The availability of attorneys’ fees for prevailing parties in copyright cases has been a hot issue for several years, and I have commented on recent developments on several occasions. This week, the Seventh Circuit issued an opinion making clear that the applicable analysis remains grounded in a fact-intensive, case-by-case approach. Timothy B. O’Brien LLC v. Knott, No. 19-2138 (7th Cir. June 17, 2020).
The underlying dispute in Timothy B. O’Brien arose when Knott, a former employee of Apple Wellness (Timothy B. O’Brien’s wellness retail store), decided to form his own competing store. Timothy B. O’Brien did not take kindly to the competition and sued Knott in the Western District of Wisconsin on copyright and trademark claims. The parties briefly engaged in litigation during which the court denied the plaintiff’s motion for a preliminary injunction on the trademark claims. Thereafter, Timothy B. O’Brien withdrew all of its claims with prejudice and Knott filed a motion under Section 505 of the Copyright Act for recovery of its attorneys’ fees. The district court denied the motion, finding that although the copyright claims were “frivolous” and “objectively unreasonable,” the other factors, including the plaintiff’s motivation and the need for deterrence weighed against a fee award.
The Seventh Circuit affirmed the decision of the district court on the basis that its analysis was “a proper, fact-specific application of the law to the facts.” A few different factors came into play in the Seventh Circuit’s analysis.
First, the copyright claim appeared to be only a minor part of the litigation. The merits of the claim were never briefed, and the preliminary injunction proceedings involved only the trademark claims. In fact, the only time the merits of the copyright claim were addressed at all was when Knott answered the complaint. So while the copyright claim was clearly a loser and objectively frivolous, given that it sounded in “common law copyright” which was “abolished in 1976,” the defendant did not actually spend significant resources having to defend against it; and ultimately the plaintiff abandoned the claim without prejudice.
Second, there was no evidence that Apple Wellness brought its claim in bad faith. In fact, the court seemed to put significant weight on the voluntary withdrawal of the claims with prejudice to bring the matter to a close.
Third, the Court agreed with the district court that considerations of deterrence were inapplicable. “As the claims had already been voluntarily dismissed, the defendants were under no pressure to abandon a meritorious defense and settle.”
Knott argued that denying a fee award ran contrary to established precedent in the Seventh Circuit creating a “strong presumption” of fee awards for prevailing defendants. The Court responded by stating that the presumption is just that, a presumption. Here, the district court properly found it was overcome by other factors.
The lesson of Timothy B. O’Brien is that fee awards under Section 505 remain subject to a somewhat subjective, case-by-case analysis. The most important factor is whether the losing party advanced reasonable, potentially meritorious claims or defenses. But that is certainly not the only factor. Litigation misconduct and whether a party (and its counsel) acted responsibly and professionally during the course of litigation is also an important factor. Finally, courts will look to the “realities” behind a case and ask what is being accomplished by awarding fees – – is the fee award equitable and fair? Does it advance principles of deterrence and the goals of the Copyright Act?
In Timothy B. O’Brien, both the district court and the Court of Appeals seemed to view Knott’s fee petition as an overreach, justified neither by the plaintiff’s conduct nor the defendant’s litigation burden. The ruling reflects the reluctance many judges have to reward litigation conduct and tactics that they view as unnecessarily aggressive under the circumstances. Here, the defendant perhaps should have been content with its victory on the merits and called it a day.
For any questions regarding copyright law or how this decision may affect you, please contact us.