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A Note of Caution When Suing for Copyright Infringement

Posted in Copyright

Think recovery of attorneys’ fees in copyright infringement cases is just for plaintiffs? Think again. Plaintiffs’ counsel should take heed of the chilling tale in Fharmacy Records v. Salaam Nassar, Nos. 10-1354, 10-2073, 2012 WL 573942 (6th Cir. Feb. 23, 2012), discussed below. But first, some background. In Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), the Supreme Court explained that awards of fees to prevailing parties in copyright cases are discretionary and with respect to liability for them, copyright plaintiffs and defendants are to be held to the same standards. Since then, there have been scores of copyright cases in which courts have awarded fees. In most, it is the plaintiffs who have recovered. See, e.g., Balsley v. LFP, Inc., Case No. 1:08 CV 491, 2011 WL 1303738, **5-7 (N.D. Ohio March 31, 2011) (plaintiff prevailed but awarded only 40% of fees; thorough analysis of fee award). But on occasion, a defendant will win its fees. See, e.g., Chambers v. Ingram Book Co., Case No. 09-14731, 2012 WL 933237, **3-7 (E.D. Mich. March 20, 2012) (court awarded prevailing defendants just shy of $75,000 in attorneys fees). Whether intended or not, the principles governing Rule 11 are regularly applied when the issue is whether defendants should recover fees. See id. (in awarding fees, court found the lawsuit frivolous and motivations behind the filing of it highly questionable).

The Sixth Circuit issued one of the more interesting decisions applying Fogarty in Bridgeport Music, Inc. v. WB Music Corp., 520 F.3d 588, 593 (6th Cir. 2008). In that case the court affirmed the award of attorneys fees against the plaintiff even though the plaintiff’s claim was, at least initially, "objectively reasonable." 

Two very recent circuit court decisions relied upon the reasoning in Bridgeport, but with considerably different results. In T-Peg, Inc. v. Vermont Timberworks, Inc., 669 F.3d 59 (1st Cir. 2012), the First Circuit affirmed an award of fees to defense counsel, but severely limited the amount in light of the modest value of the plaintiff’s claim. No matter that the defendant had to spend over four times that amount to prevail in the matter due to the plaintiff’s aggressive litigation strategy. To view a good account of the case, see the blog, "Attorney’s fees – not just for copyright Plaintiffs" here. In stark contrast, a week later the Sixth Circuit in Fharmacy Records v. Salaam Nassar, Nos. 10-1354, 10-2073, 2012 WL 573942 (6th Cir. Feb. 23, 2012) ("Fharmacy II"), awarded defense counsel fees in the amount of $546,199.89 — without express mention of the value of the plaintiff’s claim — due to what the district court deemed to be egregious conduct on the part of the plaintiffs and their counsel, conduct that included discovery abuses, spoliation of evidence, and suborned perjury, as detailed in an earlier decision in the action. See Fharmacy Records, Inc. v. Salaam Nasser, 379 F.App’x. 522 (6th Cir. 2010).

In Fharmacy II, the stated reason for the appeal regarding fees had to do with whether the district court had correctly allowed a magistrate judge to review and calculate the fee award. The District Court had referred the matter to the magistrate judge pursuant to 28 U.S.C. §636(b)(1)(a). The Sixth Circuit acknowledged that the proper basis for the referral was actually 28 U.S.C.§636(b)(3). But the court concluded this "technical or clerical error" was of no practical moment – meaning, the plaintiff was not going to be able to dodge the fee award because of it.

Cruising past that and other procedural issues, the court then focused the main issue: whether plaintiff’s counsel was jointly and severally liable under 28 U.S.C.§1927 to pay the fees the court had awarded. The court said yes, relying upon the report and recommendation the magistrate judge had prepared below excoriating plaintiffs’ counsel for their vexatious conduct in litigating the case. The Sixth Circuit flatly rejected the argument that plaintiffs’ counsel should not be liable because they didn’t fully appreciate they might be personally liable for the fees (suggesting counsel were less concerned if only their clients had to pay the fees—even for counsel’s behavior?).

There are many lessons to be learned from this case.   First, it goes without saying that counsel must always follow the rules—and play fair, even if the battle has a David versus Goliath character to it. Few things provoke a court more than being forced to deal with a myopic or petulant litigator. And second, it is imperative that counsel keep control of its clients. The struggling artist who cannot afford to pay counsel’s fees but who nonetheless insists his lawyer take unsupportable positions or pursue unreasonable litigation strategies may saddle the lawyer with a liability the lawyer never expected.