The U.S. Supreme Court issued its second decision on June 16, 2016 in the dispute between Thai student Supap Kirtsaeng and publisher John Wiley & Sons. . .
In its first decision in 2012, the Court held that the “first sale doctrine” under U.S. copyright law made it lawful for Kirtsaeng to resell in the U.S. books purchased by Kirtsaeng’s agents in Thailand. The question this time around was whether the trial court and Second Circuit Court of Appeals denied Kirtsaeng’s request for attorney’s fees for the right reasons.
Section 505 of the Copyright Act provides that a trial court “may … award a reasonable attorney’s fee to the prevailing party.” Conventional wisdom sometimes has it that the award of attorney’s fees to the prevailing party in a copyright lawsuit is all but automatic. On the contrary, in Fogerty v Fantasy, Inc., 510 U.S. 517 (1994) the Court confirmed that trial courts have substantial discretion in deciding whether or not to grant fee awards, subject to two restrictions. First, a trial court may not award attorney’s fees as a matter of course, rather, it must make a more particularized, case by case assessment. Id., at 533. Second, a court may not treat prevailing defendants any differently than prevailing plaintiffs. In addition, the Court approved the consideration of “several nonexclusive factors” such as “frivolousness, motivation, objective unreasonableness and the need in particular circumstances to advance considerations of compensation and deterrence.” Id. at 534, n. 19.
After his 2012 win before the Supreme Court, Kirtsaeng returned to the trial court to seek $2 million in attorney’s fees from Wiley. Relying upon Second Circuit precedent, the trial court gave “substantial weight” to the “objective reasonableness” of Wiley’s infringement claim and declined Kirtsaeng’s motion for attorney’s fees. The Second Circuit affirmed this decision.
In his appeal to the Supreme Court, Kirtsaeng argued that attorney’s fees should be awarded to the prevailing party in cases that “meaningfully clarify” copyright law. The Court was not persuaded that adopting this factor would substantially advance copyright goals, first because this factor would raise the stakes for both plaintiffs and defendants in copyright cases, and second, because it would be difficult to administer. In other words, it will be difficult for any court to predict in the present whether a given case is likely to “meaningfully clarify” copyright law in the future.
In assessing Wiley’s arguments, the Court found that the Second Circuit placed too much weight upon the reasonableness of the litigation position of the losing party. The Court held that while the Second Circuit analysis properly calls for trial courts to give “substantial weight” to the reasonableness of a losing party’s position, its language at times suggests that a finding of reasonableness raises a presumption against granting fees, and this goes too far in “in cabining” a trial court’s analysis.
The Court vacated the lower court decisions on fee awards and remanded the case to the trial court for further consideration. Under the Court’s holding, when deciding whether to award attorney’s fees under §505, a trial court should give substantial weight to the objective reasonableness of the losing party’s position, while still taking into account all other circumstances relevant to granting fees. The Court expanded upon the theme of the trial court’s discretion by discussing a few lower court decisions. It is within a trial court’s discretion to award attorney’s fees against a reasonable litigant. It is also appropriate to award attorney’s for reasons other than unreasonable legal positions, e.g., in cases involving “overaggressive assertions of copyright” – in which aa copyright holder filed hundreds of lawsuits on an overbroad legal theory, which led to fee awards even in the cases in which the holder’s theory was reasonable, or in cases of litigation misconduct.
Download the Supreme Court opinion here.