Opinion ID: 772071
Heading Depth: 2
Heading Rank: 2

Heading: Attorneys' Fees Based on West's Pre-Litigation and Litigation Conduct

Text: 31 If a party's conduct is unreasonable, a district court has the discretion to award fees. See Harris Custom Builders, Inc. v. Hoffmeyer, 140 F.3d 728, 731 (7th Cir. 1998) (noting that court may consider a party's sanctionable conduct in making a fee decision); 4 MELVILLE B. NIMMER &AMP; DAVID NIMMER, NIMMER ON COPYRIGHT § 14.10[D][1] (noting that attorneys' fees have been awarded where a party conducted the litigation in a manner calculated to delay a hearing on the merits and to increase the opposing party's costs). The ultimate goal, according to Fogerty, is to be faithful to the purposes of the Copyright Act. 510 U.S. at 534 n.19. Thus, bad faith in the conduct of the litigation is a valid ground for an award of fees. 32 The question, then, is whether West's conduct in this litigation-both before and after the initiation of suit-was truly in bad faith. In the District Court's view, West's conduct warranted an award of fees to HyperLaw because West failed to forthrightly recognize[] that there was an open question concerning its right to assert copyright protection in court opinions and refused to cooperate[] in Hyperlaw's efforts to obtain a judicial resolution of that question. According to the court, West used every effort to avoid an adjudication of its rights and to make it difficult for Hyperlaw to determine what portions of the reported opinions were in the public domain and could be freely copied. The court appears to have relied on two types of misconduct by West. First, the court noted that every time Hyperlaw attempted to engage in a dialog with West to determine which elements in a judicial opinion West considered protectable, West rejected the effort and responded with platitudes that gave Hyperlaw no guidance as to where West claimed its copyright protection began or ended. Second, the court observed that after HyperLaw filed its declaratory judgment action, West again strove mightily to prevent a judicial resolution of the question by arguing that the controversy was not justiciable. 33 While there can be no gainsaying the significant deference accorded to district courts when reviewing fee decisions, we find that the District Court here exceeded its allowable discretion in awarding fees on the grounds it cited. First, as a party confronted by a suspected or potential infringer, West did not act unreasonably by refusing to cooperate with HyperLaw before the initiation of suit. Assuming West legitimately believed that its products were protected-a reasonable belief, in light of the previous court decisions on the same issue-it had no duty to recognize[] that there was an open question concerning its right to assert copyright protection in court opinions and had the right vigorously to challenge any actions by HyperLaw that might infringe on its copyrights. A party's good faith refusal to cooperate with a suspected infringer prior to the filing of suit is not a proper ground for the award of attorneys' fees to the prevailing party in the subsequent suit. 34 In an analogous situation, the Seventh Circuit held that a patent holder was not required to grant clearance to a competitor's designs upon request and that the patent holder's refusal to do so did not create declaratory judgment jurisdiction. See International Harvester Co. v. Deere & Co., 623 F.2d 1207, 1213 (7th Cir. 1980). The court in that case held that the competitor's unsolicited demand that [the patent holder] admit noninfringement or face suit coupled with [the patent holder's] noncommittal response could not have created a reasonable apprehension of suit. Id.; cf. Lotus Dev. Corp. v. Borland Int'l, Inc., 140 F.3d 70, 75 (1st Cir. 1998) (Copyright defendants with strong legal or factual defenses should not be deterred from litigation by the possibility that their refusal to settle an invalid claim will be held against them after they prevail.). Similarly, here, West's reluctance to express an opinion as to the legality of HyperLaw's actions should not be held against West. To be sure, if West had engaged in other conduct indicative of bad faith prior to the filing of suit by HyperLaw, that misconduct could properly have contributed to the District Court's decision to award fees to HyperLaw. However, the District Court does not refer to any specific incidents of such bad faith; rather, it simply points to West's repeated insistence that HyperLaw obtain copyright counsel. 35 Second, with regard to West's conduct during the litigation, the only misconduct specifically identified by the District Court is West's filing of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1). According to the District Court, this motion demonstrated an effort by West to prevent a judicial resolution of the scope of its copyrights. We do not agree that this is a proper basis for an award of attorneys' fees under the Copyright Act. The District Court's award essentially punishes West for availing itself of a right provided by the Federal Rules, namely, moving to dismiss the plaintiff's complaint. To allow fees on this basis would be to deter the exercise of rights afforded to litigants in federal court. Cf. Dow Chem. Pac. Ltd. v. Rascator Mar. S.A., 782 F.2d 329, 344 (2d Cir. 1986) (noting, though not in the copyright context, that an award of attorneys' fees should not deter persons with colorable claims from pursuing those claims). Of course, if West's motion had been frivolous, lacking any plausible merit, an award of attorneys' fees may have been an appropriate sanction. However, the District Court did not find, and there is no indication in the record, that the motion was frivolous. Indeed, the District Court deemed it necessary to hold an evidentiary hearing before deciding the motion. Accordingly, under these circumstances, we conclude that the District Court's decision to base the fee award on West's efforts to dismiss HyperLaw's case was improper. 36 We do not wish to constrain district courts' discretion in awarding attorneys' fees under the Copyright Act. Misconduct before or during litigation can, in appropriate cases, provide the basis for an award of fees. However, here, although the District Court found that West's conduct of the litigation was in bad faith, it cited as support for this assertion only West's refusal to cooperate with HyperLaw prior to the initiation of suit and West's attempt to dismiss the suit on justiciability grounds. We hold that neither ground supports an award of attorneys' fees. 37 In its brief to this Court, HyperLaw lists numerous dirty tricks and threats perpetrated by West before and during the litigation. These alleged abuses were not cited by the District Court, however, and few of the incidents are supported by references to the record. Likewise, the District Court observed that the record in this case demonstrates that West used every effort to avoid an adjudication of its rights. If this statement refers to conduct other than West's refusal to cooperate and its motion to dismiss, the court does not specifically identify any such incidents in the record, making appellate review difficult. With no indication in its decision to award fees that the District Court relied on the incidents alleged by HyperLaw, we decline to address whether they would have supported a fee award. However, we remand the case so that the District Court may clarify whether it relied on any other specific pre-litigation misconduct by West, as well as any frivolous or bad faith conduct during the litigation, in awarding fees. If so, the court should specifically identify that conduct in its decision. Cf. Mentor Ins. Co. (U.K.) Ltd. v. Brannkasse, 996 F.2d 506, 521 (2d Cir. 1993) (remanding for clarification of reasons for attorneys' fees, since this Court will not speculate as to whether the award is appropriate under any other theory that has not been stated by the district court). Assuming that the District Court is able to identify such conduct, and thus adheres to its determination that HyperLaw is entitled to an award of attorneys' fees based on West's bad faith conduct, the court should not lose sight of the fact that it is awarding fees solely on the basis of West's bad faith conduct when it turns to the question of the precise amount of fees to which HyperLaw is entitled. Any fees it awards should be related to costs or expenses incurred as a direct result of bad faith conduct by West. See Hensley v. Eckerhart, 461 U.S. 424, 437 (1983) (stating that it is important . . . for the district court to provide a concise but clear explanation of its reasons for [a] fee award); In re Bolar Pharm. Co. Sec. Litig., 966 F.2d 731, 732 (2d Cir. 1992) (If we are to be satisfied that a district court has properly exercised its discretion, we must be informed by the record of why the district court acted as it did.).