The SCOTUS Kirtsaeng decision: where do we go from here?
On June 16, 2016, in Kirtsaeng v John Wiley & Sons, the US Supreme Court unanimously held (8-0) that when district courts determine whether to award attorneys’ fees to prevailing parties in copyright lawsuits, “substantial weight” should be accorded to the objective reasonableness or unreasonableness of the losing party’s position.
The court noted, however, that although objective reasonableness is an “important” factor, it is not a “controlling” one—that is, district courts still have “broad discretion” to award attorneys’ fees and “must take into account a range of considerations beyond the reasonableness of litigating positions.”
In the immediate aftermath of the ruling, the prevailing sentiment among copyright litigators (including this author) was that the Supreme Court had “clarified” the law and provided more “guidance” with respect to fee determinations (see, eg, “Supreme Court Provides Guidance on Attorneys’ Fees in Copyright Infringement Actions” and “Kirtsaeng Clarifies Standard for Award of Attorney’s Fees in Copyright Cases”). But given the wide latitude that district courts retain, and the Supreme Court’s reaffirmation of a non-exhaustive, multi-factor balancing test that applies sui generis, it is fair to question how much clarity the Kirtsaeng opinion truly provides and what, if any, systemic effects the court’s guidance will have on district courts going forward. Although it is not discussed in this article, the Supreme Court also weighed in on the litigation between these parties in 2013, regarding an issue concerning the first sale doctrine (see Kirtsaeng v John Wiley & Sons, 133 S. Ct. 1351 [2013]).
Background
Section 505 of the Copyright Act provides that courts may award reasonable attorneys’ fees to prevailing parties in copyright lawsuits. For over two decades, the primary guide in determining the propriety of a fee award has been the Supreme Court’s decision in Fogerty v Fantasy, which acknowledged the district courts’ broad discretion but set forth non-exclusive factors to inform their decisions: frivolousness of a claim or defence, motivation in bringing a lawsuit, objective unreasonableness of a legal position, and “the need in particular circumstances to advance considerations of compensation and deterrence.”
The Supreme Court noted that these factors applied to plaintiffs and defendants evenhandedly, and that the ultimate goal of fee awards is to further “the purposes of the Copyright Act.”
After Fogerty, the circuit courts varied in their approach to applying the factors. When the US Court of Appeals for the Second Circuit affirmed the denial of the plaintiff-petitioner’s motion for attorneys’ fees in Kirtsaeng, it explained that “the district court properly placed ‘substantial weight’ on the reasonableness of [plaintiff’s] position.” Not all circuits, however, have placed the same emphasis on the objective reasonableness factor.
For the express purpose of resolving disagreement among the circuits, the Supreme Court granted certiorari. While the defendant-respondent endorsed the Second Circuit’s analysis, the plaintiff-petitioner argued that special consideration should be given to whether a lawsuit resolved an important issue and thus “meaningfully clarified” copyright law.
Key aspects of Kirtsaeng
Emphasising the principles and factors set forth in Fogerty, the Supreme Court reiterated that fee awards should encourage litigation of meritorious claims while discouraging frivolous ones. More generally, the court recognised that fee awards should serve the overall purpose of the Copyright Act to encourage and reward authors’ creations while permitting others to build off that work.
The court agreed with the defendant-respondent that providing “substantial weight” to the objective reasonableness of the losing party’s position was a proper guiding principle, since it would “encourage parties with strong legal positions to stand on their rights and deter those with weak ones from proceeding with litigation.” On the other hand, awarding fees based on clarification of an important or close issue would not produce “sure benefits” and merely “raise the stakes” of close (and thus less predictable) lawsuits, discouraging risk-averse parties from litigating reasonable legal positions.
The court concluded by emphasising that “objective reasonableness” is an important factor, but is not dispositive. For example, the court opined, fee-shifting may be merited in cases of litigation misconduct or to deter repeated infringement even if the losing party had an objectively reasonable position. Moreover, to the extent that the Second Circuit suggested that a finding of objective reasonableness would create a presumption against granting fees, that went too far.
Likely impact
At the time of writing, only two federal court decisions have purported to apply Kirtsaeng, and both suggest that the court’s holding is quite malleable, and perhaps easily side-stepped. In Countryman Nevada v Doe, the US District Court for the District of Oregon noted that “objective reasonableness carries significant weight”, but never actually evaluated that factor (No. 3:15-CV-433, 2016 WL 3437598, at *7 [D. Or. June 17, 2016]).
Instead, the court relied entirely on litigation misconduct, emphasising Kirtsaeng’s reiteration that courts are bound to “view all of the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals.”
In Broadcast Music v City & Country Tavern, the US District Court for the District of Minnesota’s lone citation to Kirtsaeng is to support its general finding that “[a]n award of fees in a case like this one promotes the purposes of the Copyright Act by encouraging artists and rights holders to enforce their rights in meritorious cases” (No. CV 15-3441, 2016 WL 3566209, at *3 [D. Minn. June 27, 2016]).
“It would be unusual for a Supreme Court decision to be effectively disregarded. Practitioners certainly do not have the luxury of assuming Kirtsaeng will have little-to-no practical effect.”
Two decisions obviously provide too limited a dataset to indicate a trend. But it is notable that neither of the first two substantive opinions applying Kirtsaeng turned on what seemed the Supreme Court’s central holding that “objective reasonableness” is of particular importance. Moreover, the emphasis on the broad principle that fee awards should further the purposes of the Copyright Act suggests that district courts may construe Kirtsaeng as reaffirming their wide discretion rather than focusing on the more concrete guideposts that the court sought to provide.
