Kirtsaeng v. Wiley & Sons, Inc.: Supreme Court Sets Standard for Attorney Fee Awards in Copyright Cases

Tuesday, June 21, 2016

In a unanimous opinion, the U.S. Supreme Court recently held that in considering whether to award attorneys’ fees to a prevailing party as an element of “costs” under the Copyright Act, a court should give substantial weight to the “objective reasonableness” of the losing party’s position, but also should consider all other circumstances relevant to granting a fee award. Kirtsaeng v. Wiley & Sons, Inc., 579 U.S. ___, Case No. 15-275 (June 16, 2016).

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 (emphasis added). However, while the statute authorizes fee-shifting, the statute itself provides no guidance on when or under what “guideposts” such fees should be awarded. Moreover, prior to this decision, Supreme Court case law provided little guidance, and only identified a number of “non-exclusive factors” regarding how to determine when attorneys’ fees awards are proper (“frivolousness, motivation, objective unreasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence”), and several principles to guide decisions (attorney’s fees should never be awarded as a matter of course, and a court may not treat prevailing plaintiffs or defendants differently). See, e.g., Fogerty v. Fantasy Inc., 510 U.S. 517 (1994) (“no precise rule or formula” for when attorneys’ fees should be awarded, but non-exclusive factors to consider include the frivolousness of the case, the loser’s motivation, the objective unreasonableness of their case, and considerations of compensation and deterrence).

Based on the lack of clarity under the statute and case law, the Supreme Court granted certiorari in Kirtsaeng to resolve the question whether a court should give substantial weight to the “objective reasonableness” of the losing party’s position. The Supreme Court, in an attempt to resolve a conflict between the various circuits, unanimously held yes, but held that a court also should give “due consideration to all other circumstances relevant to granting fees” and “retain[s] discretion even when losing party advanced a reasonable claim or defense.”

The Court agreed with respondent, Wiley, regarding the objective-reasonableness approach. The Court reasoned that the results of such an approach “enhance the probability that both creators and users. . . will enjoy the substantive rights the [Copyright] statute provides.” The Court reiterated its earlier factors that remain relevant in determining attorneys’ fees. More importantly however; it endorsed the Second Circuit’s approach that a court “should give substantial weight to the objective reasonableness of the losing party’s position…. No matter which side wins a case, the court must assess whether the other side’s position was (un)reasonable…. Courts every day see reasonable defenses that ultimately fail (just as they see reasonable claims that come to nothing); in this context, as in any other, they are capable of distinguishing between those defenses (or claims) and the objectively unreasonable variety. And if some court confuses the issue of liability with that of reasonableness, its fee award should be reversed for abuse of discretion.”

The Kirtsaeng decision is consistent with other recent Supreme Court decisions affording district courts with broad discretion in awarding attorneys’ fees and other enhanced remedies. See, e.g., Halo Electronics, Inc. v. Pulse Electronics, Inc., No. 14-1513 (U.S. June 13, 2016) (decided with Stryker Corp. v. Zimmer, Inc., No. 14–1520)(enhanced damages for patent infringement); Octane Fitness, LLC v. ICON Health & Fitness Inc., 572 U. S. ___ (2014) (award of attorneys’ fees in “exceptional” cases under 35 U.S.C. § 285). As a result, district courts are likely to have a more effective tool to discourage meritless claims and litigation misconduct. The Court reiterated that a 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.” In light of this qualification, the real impact of the Kertsaeng decision will depend on how district courts apply their discretion to grant fee awards in future cases. With this in mind, copyright plaintiffs and defendants should remain cognizant of the reasonableness of their respective claims and defenses throughout any copyright disputes.