Takeaway: For fee-shifting in copyright cases, courts must place “significant weight” on the “objective unreasonableness of a losing party’s position,” which will affect attorneys fee awards in copyright cases.
On June 16, 2016, the Supreme Court unanimously held that the district courts must place “substantial weight” on objective reasonableness or lack thereof of a losing party’s position when considering whether or not to award discretionary attorney fees. Kirtsaeng v. John Wiley & Sons, Inc., 579 U.S. __ (2016).
The primary guideline that the Supreme Court set was in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), wherein the Court held that for copyright law, under Section 505 of the Copyright Act, a district court’s broad discretion regarding awarding attorneys’ fees was based on four nonexclusive factors that were to be applied evenhandedly: (1) frivolousness of a claim or defense, (2) motivation in bringing the lawsuit, (3) objective reasonableness of their legal position, and (4) the need surrounding a particular circumstances to advance considerations of compensation and deterrence.
In light of Fogerty, district courts applied various weight to the factors delineated by the Supreme Court. The 2nd U.S. Circuit Court of Appeals agreed with the district court that placed “significant weight” on the reasonableness of a defendant’s losing position.
The Court reiterated the ultimate goal which should be to further “the purpose of the Copyright Act” and generally encourage litigation of meritorious claims and discourage frivolous claims. Therefore, the Court held that the proper test was to focus on the objective unreasonableness of the losing party’s position rather than whether or not the case revolves around a close issue. By taking the focus away from how close or important an issue is, more risk-averse parties would not be discouraged from pursuing their reasonable legal positions.
The Court, however, clarified that “objective reasonableness” is not a dispositive or controlling factor, but carries “significant weight.” For example, fee-shifting may be ordered due to litigation misconduct or in order to deter repeated infringement as well.