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Seventh Circuit grants plaintiff’s motion for attorneys’ fees incurred on appeal under Copyright Act, finding that plaintiff would have otherwise lost money in prevailing on defendant’s borderline frivolous appeal and plaintiff performed public service by exposing defendant’s disreputable business strategy.
Plaintiff Leslie Klinger brought a declaratory judgment action against defendant Conan Doyle Estate, Ltd., for a declaration that his anthologies of works featuring Sherlock Holmes and other characters did not infringe copyrights in fictional works featuring Sherlock Holmes published by Arthur Conan Doyle before 1923 (now in the public domain). The Estate had previously obtained a $5,000 license fee from the publisher of Klinger’s first anthology and sought the same fee from the publisher of the second anthology, threatening to prevent distribution of Klinger’s book through well-known retailers such as Amazon and Barnes & Noble, and making veiled threats to sue for copyright infringement. In response, the publisher refused to publish Klinger’s book until he paid for a license from the Estate.
Rather than obtaining the license, Klinger brought his declaratory judgment action. After Klinger won in the district court, the Estate appealed to the Seventh Circuit Court of Appeals. The Seventh Circuit affirmed, finding no basis in statute or case law to extend the copyright in Doyle’s works beyond their expiration in 1923. The court rejected the Estate’s argument that because stories published by Doyle between 1923 and his death in 1930, which were still under copyright, depicted characters in a more “rounded form” than found in the pre-1923 fiction, the characters of the earlier stories – including Sherlock Holmes and Dr. Watson – were protected by the copyrights still in force on the “rounded” characters of the later stories. (Read our summary of the Seventh Circuit’s opinion here.)
Following his victory on appeal, Klinger brought a motion before the Seventh Circuit to recover the attorneys’ fees he incurred on appeal, amounting to $30,679.93. As the court noted, the Copyright Act authorizes the “award [of] a reasonable attorney’s fee to the prevailing party as part of the costs.” The two most important considerations in deciding whether to award fees are (1) the strength of the prevailing party’s case and (2) the amount of damages or other relief the party obtained. If, as in this case, the claim or defense is frivolous and the prevailing party wins but obtains no relief at all, a fee award is “compelling.”
In addition, the successful defense of an infringement suit carries the “very strong” presumption in favor of awarding fees in order to ensure that parties accused of infringement do not abandon meritorious defenses, enter into a nuisance settlement or be deterred from exercising their rights because “the cost of vindication exceeds the private benefit to the party.” Here, the court found that unless Klinger was awarded fees, he would actually have lost money in winning an appeal in which the Estate’s only defense “bordered on frivolous.” The court also noted that it was irrelevant whether the alleged infringer is a defendant or plaintiff, reasoning that a declaratory-judgment plaintiff in a copyright suit is effectively a defendant in an infringement suit.
The court went on to criticize the Estate’s business strategy of charging a modest license fee without any legal basis in hope that the alleged infringer will simply pay the fee rather than incur greater cost in challenging the legality of the license, likening the practice to “a form of extortion.” The court concluded that Klinger had performed a public service, acting as a “private attorney general” and undertaking substantial risk by challenging and exposing the Estate’s unlawful business strategy. Noting that “Klinger deserves a reward but asks only to break even,” the court granted Klinger’s motion and ordered the Estate to pay him $30,679.93 for the legal fees he incurred on appeal.