Kirtsaeng had family members and friends purchase copies of Wiley’s textbooks in Thailand. The books were priced substantially less than the same versions sold in the U.S. His purchasers shipped the books to Kirtsaeng in the U.S., and he then resold them here at a profit.
Wiley sued for copyright infringement on the basis that Kirtsaeng infringed Wiley’s exclusive distribution right under Section 106(3) of the Copyright Act. Kirtsaeng defended on the basis that the ‘first – sale’ provision, Section 109(a), permitted his purchases and resales. Wiley called foul stating that Section 109(a) did not apply where the books were manufactured abroad.
The courts have been in conflict on this issue. This judicial conflict is germane because Wiley was not taking a legal position contrary to an issue that was well settled. Ultimately, in the substantive copyright lawsuit, the Supreme Court decided that the first-sale doctrine allows the resale of foreign-manufactured books in the same manner as it does domestic ones. Thus, Kirstsaeng prevailed in the substantive copyright infringement suit as to an issue that was not well settled.
In this second round of litigation, Kirtsaeng claimed that Wiley should pay his fees under the Copyright Act’s discretionary fee shifting provision – Section 505. Section 505 provides as follows:
505. Remedies for infringement: Costs and attorney’s fees
“In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.”
As you can see, Section 505 confers large discretion to the District Courts in the copyright litigation/fee shifting area.
Justice Kagan delivered the opinion for the Supreme Court and citing Fogerty Fantasy, Inc., 510 U.S. 517 (1994), articulated that the approach to fee awards must best serve the purposes of the Copyright Act. As the Court stated in Fogerty, “copyright law ultimately serves the purpose of enriching the general public through access to creative works”. Fogerty at 527.
Justice Kagan stated as one primary factor that a District Court should put substantial weight on the reasonableness of the losing party’s position. The lower courts are in a good position to review and administer this factor, and it encourages parties with meritorious positions to advance them. Justice Kagan quite rightly stated that this was not the only factor, and that other previously articulated factors set forth in Fogerty also need to be evaluated. These include the “frivolousness [of the losing party’s position], [such party’s] motivation, objective unreasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence.” Fogerty at 534, n.19.
Justice Kagan is also clear to state that in sending Kirtsaeng back to the District Court, the Supreme Court did not mandate a different decision but rather that the District Court evaluate Kirtsaeng’s motion for fees “giving substantial weight to the reasonableness of Wiley’s litigating position, but also taking into account all other relevant factors.” Kirtsaeng at 12.
For lawyers and their clients who are evaluating how far to take copyright litigation, this decision is important. It provides greater guidance to litigants as to those factors the District Courts are to consider which will impact the likelihood of a successful litigant recouping its attorneys’ fees from the losing party, and the risk of the losing party having to pay for the prevailing party’s fees.
The expense of litigation is one of several critical factors intellectual property litigants should take into account when evaluating claims, positions, and settlement/resolution alternatives. This decision provides better guidance with which to evaluate those factors.