In the June 2016 decision of Kirtsaeng v. John Wiley & Sons, Inc. (2016), the Supreme Court held that in copyright cases, district courts should give “substantial weight” to the objective reasonableness of the losing party’s position when determining whether to award attorney’s fees. The Court vacated the Second Circuit’s ruling against awarding attorney’s fees in copyright cases, cautioning that “substantial” does not mean “dispositive” – or that it will determine the outcome of the case. The Court further noted that while district courts have broad discretion and “objective reasonableness” is the most important factor, district courts should also consider all other relevant factors.
Under this framework, district courts have the broad discretion to award attorney’s fees despite the losing party’s reasonableness arguments. Conversely, although the losing party made an unreasonable argument, district courts may deny attorney’s fees.
For example, a court may order fee-shifting because of a party’s litigation misconduct, whatever the reasonableness of his claims or defenses. Or a court may do so to deter repeated instances of copyright infringement or overaggressive assertions of copyright claims, again even if the losing position was reasonable in a particular case. Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals.
Kirtsaeng, 579 U.S. ______ (2016).
According to the Court, fee awards should encourage the type of lawsuits that promote the Copyright Act’s balance between encouraging and rewarding author’s work while allowing others to build on that work. In Kirtsaeng, the issue was whether giving substantial weight to the reasonableness of the losing party’s position or the lawsuit’s role in settling significant and uncertain legal issues would predictably encourage useful copyright litigation. The Court believed that the objective reasonableness approach incentivizes parties with strong legal positions to stand on their rights and deters those with weak positions from proceeding to litigation. For example, the likelihood that a clearly correct party will be awarded attorney’s fees will encourage it to litigate the case until the end. In contrast, the party that has a less than favorable position is less likely to proceed to litigation if it knows that it will have to pay two sets of attorney’s fees. Although the Court agreed that the litigation of close cases can ensure that the boundaries of copyright law are clear, the Court rejected the lawsuit’s role approach because fees increase the reward for victory and penalty for defeat.
The Court remanded this case, giving the lower court broad discretion on how to apply the standard. Giving no example, courts are allowed to apply the standard as they see fit, and therefore, the impact of the standard will likely vary depending on the circuit in which the litigation is brought. Additionally, the Court’s standard will likely impact other areas of intellectual property, such as patent cases, because it calls for an analysis that considers all relevant factors when determining whether to award attorney’s fees.
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