March 4, 2003

Small Stakes, Big Attorneys’ Fees in Copyright Litigation

Holland & Knight Newsletter
Paul F. Kilmer

The U.S. Court of Appeals for the Seventh Circuit has held that the prevailing plaintiff in a copyright infringement action where the “monetary stakes are small” has a “presumptive entitlement” to an award of attorneys’ fees. Gonzales v. Transfer Technologies Inc., 64 U.S.P.Q.2d 1319 (7th Cir. 2000).  The plaintiff, Gonzales, had created several copyrighted designs for T-shirts and promptly registered his copyright claims with the U.S. Copyright Office (thereby entitling him to statutory damages and attorneys’ fees pursuant to 17 U.S.C. §§ 412, 504 and 505). The lower court found that the defendant, Transfer Technologies, had infringed Gonzales’ copyright, and noted that the acts of infringement were “willful” although not “flagrant.” The lower court awarded Gonzales only $3,000 in statutory damages (the minimum amount provided by law) and failed to make an award of attorneys’ fees. That limited relief appears to have reflected the low value which the trial court placed on the T-shirt art at issue.

The Appeals Court vacated and remanded the trial court’s decision, indicating that the small award by the lower court did not serve the objectives of the Copyright Act, namely, to compensate the copyright owner and deter future infringements. “No one can prosecute a copyright suit for $3,000,” the Seventh Circuit wrote. Allowing an infringer to escape at a such a low cost, merely because the infringed copyrights were low in value, would mean that minor infringements “cannot be adequately deterred,” making them “immune from legal redress,” thereby allowing “minor infringements, though willful, to be committed with impunity.”  To the contrary, the Appeals Court held that “[t]he smaller the damages…, the stronger the case for an award of attorneys’ fees.”

Attorneys’ fees are not the only device for redressing a low-stakes infringement. A low-stakes plaintiff may opt for statutory damages (up to $150,000 per willful infringement, in the court’s discretion). The lower court in Gonzalez, for its own reasons, declined to use this device to adequately compensate the copyright holder and punish the willful infringer.

The Gonzalez decision has several implications. First, the Supreme Court has indicated that, when awarding attorneys’ fees to the successful party in an infringement action, copyright defendants are as important to protect as plaintiffs, since successful defenses enlarge the public domain. Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994). Employing the rationale of Gonzales and the teachings of Fogerty may therefore mean that large corporate plaintiffs that file frivolous or overreaching copyright actions could face substantial awards of attorneys’ fees against them. This is the case because the only remedy to which defendants are entitled in harassing or baseless copyright litigation is recovery of attorneys’ fees; neither actual nor statutory damages are available to the successful defendant.

The appeals court’s decision in Gonzales also raises the issue of how attorneys’ fee awards are to be calculated in copyright actions.  A recent illustration is offered by Stevens v. Aeonian Press Inc., 64 U.S.P.Q.2d 1920 (S.D.N.Y. 2002), in which the court awarded attorneys’ fees to a copyright plaintiff amounting to almost $290,000 (on top of the maximum statutory damages). The court compared the rates charged by the plaintiff’s counsel to the rates of lawyers of comparable skill, and considered the time and labor involved; the novelty and difficulty of the case; the requisite skills; the preclusion of other employment; the customary fee; time limitations; the amount in controversy and the result obtained; the attorneys’ experience, reputation and ability; the undesirability of the case; the attorneys’ relationship with their client and their actual billing arrangement; awards in similar cases; and the ability of the defendants to pay.

These decisions serve as a useful reminder of how the attorneys’ fees provisions of the Copyright Act create a powerful remedy, both against infringers and against unfounded accusations of infringement.

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