04 Civ. 2110 (JCF).
August 11, 2005
MEMORANDUM AND ORDER
In this action, the plaintiff, David Shaw Nicholls, alleged that his copyrighted rug design, the "Prado," was being infringed by the defendants' carpets. I held a bench trial pursuant to 28 U.S.C. § 636(c), and in a decision dated March 11, 2005, I granted judgment in favor of the defendants. The defendant Tufenkian Import/Export Ventures, Inc. and its owner, James Tufenkian (collectively the "defendants"), as prevailing parties, now move for attorneys' fees pursuant to the Copyright Act of 1976, 17 U.S.C. § 101 et seq. For the reasons that follow, the defendants' motion is denied.
The factual background of this case is set forth in my March 11, 2005 decision and will not be repeated in detail here. What follows is a brief summary of the relevant facts and procedural history.
The plaintiff is a designer of carpets and has created a number of designs that incorporate circular motifs. Nicholls v. Tufenkian Import/Export Ventures, Inc., 367 F. Supp. 2d 514, 517 (S.D.N.Y. 2005). One such design, called the "Prado", incorporates 20 equal size circles arranged in five rows and four columns. Id. At each end there is a rectangular band running the width of the carpet. Id. The Prado was created in 1998 and went into production that year. Id. In 2002 the plaintiff registered the design with the United States Copyright Office and received copyright number VAu 524-511. Id.
In 2004, the plaintiff viewed an advertisement in Elle Decor magazine displaying a rug identified as the "Total Eclipse", which appeared to have a pattern similar to the Prado. Id. at 518. The Total Eclipse is a variation of the "Eclipse" design, which the defendants registered with the Copyright Office in early 2001. Id. The Eclipse contains twelve circles laid out in four rows and three columns, but without a "frame," as the circles extend to the edge of the rug on all sides. Id. at 519. The Total Eclipse is a less "edgy" version of the Eclipse. Id.
Mr. Nicholls discovered that the Eclipse and Total Eclipse were created by the defendants, who had manufactured carpets for him beginning in 1996. Their business relationship had ended after a dispute that led to litigation. Id. at 518. The plaintiff sent a letter to the defendants stating that the Total Eclipse design was substantially similar to the Prado and demanding that they stop production. The defendants refused, claiming that there was no infringement. Further, the defendants argued that they had never seen the plaintiff's Prado design and that the Eclipse had been registered with the Copyright Office before the Prado. Id.
The plaintiff then commenced an action for copyright infringement. The defendants moved to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief may be granted, and the Honorable William H. Pauley III, U.S.D.J., to whom the case was then assigned, denied the motion. Nicholls v. Tufenkian Import/Export Ventures Inc., No. 04 Civ. 2110, 2004 WL 1399187, at *4 (S.D.N.Y. June 23, 2004). The following month, defendants' counsel proposed a settlement in the amount of $5,000, which the plaintiff rejected. (Memorandum of Law in Support of Defendants' Motion for Award of Costs Including Attorney's Fees dated May 13, 2005 ("Def. Memo."), at 2; Plaintiff's Memorandum Opposing Defendants' Motion for Attorneys' Fees dated June 8, 2005 ("Pl. Memo."), at 2). The defendants then made a second attempt at settlement, but plaintiff's counsel refused to entertain any further discussion. (Supplemental Declaration of Robert W. Clarida in Support of Defendants' Motion for Award of Costs Including Attorneys' Fees dated June 23, 2005 ("Clarida Supp. Decl."), ¶ 2; Def. Memo. at 2; Pl. Memo. at 2).
Trial then commenced before Judge Pauley, and evidence was presented over the course of four days. However, after the case was submitted to the jury, one of the jurors conducted independent internet research and shared his findings with the other jurors. Nicholls, 367 F. Supp. 2d at 516-17. The judge declared a mistrial, and the parties subsequently consented to retry the case before me. Id.
At the second trial, the plaintiff demonstrated that he had a valid copyright. However, he could not prove unauthorized copying, as the defendants did not have access to the Prado and there was no substantial similarity between the designs. Id. at 521-23. Further, there was ample evidence of independent creation to rebut any inference of copying. Id. at 525. Thus, I concluded that the plaintiff had not sustained his burden of proving that the defendants had infringed the plaintiff's copyrighted work. Id.
The defendants now move pursuant to 17 U.S.C. § 505 for the costs and attorneys' fees they incurred in defending against the infringement suit. They seek a total award in the amount of $328,686.81. (Declaration of Robert W. Clarida in Support of Defendants' Motion for Award of Costs Including Attorneys' Fees dated May 10, 2005 ("Clarida Decl."), at 5).
Section 505 of the Copyright Act provides that:
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.17 U.S.C. § 505.