Nevertheless, it would be unusual for a Supreme Court decision to be effectively disregarded. Practitioners certainly do not have the luxury of assuming Kirtsaeng will have little-to-no practical effect. With that in mind, if Kirtsaeng is truly going to provide “clarity” and create any discernible trends in fee award jurisprudence, the following are the most likely results.
More inter-circuit consistency
Whatever doubts there may be about the impact of Kirtsaeng on the predictability of individual fee determinations, the ruling should eliminate any persistent inter-circuit differences; indeed, that was the express purpose of the grant of certiorari.
With the caveat that the particular standards applied by each circuit are frequently unclear and often vary internally, a review of recent appellate cases reveals that the bulk of jurisdictions have typically endorsed a general application of the Fogerty factors without any particular emphasis on a particular factor, making it difficult to determine whether any discernible shift in fee determinations will occur.
These include the First (see, eg, Airframe Sys v L-3 Communs, 658 F. 3d 100, 108-10 [1st Cir. 2011]), Third (see, eg, Am. Bd. of Internal Med v Von Muller, 540 Fed. Appx. 103 [3d Cir. 2013]), Fourth (see, eg, Allora v Cambridge Builders of Johnston County, 532 Fed. Appx. 349, 351-52 [4th Cir. 2013]), Sixth (see, eg, Balsley v LFP, 691 F.3d 747, 773 [6th Cir. 2012]), Eighth (see, eg, Killer Joe Nevada v Does 1-20, 807 F.3d 908, 911-13 [8th Cir. 2015]), Ninth (see, eg, Marshall & Swift/Boeckh v Dewberry & Davis, 586 F. App'x 448, 449 [9th Cir. 2014]) and Tenth (see, eg, Meshwerks v Toyota Motor Sales, 528 F.3d 1258, 1270 n. 11 [10th Cir. 2008]) Circuits. There does not appear to be any instructive case law in the DC Circuit at the appellate level.
Both the Second Circuit (see, eg, John Wiley & Sons, 605 Fed. Appx. at 49-50), discussed above, and the Eleventh Circuit (see, eg, Hermosilla v Coca-Cola, 492 F. App'x 73, 75 [11th Cir. 2012]) appear to have been employing tests similar to the Kirtsaeng analysis, focusing on objective reasonableness in particular. With the exception of no longer being able to apply certain presumptions, the jurisprudence in those two jurisdictions is least likely to see any material shift.
Two circuits have endorsed tests that most clearly no longer apply following Kirtsaeng. The Fifth Circuit has espoused a pre-Fogerty version of the factor analysis and effectively presumes that prevailing parties in copyright suits are entitled to fees (see, eg, Hunn v Dan Wilson Homes, 789 F.3d 573, 588-89 [5th Cir. 2015] and Hogan Sys v Cybresource Int’l, 158 F.3d 319. 325 [5th Cir. 1998]). The Seventh Circuit, among other idiosyncrasies, employs a presumption of awards for prevailing defendants in particular, and places increased importance on the strength of the prevailing party’s case and the amount of damages that party has already obtained (see, eg, Klinger v Conan Doyle Estate, 761 F.3d 789, 791 [7th Cir. 2014] and DeliverMed Holdings v Schaltenbrand 734 F.3d 616, 625-26 [7th Cir. 2013]). Practitioners in these two jurisdictions should be particularly cognisant of the possibility that pre-Kirtsaeng precedent will have limited utility.
De-emphasis of ‘meaningfully clarifying’ the law
For all the discretion left to district courts, the Supreme Court clearly rejected the theory that special consideration should be afforded to whether a lawsuit “meaningfully clarified” an important legal issue. In dicta, the court recognises that advancing the body of copyright law is not equivalent, and may bear little relation, to advancing the underlying purposes of the Copyright Act. Practitioners should therefore avoid arguing for fees on this basis.
Some, but not exclusive, attention to objective reasonableness
As discussed above, the limited case law following Kirtsaeng casts some doubt on the notion that “objective reasonableness” will actually receive “substantial weight” among the totality of the circumstances. Nevertheless, informed judges will likely be wary of having their fee determinations reversed due to failing to even mention or review “objective reasonableness” in some capacity. It behoves practitioners to strongly consider whether the reasonableness factor weighs in their clients’ favour before making a final decision to seek attorneys’ fees (or litigate a copyright claim at all). The default assumption should be that reasonableness will be briefed.
Yet the Supreme Court also clearly stated that objective reasonableness is not a “dispositive” or “controlling” factor, nor does it create a “presumption” that fees are inappropriate. A district court that flatly ignores all other factors will not be applying the court’s test. Just as we can expect that courts will at a minimum pay lip service to objective reasonableness in the wake of Kirtsaeng, so too will many courts ensure that they at least nod to one or more of the other non-exclusive factors.
Practitioners must therefore not exclusively limit their arguments to the issue of reasonableness. A party that is confident that it will prevail on the fees issue because that factor strongly favours their position (and wants to avoid a reversal on appeal) may nevertheless want to address other factors as a reminder that the court may not rely on reasonableness alone.
Implications for practitioners
It is difficult to state with any certainty that Kirtsaeng will add predictability to the wide-open discretionary world of awarding fees in copyright cases. Some commentators have made broader predictions about the impact of the court’s ruling—for example, that fees will be awarded more often, or that there will be more awards for prevailing defendants in particular.
To this author, those predictions are speculative, and do not rest on as robust a foundation as the potential (albeit narrower) trends identified above. While there is a natural temptation to read as much as one can from the tea leaves, practitioners are better served focusing on more likely and immediate outcomes in properly gauging the benefits and risks of litigating claims for attorneys’ fees.
Jordan Feirman is an associate at Skadden. He can be contacted at: jordan.feirman@skadden.com
He was assisted by Anthony Dreyer, partner at Skadden, and Andrew Patrick, who is a summer associate at the firm.
