Attorney Steve® Copyright Law Essentials - Fee Shifting in Infringement Matters - Factors to Review

Introduction

In Plan Pros and Prime Designs, Inc. vs. Dultmeir Homes (architectural infringement case), the Court discussed the factors a Court will consider in a copyright infringement action to determine if they will EXERCISE THEIR DISCRETION and award attorney fees to the prevailing party in the litigation.  This could be either the Plaintiff if they were the prevailing party, or a Defendant may recover attorney fees in copyright cases if they prevail. (for example, if a fair use defense wins the day).

The Kirtsaeng Case

Section 505 of the Copyright Act allows district courts to “award a reasonable attorney's fee to the prevailing party as part of the costs.” 17 U.S.C. § 505. In this regard, § 505 “grants courts wide latitude to award attorney's fees based on the totality of circumstances.” Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979, 1985 (2016). Indeed, because of the Copyright Act's statutory grant of authority, “in any given [copyright] case a court may award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones).” Hughes v. Benjamin, No. 17-cv-6493 (RJS), 2020 WL 4500181, at *3 (S.D.N.Y. Aug. 5, 2020) (Sullivan, J.) (quoting Kirtsaeng, 136 S. Ct. at 1988).

In Kirtsaeng, the court recognized that the objective reasonableness of the losing side's position is entitled to significant or substantial, but not controlling, weight in accounting for all relevant factors. Id. at 1988-89. The Court explained: As we recognized in Fogerty, § 505 confers broad discretion on district courts and, in deciding whether to fee-shift, they must take into account a range of considerations beyond the reasonableness of litigating positions.  Inquiry in determining whether to award fees must account for “the totality of the circumstances” and should consider “factors” that include “frivolousness, motivation, objective unreasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence.”

The four, non-exhaustive factors to consider:

(1) frivolousness

(2) motivation

(3) objective unreasonableness

and

(4) the need in particular circumstances to advance considerations of compensation and deterrence

“[S]uch factors may be used only ‘so long as they are faithful to the purposes of the Copyright Act.'” Matthew Bender & Co. v. West Publ'g Co., 240 F.3d 116, 121 (2d Cir. 2001)

That means in any given case a court may award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones).

For example, a court may order fee-shifting because of a party's litigation misconduct, whatever the reasonableness of his claims or defenses. See, e.g., Viva Video, Inc. v. Cabrera, 9 Fed.Appx. 77, 80 (C.A.2 2001).

Or a court may do so to deter repeated instances of copyright infringement or overaggressive assertions of copyright claims, again even if the losing position was reasonable in a particular case. See, e.g., Bridgeport Music, Inc. v. WB Music Corp., 520 F.3d 588, 593–595 (C.A.6 2008) (awarding fees against a copyright holder who filed hundreds of suits on an overbroad legal theory, including in a subset of cases in which it was objectively reasonable).

Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act's essential goals. Kirtsaeng, 136 S. Ct. at 1988–89. 

Frivolousness

The factors of objective unreasonableness and frivolousness are often analyzed together, as “[t]he test for frivolousness largely duplicates that of objective unreasonableness.” Boesen v. United Sports Publ'ns, Ltd., 20-CV-1552 (ARR) (SIL), 2021 WL 1145730, at *3 (E.D.N.Y. Mar. 25, 2021); TCA Television Corp. v. McCollum, No. 15-CV-4325 (GBD) (JCF), 2017 WL 2418751, at *14 (S.D.N.Y. June 5, 2017) (“Cases indicate . . . that frivolousness is a particularly intense form of objective unreasonableness.”), report & recommendation adopted, 2018 WL 2932724 (S.D.N.Y. June 12, 2018). “[F]rivolousness and objective unreasonableness are not necessarily coextensive.” Gordon v. McGinley, No. 11 Civ. 1001(RJS), 2013 WL 1455122, at *2 n.3 (S.D.N.Y. Mar. 28, 2013) (Sullivan, J.) (citing Matthew Bender & Co., 240 F.3d at 122 (“An objectively unreasonable argument is not necessarily frivolous or made in bad faith.”)).

Walsh vs. Townsquare Media [Walsh v. Townsquare Media, Inc., 1-19-cv-04958 (SDNY May. 2, 2022)] - See unreasonable ignoring of fair use leading to attorney fee award for the Defendant - As such, I do not see how a “reasonable lawyer with any familiarity of the law of copyright could have thought that the” incidental use of the Photograph “in the context of news reporting” on the Post “was anything but fair.” See Konangataa v. Am. Broadcastingcompanies, Inc., 16-cv-7382 (LAK), 2017 WL 2684067, at *2 (S.D.N.Y. June 21, 2017).  Frivolous arguments can lead to bad results.

