Source: https://supreme.justia.com/cases/federal/us/579/15-375/
Timestamp: 2019-04-26 06:20:26+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 579 › Kirtsaeng v. John Wiley & Sons, Inc.
Kirtsaeng bought low-cost foreign edition textbooks in Thailand and resold them to students in the U.S. In 2013 the Supreme Court held that Kirtsaeng could invoke the Copyright Act’s “first-sale doctrine,” 17 U.S.C. 109(a), as a defense to the publisher's copyright infringement claim. Kirtsaeng then sought more than $2 million in attorney’s fees from the publisher under the Act’s fee-shifting provision. The Second Circuit affirmed denial of Kirtsaeng’s application, reasoning that Wiley had taken reasonable positions during litigation. A unanimous Supreme Court vacated. When deciding whether to award attorney’s fees under 17 U.S.C. 505, a court should give substantial weight to the objective reasonableness of the losing party’s position, while still taking into account all other relevant circumstances. Precedent has identified several non-exclusive​ factors for courts to consider, e.g., frivolousness, motivation, objective unreasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence. Putting substantial weight on the reasonableness of a losing party’s position is consistent with the objectives of the Copyright Act, but courts must take into account a range of considerations beyond the reasonableness of litigating positions. Because the district court “may not have understood the full scope of its discretion,” the Court remanded for consideration of other relevant factors.
When determining whether to award attorney's fees in copyright litigation, a court should consider not only whether the losing party's position was objectively reasonable but also other relevant factors provided by precedent, such as the losing party's motivations and the interest of deterrence.
At the time, courts were in conflict on that issue. Some thought, as Kirtsaeng did, that the first-sale doctrine permitted the resale of foreign-made books; others maintained, along with Wiley, that it did not. And this Court, in its first pass at the issue, divided 4 to 4. See Costco Wholesale Corp. v. Omega, S. A., 562 U. S. 40 (2010) ( per curiam). In this case, the District Court sided with Wiley; so too did a divided panel of the Court of Appeals for the Second Circuit. See 654 F. 3d 210, 214, 222 (2011). To settle the continuing conflict, this Court granted Kirtsaeng’s petition for certiorari and reversed the Second Circuit in a 6-to-3 decision, thus establishing that the first-sale doctrine allows the resale of foreign-made books, just as it does domestic ones. See Kirtsaeng v. John Wiley & Sons, Inc., 568 U. S. ___, ___ (2013) (slip op., at 3).
We granted certiorari, 577 U. S. ___ (2016), to resolve disagreement in the lower courts about how to address an application for attorney’s fees in a copyright case.
We join both parties in seeing a need for some additional guidance respecting the application of §505. In addressing other open-ended fee-shifting statutes, this Court has emphasized that “in a system of laws discretion is rarely without limits.” Flight Attendants v. Zipes, 491 U. S. 754, 758 (1989) ; see Halo Electronics, Inc. v. Pulse Electronics, Inc., ante, at 8. Without governing standards or principles, such provisions threaten to condone judicial “whim” or predilection. Martin, 546 U. S., at 139; see also ibid. (“[A] motion to [a court’s] discretion is a motion, not to its inclination, but to its judgment; and its judgment is to be guided by sound legal principles” (quoting United States v. Burr, 25 F. Cas. 30, 35 (No. 14,692d) (CC Va. 1807) (Marshall, C. J.))). At the least, utterly freewheeling inquiries often deprive litigants of “the basic principle of justice that like cases should be decided alike,” Martin, 546 U. S., at 139—as when, for example, one judge thinks the parties’ “motivation[s]” determinative and another believes the need for “compensation” trumps all else, Fogerty, 510 U. S., at 534, n. 19. And so too, such unconstrained discretion prevents individuals from predicting how fee decisions will turn out, and thus from making properly informed judgments about whether to litigate. For those reasons, when applying fee-shifting laws with “no explicit limit or condition,” Halo, ante, at 8, we have nonetheless “found limits” in them—and we have done so, just as both parties urge, by looking to “the large objectives of the relevant Act,” Zipes, 491 U. S., at 759 (internal quotation marks omitted); see supra, at 5.
