In Rimini Street, Inc. v. Oracle USA, Inc., a unanimous Supreme Court recently held that 17 U.S.C. § 505’s award of “full costs” is limited to the specific categories of costs defined in 28 U.S.C. §§ 1821 and 1920, which exclude expert witness fees, e-discovery expenses and jury consultant fees. “A statute awarding ‘costs’ will not be construed as authorizing an award of litigation expenses beyond the six categories listed in §§ 1821 and 1920, absent an explicit statutory instruction to that effect.” This decision effectively limits the costs recoverable by a successful litigant as a matter of course in copyright litigation and in “exceptional” trademark and patent cases.
Oracle originally sued Rimini Street in the District of Nevada, alleging that Rimini’s software support services for Oracle customers wrongly copied Oracle’s software without licensing it. The jury agreed and awarded Oracle $35.6 million in damages for copyright infringement and $14.4 million for Oracle’s state law claims. The district court also ordered Rimini Street to pay roughly $28.5 million in attorney’s fees and $4.95 million in taxable costs. Rimini Street was further ordered to pay approximately $12.8 million for nontaxable litigation expenses such as expert witnesses, additional e-discovery fees, contract attorney services and jury consulting.
On appeal, the Ninth Circuit affirmed the district court’s $12.8 million award of nontaxable litigation expenses. While the appellate court acknowledged “28 U.S.C. § 1920 identifies only six categories of costs taxable against the losing party[,]” it relied on existing precedent in the Ninth Circuit interpreting § 505’s full costs language to mean courts are not confined to awarding only the six categories of costs in § 1920. “We are bound by our precedent unless the theory or reasoning of the [Twentieth Century Fox] decision is ‘clearly irreconcilable’ with a higher intervening authority, such as a decision by the Supreme Court[,]” said the Ninth Circuit.
The Supreme Court ultimately rejected the Ninth Circuit’s interpretation of § 505 and reversed and remanded the $12.8 million award for litigation expenses. “[F]ull costs” in 17 U.S.C. § 505 does not authorize awards for litigation expenses beyond the six categories of costs listed in 28 U.S.C. §§ 1821 and 1920. In so holding, the Supreme Court rejected three arguments advanced by Oracle to the contrary. First, the word “full” does not expand the scope of “costs” beyond §§ 1821 and 1920 but simply means all the costs available under those statutes. Second, “full costs” is not a historical term of art in English and American copyright statutes permitting recovery of all litigation expenses. And third, the word “full” before “costs” is not surplusage (which would indicate congressional intent to permit costs beyond §§ 1821 and 1920), as evidenced by Congress explicitly authorizing attorney’s fees (which are not listed in §§ 1821 and 1920) in the second sentence of § 505.
While the Supreme Court’s decision in Rimini Street v. Oracle USA appears straightforward, the question of whether fees for expert witnesses, e-discovery and jury consulting services may be recoverable on other grounds is still unclear. For example, in West Virginia University Hospitals, Inc. v. Casey, the Supreme Court determined that expert witness fees cannot be included in awards of attorney’s fees. But some courts (like the Federal Circuit) have worked their way around the decision by noting expert fees still may be awarded pursuant to a court’s inherent power to address fraud or abuse of the judicial process. “As for the award of expert fees, a district court may invoke its inherent power to impose sanctions in the form of reasonable expert fees in excess of what is provided for by statute … [but the] use of this inherent power is reserved for cases with a finding of fraud or abuse of the judicial process.”
Rimini Street’s blanket exclusion of e-discovery costs could also have implications for district courts that disagree as to whether any or part of e-discovery expenses are included in § 1920. Numerous courts have adopted the Third Circuit’s reasoning in Race Tire America, Inc. v. Hoosier Racing Tire Corp. and interpret § 1920(4) as authorizing e-discovery costs reasonably linked to “making copies” of materials (e.g., scanning, file format conversions) necessarily obtained for use in the case. District courts also point to CBT Flint Partners, LLC v. Return Path, Inc., where the Federal Circuit held that § 1920(4) covers costs necessary to duplicate an electronic document in the manner required by rule, by court order or agreement of the parties. The Seventh Circuit has also held that costs of “converting computer data into a readable format in response to [the non-prevailing party’s] discovery requests” are recoverable under § 1920. Courts in the Seventh Circuit also consider Bates labeling to be taxable, though courts outside the Seventh Circuit do not agree.
The Supreme Court did not expand at all on what it meant by e-discovery costs, and so its broad exclusion of e-discovery costs in Rimini Street calls the above decisions into question. As such, more litigants may now seek to recover e-discovery costs in the form of attorney’s fees. While recovery of such costs as attorney’s fees in patent and trademark cases will be subject to the “exceptional case” requirement as set forth in 35 U.S.C. § 285, recovery of attorney’s fees under § 505 is available as a matter of course. There already is some support for this approach outside the intellectual property context.
Moreover, courts and litigants could treat some e-discovery costs (e.g., reviewing and producing documents) as if they were paralegal expenses or research services, which are ordinarily recoverable as attorney’s fees, even though such expenses are not allowed under § 1920. Or courts could follow the Federal Circuit path of allowing such fees where there is fraud or abuse of the judicial system. Faced with this uncertainty, it is also possible that parties may simply decide to avoid the issue altogether by initially clarifying how e-discovery costs are to be allocated regardless of which party prevails.
The Supreme Court’s rejection of costs for jury consulting services under § 1920, however, is on par with many decisions in the district courts. Most courts agree that recovery of jury consulting fees is impermissible, or at least disfavored. As the Southern District of Ohio explained, “[a] jury consultant is obviously not an attorney, paralegal, or legal assistant whose time falls within the rubric of ‘attorney fees’ for purposes of the fee-shifting statutes[,]” and 28 U.S.C. § 1920 does not explicitly include jury consultant fees as a category of costs.
The Supreme Court’s recent decision in Rimini Street v. Oracle USA solidified the Court’s view that federal statutes awarding “costs” will not be construed as authorizing an award of litigation expenses beyond the six categories listed in §§ 1821 and 1920 absent an explicit statutory instruction to that effect. While clear on its face, this holding may prove difficult in application. Courts have already found ways to award expert witness fees pursuant to their inherent powers in special cases. And given that 17 U.S.C. § 505 explicitly authorizes an award of reasonable attorney’s fees to a prevailing party, courts and intellectual property litigants are likely to revisit and place a newfound emphasis on existing authority suggesting some e-discovery costs may be recovered as attorney’s fees. In the wake of Rimini Street, litigants in copyright and other intellectual property cases will need to pay close attention to how courts in their circuit apply Rimini Street in light of earlier authority explaining the scope of recoverable costs and attorney’s fees.