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Take a Wide View When Awarding Attorney's Fees, SCOTUS Instructs

The Supreme Court has been in a generous mood this week. On Monday, the Court made it easier for patent holders to get treble damages for patent infringement and yesterday a unanimous Court ruled that the reasonableness of a party's claims should not be the determining factor when awarding attorney's fees under the Copyright Act's fee-shifting provisions.

The opinion, written by Justice Kagan, revived a $2 million claim for attorney's fees by Supap Kirtsaeng, a former Thai student who had been sued by an American textbook publisher. The ruling marks the second Supreme Court win for Kirtsaeng -- and his best chance at recovering legal fees after years of litigation.

Student vs. Publisher

As a grad student at Cornell, Kirtsaeng made money on the side by reselling text books produced in Asia to American students online, for much less than those students would have to pay at the university bookstore. John Wiley and Sons, a textbook publisher, sued, alleging that Kirtsaeng's sales violated their copyright.

The case made it all the way to the Supreme Court, where the Court sided with Kirtsaeng, arguing that the "first sale" doctrine protected resellers even when the goods sold were manufactured outside of the United States.

Kirtsaeng then moved for attorney's fees under section 505 of the Copyright Act, which grants courts the discretionary right to award fees. But how that discretion is exercised varies from circuit to circuit. In 1994's Fogerty v. Fantasy, Inc., the Supreme Court ruled that such discretion should be exercised with attention paid to "several nonexclusive factors," such as frivolousness, motivation, objective unreasonableness, among others.

Which factor is emphasized varies, depending on the court. In many circuits, whether a party "advanced the purposes" of the act matters most; under that standard Kirtsaeng would likely be entitled to fees.

In the Second Circuit, where Kirtsaeng's legal battle played out, however, courts look primarily at whether the losing party's claim or defense was "objectively unreasonable." Since John Wiley & Sons won in both district and appellate court before being overruled, their position couldn't have been unreasonable, the Second Circuit ruled when denying Kirtsaeng fees.

Objective Reasonableness: Just One of Many Factors

Courts should indeed give substantial weight to the objective reasonableness of a party's position when deciding whether to award attorney's fees, the Court explained. "But," Justice Kagan wrote, "the court must also give due consideration to all other circumstances relevant to granting fees" and should be allowed to award fees "even when the losing party advanced a reasonable claim or defense."

While extolling the virtues of the objective reasonableness test, the Court also explained that it is only one important factor, "not the controlling one." In addition to the Fogerty factors, courts may consider litigation misconduct and deterrence.

And while the Second Circuit never said that reasonableness was to be the only consideration, the Court explained, the appellate court's language "at times suggest that a finding of reasonableness raises a presumption against granting fees." Such language "goes too far in cabining how a district court must structure its analysis and what it may conclude from its review of relevant factors."

Kirtsaeng's case now returns to the lower courts for a more holistic review of his motion for attorneys' fees. But the ruling is only a narrow win for Kirtsaeng. The former student, who is currently a professor in Thailand, had argued that courts should place extra weight on whether or not a case had clarified an important legal issue, as his had. But that can be impossible to determine for years, Justice Kagan explained, concluding that "Kirtsaeng's proposal would not produce any sure benefits."

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