Assessment Technologies of Wi, LLC v. Wiredata

Decision Date17 March 2004
Docket NumberNo. 03-2061.,03-2061.
PartiesASSESSMENT TECHNOLOGIES OF WI, LLC, Plaintiff-Appellee, v. WIREDATA, INC., Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Daniel R. Johnson (argued), Ryan Kromholz & Manion, Milwaukee, WI, for Plaintiff-Appellee.

Alan Deutch (argued), Deutch & Weiss, Fox Point, WI, for Defendant-Appellant.

Before POSNER, DIANE P. WOOD, and EVANS, Circuit Judges.

POSNER, Circuit Judge.

In reversing the judgment for the plaintiff in this suit for copyright infringement, we described it as a case "about the attempt of a copyright owner to use copyright law to block access to data that not only are neither copyrightable nor copyrighted, but were not created or obtained by the copyright owner; the owner is trying to secrete the data in its copyrighted program — a program the existence of which reduced the likelihood that the data would be retained in a form in which they would have been readily accessible." 350 F.3d 640, 641-42 (7th Cir.2003). We added: "It would be appalling if such an attempt could succeed." Id. at 642. And it did not succeed.

Before us now is the defendant's motion for an award of attorneys' fees incurred by it in defending the suit both in the district court and in our court. The Copyright Act authorizes the award of reasonable attorney's fees to the prevailing party in a suit under the Act. 17 U.S.C. § 505. And unlike civil rights suits, where while a prevailing plaintiff is presumptively entitled to an award of fees a prevailing defendant is entitled to such an award only if the suit was groundless, e.g., Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978); Johnson v. Daley, 339 F.3d 582, 587 (7th Cir. 2003) (en banc), in copyright suits "prevailing plaintiffs and prevailing defendants are to be treated alike." Fogerty v. Fantasy, Inc., 510 U.S. 517, 534, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994). The reason is that the plaintiff in such a suit is not a little guy suing a big guy — an employee suing an employer, for example — but often the reverse. For such a suit pits a property owner against an individual or firm that will often be, and in this case is, someone who seeks not to enforce a property right — a right to exclude that may generate big profits — but to obtain nonexclusive access to the intellectual public domain. The public interest in that access is as great as the public interest in the enforcement of copyright; this is shown by the restrictions with which copyright is hedged about, of which the most pertinent is that, as we pointed out in our original opinion, once work enters the public domain it cannot be appropriated as private (intellectual) property. 350 F.3d at 643; Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 348, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991); Country Kids 'N City Slicks, Inc. v. Sheen, 77 F.3d 1280, 1287 (10th Cir.1996); Norma Ribbon & Trimming, Inc. v. Little, 51 F.3d 45, 47 (5th Cir.1995); Engineering Dynamics, Inc. v. Structural Software, Inc., 26 F.3d 1335, 1344 (5th Cir.1994); Computer Associates International, Inc. v. Altai, Inc., 982 F.2d 693, 710 (2d Cir.1992); 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[F][4], p. 13-141 (2004); see also Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262, 99 S.Ct. 1096, 59 L.Ed.2d 296 (1979); Gonzales v. Transfer Technologies, Inc., 301 F.3d 608, 609 (7th Cir.2002).

The courts have not said, however, that the symmetry of plaintiff and defendant in copyright cases requires a presumption that the prevailing party, whichever it is, is entitled to an award of attorneys' fees. They have instead left it to judicial discretion by setting forth a laundry list of factors, all relevant but none determinative. Fogerty v. Fantasy, Inc., supra, 510 U.S. at 534 n. 19, 114 S.Ct. 1023; McRoberts Software, Inc. v. Media 100, Inc., 329 F.3d 557, 571 (7th Cir.2003); Gonzales v. Transfer Technologies, Inc., supra, 301 F.3d at 609; Berkla v. Corel Corp., 302 F.3d 909, 923 (9th Cir.2002); Lotus Development Corp. v. Borland Int'l, Inc., 140 F.3d 70, 73-74 (1st Cir.1998). The list, moreover, is nonexclusive, Hogan Systems, Inc. v. Cybresource International, Inc., 158 F.3d 319, 325 (5th Cir.1998), arguably dictum, Matthew Bender & Co. v. West Publishing Co., 240 F.3d 116, 121 (2d Cir.2001), and in need of simplification — a process begun in this circuit in Gonzales v. Transfer Technologies, Inc., supra, and continued here.

