High Court Clarifies: Objective Unreasonableness Factor Favored in Attorneys’ Fees Analysis Under the Copyright Act

Section 505 of the Copyright Act provides for recovery of attorneys’ fees by prevailing litigants. It states that a court, “in its discretion may allow the recovery of full costs.” However, no guidance has been provided on this language in more than 20 years. The last word from the High Court occurred in 1994,[1] where the Court held that fees should be equally available to prevailing plaintiffs and defendants, but stated that “no precise rule or formula” existed for when they should be awarded. Four non-exclusive factors were articulated for courts to consider when determining whether attorneys’ fees should be awarded, including: (1) the frivolousness of the case, (2) the motivation of the loser, (3) the objective unreasonableness of the case, and (4) considerations of compensation and deterrence.[2] Yet, the Court complicated matters, noting that the factors must be applied in a manner that is “faithful to the purposes of the Copyright Act.”[3] From this decision sparked a circuit split – while some courts weighed the factors evenly, others focused mainly on serving the “purposes of the Copyright Act.” To confuse matters more, the Second Circuit placed a strong emphasis on the “objective unreasonableness” factor, at the expense of the other factors.

This month, in Kirtsaeng v. John Wiley & Sons, Inc., the Supreme Court finally revisited damages under the Copyright Act. Kirtsaeng appealed the denial of more than $2 million in attorneys’ fees, alleging that he was entitled to compensation for years spent fighting off copyright infringement claims brought by publishing giant John Wiley & Sons, Inc. Both the trial court and Second Circuit refused, on the grounds that the infringement case was not the kind of “objectively unreasonable” suit in which a fee penalty should be invoked.

The High Court unanimously validated the Second Circuit’s approach, stating that whether a case is “objectively unreasonable” weighs heavily in the question of whether attorneys’ fees should be awarded. Justice Elena Kagan emphasized, “[w]hen deciding whether to award attorney’s fees … a district court should give substantial weight to the objective reasonableness of the losing party’s position, while still taking into account all other circumstances relevant to granting fees.”[4]

However, in vacating the Second Circuit’s denial of attorney’s fees, the High Court clarified that the Second Circuit’s language, “at times suggests that a finding of reasonableness raises a presumption against granting fees, and that goes too far in cabining the district court’s analysis.”[5] While objective reasonableness is an important factor in assessing fee applications, it is “not the controlling one.”[6] Ultimately, the High Court found that the Second Circuit had improperly made objective unreasonableness a dispositive factor, rather than one with substantial weight. Thus, the high court remanded the case for further proceedings consistent with the opinion.

In setting forth a more flexible framework, the Supreme Court’s holding encourages parties to continually evaluate their case and discourages unreasonable positions and litigation tactics. This decision is also consistent with the Supreme Court’s 2014 decision in Octane Fitness, 134 S. Ct. 1756, which found that, in patent cases, an exceptional case warranting fees is “one that stands out from the others with respect to the substantive strength of a party’s litigation position . . . or the unreasonable manner in which the case was litigated.”

[1] Fogarty v. Fantasy, Inc., 510 U.S. 517 (1994).

[2] Id. at 534.

[3] Id. at 534 n. 19.

[4] Kirtsaeng, 2016 WL 3317564 at *1.

[5] Id. at 2.

[6] Id. at 7.

Edited by Mieke Malmberg.