IP Law Daily Denial of attorney fees in peer-to-peer copyright infringement case was abuse of discretion
Tuesday, July 24, 2018

Denial of attorney fees in peer-to-peer copyright infringement case was abuse of discretion

By Cheryl Beise, J.D.

The federal district court in Portland, Oregon, erred in declining to award attorney fees to a film distributor as the prevailing party in a copyright infringement suit against a BitTorrent peer-to-peer network user who had stipulated to judgment of infringement, the U.S. Court of Appeals in San Francisco has ruled. The district court abused its discretion by denying fees without properly analyzing the "Fogerty factors" in deciding whether a fee award was appropriate under Section 505 of the Copyright Act. The court also improperly focused on unfavorable conduct of plaintiffs and their counsel in other BitTorrent cases rather than assessing the particular circumstances of this case (Glacier Films (USA), Inc. v. Turchin, July 24, 2018, McKeown, M.).

Plaintiff Glacier Films (USA), Inc. and Glacier Films 1, LLC (collectively, "Glacier") produced and own a copyright in the motion picture American Heist. According to Glacier, over 100,000 Internet Protocol ("IP") addresses illegally downloaded and exchanged copies of American Heist on BitTorrent prior to the film’s release. Glacier filed a John Doe action against one IP address located in Oregon. After the IP address was traced to defendant Andrey Turchin, the parties reached a stipulated consent judgment, under which Turchin agreed to pay $750 in statutory damages. Glacier moved for costs of $792 and attorney fees totaling $4,833. The district court awarded costs to Glacier but denied any attorney fees.

Copyright Act attorney fees. Section 505 of the Copyright Act provides that courts "may" award attorney’s fees to a prevailing party in an infringement action. In Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), the Supreme Court laid out factors to guide discretion in whether to award fees.

In this case, the district court focused only on three Fogerty factors—"minimal success" in the litigation, the lack of need for further deterrence, and the goals of the Copyright Act—to the detriment of other relevant factors. Moreover, the court erred in analyzing the three factors it did consider.

Degree of success. The district court characterized Glacier’s success in this case as "minimal." The Ninth Circuit disagreed. Glacier’s suit was a complete victory, yet the district court "twisted total triumph into a conclusion that ‘the degree of success in each of these BitTorrent copyright cases is minimal,’" the court said.

The district court also found that the statutory damage award Turchin agreed to pay was low in relation to the amount of attorney fees requested. However, the court did not cite any precedential authority that a small (and agreed upon) amount of statutory damages is a reflection of "minimal success." To the contrary, the Ninth Circuit has expressed concern that a "small award for damages," without fees, may be "insufficient to deter future copyright infringements." Magnuson v. Video Yesteryear, 85 F.3d 1424, 1432 (9th Cir. 1996).

While the Ninth Circuit expressly rejected the Seventh Circuit’s "presumptive entitlement" approach to fees for a "prevailing party in a copyright case in which the monetary stakes are small—see Gonzales v. Transfer Techs., Inc., 301 F.3d 608, 610 (2002) (citation omitted)—the court found the policy rationale underlying the presumption was "a principle that bears on the calculus of whether to award fees." In this case, Glacier’s rejection of Turchin’s initial offer to pay Glacier $2,501 in satisfaction of all debts, including attorney fees, in favor of $750 in stipulated damages was evidence of "a belief that Glacier had a strong legal case for costs and fees."

The district court also reasoned that because American Heist had been illegally downloaded over 100,000 times and this suit yielded an injunction against only one infringer, that result was "de minimis in relation to the serious online piracy problem Plaintiffs seek to combat." This conclusion made little sense in light of the district court’s case management order, which allowed copyright holders to sue only one BitTorrent infringer at a time, the appeals court said.

Deterrence. The Ninth Circuit found that the district court did not appropriately weigh the interests of deterrence and compensation. The district court’s conclusion that that the award of damages and fees was adequate deterrence was belied by the record. Turchin was "associated with" 700 pirated titles, an amount that may be worth more in economic value than $1,500, the court noted. Prior stipulated consent judgments of over $8,000 in cases against other BitTorrent users apparently did not deter Turchin.

The Ninth Circuit recognized that digital technologies "have strained application of certain sections of the Copyright Act," but the court said that the attorney fee provision was not one of them. In 1999, Congress passed the Digital Theft Deterrenceand Copyright Damages Improvement Act to combat digital infringement by consumers. "If now, almost two decades after the Deterrence Act, copyright trolls and mass filings present a further public policy issue, then Congress should step in," the court opined. In the meantime, courts must judge each case on its own merits.

Goals of Copyright Act. The district court also erred in considering whether a fee award would further the goals of the Copyright Act. In the Ninth Circuit’s view, this case fit "squarely within the tradition of copyright enforcement." The court likened Turchin’s conduct to "standing outside the neighborhood Redbox ... and giving away copies of the movie for free." Instead of analyzing whether Turchin’s conduct furthered or frustrated the goals of the Copyright Act, the district court was of the view that awarding "attorney fees in this case would only contribute to the continued overaggressive assertion and negotiation of" othercopyright claims. The district court apparently viewed with disfavor the fact that Glacier’s counsel had filed 300 copyright actions against BitTorrent users.

The district court compounded its error by misinterpreting the Supreme Court’s decision in Kirtsaeng v. John Wiley & Sons, Inc., as counseling courts to consider the need to ‘deter ... overaggressive assertions of copyright claims’" in denying fees. 136 S. Ct. 1979, 1989 (2016). The Ninth Circuit explained that "Kirtsaeng actually stated that a district court "may order fee-shifting ... to deter ... overaggressive assertions of copyright claims, again even if the losing position was reasonable in a particular case." 136 S. Ct. at 1988–89 (emphasis added).

The district court "lumped the present case together with the worst of ... BitTorrent copyright cases," even though it shared "none of the unsavory characteristics" of those cases. Glacier was not a "copyright troll," the appeals court said. Glacier did not buy the copyright to a pornographic film, butproduced American Heist, a Hollywood feature motion picture, with a substantial budget and a recognizable cast.

Other factors. The Ninth Circuit further admonished the district court for passing over the Fogerty factor that considers the unreasonableness of the losing party’s factual and legal position. The failure to analyze Turchin’s conduct in the litigation was particularly problematic because his actions added to Glacier’s attorney’s fees, the court noted. Turchin delayed resolution of the case for nearly eight months by failing to respond to letter inquiries and causing Glacier to file a notice of default before filing an answer. Despite admitting to downloading American Heist, and other content using BitTorrent, Turchin denied liability, sought costs and fees from Glacier, and asserted seven baseless affirmative defenses.

The Ninth Circuit additionally noted that the district court did not assess motivation, a potentially relevant factor in this case. Given Turchin’s admissions, his infringement in this case may have been willful and his assertion of defenses may have been in bad faith.

The Ninth Circuit reversed the district court’s decision and remanded the case for reconsideration of whether to award reasonable attorney fees, weighing the appropriate factors. The district court was advised to follow Kirtsaeng’s counsel and "view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals."

The case is No. 16-35688.

Attorneys: John Mansfield (Harris Bricken) for Glacier Films [USA], Inc. and Glacier Films 1, LLC. Klaus H. Hamm (Klarquist Sparkman, LLP) for Andrey Turchin, f/k/a Doe-

Companies: Glacier Films (USA), Inc.; Glacier Films 1, LLC

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