Supreme Court Rules on Copyright Fee Shifting

The U.S. Supreme Court
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The U.S. Supreme Court in Washington, D.C.

The decision is likely to be cited in most future copyright cases.

Reviving a $2 million attorney fee dispute in a high-profile copyright case, the U.S. Supreme Court unanimously decided Thursday (June 16) that federal courts should examine a variety of factors in deciding whether to award fees to winners in copyright infringement cases, and sent the case, Kirtsaeng v. John Wiley & Sons, back to the lower court for a new ruling on fees.

The decision from the nation’s highest court brings additional clarity to a technical area and may result in more meritorious decisions, but it’s unclear whether it will significantly increase or decrease the amount of complexity of copyright litigation. Nonetheless, it will no doubt be cited by the winners and losers in most copyright disputes going forward, such as the Led Zeppelin “Stairway to Heaven” case filed two years ago that went to trial this week in Los Angeles.

In the underlying Kirtsaeng case, a 6-3 Court turned away a copyright infringement claim against Supap Kirtsaeng, a student who made a $100,000 profit by importing and reselling textbooks he had asked family and friends to purchase abroad at list prices substantially lower than the publisher’s U.S. pricing. After his 2013 SCOTUS victory, Kirtsaeng sought an attorney’s fee award against Wiley, which the district court and Second Circuit rejected.

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Win or lose, litigants in the U.S. usually bear their own attorneys fees, but some statutes provide for fee shifting. Among those is the Copyright Act, which says that the federal district court “may . . . award a reasonable attorney’s fee to the prevailing party.” But what factors should the court consider when deciding whether to do so?

It turns out that courts across the country have applied different standards, a fact that is often catnip for the Justices. In the Second Circuit, courts have apparently tended to deny attorney’s fees if the losing party had an objectively reasonable position.

Wiley met that standard, but in today’s decision by Justice Elena Kagan, the Court, while acknowledging that “the objective reasonableness of the losing party’s position” was a valid factor, said that that wasn’t enough. Even though the fee-shifting statute has no explicit limits or criteria, the Court found it necessary to read conditions into the statute in order to avoid arbitrary decisions, foster consistency – a “basic principle of justice” – and increase predictability so that parties can make informed decisions about whether to litigate.

“The [lower] court must also give due consideration to all other circumstances relevant to granting fees,” wrote Kagan, “and it retains discretion, in light of those factors, to make an award even when the losing party advanced a reasonable claim or defense.”

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Among those factors, said the Court, are “frivolousness, motivation, objective unreasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence,” citing a 1994 precedent and adding that other factors may arise as well. There can be no blanket policy, said the Court. Instead,  decisions must be made on a case by case basis, and prevailing plaintiffs and prevailing defendants must be treated similarly.

“For example, a court may order fee-shifting because of a party’s litigation misconduct … [or] to deter repeated instances of copyright infringement or overaggressive assertions of copyright claims, … even if the losing position was reasonable in a particular case,” Kagan wrote. “Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms.”

The Court rejected Kirtsaeng’s proposal that the precedent-setting nature of a close case be deemed a factor to consider, but did not decide whether he was entitled to fees. That will now be a matter for the New York district court to consider, in light of the Supreme Court’s new guidance.

Read the decision here.

This article was originally reported on The Hollywood Reporter.