Tag Archives: Supreme Court Decision

Two Unanimous Supreme Court Opinions Regarding the Copyright Act

It was an eventful day for copyright law on Monday, March 4, as the Supreme Court of the United States issued two unanimous opinions, both involving provisions of the Copyright Act.  The decisions were fittingly both issued on the 110th anniversary of the 1909 Copyright Act. The office of our counsel, Nancy Wolff, Cowan, DeBaets, Abrahams & Sheppard LLC,  wrote a review of these decisions and how they will impact copyright infringement cases going forward.

You can read the review of Public Benefit Corp v Wall Street.com and LLC and Rimini Street , Inc v Oracle USA, Inc. here

Supreme Court Hands Down Critical Decisions in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLCand Rimini Street, Inc. v. Oracle USA, Inc.,Resolving Circuit Splits Over Interpretation of Copyright Act Provisions

It was an eventful day for copyright law on Monday, March 4, as the Supreme Court of the United States issued two unanimous opinions, both involving provisions of the Copyright Act.  The decisions were fittingly both issued on the 110th anniversary of the 1909 Copyright Act.

In the first case, Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC,No. 17–571, the Court, in an opinion authored by Justice Ginsburg, resolved a long-standing circuit split over whether a copyright owner can sue in federal court with only a copyright application in hand, or whether a completed registration is necessary.  The Court held that “registration . . . has been made” under Section 411(a) of the Copyright Act—and thus an infringement suit may be instituted—when the Copyright Office grants or denies registration after evaluating the copyright application (coined the “registration approach”) rather than when a copyright owner merely submits the application, materials, and fee required for the registration to begin processing (the “application approach”).

In the second case, Rimini Street, Inc. v. Oracle USA, Inc., No. 17-1625, Justice Kavanaugh delivered the option for the Court, holding that Section 505 of the Copyright Act, which allows a party to recover “full costs,” does not authorize appellate courts to award litigation costs beyond the categories enumerated by Congress in the general costs statute codified at 28 U.S.C. § 1821 and § 1920.  Such “costs” are limited to fees for the clerk and marshal; transcript, copyright, and docketing fees; disbursements for printing and witnesses; and the compensation of court-appointed experts and certain special interpretation services. The Court rejected Oracle’s position that “full costs” under Section 505 included expert witness fees, electronic discovery expenses, and jury consultant fees.

Both of the Court’s determinations are instructive, as they clarify the legal landscape for copyright litigants who have been grappling with inconsistent applications of the Copyright Act for years.

The “registration approach” adopted in Fourth Estateincentivizes copyright owners—more than ever—to register works with the Copyright Office and will likely incite an uptick in registrations. While there were many benefits to registration prior to this decision, now, if a copyright owner fails to register works prior to discovering an infringement, she will have to wait an average of seven months to sue (the Copyright Office’s average processing time), and the work may continue to be infringed without recourse in the interim.  There is, of course, the option of invoking the Copyright Office’s Special Handling process, but it comes with a $800 special handling fee, which may not be an attractive or feasible alternative for some.

Furthermore, creators who have yet to register works and are running up against the three-year statute of limitations for infringement may be out of luck if they file an application and the Copyright Office does not process it in time.  The best practice for content owners is to apply for registration as soon as possible, even before infringement is anticipated or suspected.  Those who have filed lawsuits based on applications that have not yet been processed should take advantage of the Special Handling process, if possible, otherwise the claim may ultimately be dismissed as untimely.

The limitation on recoverable fees fashioned by the Rimini Street decision may also have far-reaching implications, especially for individual creators and litigants who cannot bear high litigation costs without the chance for recovery.  The ruling sounded a death knell for a copyright litigant’s ability to recover fees for expert witnesses, electronic discovery platforms, and jury consultants, which have become increasingly prevalent in copyright cases in the digital age.

For example, while music and software cases have almost always involved experts, matters involving “viral” infringements often call for specialized experts to address novel copyright issues.  In such highly technical cases, retention of a knowledgeable expert may make or break the case, making the choice of whether to hire without the option for recovery of those fees all the more difficult, especially for those unable to afford the costs.  Additionally, as the use of e-discovery platforms has become nearly ubiquitous, payment for such services has become a necessity for a litigant to maintain an equal footing with their opponent.

The Rimini Street ruling will certainly force copyright litigants to face difficult decisions in how they want to proceed with their case, especially if they are facing an opponent with deep pockets who can afford to hire numerous experts, pay for e-discovery platforms, and retain jury consultants.  Clients should discuss their financial limitations with counsel before deciding to commence a copyright action or how to defend against a copyright action, as they may have to bear the burden of certain unrecoverable costs to prevail.

