A federal appeals panel has ruled judges should be more willing to force so-called "copyright trolls" to pay the legal bills of companies who successfully defend against a lawsuit under the federal Copyright Act.
On Aug. 11, a three-judge panel of the U.S. Seventh Circuit Court of Appeals ruled the Cremation Society of Illinois should be allowed to pursue legal fees after prevailing in a lawsuit against a “copyright troll” that sued the Society under the Copyright Act.
The underlying legal dispute pitted the society and other defendants against Live Face on Web, which sued companies that paid $328 to license a piece of its computer code. In this action, one of about 200 copyright suits in almost 30 federal district courts, Live Face on Web sought at least $438,000 in damages.
Live Face sued the Cremation Society in 2016.
The Cremation Society operates 10 cremation centers in Chicago and its suburbs. The company also does business as Pets Are Family Too Cremation Services.
U.S. District Judge John Blakey ruled that since the Society only prevailed due to an intervening Supreme Court decision, an award of legal fees wouldn’t serve the purpose of a fee-shifting provision in the federal law, in part intended to discourage nuisance litigation.
The defendants asked the U.S. Seventh Circuit Court of Appeals to review Blakey’s ruling. Judge Thomas Kirsch wrote the panel’s opinion, issued Aug. 11; Judges Michael Scudder and Candace Jackson-Akiwumi concurred.
“The Copyright Act authorizes prevailing parties to recover their costs and fees,” Kirsch wrote. “This makes sense: A copyright holder who successfully enforces her rights encourages others to use the copyright system, fostering further innovation. At the same time, a defendant who successfully protects his rights to use things in the public domain necessarily gives others a license to do the same. And no matter who prevails, copyright law writ-large benefits from definitive adjudications. By encouraging parties to stand on their rights, the Act’s symmetrical fee-shifting provision advances its core purposes.”
The panel said federal judges must consider “four nonexclusive factors” regarding fee award requests in Copyright Act litigation: If the suit was frivolous, the losing party’s motivation, whether the losing party’s claims were objectively unreasonable and “the need to advance considerations of compensation and deterrence.”
Copyright claims have unbalanced recovery possibilities, the panel continued, because while someone suing over having their copyright infringed can recover financial damages, a prevailing defendant can only recover the right to keep using something they’ve already created. Allowing such defendants to seek compensation for the cost of their defense relieves the pressure to abandon “meritorious defenses and throw in the towel because the cost of vindicating” exceeds the private benefit of legal victory.
“The parties slugged it out in district court for more than five years,” Kirsch wrote. “While summary judgment was pending, Live Face moved to dismiss its own suit with prejudice. It argued that a (2021) Supreme Court case — Google LLC v. Oracle America — cut the legs out from under its claims” because its holding made the Society’s fair-use defense insurmountable.
But while Blakey agreed a fee award was improper because the Google litigation changed the playing field, the panel said “Live Face all but concedes that if the Supreme Court had granted review here rather than in Google, the outcome would have been the same. That Google got to the court first is thus of no significance to our presumption, which exists to encourage parties to prevail on meritorious claims and defenses.”
The panel further said Blakey didn’t “meaningfully test Live Face’s assertion,” but simply accepted its conclusion. Further, it noted the Society and co-defendants raised several other contentions aside from fair use and Live Face didn’t ever argue the Google ruling was the sole reason it couldn’t prevail.
“Whether to award fees is a matter for the district court’s discretion, but our presumption places a heavy thumb on the scale in favor of doing so for a prevailing defendant,” Kirsch wrote. “On this record, we cannot tell whether the defendants were given the full benefit of that presumption.”
Furthermore, the panel said, an analysis of the four factors disfavored Live Face, with Kirsch noting the present “suit bears all the hallmarks of a copyright troll at work.”
The panel vacated Blakey’s denial of the fees and remanded the complaint for reconsideration “with the benefit of our views.” Should Blakey determine a fee award is proper, “any such award must include the fees incurred in bringing this appeal.”
Live Face on Web has been represented by attorney Ryan Santurri, of Allen Dyer Doppelt Milbrath & Gilchrist, of Orlando, Florida.
Cremation Society is represented by attorney attorney James K. Borcia, of Tressler LLP, of Chicago.