Until 1994, this Circuit awarded attorneys' fees to prevailing plaintiffs in copyright actions as a matter of course, but not to prevailing defendants. See In Design v. K-Mart Apparel Corp., 13 F.3d 559, 567 (2d Cir. 1994) (stating that attorneys' fees are awarded as a matter of course to prevailing plaintiffs, while prevailing defendants must show that the plaintiff's suit was frivolous or brought in bad faith). This rule was thought to "encourage the assertion of colorable copyright claims and to deter infringement[.]," Diamond v. Am-Law Publishing Corp., 745 F.2d 142, 148 (2d Cir. 1984), and to best serve the policies of the Copyright Act. In Design, 13 F.3d at 567.
However, the Supreme Court rejected this dual standard inFogerty v. Fantasy, Inc., 510 U.S. 517, 533 (1994). At the same time, the Fogerty court also eschewed arguments that courts should apply the so-called "British Rule," which mandates the award of attorneys' fees to the prevailing party. Fogerty, 510 U.S. at 534. Although the Court held that prevailing plaintiffs and prevailing defendants must be treated alike when courts consider fee awards, attorneys' fees are not to be granted automatically to the prevailing party under 17 U.S.C. § 505. Rather, fees are awarded "only as a matter of the court's discretion." Id.
In dictum, the Fogerty Court suggested several nonexclusive factors that courts may consider "so long as such factors are faithful to the purpose of the Copyright Act" and applied in an evenhanded manner. Id. at 534 n. 19. These include "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. (quoting Lieb v. Topstone Industries, Inc., 788 F.2d 151, 156 (3d Cir. 1986)). "`There is no precise rule or formula for making these determinations,' but instead equitable discretion should be exercised `in light of the considerations we have identified.'" Id. (quoting Hensley v. Eckerhart, 461 U.S. 424, 436-37 (1983)).
A. Objective Unreasonableness
In evaluating a motion for attorneys' fees, the Second Circuit has held that "objective reasonableness is a factor that should be given substantial weight[.]" Matthew Bender Co. v. West Publishing Co., 240 F.3d 116, 123 (2d Cir. 2001). Indeed, courts place the greatest emphasis on this factor. Id. at 121-22. This policy is "firmly rooted in the admonition that an award of attorneys' fees must comport with the purposes of the Copyright Act." Earth Flag Limited v. Alamo Flag Co., 154 F. Supp. 2d 663, 666 (S.D.N.Y. 2001). See also Lotus Development Corp. v. Borland International, Inc., 140 F.3d 70, 74 (1st Cir. 1998) (affirming denial of fees because copyright holder's claims were neither frivolous nor objectively unreasonable); Harris Custom Builders, Inc. v. Hoffmeyer, 140 F.3d 728, 730-31 (7th Cir. 1998) (vacating award of fees because losing party's claims were objectively reasonable); EMI Catalogue Partnership v. CBS/Fox Co., No. 86 Civ. 1149, 1996 WL 280813, at *2 (S.D.N.Y. May 23, 1996) (copyright owner's claim not so objectively unreasonable as to justify award of attorneys' fees).
The mere fact that a defendant has prevailed "does not necessarily mean that the plaintiff's position was frivolous or objectively unreasonable." Arclightz and Films Pvt. Ltd. v. Video Palace Inc., No. 01 Civ. 10135, 2003 WL 22434153, at *3 (S.D.N.Y. Oct. 24, 2003). "To hold otherwise would establish aper se entitlement of attorney's fees whenever [issues pertaining to judgment] are resolved against a copyright plaintiff. . . . [This is not] a correct construction of the law." CK Co. v. Burger King Corp., No. 92 Civ. 1488, 1995 WL 29488, at *1 (S.D.N.Y. Jan. 24, 1995).
Because the primary purpose of the Act "is to encourage the origination of creative works by attaching enforceable property rights to them[,]" a court should not impose a fee award against a copyright holder with an objectively reasonable litigation position. Matthew Bender, 240 F.3d at 122 (quoting Diamond, 745 F.2d at 147). The litigation of close copyright infringement cases serves to benefit copyright law by clarifying the doctrine's boundaries. See Lotus Development Corp., 140 F.3d at 75. Here, the plaintiff's claims were not objectively unreasonable at the time the suit was commenced. Cf. Williams v. Crichton, 891 F. Supp. 120 (S.D.N.Y. 1994) (defendant awarded attorneys' fees because plaintiff's case was entirely unreasonable).