 

Supreme Court Instructs Courts On How and When to Award Attorney Fees under the Copyright Act (Kirtsaeng v. Wiley)

by Nancy Wolff, DMLA Counsel and Brittany Kaplan, Cowan, DeBaets, Abrahams & Sheppard LLP

Attorney’s fees under the Us Copyright Act are discretionary with the court, and not awarded as a matter of course. The last time the Supreme Court examined attorney’s fees under the Copyright Act was in 1994 in Fogerty v. Fantasy, Inc., 510 U. S. 517 (1994) where it provided factors for the lower courts to consider and confirmed that defendants, as well as plaintiffs could seek fees as a prevailing party.

In the recent case that reached the Supreme Court, the publisher John Wiley & Sons, Inc. brought a copyright infringement action against Supap Kirtsaeng, a citizen of Thailand who studied math at Cornell University. Kirtsaeng saw an opportunity to make money when he realized that Wiley sold identical English-language textbooks in both countries, but for a much lower price in Thailand. Kirtsaeng could do the math and asked relatives to purchase the textbook in Thailand and send them to him in the United States for resale to American students, at a tidy profit.

Both the District Court and Second Circuit found in favor of Wiley. Kirtsaeng appealed to the U.S. Supreme Court, which reversed the lower courts’ decisions, determining that Kirtsaeng was protected by the Copyright Act’s “first-sale” doctrine despite the fact that the textbooks at issue had been manufactured abroad. This was a previously unsettled area of law under the Copyright Act. As a prevailing party, Kirtsaeng sought an award of more than $2 million in attorney’s fees under the Copyright Act’s fee-shifting provision, 17 U.S.C. § 505. The District Court denied Kirtsaeng’s application, holding that Wiley, although the losing party, had taken reasonable legal positions. The Second Circuit affirmed and Kirstaeng appealed to the Supreme Court.

Copyright Act Section 505:

Under Section 505 a court may award reasonable attorney’s fees to a prevailing party. While the Act provides no precise rule or formula, the Supreme Court in Fogerty identified several factors for courts to consider including frivolousness, motivation, objective unreasonableness, and the need in particular circumstances “to advance considerations of compensation and deterrence.” The Supreme Court also stated that a lower court may not award attorney’s fees as a matter of course, and may not treat prevailing plaintiffs and prevailing defendants differently.

The Supreme Court’s Decision:

Acknowledging that further guidance regarding attorney’s fees would be useful, the Supreme Court sought the proper approach in considering the propriety of fee awards under Section 505 that would best advance of the objectives of the Copyright Act—namely, enriching the general public through access to creative works by striking a balance between rewarding and protecting creators while also enabling others to make use of existing content. Wiley proposed placing substantial weight on the objective reasonableness of a losing party’s position; in contrast, Kirtsaeng proposed giving special consideration to whether a lawsuit meaningfully clarified copyright law by resolving important legal issues.

The Court agreed that Wiley’s test encourages parties with strong positions to assert their rights. Under this approach, a copyright holder whose rights have been infringed would have good reason to bring and maintain a lawsuit, even if available damages are small. Similarly, a party defending against a meritless infringement claim would be incentivized to maintain a strong defense. Conversely, applying Kirtsaeng’s test would not produce any similarly sure benefits. While perhaps advancing the public interest, Kirtsaeng’s test would not necessarily encourage parties to litigate close cases because “the hallmark of hard cases is that no party can be confident if he will win or lose,” and the potential for fee shifting raises high stakes even higher. Even where a court, after ruling on the merits is able to assess whether the losing party advanced an unreasonable claim or defense, it cannot necessarily know whether its decision will have broad legal significance. In that sense, the Court found Wiley’s approach to be “more administrable.”

The Court warned that while objective reasonableness may be an important factor in assessing fee awards, it should not be “controlling.” In other words, courts should consider all factors relevant to granting fees—for instance, a party’s litigation misconduct, or the necessity of deterring repeated instances of copyright infringement or repeated instances of overly aggressive copyright infringement claims. The Court further explained that a fee award may be appropriate even when the losing party advanced a reasonable claim or defense if, considering “all the circumstances,” a fee award would further “the Copyright Act’s essential goals.” The Supreme Court did not suggest the lower court was wrong in declining Kirtsaeng’s fee award but sent the case back for reconsideration based on its clarification that all factors should be considered.

Takeaway:

The Court’s decision offers some further guidance to lower courts assessing fee applications under the Copyright Act, which may lead to greater uniformity of lower court decisions. Specifically the Supreme Court observed that courts within the Second Circuit have come dangerously close to establishing a presumption against granting fees when a claim or defense is found to be reasonable, but warned that such an approach “goes too far.” Parties litigating in the future should expect a more nuanced and possibly complex fee award analysis, and should not presume that fees necessarily will (or will not) be awarded based solely on the reasonableness of the losing party’s position.