Copyright Infringement Damages – Prevailing Defendant seeking its attorney fees!

Introduction

The Copyright Act of 1976, 17 U.S.C. § 505, provides in relevant part that in any copyright infringement action “the court may award a reasonable attorney's fee to the prevailing party as part of the costs.”  Individuals and business owners who receive copyright infringement notices, cease and desist letters, subpoena notices of ISP's (torrent lawsuits) and software audit demand letters from Autodesk or the Business Software Alliance often want to know what happens if they “fight” the allegations of copyright infringement.  As I mention, there is potential under the federal copyright laws to recover your attorney fees, but litigants should realize this is not a sure thing.  This blog discusses the “two sided” attorney fees provision.

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United States Supreme Court – Fogerty v. Fantasy, Inc. case

This is one of the key cases dealing with the issue of whether or not a successful defendant can seek to have the Plaintiff pay for their attorney fees if they defeat the Plaintiff in a federal lawsuit.  This was a music infringement case.

FACTS:  Petitioner John Fogerty is a successful musician, who, in the late 1960's, was the lead singer and songwriter of a popular music group known as “ Creedence Clearwater Revival.” In 1970, he wrote a song entitled “Run Through the Jungle” and sold the exclusive publishing rights to predecessors-in-interest of respondent Fantasy, Inc., who later obtained the copyright by assignment. The music group disbanded in 1972 and Fogerty subsequently published under another recording label. In 1985, he published and registered a copyright to a song entitled “ The Old Man Down the Road,” which was released on an album distributed by Warner Brothers Records, Inc. Respondent Fantasy, Inc., sued Fogerty, Warner Brothers, and affiliated companies in District Court, alleging that “The Old Man Down the Road” was merely “Run Through the Jungle” with new words. The copyright infringement claim went to trial and a jury returned a verdict in favor of Fogerty. After his successful defense of the action, Fogerty moved for reasonable attorney's fees pursuant to 17 U.S.C. § 505. The District Court denied the motion, finding that Fantasy's infringement suit was not brought frivolously or in bad faith as required by Circuit precedent for an award of attorney's fees to a successful defendant. The Court of Appeals affirmed, 984 F.2d 1524 (CA9 1993), and declined to abandon the existing Ninth Circuit standard for awarding attorney's fees which treats successful plaintiffs and successful defendants differently.

The Court's Ruling – Copyright Attorney Fees are two-sided

The United States Supreme Court reversed the lower courts and remanded the case back to the district court.  Here is some language from the holding of the case:

“Thus we reject both the “dual standard” adopted by several of the Courts of Appeals and petitioner's claim that § 505 enacted the British Rule for automatic recovery of attorney's fees by the prevailing party. Prevailing plaintiffs and prevailing defendants are to be treated alike, but attorney's fees are to be awarded to prevailing parties only as a matter of the court's discretion.

There is no precise rule or formula for making these determinations,” but instead equitable discretion should be exercised “in light of the considerations we have identified.” See Hensley v. Eckerhart, 461 U.S. 424, 436–437, 103 S.Ct. 1933, 1941–1942, 103 S.Ct. 1933 (1983). Because the Court of Appeals erroneously held petitioner, the prevailing defendant, to a more stringent standard than that applicable to a prevailing plaintiff, its judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.

See Fogerty v. Fantasy, Inc., 510 U.S. 517, 534–35, 114 S. Ct. 1023, 1033, 127 L. Ed. 2d 455 (1994).

Factors a federal court may look to before awarding a Defendant attorney fees in a copyright infringement case

While the 1994 Fogerty decision laid out the general rule, other courts have further defined this ruling and provided guidelines for federal judges seeking to make this determination of how to exercise their equitable discretion.   For example,  in Entm't Research Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211, 1228–29 (9th Cir. 1997) the ninth circuit court discussed certain factors to guide federal judges in deciding when to exercise their discretion to award a defendant their attorney fees in a copyright case.  The Court noted:

“We have established that “an award of attorney's fees to a prevailing defendant that furthers the underlying purposes of the Copyright Act is reposed in the sound discretion of district courts.  Moreover, such discretion is not cabined by a requirement of culpability on the part of the losing party.  Within this framework, district courts are given wide latitude to exercise “equitable discretion.” See generally, Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994). Some of the factors that can affect a district court's decision are: (1) the degree of success obtained; (2) frivolousness; (3) motivation; (4) the objective unreasonableness of the losing party's factual and legal arguments; and (5) the need, in particular circumstances, to advance considerations of compensation and deterrence. So these factors need to be taken into account before deciding if you want to challenge a software audit, bittorrent or utorrent defense case, DMCA litigation or other copyright infringement action.

