Source: Grill IP patents news
In 2008, academic publishing company John Wiley & Sons filed a lawsuit against a student at Cornell university, Supap Kirtsaeng, for copyright infringement. Mr. Kirtsaeng had put his math major to work, setting up a lucrative scheme whereby family and friends would ship him Wiley textbooks from their native Thailand, for him to resell in the US for a profit. According to Wiley, Kirtsaeng violated the company’s exclusive right to distribute its copyrighted books. The case went all the way to the Supreme Court in 2013, which ruled in the defendant’s favor. Kirtsaeng’s actions were deemed permissible according to the first-sale doctrine, which authorizes the lawful owner of copyrighted work to sell, display or dispose of it as they like. Kirtsaeng is back in the news for an entirely different reason: compensation. Mr. Kirtsaeng returned to District Court, seeking an excess of $2 million in attorney’s fees from Wiley. This time, however, he was on the losing side, with a Supreme Court decision that clarifies who has to pay attorney fees.
When seeking that Wiley pay for his legal fees, Kirtsaeng invoked section 505 of the Copyright Act. According to its fee-shifting provision, a District Court may “award a reasonable attorney’s fee to the prevailing party.” However, 505 fails to specify the criteria that courts should apply when assessing whether an award is appropriate. Kirtsaeng’s application was denied by the District Court, which ruled that if the losing party takes a reasonable position during litigation, then awarding an attorney fee is counter to the intent of the Copyright Act. The Second Circuit affirmed the decision, determining that it was appropriate to place “substantial weight” on the reasonableness of the losing party’s stance.
Lower courts have been wrestling with the question whether the term “first-sale” applied to foreign-made books at the time of the lawsuit, and several appeals courts and the Supreme Court were divided on the issue. Costco Wholesale Corp. v. Omega, S.A (2010) addressed the reselling of foreign-made goods, with the Ninth Circuit deciding that the first-sale doctrine solely related to the resale of lawfully obtained copies, and that the Copyright Act could not apply extraterritorially, making imported copies fair game for defense on first-sale grounds.
On Kirtsaeng’s application, the Supreme Court agreed with lower courts, and ruled that the “objective reasonableness” of Wiley’s lawsuit exempts the publishing company from having to pay Kirtsaeng’s fees. This reasonableness was deemed a substantial, but not sole, factor in determining fee awards. Cases must be considered with respect to a multitude of circumstances, including: frivolousness, motivation, considerations of compensation and deterrence. These considerations must take place with regard to the Copyright Act’s “essential goals.” These goals centre on striking a balance between rewarding the creator while allowing others to add to their creation. Giving substantial wait to the losing party’s level of reasonableness ensures that parties with weak positions refrain from proceeding with litigation, while those with strong arguments stand on their right to protection.
Kirtsaeng argued that district courts should give consideration to whether a lawsuit resolved an important legal issue. While Wiley’s suit led to clarification over first-sale’s application to foreign-made works, the courts eschewed this argument, ruling that the “objective reasonableness” of the losing party’s position was a substantial determinant in whether fees should be awarded. In turn, another sphere of copyright law was clarified in the process. Kirtsaeng v. John Wiley & Sons, Inc. led the Supreme Court to provide guidance on the Copyright Act’s fee-shifting provision (17 U.S.C. § 505). That spells bad news for Kirtsaeng, for in this case, those who buy the books must also foot the bills.
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