Motivation

“The presence of improper motivation in bringing a lawsuit or other bad faith conduct weighs heavily in favor of an award of costs and fees.” Ariel(UK) Ltd. v. Reuters Grp. PLC, No. 05-CV-9646 (JFK), 2007 WL 194683, at *4 (S.D.N.Y. Jan. 24, 2007) (citing Matthew Bender & Co., 240 F.3d at 125–27)). One example of improper motivation is “gambl[ing] on an unreasonable legal theory in order to achieve a secondary gain,” such as “the leveraging of a settlement.” Torah Soft Ltd. v. Drosnin, No. 00-CV-5650 (JCF), 2001 WL 1506013, at *5 (S.D.N.Y. Nov. 27, 2001); see also Video-Cinema Films, Inc. v. Cable News Network, Inc., No. 98-CV-7128 (BSJ), 2003 WL 1701904, at *5 (S.D.N.Y. Mar. 31, 2003) (“Plaintiff's conduct was nothing more than an obvious effort to use the Copyright Act to secure payment from Defendants for their fair use of the film footage. As such, Plaintiff's motivation was improper . . . ”). “[I]improper motive and bad faith” may be found where the record indicates a lack of “respectful conduct” or “efforts” that run counter to a goal of “efficiently and inexpensively resolv[ing] a dispute.” See Hughes, 2020 WL 4500181, at *4.

Walsh case - Here, “[P]laintiff's approach to settlement was disingenuous” because her counsel made grossly overinflated settlement demands and failed to engage with Defendant's settlement.  In the Settlement Emails,6 Plaintiff's counsel, Richard Liebowitz, wrote that he was “authorized to make an offer of $25,000” to settle this case prior to the motion practice that led to the Opinion. (See id. at 3.) In response, Defendant's counsel wrote twelve lines arguing and explaining why Plaintiff's $25,000 demand was unreasonable and “unrealistic” and counter-offered “$250.” (Id. at 2–3.) Liebowitz offered a one-line response: “Thanks. I am authorized to come down to $24,750.” (Id. at 2). Liebowitz never grappled with Defendant's arguments, and he provided no explanation of how Plaintiff's copyright infringement claim could possibly be worth anything near $25,000. The baselessness of Liebowitz's large settlement demand speaks to bad faith.

3-5x multiplier in copyright photo casers discussed - “courts in this Circuit commonly award, in cases of non-innocent infringement, statutory damages of between three and five times the cost of the licensing fees the defendant would have paid.” Mango v. BuzzFeed, Inc., 356 F. Supp. 3d 368, 374 (S.D.N.Y. 2019) (citation omitted), aff'd, 970 F.3d 167 (2d Cir. 2020).  In other words, if a photo typically licenses for $3,000 it is not unreasonable to demand $15,000.

Objective Unreasaonableness

“The presence of improper motivation in bringing a lawsuit or other bad faith conduct weighs heavily in favor of an award of costs and fees.” Ariel(UK) Ltd. v. Reuters Grp. PLC, No. 05-CV-9646 (JFK), 2007 WL 194683, at *4 (S.D.N.Y. Jan. 24, 2007) (citing Matthew Bender & Co., 240 F.3d at 125–27)). One example of improper motivation is “gambl[ing] on an unreasonable legal theory in order to achieve a secondary gain,” such as “the leveraging of a settlement.” Torah Soft Ltd. v. Drosnin, No. 00-CV-5650 (JCF), 2001 WL 1506013, at *5 (S.D.N.Y. Nov. 27, 2001); see also Video-Cinema Films, Inc. v. Cable News Network, Inc., No. 98-CV-7128 (BSJ), 2003 WL 1701904, at *5 (S.D.N.Y. Mar. 31, 2003) (“Plaintiff's conduct was nothing more than an obvious effort to use the Copyright Act to secure payment from Defendants for their fair use of the film footage. As such, Plaintiff's motivation was improper . . . ”). “[I]improper motive and bad faith” may be found where the record indicates a lack of “respectful conduct” or “efforts” that run counter to a goal of “efficiently and inexpensively resolv[ing] a dispute.” See Hughes, 2020 WL 4500181, at *4.

Compensation and Deterrence

“Compensation and deterrence . . . exist for the dual purposes of incentivizing parties with strong claims to litigate them and deterring parties with weak claims from embarking on wasteful litigation.” Hughes, 2020 WL 4500181, at *4. Courts in this Circuit recognize the importance of “deter[ring] counsel ‘from bringing unreasonable claims based on a cost/benefit analysis [suggesting] that they can score big if they win and that there will be no adverse consequences if they lose.” Bechler v. MVP Grp. Int'l, Inc., No. 16-CV-8837 (LAP), 2021 WL 848024, at *7 (S.D.N.Y. Mar. 5, 2021) (quoting Baker, 431 F. Supp. 2d at 359).

Contact a California and Arizona IP law firm

Hopefully, this blog provides some general insight into how a federal court may look at awarding attorney fees in copyright infringement cases.

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