United States: Supreme Court Clarifies Meaning Of ‘Full Costs' In Section 505 Of Copyright Act

In Rimini Street, Inc. v. Oracle USA, Inc.,¹ a unanimous Supreme Court recently held that 17 U.S.C. § 505's award of "full costs" is limited to the specific categories of costs defined in 28 U.S.C. §§ 1821 and 1920, which exclude expert witness fees, e-discovery expenses and jury consultant fees. "A statute awarding 'costs' will not be construed as authorizing an award of litigation expenses beyond the six categories listed in §§ 1821 and 1920, absent an explicit statutory instruction to that effect."² This decision effectively limits the costs recoverable by a successful litigant as a matter of course in copyright litigation and in "exceptional" trademark and patent cases.³

Oracle originally sued Rimini Street in the District of Nevada, alleging that Rimini's software support services for Oracle customers wrongly copied Oracle's software without licensing it. The jury agreed and awarded Oracle $35.6 million in damages for copyright infringement and $14.4 million for Oracle's state law claims.⁴ The district court also ordered Rimini Street to pay roughly $28.5 million in attorney's fees and $4.95 million in taxable costs.⁵ Rimini Street was further ordered to pay approximately $12.8 million for nontaxable litigation expenses such as expert witnesses, additional e-discovery fees, contract attorney services and jury consulting.⁶

On appeal, the Ninth Circuit affirmed the district court's $12.8 million award of nontaxable litigation expenses. While the appellate court acknowledged "28 U.S.C. § 1920 identifies only six categories of costs taxable against the losing party," it relied on existing precedent in the Ninth Circuit interpreting § 505's full costs language to mean courts are not confined to awarding only the six categories of costs in § 1920.⁷ "We are bound by our precedent unless the theory or reasoning of the Twentieth Century Fox decision is 'clearly irreconcilable' with a higher intervening authority, such as a decision by the Supreme Court," said the Ninth Circuit.⁸

The Supreme Court ultimately rejected the Ninth Circuit's interpretation of § 505 and reversed and remanded the $12.8 million award for litigation expenses. "Full costs" in 17 U.S.C. § 505 does not authorize awards for litigation expenses beyond the six categories of costs listed in 28 U.S.C. §§ 1821 and 1920.⁹ In so holding, the Supreme Court rejected three arguments advanced by Oracle to the contrary. First, the word "full" does not expand the scope of "costs" beyond §§ 1821 and 1920 but simply means all the costs available under those statutes. Second, "full costs" is not a historical term of art in English and American copyright statutes permitting recovery of all litigation expenses. And third, the word "full" before "costs" is not surplusage (which would indicate congressional intent to permit costs beyond §§ 1821 and 1920), as evidenced by Congress explicitly authorizing attorney's fees (which are not listed in §§ 1821 and 1920) in the second sentence of § 505.¹⁰

While the Supreme Court's decision in Rimini Street v. Oracle USA appears straightforward, the question of whether fees for expert witnesses, e-discovery and jury consulting services may be recoverable on other grounds is still unclear. For example, in West Virginia University Hospitals, Inc. v. Casey,¹¹ the Supreme Court determined that expert witness fees cannot be included in awards of attorney's fees. But some courts (like the Federal Circuit) have worked their way around the decision by noting expert fees still may be awarded pursuant to a court's inherent power to address fraud or abuse of the judicial process.¹² "As for the award of expert fees, a district court may invoke its inherent power to impose sanctions in the form of reasonable expert fees in excess of what is provided for by statute ... but the use of this inherent power is reserved for cases with a finding of fraud or abuse of the judicial process."¹³

Rimini Street's blanket exclusion of e-discovery costs could also have implications for district courts that disagree as to whether any or part of e-discovery expenses are included in § 1920. Numerous courts have adopted the Third Circuit's reasoning in Race Tire America, Inc. v. Hoosier Racing Tire Corp.¹⁴ and interpret § 1920(4) as authorizing e-discovery costs reasonably linked to "making copies" of materials (e.g., scanning, file format conversions) necessarily obtained for use in the case.¹⁵ District courts also point to CBT Flint Partners, LLC v. Return Path, Inc., where the Federal Circuit held that § 1920(4) covers costs necessary to duplicate an electronic document in the manner required by rule, by court order or agreement of the parties.¹⁶ The Seventh Circuit has also held that costs of "converting computer data into a readable format in response to the non-prevailing party's discovery requests" are recoverable under § 1920.¹⁷ Courts in the Seventh Circuit also consider Bates labeling to be taxable,¹⁸ though courts outside the Seventh Circuit do not agree.¹⁹

