On June 16, 2016, in the case of Kirtsaeng v. John Wiley & Sons, the United States Supreme Court issued a long-awaited ruling clarifying the standards to be applied when District Courts consider whether prevailing parties in copyright cases should be awarded attorneys' fees.

17 U.S.C. Section 505 has long dictated that District Courts "may...award a reasonable attorneys' fees to the prevailing party....". This language necessarily mandated that District Courts exercise their discretion in making such awards. After decades of inconsistent rulings by both the District Courts and Appellate Courts, the Supreme Court finally weighed in and set forth additional guidelines which, although helpful, do not set forth any bright-line rules.

Many courts previously defaulted in their analysis to a bright-line rule. Specifically, if a party advanced an "objectively reasonable" position, attorneys' fees would not be awarded. In contrast, parties that lost and did not advance an objectively reasonable position were ordered to pay the other side's attorneys' fees. While the Supreme Court in Kirtsaeng reiterated that "objective reasonableness" is an important factor to consider, it is not the only factor that must be considered and indeed cannot be the dispositive factor.

In emphasizing that discretion has limits (lest discretion turn into "whim"), the Supreme Court identified a number of factors that District Courts should look to in assessing whether it was appropriate to award attorneys' fees. What is clear from the Supreme Court's decision is that the relative strength of the parties' positions is still highly relevant and should in most cases be the most significant factor. "The copyright holder with no reasonable infringement claim has good reason not to bring suit in the first instance...and the infringer with no reasonable defense has every reason to give in quickly..." But the Supreme Court went on to say that "objective reasonableness can only be an important factor in assessing fee applications - not the controlling one...[the copyright law] confers broad discretion on District Courts and, in deciding whether to fee-shift, they must take into account a range of considerations beyond the reasonableness of litigating positions."

The Supreme Court then offered some examples of when fee-shifting might be appropriate even against a party that had taken an objectively reasonable position:

  • A party's litigation misconduct may warrant fee-shifting;
  • To deter repeated instances of copyright infringement (this suggests that a serial copyright infringer's prior infringements might be a relevant inquiry in discovery).
  • A copyright holder's overaggressive assertions of copyright claims.

But the above were the only examples offered, and the opinion still leaves great uncertainty as to how the District Courts will treat fee applications. For example, while the court did not expressly comment on settlement positions, it may be reasonable to infer based on the overall tenor of the Supreme Court's opinion that a party that takes an unreasonable settlement position might be viewed to have engaged in "litigation misconduct" that might mitigate against awarding that party attorneys' fees. For example, consider a plaintiff who has a clear infringement case but refuses to settle for a reasonable damage amount choosing instead to use the threat of attorneys' fees as a lever to compel a settlement amount that is not indicative of the exposure of a case. The Supreme Court's decision suggests that such behavior might very well be part of the overall circumstances of a case that might guide a District Court's discretion in not rewarding such a party with attorneys' fees.

In sum, copyright infringement cases must be evaluated early with an eye toward not only whether prevailing is ultimately feasible but also with an eye toward limiting the impact of a potential attorneys' fees award. A win could easily turn into a net loss by virtue of the impact of an award or lack of an award of attorneys' fees.

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