United States: SCOTUS: Full Costs In Copyright Cases Limited By General Costs Statute

In Rimini Street v. Oracle USA, the U.S. Supreme Court held unanimously that the "full costs" the Copyright Act authorizes federal district courts to award a party in copyright litigation means the costs specified in the general federal statute authorizing district courts to award costs, 28 U.S.C. §§ 1821 and 1920. While the Court's decision is only directed toward the Copyright Act, it may have greater ramifications for all "200 subject-specific federal statutes that explicitly authorize the award of costs to prevailing parties in litigation." It is already clear that other IP areas are dealing with similar issues—a dispute is currently before the Supreme Court regarding whether the U.S. Patent and Trademark Office can include its attorney fees as part of the "expenses" to be borne by an applicant who brings suit in federal court after losing an appeal at the USPTO. Thus it is timely to look at this issue in a broad context.

District Court Awards Litigation Expenses

In Rimini Street v. Oracle USA, Oracle sued Rimini Street and its CEO in the Federal District Court of Nevada for copyright infringement and violation of state computer access laws for copying Oracle's software when providing support services to Oracle's customers. The jury found that Rimini Street violated various statutes, including the Copyright Act, and awarded Oracle $50 million in damages. The District Court further ordered Rimini Street to pay Oracle $28.5 million in attorneys' fees, $4.95 million in costs and $12.8 million in litigation expenses such as expert witnesses, e-discovery and jury consulting. The Ninth Circuit affirmed.

Under the statute at issue in Rimini Street, 17 U.S.C. § 505, a district court "in its discretion may allow the recovery of full costs by or against any party" and "may also award a reasonable attorney's fee to the prevailing party as part of the costs." When deciding to affirm the District Court's award, the Ninth Circuit acknowledged that the litigation expenses were beyond the scope of the six categories of costs that may be awarded against a losing party under §§ 1821 and 1920 but held that it was permitted because it reasoned that § 505's "full costs" were not confined to the six categories.

Interpretation with a Little Redundancy

In a 9-0 decision on March 4, 2019, the Supreme Court reversed the Ninth Circuit and remanded for further proceedings.

Justice Kavanaugh, writing for the Court, held that the term "full" did not expand the categories or kinds of expenses that may be awarded as costs under §§ 1821 and 1920, including the phrase in § 505. He noted that "[i]f, for particular kinds of cases, Congress wants to authorize awards of expenses beyond the six categories specified in the general costs statute, Congress may do so." Without such express authority, courts are not permitted to do so themselves. Because the Copyright Act does not explicitly authorize additional costs, it does not authorize any award beyond the six categories specified under the general costs statute.

The Court stated that this is the approach that it had consistently adhered to in its precedents, citing Crawford Fitting Co. v. J. T. Gibbons, West Virginia University Hospitals v. Casey and Arlington Central School District Board of Education v. Murphy. It noted that the term "full" did not alter the meaning of the word cost but was merely a term of quantity or amount describing all the costs available under the law. When Oracle tried to argue that the history of the phrase "full costs" supported the Ninth Circuit's interpretation, the Court said, first, that it frowned upon such "extensive historical excavation to determine the meaning of cost statutes." Second, it stated that history did not support Oracle's position. The justices found that in both statutes and case law "full costs" did not encompass expenses beyond those that could be awarded under applicable law. They were also not persuaded when Oracle argued that the meaning of "full costs" changed when Congress amended the Copyright Act in 1976. Oracle argued that the term "full" would have been surplusage when Congress made the award discretionary up to 100 percent of costs under the 1976 Act if they didn't mean for it to encompass expenses beyond the costs listed in §§ 1821 and 1920. The Court explained that the 1976 amendment did not change the meaning of the phrase "costs" and that Oracle's own redundancy argument created redundancy—interpreting the "full costs" the way Oracle suggested would have made the second sentence of § 505 granting attorneys' fees unnecessary. It still obliquely acknowledged Oracle's point, ultimately disagreeing with it, by stating that "[s]ometimes the better overall reading of the statute contains some redundancy."

Implications for Future Awards

Although the Supreme Court's interpretation of the phrase "full costs" is centered on § 505 of the Copyright Act, it notes that the Act is merely one of 200 subject-specific federal statutes that explicitly authorize the award of costs. This decision has ramifications for all of those statutes, suggesting that non-taxable costs, such as expert fees, will likely be unavailable unless the statutes expressly authorize them.

With respect to the Copyright Act, this interpretation of "full costs" may be a sign that the Court may take a more textualist approach in interpreting the Act in the future. One place where a more textualist approach can have a significant impact is in 17 U.S.C. § 504(c): statutory damages. The statute states that a copyright owner may elect to an award of "statutory damages for all infringements involved in the action... in a sum of not less than $750 or more than $30,000 as the court considers just." (Emphasis added.) Thus far, courts have interpreted that to mean that a copyright owner may be awarded the sums listed for each individual instance of infringement but an accused infringer could reasonably argue that the text of the statute limits the copyright owner to one award of statutory damages for all the infringement of a work that occurs.

This holding may also provide a preview of the Court's decision in Iancu v. NantKwest, a patent case to which the Supreme Court granted certiorari the same day as it handed down the Rimini Street decision, and which is set to be argued on [date] or ["this coming term"]. Iancu concerns the USPTO's controversial policy that permits the agency to seek attorneys' fees from applicants who seek de novo appeal to a district court after unsuccessful proceedings before the Patent Trial and Appeal Board.

Specifically, the Court will determine whether the phrase "[a]ll the expenses of the proceedings" in 35 U.S.C. § 145 encompasses the personnel expenses that the USPTO incurs when its employees, including attorneys, defend the agency in a § 145 litigation. Last July, the en banc Federal Circuit held that the USPTO's policy of seeking attorneys' fees from applicants, regardless of whether the applicant won or lost before the district court, violated the American Rule that litigants must pay their own legal fees. But the statute calls for the applicant to pay "[a]ll the expenses of the proceedings" and literal interpretation of those words would include the USPTO's fees. Given the Court's ruling in Rimini Street, there is a higher chance that it could rule in favor of the USPTO and that applicants going forward will be required to pay all the USPTO's fees if they decide to bring a civil action to challenge the PTAB's decision.

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