Copyright owners considering filing suit against potential copyright infringers must weigh a risk not present in most other lawsuits: the possibility of paying the defendant’s attorney fees if the copyright owner loses. In a string of decisions over the last several years — including one issued this past January — the Seventh Circuit Court of Appeals has made it clear that prevailing defendants in copyright infringement cases may be presumptively entitled to recover their reasonable attorney fees from the unsuccessful plaintiff.
Awarding attorney fees to prevailing defendants is an exception to the general "American Rule," under which each party to a lawsuit typically cannot recover its fees from its opponent. While some federal and state statutes such as the Civil Rights Act, the Patent Act, and the Lanham Act permit the recovery of attorney fees in certain instances, recovery is often limited to prevailing plaintiffs and the evidentiary threshold for recovering fees is often high. The Patent Act, for example, permits an award of fees only in "exceptional cases," and plaintiffs in Civil Rights Act cases are presumptively entitled to recover fees, while defendants are entitled to a fee award only if the suit was groundless.
Section 505 of the Copyright Act provides that courts may award reasonable attorney fees to prevailing parties in copyright infringement actions. In a 1994 decision, the U.S. Supreme Court ruled that the Act requires that prevailing plaintiffs and prevailing defendants must be "treated alike" when it comes to awarding attorney fees. See Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994). The court did not articulate a precise standard for determining when to award fees, but merely suggested that trial courts consider, among other things, "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance consideration of compensation and deterrence." Id. at 535 n. 19.
Since the Fogerty decision, the U.S. Court of Appeals for the Seventh Circuit has taken the lead in fleshing out the standards for when to award attorney fees to prevailing parties — especially prevailing defendants. In Harris v. Custom Home Builders, Inc., 140 F.3d 728, 730 (7th Cir. 1998), the court stated that "in order to obtain fees, a prevailing defendant need not show that the case was brought in bad faith or that it was frivolous."
Four years later, in Gonzales v. Transfer Technologies, Inc., 301 F.3d 608, 610 (7th Cir. 2002), the court held that "the prevailing party in a copyright case in which the monetary stakes are small should have a presumptive entitlement to an award of attorneys’ fees." The Seventh Circuit expanded upon that rule last year in Assessment Technologies v. Wiredata, Inc., 361 F.3d 434 (7th Cir. 2004), finding that "[w]hen the prevailing party is the defendant, who by definition receives not a small award but no award, the presumption in favor of awarding fees is very strong." Id.
Finally, this past January the Seventh Circuit, in Woodhaven Homes & Realty, Inc. v. Hotz, 396 F.3d 822 (7th Cir. 2005), again held that "prevailing defendants in copyright cases . . . are presumptively entitled (and strongly so) to recover attorney fees." Id. at 824. The prevailing defendant in that case sought to recover more than $220,000 in attorney fees spent in defending allegations of copyright infringement. Id. The Seventh Circuit remanded the case to the trial court for an evaluation of the reasonableness of that request. Id. at 825.
Federal appeals courts in other circuits have not yet addressed whether the Seventh Circuit’s approach toward awarding attorney fees applies outside of that jurisdiction. Copyright owners contemplating filing suit against potential infringers should consider the Seventh Circuit’s rule and its potential applicability to their case.
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