Torrent Lawsuits / Software Audits – Can I get my attorney fees paid if I prevail in a bittorent case or BSA or Autodesk audit following a forensics exam?

Our firm handles copyright infringement cases across the United States for creative individuals and business owners small and large.  One of the issues that comes up in our defense of parties being accused of infringement is whether or not it is worth challenging, or just pay the amount of money (often a large amount) that is being demanded.  My general thoughts are if you didn't do something you should not have to pay a ransom or extortion fee.

In torrent illegal movie download cases some individuals claim they never downloaded the movie (for example a , or a London Has Fallen video), and they want to fight the allegations.  I say fine, we can hire a forensics examiner and produce the results to the opposing counsel and seek to have the drop the case.  For example, possibly the internet “subscriber” has a defense to copyright infringement (ex. they had an unsecured or unprotected wireless wifi and a “freeloader” downloaded the movie).  In these cases, assuming the results of a forensic exam point to no infringement, and assuming they drop the case, your remedy to recover attorney fees would likely be to file a lawsuit for malicious prosecution, however, that is a high hurdle as you have to show malice and no good faith grounds to bring the lawsuit.  Those cases are tough to win, and normally require attorney fees be paid (as opposed to being able to find a lawyer to take the case on a contingency fee basis).

The other option would be to litigate the case in federal court, prevail on the merits, and then request that the judge exercise its discretion to award Attorney fees as discussed above.   Again, this is a gamble as:

(1) litigation can be unpredictable;

(2) the costs to litigate are not cheap,

and

(3) even if you win, you have to make the case to the Court that the attorney fees should be awarded as they are not automatic.  

These prospects make many litigants decide to try to find a way to work the case out privately, confidentially, and anonymously, and get the case settled.  This is why at times we refer to these cases as “copyright bully cases” where business owners facing software audits (who can literally prove for example that they have no copies of Autocad or Revit installed on their computers, servers and latptops), still may end up paying for the foresnic examination to prove their innocence.  This can be very frustrating.  It should be noted that some software publishers such as Microsoft, Adobe, and Autodesk might be willing to “drop” their case if the business owner or other authorized representative signs a “certificate of compliance.” 

Of course, we can always request attorney fees as part of a settlement (i.e. have the copyright holder or software company pay for the costs of any forensics that may have been required), but given the above hurdles to recovering attorney fees for a prevailing Defendant, likely they would deny this request and offer to dismiss the case with prejudice at best.

Another case – Kirtsaeng v. John Wiley & Sons, Inc. (United States Supreme Court)

In Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979, 1983, 195 L. Ed. 2d 368 (2016) the U.S. Supreme Court held:

