Supreme Court Justices Search for Copyright Fee-Shifting Compromise in Kirtsaeng

Kirtsaeng counsel Joshua Rosenkranz of Orrick, Herrington said the 2nd Circuit misapplied the Fogerty rules by overemphasizing the importance of the “objective reasonableness” standard, as expected (see 1604220057). The 2nd Circuit’s standard “does nothing to encourage a defendant who has a good defense but is facing off against a powerful adversary armed with a reasonable position,” Rosenkranz said. A U.S. district court “should consider each of the Fogerty factors and do it through the lens of the purposes of the Copyright Act,” he said. “It should also consider the significance and nature of the win and the litigation incentives on both sides of the deed, including any disparity in resources.”

Wiley counsel Paul Smith of Jenner & Block argued the 2nd Circuit’s application of Fogerty is in line with the Supreme Court’s standard for fee-shifting in patent infringement cases. Smith also questioned statistics provided by Kirtsaeng’s legal team that it claimed show the 2nd Circuit rarely awarding attorney’s fees to prevailing defendants in copyright lawsuits. “These statistics can be thrown around” depending on what kind of judgments are included in the statistics, Smith said. Elaine Goldenberg, assistant to the U.S. solicitor general, supported Wiley’s position in favor of the 2nd Circuit standard, saying many of the Fogerty factors “center around objective reasonableness.”

Justice Stephen Breyer suggested he would be in favor of finding in its ruling that the 2nd Circuit “seems not to have taken account of what we said, which is that all considerations that are consistent with the purposes of the Copyright Act can be relevant. It depends on the case, period.” Breyer questioned Kirtsaeng’s argument that courts should consider the significance of a case’s outcome in advancing copyright law, saying, “I don’t know how to” set a rule that courts can consistently apply in all copyright cases. “How do we know which advances the law?” he asked. Breyer said the Supreme Court’s 1803 ruling in Marbury v. Madison may have been “viewed by many people [at the time] as being just about an appointment, and that it didn’t really advance the law.”

Justice Sonia Sotomayor said she is “sympathetic” to Kirtsaeng’s argument that the 2nd Circuit “stacks everything in favor of a winning plaintiff” in determining copyright fee-shifting but wasn’t comfortable with siding with the 9th Circuit’s interpretation of Fogerty, which is more favorable to winning defendants. The rule could be “it’s OK to have [objective reasonableness as] one among others, but not a presumption that says that’s always going to entitle you to defend against an award or to win an award,” Sotomayor said.

Justice Elena Kagan was also sympathetic to Kirtsaeng’s argument. “It does seem as though [the 2nd Circuit’s standard] sends a pretty strong signal to district courts that this is the key factor and that they are probably not in their lifetimes going to see a case in which that factor is outweighed.” But Kagan also said she was concerned that Kirtsaeng’s proposed rule doesn’t allow for a “pretty clear safe harbor” for underdog parties in copyright lawsuits. “It’s very hard for people to make judgments ex ante and to figure out what their chances are” of a case impacting copyright law, Kagan said. “It’s very hard to predict.” Justice Ruth Bader Ginsburg at one point extended Kagan’s comparison of cases in which an underdog party wins to the biblical story of David and Goliath, saying Kirtsaeng’s proposed rule would ensure that “if David faces Goliath and David wins, David gets fees no matter how reasonable Goliath’s position was.”

Justice Samuel Alito also questioned the applicability of Kirtsaeng’s proposed rule, saying it was problematic because “different judges are going to have very different views about what will further the purposes of the Copyright Act. Don’t you think both the 2nd Circuit and the 7th Circuit think that their rules are the rules that best further the purposes of the Copyright Act?”

Chief Justice John Roberts focused several questions on the extent to which the financial circumstances of parties in a copyright case should factor into a decision on fee-shifting. Kirtsaeng received pro bono representation in the case that ended with the Supreme Court’s 2013 ruling in his favor, which Smith said “can affect” several of the Fogerty factors. “You don’t need to compensate [Kirtsaeng] for representation that he didn’t pay for,” Smith said. “That’s quite an intrusion into the relationship between the party and counsel,” Roberts said. “Do you look at it and say, ‘Oh, well, you have discovery … on what the relationship was between him and his counsel, with the counsel giving a discount and fees and all that?' I’m not sure that should be a pertinent consideration.”

Justices appeared to be “more bothered by the 2nd Circuit putting its thumb on the scale” in favor of the objective reasonableness factor than with Kirtsaeng’s argument that the importance of a case should be a factor in fee-shifting, said Constantine Cannon attorney Seth Greenstein, who co-drafted Public Knowledge’s amicus brief supporting Kirtsaeng. Breyer appeared to “strike the middle ground” by saying that courts shouldn’t “prescribe the weight given to each factor in Fogerty” in advance, and that view may form the locus of the Supreme Court’s majority opinion, Greenstein said. It’s not certain from oral argument whether there is a clear majority in favor of Breyer’s position, and the other left-leaning justices appeared to differ on what the “right test should be,” said PK Director-Patent Reform Project Charles Duan.