Supreme Court Review of Kirtsaeng Turns on Copyright Lawsuit Fee-Shifting Factors

“We’ll be arguing that both the U.S. District Court [in New York] and the 2nd Circuit were mistaken in their departure from” the rules for awarding attorney’s fees in copyright cases set in Fogerty, said Kirtsaeng co-counsel Sam Israel. “They missed the overarching spirit and purpose of that case, which was to take a neutral perspective” on fee-shifting cases. Kirtsaeng is arguing that the Supreme Court must resolve a split among U.S. circuit courts on the fee-shifting rules, claiming the 2nd Circuit’s ruling that Wiley’s claims in its lawsuit against Kirtsaeng didn’t meet the “objective reasonableness” standard for fee shifting doesn’t match the application of that standard in multiple other circuit courts.

“A rule that mandates the weight of a particular factor in every single case restricts district court discretion to consider relevant factors and assign them relative weight,” Kirtsaeng’s lawyers said in their initial brief to the Supreme Court. The 2nd Circuit’s standard “also ignores the court’s teaching in Fogerty, which rejected the ‘dual standard’ that explicitly favors plaintiffs (who were presumptively entitled to fees) over defendants (who could secure fees only if the plaintiff was blameworthy).” The Supreme Court should instead rule in favor of the standard set by the 9th and 11th Circuits that would consider awarding attorney’s fees to the prevailing party when that party’s litigation “has advanced the purposes of the Copyright Act,” Kirtsaeng said.

Wiley’s lawyers argued in their brief that “giving substantial weight to objective reasonableness of the losing party’s position” serves the goal of advancing the purposes of the Copyright Act “perfectly because it encourages parties to litigate the close and difficult questions of copyright law where clarification is needed the most.” Kirtsaeng’s argument that the importance of how a case shifts copyright should become a fee-shifting factor “perversely discourages” unresolved issues of copyright law “from being litigated in the first place,” Wiley said. “Many litigants who prevailed against unreasonable positions or for whom an award of fees would otherwise serve the goals of the Copyright Act” deserve to be awarded attorney’s fees, but “Kirtsaeng is not one of those litigants.”

U.S. Solicitor General Donald Verrilli supported Wiley in an amicus brief, saying the 2nd Circuit’s standard for evaluating fee-shifting cases “reflects a proper understanding” of the fee-shifting provisions in Copyright Act Section 505. The 2nd Circuit’s standard is also consistent “with longstanding copyright practice, and with the standards that generally apply under other discretionary federal fee-shifting provisions,” Verrilli said. Emphasizing the objective reasonableness factor “deters unreasonable arguments and encourages reasonable ones. Because plaintiffs and defendants are equally capable of making both reasonable and unreasonable arguments, the [2nd] Circuit’s approach reflects the even-handedness that Fogerty demands.”

Kirtsaeng’s reliance on the argument that a case’s advancement of the purposes of the Copyright Act should be considered when considering fee shifting is “very telling” because “it’s the only way they can potentially win on remand,” said Volunteer Lawyers for the Arts (VLA) counsel David Leichtman of Robins, Kaplan. VLA, the Copyright Alliance and software support firm Rimini Street separately filed amicus briefs in support of Wiley. VLA said in its brief it believes the 2nd Circuit’s “totality of the circumstances” approach to evaluating fee-shifting cases, also applied in the 3rd, 4th and 6th circuits, “is consistent with this Court’s decision” in Fogerty. Public Knowledge filed a brief in support of Kirtsaeng, while the American Intellectual Property Law Association and the Intellectual Property Owners Association separately filed briefs in support of neither party.

The justices will likely have "a lot of questions about whether [Kirtsaeng’s Copyright Act factor argument] should be viewed as a separate factor or if it’s something that’s already baked into the objective reasonableness factor, Leichtman told us. “When courts have examined fee-shifting cases they’ve traditionally looked at whether the conduct of the losing party was reasonable rather than the value of the case brought by the winning party.” The Supreme Court ruled 6-3 for Kirtsaeng in 2013, but it was still a “close case” and the New York district court found on remand that Wiley’s original argument in the lawsuit “wasn’t vexatious,” Leichtman said. “Even if your case changes copyright law, that doesn’t mean that you’re entitled to attorney’s fees even if the losing party is acting reasonably in originally taking the case to court.”

The justices “may feel that the discretion that’s available to courts in applying the multiple factors involved in Fogerty trumps our concern that Fogerty hasn’t been applied faithfully” at the 2nd Circuit, Israel said. “That’s our principal concern” ahead of oral arguments. Kirtsaeng’s lawyers are planning to argue there has been a historical bias in courts’ application of Fogerty against defendants even though the language in Fogerty “doesn’t express that bias,” Israel said. He said the Supreme Court vacancy since Justice Antonin Scalia’s death in February, which leaves the court with only eight justices, could affect the court’s Kirtsaeng ruling but was unsure whether the vacancy favors Kirtsaeng or Wiley. Scalia partially joined a dissenting opinion on the Supreme Court’s 2013 Kirtsaeng ruling written by Justice Ruth Bader Ginsburg. Justice Anthony Kennedy also joined Ginsburg’s dissent.