IP Law Daily, COPYRIGHT—7th Cir.: District court improperly applied Copyright Act’s fee shifting provision, (Aug 14, 2023)

By Patricia K. Ruiz, J.D.

The fee shifting provision encourages innovation by allowing a copyright holder to enforce its rights and allowing others to protect the right to use what is in the public domain.

In denying the defendants in a copyright infringement suit fees and costs under the Copyright Act, the district court misapplied the very strong presumption in favor of awarding a prevailing copyright defendant his fees and costs, held the U.S. Court of Appeals for the Seventh Circuit, affirming in part and vacating in part the order of the U.S. District Court for the Northern District of Illinois. The Seventh Circuit instructed that if, on remand, the district court determines that the defendants should recover their fees, any such award must include the fees incurred in bringing the appeal (Live Face on Web, LLC v. Cremation Society of Illinois, Inc., August 11, 2023, Kirsch, T.).

District court decision. The Cremation Society of Illinois and its co-defendants (CSI, collectively) each licensed a piece of computer code from Live Face on Web (LFW) for $328. In one of roughly 200 copyright suits, LFW sued the defendants for copyright infringement, alleging CSI infringed its copyrighted source code by using it on various websites without permission, and sought at least $483,000 in damages. Following five years of litigation, while summary judgment was pending, LFW moved to dismiss its own suit with prejudice, arguing a recent Supreme Court case, Google LLC v. Oracle America, Inc., made its fair-use defense insurmountable. The Northern District of Illinois granted the motion and denied a request by CSI to recover attorney’s fees after defeating LFW’s copyright claims against them, concluding that, because the defendants only prevailed due to an intervening Supreme Court decision, awarding fees would not advance the purposes of the Copyright Act’s symmetrical fee-shifting provision.

Fee-shifting provision. The Copyright Act authorizes prevailing parties to recover their costs and fees, encouraging innovation by allowing a copyright holder to enforce its rights and allowing others to protect the right to use what is in the public domain. Four nonexclusive factors guide a district court in its decision whether to award a prevailing party its fees: (1) the frivolousness of the suit; (2) the losing party’s motivation for brining or defending against a suit; (3) the objective unreasonableness of the claims advanced by the losing party; and (4) the need to advance considerations of compensation and deterrence. None of the factors are determinative, and a district court’s analysis must be sensitive to the facts before it. Given the fact-intensive nature of this inquiry, appellate courts review for an abuse of discretion. Prevailing copyright defendants are entitled to a very strong presumption in favor of recovering their fees, given that a successful copyright plaintiff can recover damages and receive judicial recognition of its rights, where a successful defendant recovers nothing it did not already have. The presumption can be overcome if these nonexclusive factors manage to surmount it, the appellate court explained.

Appeal. On appeal, the appellate court found the district court’s analysis to be faulty. The district court did not meaningfully test LFW’s assertion that Google changed the applicable law before concluding that it undermined the purpose of the presumption. Even if the Google decision did change something fundamental, the defendants raised several defenses apart from fair use. The appellate court determined any of those defenses might have defeated LFW’s claims, and Google impacted none of them. LFW never argued or proved it would have prevailed but for Google. The appellate court stated that the presumption can be outweighed by a careful application of the four factors. However, after weighing the factors, the appellate court found its strong presumption would resolve the question in the defendant’s favor, as a number of the factors pointed to the frivolousness of LFW’s lawsuit.

The case is No. 22-1641.

Attorneys: Ryan Santurri (Allen Dyer Doppelt Milbrath Gilchrist P.A.) for Live Face on Web, LLC. James K. Borcia (Tressler LLP) for Cremation Society of Illinois, Inc.

Companies: Live Face on Web, LLC; Cremation Society of Illinois, Inc.

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