For example, in the March 11, 2005 opinion, I stated that it was a "close question" whether the plaintiff had presented sufficient evidence of access. Nicholls, 367 F. Supp. 2d at 521. Likewise, although individual elements of the work were sufficiently different such that the plaintiff could not sustain his infringement claim, this does not suggest that the works were devoid of similarity. Attorneys' fees will not be awarded to a defendant when works, although not infringing, are similar in overall appearance. See Ann Howard Designs, L.P. v. Southern Frills, Inc., 7 F. Supp. 2d 388, 390 (S.D.N.Y. 1998) (denying award of attorneys' fees when works, though not substantially similar in protectable elements, were largely similar when examined in their entirety). Further, my analysis regarding the lack of substantial similarity here was based on a narrow interpretation of the plaintiff's copyright. Nicholls, 367 F. Supp. 2d at 520. Because a major element of the Prado is the relationship between the colors, I determined that only the color ways that followed the pattern in the plaintiff's blueprint were covered by the copyright. Id. Yet, upon filing suit, the plaintiff could not have known how expansively or restrictively his copyright would be interpreted. And, notwithstanding the narrow scope of the copyright, I noted that the Eclipse and Total Eclipse could be considered "inexact copies of Prado." Id. at 523. Thus, there were sufficient similarities in the designs for the plaintiff to assert an objectively reasonable claim.
The defendants rely on Diamond Star Building Corp. v. Freed, 30 F.3d 503 (4th Cir. 1994), and Budget Cinema, Inc. v. Watertower Associates, 81 F.3d 729 (7th Cir. 1996), in which district court decisions not to award fees were reversed. InDiamond Star, the Fourth Circuit held that the plaintiff had acted in an objectively unreasonable manner by asserting a baseless claim and a "patently frivolous position" and concluded that the defendant should receive his reasonable attorneys' fees. 30 F.3d at 506. In Budget Cinema, the Seventh Circuit found the plaintiff's claim to be objectively unreasonable because the plaintiff did not have a valid copyright at the time it filed suit. 81 F.3d at 732.
However, this case is not characterized by such an utter lack of merit. While the plaintiff's claim was ultimately unsuccessful, it was sufficiently colorable to overcome a motion to dismiss and presented a sufficient number of litigable issues to go to trial. See, e.g., EMI Catalogue, 1996 WL 280813, at *2 (plaintiff's case not objectively unreasonable in part because it withstood motion for summary judgment and required ten day trial). This case is also distinguishable from Torah Soft Ltd. v. Drosnin, No. 00 Civ. 5650, 2001 WL 1506013 at *5 (S.D.N.Y. Nov. 21, 2001). In Torah Soft, the plaintiff's contributions to the elements alleged to be protectable were "obvious, garden-variety, or routine selections," "commonplace or stock feature[s]," and "required no skill beyond that of a high school . . . student[.]" Id. at *4. Thus, the plaintiff's claims of infringement in that case were objectively unreasonable. Moreover, as a predicate for awarding fees in Torah Soft, I concluded that there was strong circumstantial evidence that the copyright claim was not brought because of its inherent merit, but because of its influence on settlement negotiations. Thus, the alleged copyright holder was improperly motivated in bringing suit and an award of attorneys' fees was justified. Id. That was not the case here.
There is no indication that the plaintiff undertook this action in bad faith or to harass the defendants. While the parties were estranged business colleagues, the plaintiff believed that the defendants had infringed upon his work and accordingly sought relief. Both parties had legitimate economic interests and concerns about protecting their designs. Furthermore, although the defendants twice suggested settling the case, the plaintiff's unwillingness to do so does not indicate that his motivation in bringing the suit was malicious or improper, particularly since the settlement amount offered was negligible.
C. Purpose of the Copyright Act
The Copyright Act's objectives are "promoted by the discouragement of infringement as well as by the successful defense of copyright infringement actions." Procter Gamble Co. v. Colgate-Palmolive Co., No. 96 Civ. 9123, 1999 WL 504909, at *4 (S.D.N.Y. July 15, 1999). Because this case involved complicated issues of fact, an award of attorneys' fees would chill future lawsuits rather than deter frivolous or objectively unreasonable claims. See id.
D. Financial Strength of the Parties
Finally, although not mentioned by the Supreme Court inFogerty, the relative financial resources of the parties is an appropriate factor to be considered in awarding fees under the Copyright Act. See Leibovitz v. Paramount Pictures Corp., No. 94 Civ. 9144, 2000 WL 1010830, at *5 (S.D.N.Y. July 21, 2000);Littel v. Twentieth Century-Fox Film Corp., No. 89 Civ. 8526, 1996 WL 18819, at *3 (S.D.N.Y. Jan. 18, 1996). Here, both sides appear fully capable of bearing their own costs, and there is no evidence that the plaintiff sought to use superior economic power to exhaust the defendants' resources in litigation. Therefore, this factor, too, fails to support an award of fees.
On the basis of the factors set forth above, the defendants' motion for attorneys' fees and costs is denied.