trial court to reconsider its decision in view of all the factors that cited in the opinion, giving strong indications that it was not looking for a reversal of the original decision.

Many commentators believe that this decision has brought clarity to the issue; personally, I do not as it has simply added more factors to the fees analysis. What it does appear to mean is that, in most instances, if a party has a legitimate defense to an infringement claim and acts reasonably in defending the claim, it is not going to have to pay attorney's fees even if it loses. On the other hand, if someone does not have a legitimate defense, it is just stalling and trying to run up attorney's fees then it will be hit with an award of attorney's fees. Also, if someone files a frivolous or vexatious claim, it will get hit with fees.

The other takeaway reaffirmed by this case is that you have to register your copyrights, because if you are the copyright owner and you do not have the registration in place prior to the infringement, you are not even in the game. So if you go out and sue somebody for infringement and you did not have a registration prior to infringement, you are at a distinct disadvantage because you, as the aggrieved party, will never get your attorney's fees. However, the defendant could still get its attorney’s fees if it prevails in the suit. There are many reasons why copyright owners do not register, but at the end of the day, when they cannot get statutory damages or attorney's fees, those reasons ring hollow. So register, register, register. If you need any help, let us know.