The Supreme Court did not expand at all on what it meant by e-discovery costs, and so its broad exclusion of e-discovery costs in Rimini Street calls the above decisions into question.²⁰ As such, more litigants may now seek to recover e-discovery costs in the form of attorney's fees. While recovery of such costs as attorney's fees in patent and trademark cases will be subject to the "exceptional case" requirement as set forth in 35 U.S.C. § 285, recovery of attorney's fees under § 505 is available as a matter of course.²¹ There already is some support for this approach outside the intellectual property context.²²

Moreover, courts and litigants could treat some e-discovery costs (e.g., reviewing and producing documents) as if they were paralegal expenses or research services, which are ordinarily recoverable as attorney's fees, even though such expenses are not allowed under § 1920.²³ Or courts could follow the Federal Circuit path of allowing such fees where there is fraud or abuse of the judicial system. Faced with this uncertainty, it is also possible that parties may simply decide to avoid the issue altogether by initially clarifying how e-discovery costs are to be allocated regardless of which party prevails.

The Supreme Court's rejection of costs for jury consulting services under § 1920, however, is on par with many decisions in the district courts. Most courts agree that recovery of jury consulting fees is impermissible, or at least disfavored.²⁴ As the Southern District of Ohio explained, "a jury consultant is obviously not an attorney, paralegal, or legal assistant whose time falls within the rubric of 'attorney fees' for purposes of the fee-shifting statutes," and 28 U.S.C. § 1920 does not explicitly include jury consultant fees as a category of costs.²⁵

Conclusion

The Supreme Court's recent decision in Rimini Street v. Oracle USA solidified the Court's view that federal statutes awarding "costs" will not be construed as authorizing an award of litigation expenses beyond the six categories listed in §§ 1821 and 1920 absent an explicit statutory instruction to that effect. While clear on its face, this holding may prove difficult in application. Courts have already found ways to award expert witness fees pursuant to their inherent powers in special cases. And given that 17 U.S.C. § 505 explicitly authorizes an award of reasonable attorney's fees to a prevailing party, courts and intellectual property litigants are likely to revisit and place a newfound emphasis on existing authority suggesting some e-discovery costs may be recovered as attorney's fees. In the wake of Rimini Street, litigants in copyright and other intellectual property cases will need to pay close attention to how courts in their circuit apply Rimini Street in light of earlier authority explaining the scope of recoverable costs and attorney's fees.

Footnotes

1 2019 WL 1005828 (March 4, 2019).

2 Id. at *4.

3 See 35 U.S.C. § 285; Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014) ("An 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated."). The Rimini Street decision, of course, applies to all federal litigation. This article examines its specific impact on intellectual property cases.

4 Rimini Street, 2019 WL 1005828, at *2.

5 Id.; Oracle USA, Inc. v. Rimini Street, Inc., 209 F. Supp. 3d 1200, 1218 (D. Nev. 2016) (separately awarding attorney's fees and then taxable costs for "deposition costs, document recovery and storage, and electronic discovery costs."). The Ninth Circuit ultimately reduced the award of taxable costs down to $3.4 million, however, based on a computational error. 879 F.3d 948, 965.

6 Oracle USA, 209 F. Supp. 3d at 1218-19 (stating "Section 505 of the Copyright Act permits a successful plaintiff to recover all costs incurred in litigation, not just taxable costs authorized by Rule 54(d) and 28 U.S.C. § 1920.").

7 Oracle USA, 879 F.3d at 965-66. In 2005, the Ninth Circuit held that "district courts may award otherwise non-taxable costs, including those that lie outside the scope of § 1920, under § 505." Twentieth Century Fox Film Corp. v. Entm't Distrib., 429 F.3d 869, 885 (9th Cir. 2005).

8 Oracle USA, 879 F.3d at 966.

9 Rimini Street, 2019 WL 1005828 at *2. The Court noted this holding is in line with prior Supreme Court precedent interpreting "costs" in federal statutes and authority. For example, under Fed. R. Civ. P. 54(d), 42 U.S.C. § 1988, and the Individuals with Disabilities Act, "costs" do not encompass expert witness fees. Id. at *4 (citations omitted).

10 Id., at *4-7.

11 499 U.S. 83, 92 (1991).

12 See, e.g., Amsted Indus. Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 378-79 (Fed. Cir. 1994); Datatern, Inc. v. MicroStrategy Inc., 2018 WL 2694458, at *7 (D. Mass. June 5, 2018); UCP Int'l Co. Ltd. v. Balsam Brands Inc., 2018 WL 2938855, at *6 (N.D. Cal. June 12, 2018).