“Section 505 of the Copyright Act provides that a district court “may” award a reasonable attorney's fee to the prevailing party.” 17 U.S.C. § 505. The question presented here is whether a court, in exercising that authority, should give substantial weight to the objective reasonableness of the losing party's position. The answer, as both decisions below held, is yes—the court should. But the court must also give due consideration to all other circumstances relevant to granting fees; and it retains discretion, in light of those factors, to make an award even when the losing party advanced a reasonable claim or defense. Because we are not certain that the lower courts here understood the full scope of that discretion, we return the case for further consideration of the prevailing party's fee application.” Facts of Kirtsaeng: “Returning victorious to the District Court, Kirtsaeng invoked § 505 to seek more than $2 million in attorney's fees from Wiley. The court denied his motion. Relying on Second Circuit precedent, the court gave “substantial weight” to the “objective reasonableness” of Wiley's infringement claim.  In explanation of that approach, the court stated that “the imposition of a fee award against a copyright holder with an objectively reasonable”—although unsuccessful—“litigation position will generally not promote the purposes of the Copyright Act.” Id., at 11a (quoting Matthew Bender & Co. v. West Publishing Co., 240 F.3d 116, 122 (C.A.2 2001) (emphasis deleted)). Here, Wiley's position was reasonable: After all, several Courts of Appeals and three Justices of the Supreme Court had agreed with it. And according to the District Court, no other circumstance “overrode” that objective reasonableness, so as to warrant fee-shifting. The Court of Appeals affirmed, concluding in a brief summary order that “the district court properly placed ‘substantial weight' on the reasonableness of [Wiley's] position” and committed no abuse of discretion in deciding that other “factors did not outweigh” the reasonableness finding. 605 Fed.Appx. 48, 49, 50 (C.A.2 2015).

Federal Courts may look to Certain Factors such as Motives and need to Deter

The Kirtsaeng case cited above also noted:

“The statutory language, we stated, “clearly connotes discretion,” and eschews any “precise rule or formula” for awarding fees.  Still, we established a pair of restrictions.

First, a district court may not “award attorney's fees as a matter of course”; rather, a court must make a more particularized, case-by-case assessment.

Second, a court may not treat prevailing plaintiffs and prevailing defendants any differently; defendants should be “encouraged to litigate [meritorious copyright defenses] to the same extent that plaintiffs are encouraged to litigate meritorious claims of infringement.”

In addition, we noted with approval “several nonexclusive factors” to inform a court's fee-shifting decisions:

“frivolousness, motivation, objective unreasonableness and the need in particular circumstances to advance considerations of compensation and deterrence.

If you are seeking your attorney fees in a software infringement, music infringement, or torrent illegal movie download case, you will want to argue the facts as to why the suit was frivolous (ex. in software audits, the software alliance had no reasonable grounds to accuse you of copyright infringement based upon the testimony of a single “informant” that they never met, and was never vetted for veracity, and was in fact nothing more than a defaming disgruntled employee).  In cases involving illegal downloading of adult pornographic movies, perhaps involving Malibu Media, for example, your argument might be that they had the wrong subscriber and had no reasonable basis to name you in the lawsuit.  We saw this type of argument in one  case.  These are just a few examples.

Conclusion

Whether a successful litigant in a federal copyright action can recover their attorney fees or not is a matter of discretion for the federal court judge.  There are guiding factors to help make this determination and if the alleged copyright holder “gets it wrong” they could be held liable for paying the Attorney Fees of the prevailing Defendant who is found NOT to be an infringer. As alluded to above, this could play out in several types of cases:

1.  Software audits from the BSA, SIIA, Autodesk, Adobe, IBM, Attachmate, Oracle and others where it is determined there was no software licensing infringement (assuming the case went to Court, or where a Defendant files a declaratory judgement action)

2.  A music infringement case where a band, artist, singer, songwriter is found NOT to have infringed the songs, lyrics, or music of an alleged copyright holder and wants to recover their costs and fees expended to prove their innocence, transformative use, parody, or fair use.

3.  A case where it was found that certain defenses applied (ex. the movie company had the wrong IP address, there was an unsecured WIFI that caused third parties to download the movies, or where “IP spoofing” was involved for example.

4.  Other copyright infringement cases that fail (ex, architecture, tattoo, art, paintings and similar cases involving creative goods).

Contact a Copyright Infringement & Piracy Law firm

Our intellectual property law firm can help both Plaintiff's and Defendants, business owners and creative individuals across the United States who are involved in copyright legal issues, arbitration or mediation involving books, plagiarism, movie downloads, software audits, music infringement and other creative works of authorship that are the subject of a dispute.  We offer a free initial consultation by calling (877) 276-5084.   We offer low flat rate legal fees (predictable fees not based on one or more attorneys “billing” your case for all it's worth) for most non-litigation cases.  In some cases we might be able to structure a contingency fee arrangement for copyright rights holder cases (ex. Plaintiff cases).