The two most important considerations in determining whether to award attorneys' fees in a copyright case are the strength of the prevailing party's case and the amount of damages or other relief the party obtained. If the case was a toss-up and the prevailing party obtained generous damages, or injunctive relief of substantial monetary value, there is no urgent need to add an award of attorneys' fees. Cf. Mathias v. Accor Economy Lodging, Inc., 347 F.3d 672, 677 (7th Cir.2003). But if at the other extreme the claim or defense was frivolous and the prevailing party obtained no relief at all, the case for awarding him attorneys' fees is compelling. As we said with reference to the situation in which the prevailing plaintiff obtains only a small award of damages, "the smaller the damages, provided there is a real, and especially a willful, infringement, the stronger the case for an award of attorneys' fees.... [W]e go so far as to suggest, by way of refinement of the Fogerty standard, that the prevailing party in a copyright case in which the monetary stakes are small should have a presumptive entitlement to an award of attorneys' fees." Gonzales v. Transfer Technologies, Inc., supra, 301 F.3d at 610; see also Magnuson v. Video Yesteryear, 85 F.3d 1424, 1432 (9th Cir. 1996). When the prevailing party is the defendant, who by definition receives not a small award but no award, the presumption in favor of awarding fees is very strong. See Diamond Star Building Corp. v. Freed, 30 F.3d 503, 506 (4th Cir. 1994). For without the prospect of such an award, the party might be forced into a nuisance settlement or deterred altogether from exercising his rights.

We of course were not saying that the smaller the damages, the larger the fee. The fee is independent of the size of the damages. The point is only that when a meritorious claim or defense is not lucrative, an award of attorneys' fees may be necessary to enable the party possessing the meritorious claim or defense to press it to a successful conclusion rather than surrender it because the cost of vindication exceeds the private benefit to the party. The best illustration is in fact a case like this, where the party awarded the fees, being the defendant, could not obtain an award of damages from which to pay his lawyer no matter how costly it was for him to defend against the suit.

Although the plaintiff managed to obtain a judgment from the district court, and so we do not go so far as to call the suit frivolous, the suit was marginal, as we explained in our opinion. The plaintiff was rather transparently seeking to annex a portion of the intellectual public domain. And since the prevailing party was the defendant, it obtained no affirmative relief from its victory. Unless a party in that situation has a prospect of obtaining attorneys' fees, it will be under pressure to throw in the towel if the cost is less than the anticipated attorneys' fees. We suggested in our opinion that "for a copyright owner to use an infringement suit to obtain property protection, here in data, that copyright law clearly does not confer, hoping to force a settlement or even achieve an outright victory over an opponent that may lack the resources or the legal sophistication to resist effectively," could be a form of copyright misuse. 350 F.3d at 647. We did not reach the question whether the plaintiff's conduct rose to the level of actual copyright misuse, but we made clear that it came close, and an award of attorneys' fees to the defendant is an appropriate sanction. For illustrative cases, see Budget Cinema, Inc. v. Watertower Associates, 81 F.3d 729, 732-33 (7th Cir.1996); Bond v. Blum, 317 F.3d 385, 397-98 (4th Cir.2003) (a case in which misuse was found); Coles v. Wonder, 283 F.3d 798, 804 (6th Cir.2002); Edwards v. Red Farm Studio Co., 109 F.3d 80, 83 (1st Cir.1997).

Most of the fees incurred by the defendant were incurred in the district court proceedings, and ordinarily that would argue compellingly for our limiting our award to the appellate fees and inviting the defendant to file in the district court a motion for the award of the fees that he incurred in that court. But in some cases in which detailed billing records of the applicant are submitted to the court of appeals, as the defendant has done in this case, and the opposing party has had a chance to rebut, as it has, we can make the full award and save the parties the added expense and the district judge the added bother of a separate fees proceeding in the district court. Cengr v. Fusibond Piping Systems, Inc., 135 F.3d 445, 454 (7th Cir.1998); Nanetti v. University of Illinois, 944 F.2d 1416, 1422 (7th Cir.1991); Ustrak v. Fairman, 851 F.2d 983, 989 (7th Cir.1988); In re Thirteen Appeals, 56 F.3d 295, 312 (1st Cir.1995); cf. Walz v. Town of Smithtown, 46 F.3d 162, 170 (2d Cir.1995). Such an approach furthers the principle that the fees tail should not be allowed to wag the merits dog too vigorously. Ustrak v. Fairman, supra, 851 F.2d at 987-88; see also Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983).

In all the cases cited, except Hensley and Walz, the court of appeals was fixing fees for services incurred in the district court as well, as we...

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