This morning, the Supreme Court issued its most recent ruling in Kirtsaeng v. John Wiley & Sons, Inc., unanimously holding that the “objective reasonableness” of an unsuccessful litigant’s position should be accorded “substantial weight” when awarding attorneys’ fees in copyright cases. The Court, however, also noted that this factor is not dispositive and district courts must examine a wide-array of other factors.
This case first came before the Court in 2012 when the Plaintiff, Supap Kirtsaeng, petitioned the Court to reverse the Second Circuit’s holding that he had infringed John Wiley & Sons copyrights by reselling textbooks in the United States that he had purchased in Thailand. After the Court ruled in his favor, he returned to the District Court, seeking over $2 million in fees under the Copyright Act’s fee-shifting provision, 17 U.S.C. § 505.
The District Court and the Second Circuit held that fees were inappropriate because Wiley’s position in the underlying litigation had been “objectively reasonable.” No. 08-cv-07834 (S.D.N.Y. Dec. 20, 2013); 605 F. Appx. 48, 49, 50 (2nd Cir. 2015). At the Supreme Court, both parties argued that the Copyright Act fee-shifting statute should be interpreted to further the overall goals of the Copyright Act, but took different positions on how that should be accomplished. Kirtsaeng argued that fees should be awarded to successful litigants whose cases “meaningfully clarif[y]” copyright law. Wiley, on other hand, argued that “giving substantial weight to the reasonableness of a losing party’s position” best serves those goals.
The Court agreed with Wiley. The Court began its analysis by noting that the Copyright Act “serves the purpose of enriching the general public through access to creative works.” Slip Op. at 6. Thus, the Court aimed to craft guidance that would further those goals by “encouraging and rewarding authors’ creations while also enabling others to build on that work.” Id. The Court reasoned that Kirtsaeng’s approach would not further the goals of the Copyright Act because it would disincentivize litigants from pursuing cases that would “meaningfully clarify” copyright law by imposing a financial penalty for losing. It would also be difficult to implement because the long-term implications of a court’s holding are often not immediately clear.
The Court found that Wiley’s “objective reasonableness” test, on the other hand, furthers the goals of the Copyright Act by encouraging parties with strong legal positions to litigate (since they stand to recover fees) and those with weak positions to settle (since they face the potential of paying two sets of fees). The Court reasoned that Wiley’s approach is also more administrable because a court that has ruled on the merits of a copyright case can easily assess the reasonableness of the losing party’s position.
But, while the Court held the “objective reasonableness” factor should be given “substantial weight,” it held it is not dispositive. Instead, courts must consider other factors that further the goals of the Copyright Act, and can award fees where a losing party’s position is reasonable if doing so would further the goals of the Copyright Act and vice versa. Slip. Op. at 10-11. Because it was not clear if the lower courts had properly weighed factors other than objective reasonableness, the Court remanded the case to the District Court to review the fee application “giving substantial weight to the reasonableness of Wiley’s position but also taking into account all other relevant factors.” Slip Op. at 12.
Ultimately, consistent with its recent decisions on fee-shifting statutes related to patent law, Kirtsaeng increases the discretion district courts have in making fee award determinations in copyright cases, giving them leeway to consider the totality of the circumstances.