13 Takeda Chem. Indus., Ltd. v. Mylan Labs., Inc., 549 F.3d 1381, 1391 (Fed. Cir. 2008) (affirming award of expert fees via district court's inherent powers even though 35 U.S.C. § 285 did not expressly authorize recovery). The district court determined Mylan "engaged in a host of bad faith litigation tactics," like the presentation of factually indefensible positions and ill-prepared experts, which "increased the burden of this litigation enormously." 2007 WL 840368, at *13.

14 674 F.3d 158, 167 (2012).

15 See, e.g., Country Vintner of North Carolina LLC v. E. & J. Gallo Winery Inc., 718 F.3d 249, 261 (4th Cir. 2013) (only awarding e-discovery costs for conversion of native files to TIFFs and PDFs, as well as transfer of files to CDs); CBT Flint Partners, LLC v. Return Path, Inc., 737 F.3d 1320, 1330-33 (Fed. Cir. 2013) (permitting format conversion, extraction of documents to preserve metadata and creation of "load files" as costs under § 1920(4), but rejecting tasks like keyword searching, statistical previews, auditing and logging of files, deduplication, and decryption costs); Johns Manville Corp. v. Knauf Insulation, LLC, 2018 WL 2388556, at *5 (D. Colo. May 25, 2018) (reviewing case law across jurisdictions and noting ESI costs covered by § 1920(4) are those attributable to scanning of hard-copy documents, conversion of native files to other formats and transferring electronic documents to a CD or DVD).

16 737 F.3d 1320, 1328 (2013).

17 Hecker v. Deere & Co., 556 F.3d 575, 591 (2009).

18 DSM Desotech, Inc. v. 3D Sys. Corp., 2013 WL 3168730, at *2 (N.D. Ill June 20, 2013) (citing cases).

19 See, e.g., Durden v. Citicorp Tr. Bank, FSB, 2010 WL 2105921, at *4 (M.D. Fla. Apr. 26, 2010) (citing cases from the Northern District of Texas, Northern District of Ohio and District of Colorado concluding Bates labeling not taxable).

20 The district court's award of certain e-discovery costs as taxable costs under § 1920 was not appealed. See Oracle USA, 879 F.3d at 965; Rimini Street, 2019 WL 1005828, at *2 (only the e-discovery costs included in the $12.8 million nontaxable litigation expenses were appealed). The Supreme Court therefore still has room to clarify what (if any) e-discovery costs can properly be taxed under § 1920(4).

21 See Note 3, supra. See also Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994) (listing four nonexclusive factors to determine propriety of attorney's fees: (i) frivolousness of the claim, (ii) motivation, (iii) reasonableness of the factual and legal components of the case, and (iv) deterrence).

22 See Thorncreek Apartments I, LLC v. Village of Park Forest, 2016 WL 4503559, at *9-10 (N.D. Ill. Aug. 29, 2016) (permitting recovery of payments to e-discovery vendors as "expenses of litigation" as part of reasonable attorney fees under 42 U.S.C. § 1988); Downes v. Volkswagen of Am., 41 F.3d 1132, 1144 (7th Cir.1994) (noting copying, paralegal and expert witness expenses are part of reasonable attorney's fees in civil rights cases).

23 See Haroco, Inc. v. American Nat. Bank & Trust of Chicago, 38 F.3d 1429, 1440-41 (7th Cir. 1994) (computerized legal research costs are more akin to awards under attorney's fees provisions than under costs.); Spear Mktg., Inc. v. Bancorpsouth Bank, 2016 WL 193586, at *9 n.15 (N.D. Tex. Jan. 14, 2016), aff'd, 844 F.3d 464 (5th Cir. 2016) (noting § 505 allows prevailing parties to recover paralegal fees); Latin Am. Music Co. v. Archdiocese of San Juan, 2010 WL 1068195, at *5 (D.P.R. Mar. 17, 2010) ("reasonable attorney's fees under § 505 include fees for paralegal services.").

24 See, e.g., In re Fidelity/Micron Sec. Litig., 167 F.3d 735, 739 (1st Cir. 1999) (noting the court will not award jury consult fees absent a showing of special circumstances); Abellan v. HRDS Le Roy IL, LLC, 2018 WL 6247260, at *13 (C.D. Ill Nov. 29, 2018) ("Plaintiff fails to provide any ... caselaw to support his request for reimbursement of a jury consultant fee."); New Form, Inc. v. Sabina Corp., 2008 WL 11336584, at *1 (C.D. Cal. July 2, 2008) ("The Court's independent research reflects that jury consult fee awards are disfavored.").

25 Jorling v. Habilitation Servs., Inc., 2005 WL 1657060, at *12 (S.D. Ohio July 14, 2005).

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