Supreme Court Clarifies Standard for Awarding Attorney Fees in Copyright Cases

In most lawsuits in this country, each party pays its own attorney fees regardless of who wins, except where a contract between the parties or a specific statute provides otherwise. This is known as the "American Rule." The Copyright Act is one such statutory exception. Section 505 of the Copyright Act provides that a federal district court "may … award a reasonable attorney's fee to the prevailing party." In a previous decision from 1994 interpreting this statute, Fogerty v. Fantasy, Inc., the Supreme Court said that although §505 allows wide discretion, courts may not award attorney fees to prevailing plaintiffs or defendants as a matter of course, but must consider all relevant factors on a case-by-case basis, including frivolousness, motivation, deterrence, compensation, and the reasonableness of the losing party's position. This has become known as the "Fogerty" factors. 

Since 1994, federal courts have given different interpretations and different weight to these factors. Some courts have determined that there is a rebuttable presumption of awarding fees to the prevailing party, others have held that all "Fogerty" factors must be considered equally without giving special weight to any one factor, and still others have said substantial weight must be given to the reasonableness of a losing party's position. This has led to a split among the various federal circuit courts on how to apply the "Fogerty" factors.

On June 16th of this year, in a unanimous decision in a case entitled Kirtsaeng v. John Wiley & Sons, Inc., the Supreme Court clarified the standard to be applied by district courts in exercising discretion to award attorney fees to prevailing parties (plaintiffs or defendants) in copyright cases. The Court reiterated the Fogerty decision and said district courts must consider all of the factors, while not awarding attorney fees to the prevailing party as a matter of course. However, the Court held that "substantial weight" should be given to the reasonableness of the losing party's position as long as that does not become the controlling factor. In other words, according to the Court, attorney fees may be awarded in the court's discretion even though the losing party offered reasonable arguments for its non-winning position, and conversely, attorney fees may be denied even though the losing party made unreasonable arguments.

The Kirtsaeng case is unusual because it marked the second time in three years that the parties had been before the Supreme Court. Supap Kirtsaeng, an enterprising young man from Thailand, came to the United States to study math as a graduate student at Cornell. To help defray the cost for part of his educational expenses, he and his family purchased used English-language textbooks abroad and re-sold them in the United States, where used textbooks typically sell for more money. John Wiley & Sons, the publisher of the textbooks, sued him for copyright infringement. Although §109(a) of the Copyright Act allows the lawful purchaser of a copyrighted work to re-sell or otherwise dispose of that work as he or she wishes, Wiley claimed that the so-called "first sale" doctrine only applies to works lawfully purchased in the United States. 

In 2013, the Supreme Court found in Kirtsaeng's favor, ruling that the "first sale" doctrine also applies to copyrighted works lawfully purchased abroad. Kirtsaeng, as the prevailing party, then sought to recover his attorney fees which ostensibly exceeded $2 million. Wiley argued that attorney fees should be denied to Kirtsaeng, since this was the first time the Court had applied the "first sale" doctrine to copyrighted works purchased abroad and hence its position was not unreasonable. The Supreme Court has now remanded the attorney fee portion of the case back to the district court to give substantial (but not controlling or presumptive) weight to the reasonableness of Wiley's position, while at the same time considering all of the other "Fogerty" factors.

About the author:

Leslie Steinau practices in the publishing, trademark and corporate areas for the Firm and recently concluded a three-year term as a member of the NYC Bar's Copyright & Literary Property Committee, where he reported on this case for the committee.