To the original defendant, this matter seemed like a smart business approach, a way to take stuff available cheaply in his native land and to resell it in another market with a premium markup.
To plaintiff John Wiley & Sons, this was a seemingly straight-forward infringement claim that has boomeranged in ways unimaginable not that long ago.
Someone now may be on the hook for more than $2 million in lawyer fees. To intellectual property practitioners, especially Entertainment Law specialists, Kirtsaeng v. John Wiley, which is potentially up for another round in the nation’s highest court, may be a pivotal case in figuring if and how they get paid.
It is still unclear what to expect from the high court, which has granted certiorari but has not assigned the case a hearing date. Because real money’s involved, let’s keep close book on this dispute:
How the dispute began
Supap Kirtsaeng and John Wiley battled before the High Court in 2013 over the First Sale doctrine and whether it applies to works lawfully made and sold in a foreign country. Kirtsaeng, a Thai, was studying for his math Ph.D. at Cornell University. He realized that texts he was using in the United States also were sold in Asia. They were nearly identical but far cheaper back home. He got friends and family to send the cheaper books to him. He sold them online, making enough to pay back friends and rake in a tidy profit.
That upset John Wiley, which sued him for infringement. That suit made it all the way up to the U.S. Supreme Court. In a dramatic departure from the lower courts, Associate Justice Stephen G. Breyer wrote an opinion strengthening the First Sale doctrine, finding it applies to “copies of a copyrighted work lawfully made abroad.” 133 S. Ct. 1351, 1356. When he remanded the case, the lower courts, with the new guidance, found John Wiley no longer could sustain its infringement suit.
But now the parties are haggling over whether Kirtsaeng is entitled to attorney’s fees under 17 USC §505.
A fee controversy
Kirtsaeng and his attorneys have filed for John Wiley to pay attorney’s fees under section of 17 USC §505, which states:
In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.
Judicial discretion is key. Both the district court and the U.S. Court of Appeal for the Second Circuit denied Kirtsaeng’s motion. They held, essentially, that John Wiley’s suit was reasonable. It, therefore, would be unfair to punish the company by forcing it to cover Kirtsaeng’s costs.
Common law in the United States tends to disapprove the award of attorney’s fees. Courts typically have allowed such fees as a punitive measure, say, to discourage frivolous suits; judges have frowned on fees when they’re part of a suit that serves the public interest, or, as in this case, when explicitly allowed by statute.
Courts get discretion in awarding attorney’s fees. They hew to vague standards.
The district court in Kirtsaeng used factors laid out in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), “frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Id. at 534 n. 19. Because the lawsuit was neither frivolous, nor due to unscrupulous motivation, the court spends the bulk of its time analyzing whether it was unreasonable of John Wiley to sue and whether awarding attorney’s fees will promote the Copyright Act’s purposes. The judges ultimately decided John Wiley had a reasonable case, especially before the Supreme Court’s new ruling; they said it would be inappropriate to award attorney’s fees.
But Kirtsaeng argues the judges took up the wrong issue. It was not the reasonableness of the case but courts awarding fees when the losing party’s “claim or defense was objectively reasonable.”
Kirtsaeng’s legal team notes that the federal appellate courts have split on this issue: the Second puts “substantial weight” on objective reasonableness of the losing party’s claim or defense; the Ninth and Eleventh award attorney’s fees “when the prevailing party’s successful claim or defense advanced the purposes of the Copyright Act;” and the Fifth and Seventh employ “a presumption in favor of attorney’s fees for a prevailing party that the losing party must overcome.”
They call on the Supreme Court to clarify the standard. The arguments they muster include Kirtsaeng’s financial need, the prohibitive expense of copyright suits, and the reality that this litigation, they say, benefited the public good because it clarified an important legal point, the international application of the First Sale doctrine.
John Wiley’s argument
Respondent’s strongest argument was made in the lower courts: John Wiley had a reasonable infringement suit, especially because precedents had held that the First Sale doctrine did not apply to books sold in an international market. (Especially since the works carried considering disclaimers saying they could not be sold in the United States.) Further, John Wiley’s team discounts Kirtsaeng’s financial argument, noting his counsel took his case pro bono.
They do not see an appellate split, as each court uses substantially similar factors; each includes objective reasonableness as part of its standards or tests.