By contrast, Kirtsaeng’s proposal would not produce any sure benefits. We accept his premise that litigation of close cases can help ensure that “the boundaries of copyright law [are] demarcated as clearly as possible,” thus advancing the public interest in creative work. Brief for Petitioner 19 (quoting Fogerty, 510 U. S., at 527). But we cannot agree that fee-shifting will necessarily, or even usually, encourage parties to litigate those cases to judgment. Fee awards are a double-edged sword: They increase the reward for a victory—but also enhance the penalty for a defeat. And the hallmark of hard cases is that no party can be confident if he will win or lose. That means Kirtsaeng’s approach could just as easily discourage as encourage parties to pursue the kinds of suits that “meaningfully clarif[y]” copyright law. Brief for Petitioner 36. It would (by definition) raise the stakes of such suits; but whether those higher stakes would provide an incentive—or instead a disincentive—to litigate hinges on a party’s attitude toward risk. Is the person risk-preferring or risk-averse—a high-roller or a penny-ante type? Only the former would litigate more in Kirtsaeng’s world. See Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. Legal Studies 399, 428 (1973) (fees “make[ ] the expected value of litigation less for risk-averse litigants, which will encourage [them to] settle[ ]”). And Kirtsaeng offers no reason to think that serious gamblers predominate. See, e.g., Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630 , n. 8 (1981) (“Economists disagree over whether business decisionmakers[ ] are ‘risk averse’ ”); CIGNA Corp. v. Amara, 563 U. S. 421, 430 (2011) (“[M]ost individuals are risk averse”). So the value of his standard, unlike Wiley’s, is entirely speculative.
Contrary to Kirtsaeng’s view, placing substantial weight on objective reasonableness also treats plaintiffs and defendants even-handedly, as Fogerty commands. No matter which side wins a case, the court must assess whether the other side’s position was (un)reasonable. And of course, both plaintiffs and defendants can (and sometimes do) make unreasonable arguments. Kirtsaeng claims that the reasonableness inquiry systematically favors plaintiffs because a losing defendant “will virtually always be found to have done something culpable.” Brief for Petitioner 29 (emphasis in original). But that conflates two different questions: whether a defendant in fact infringed a copyright and whether he made serious arguments in defense of his conduct. Courts every day see reasonable defenses that ultimately fail (just as they see reasonable claims that come to nothing); in this context, as in any other, they are capable of distinguishing between those defenses (or claims) and the objectively unreason-able variety. And if some court confuses the issue of liability with that of reasonableness, its fee award should be reversed for abuse of discretion.
1 Compare, e.g., Matthew Bender & Co. v. West Publishing Co., 240 F. 3d 116, 122 (CA2 2001) (giving substantial weight to objective reasonableness), with, e.g., Bond v. Blum, 317 F. 3d 385, 397–398 (CA4 2003) (endorsing a totality-of-the-circumstances approach, without according special significance to any factor), and with, e.g., Hogan Systems, Inc. v. Cybersource Int’l, Inc., 158 F. 3d 319, 325 (CA5 1998) (presuming that a prevailing party receives fees).
2 This case serves as a good illustration. Imagine you are Kirtsaeng at a key moment in his case—say, when deciding whether to petition this Court for certiorari. And suppose (as Kirtsaeng now wishes) that the prevailing party in a hard and important case—like this one—will probably get a fee award. Does that make you more likely to file, because you will recoup your own fees if you win? Or less likely to file, because you will foot Wiley’s bills if you lose? Here are some answers to choose from (recalling that you cannot confidently predict which way the Court will rule): (A) Six of one, half a dozen of the other. (B) Depends if I’m feeling lucky that day. (C) Less likely—this is getting scary; who knows how much money Wiley will spend on Supreme Court lawyers? (D) More likely—the higher the stakes, the greater the rush. Only if lots of people answer (D) will Kirtsaeng’s standard work in the way advertised. Maybe. But then again, maybe not.
3 Kirtsaeng also offers statistics meant to show that in practice, even if not in theory, the objective reasonableness inquiry unduly favors plaintiffs; but the Solicitor General as amicus curiae has cast significant doubt on that claim. According to Kirtsaeng, 86% of winning copyright holders, but only 45% of prevailing defendants, have received fee awards over the last 15 years in the Second Circuit (which, recall, gives substantial weight to objective reasonableness). See Reply Brief 17–18; supra, at 2–3. But first, the Solicitor General represents that the overall numbers are actually 77% and 53%, respectively. See Tr. of Oral Arg. 41. And second, the Solicitor General points out that all these percentages include default judgments, which almost invariably give rise to fee awards—but usually of a very small amount—because the defendant has not shown up to oppose either the suit or the fee application. When those cases are taken out, the statistics look fairly similar: 60% for plaintiffs versus 53% for defendants. See id., at 42. And of course, there may be good reasons why copyright plaintiffs and defendants do not make reasonable arguments in perfectly equal proportion.

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