T-Peg v. Vermont Timber Works, et al. 03-CV-462-SM 09/30/10 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
T-Peq, Inc. and Timberpeq East, Inc., Plaintiffs
v. Civil No. 03-cv-462-SM Opinion No. 2010 DNH 172 Vermont Timber Works, Inc. and Douglas S. Friant, Defendants
O R D E R
After the jury returned a verdict in favor of the defendants
(collectively "VTW") in this copyright infringement suit, they
moved for an award of attorney's fees in the amount of
$232,905.07. Plaintiffs (collectively "Timberpeg") object. For
the reasons given, VTW's motion is granted in part and denied in
part.
Under the Copyright Act, "the court .in its discretion . . .
may . . . award a reasonable attorney's fee to the prevailing
party as a part of the costs." 17 U.S.C. § 505 (emphasis added).
That provision modifies the usual American Rule, under which each
party pays its own fees. See Foqertv v. Fantasy, Inc., 510 U.S.
517, 533-34 (1994). To obtain an award of fees in a copyright
case, then, one must be a prevailing party. But, as the fee award is discretionary, prevailing party status, alone, does not
give rise to an entitlement. More is necessary.
The Supreme Court has identified a non-exclusive set of
factors district courts should consider when exercising equitable
discretion to award or deny attorney's fees in copyright cases.
These factors 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." Lieb v. Topstone Industries, Inc., 788 F.2d 151, 156 ([3d Cir.] 1986). . . . [S]uch factors may be used to guide courts' discretion, so long as such factors are faithful to the purposes of the Copyright Act and are applied to prevailing plaintiffs and defendants in an evenhanded manner.
Foqertv, 510 U.S. at 534 n.191. The Court stressed that "[t]here
is no precise rule or formula for making these determinations."
1 "[T]he overriding purpose of the Copyright Act [is] to encourage the production of original literary, artistic, and musical expression for the public good." Lotus Dev. Corp. v. Borland Int'1, 140 F.3d 70, 73 (1st Cir. 1998) (citing Foqertv, 510 U.S. at 534). It is well established that the purpose of the Copyright Act may be served by awarding fees to either plaintiffs or defendants who prevail in copyright suits. See Foqertv, 510 U.S. at 526-27; InvesSvs, Inc. v. McGraw-Hill Cos., 369 F.3d, 16, 20 (1st Cir. 2004) ("[I]n section 505 Congress aimed to provide a potential incentive to the winner who asserts a successful copyright claim or defends against an unworthy one. This practical concern is present whether the case happens to decide a landmark issue of copyright law or, in the end, turns on matters that have nothing to do with the statute."); Lotus, 140 F.3d at 75 ("a copyright defendant's success on the merits of a case of first impression may militate in favor of a fee award").
2 Id. at 534 (quoting Hensley v. Eckerhart, 461 U.S. 424, 436
(1983)); see also Lotus Dev. Corp. v. Borland Int'l, 140 F.3d 70,
75 (1st Cir. 1998) ("Foqertv made clear that courts are to
evaluate cases on an individualized basis").
The Court in Foqertv, however, squarely rejected "the 'dual
standard' for the award of fees, then in effect in many circuits,
. . . which required prevailing defendants to demonstrate that
the plaintiff's claims were frivolous or brought in bad faith."
Lotus, 140 F.3d at 72. That is, "[u]nder the case law,
dishonesty is not required for an award [of fees to a prevailing
defendant]; even a case that is merely objectively quite weak can
warrant such an award." InvesSvs, Inc. v. McGraw-Hill Cos., 369
F.3d 16, 20-21 (1st Cir. 2004) (citing Matthews v. Freedman, 157
F.3d 25, 29 (1st Cir. 1998)). In fact, depending upon the
circumstances present in a particular case, "a district court
could conclude that the losing party should pay even if all its
arguments were reasonable." Matthews, 157 F.3d at 29. In sum,
" [p]revailing plaintiffs and prevailing defendants are to be
treated alike, but attorney's fees are to be awarded to
prevailing parties only as a matter of the court's discretion."
Foqertv, 510 U.S. at 534.
3 Finally, when assessing factors such as frivolousness and
objective unreasonableness, the analysis should focus on what a
party knew when it pressed a claim or defense, rather than on
what decisions that party might have made with the benefit of the
court's subsequent resolution of the case. See InvesSvs, 369
F.3d at 21 (1st Cir. 2004) (citing Tang v. R.I. Dep't of Elderly
Affairs, 163 F.3d 7, 13 (1st Cir. 1998) ) .
VTW contends that it should be awarded fees because: (1)
Timberpeg's infringement claim was frivolous;2 (2) Timberpeg
pursued its claim in bad faith; (3) the circumstances of this
case call for compensation and deterrence; (4) Timberpeg made
various misrepresentations to this court and the court of
appeals, obfuscated the factual record, and shifted its legal
theories (with respect to copyright ownership and "precise"
similarity) in a manner that warrants an award of fees.
Timberpeg disagrees, and opposes any fee award, relying in large
2 VTW asserts at least five bases for arguing that Timberpeg's claim was frivolous: (1) it was unreasonable for Timberpeg to claim that VTW's timber frame was substantially similar to the copyrighted architectural work; (2) Timberpeg made allegations that were inconsistent with what it learned from its site visit to the house that was partially built by Stanley Isbitski; (3) Timberpeg did not allege any wrongdoing other than copying to support its state-law claims; (4) Timberpeg's characterization of certain letters from VTW's counsel was "ridiculous" in light of facts developed after the case was remanded by the court of appeals; and (5) Timberpeg failed to heed VTW's own repeated warnings that the case was frivolous.
4 measure on a pre-trial opinion by the court of appeals reversing
this court's entry of summary judgment for the defendants, and
remanding the case for trial. See T-Peq, Inc. v. Vermont Timber
Works, Inc., 459 F.3d 97 (1st Cir. 2006). Having considered the
factors described in Foqertv, and the circumstances and nuances
of this particular litigation, I conclude that VTW should recover
attorney's fees, but in an amount significantly less than that
requested.
As noted, this court earlier granted defendants' motion for
summary judgment on grounds that no reasonable jury could
conclude that the bent timberframe, as constructed by VTW and
embodied in its shop drawings, was substantially similar to the
architectural work embodied in Timberpeg's registered house
plans. Plaintiffs appealed that judgment, and prevailed.
The court of appeals examined the background facts in great
detail, and thoroughly analyzed pertinent aspects of copyright
law and provisions of "the Architectural Works Copyright
Protection Act ('AWCPA'), Pub. L. No. 101-650, §§ 701-706, 104
Stat. 5089, 5133-34 (1990) (codified in scattered sections of 17
U.S.C.), which created a new category of copyrightable subject
matter for 'architectural works.' 17 U.S.C. § 102(a)(8)." T-
Peq, 459 F.3d at 108.
5 The court of appeals noted that under the ordinary observer
test, two works can be found to be substantially similar
if a reasonable, ordinary observer, upon examination of the two works, would "conclude that the defendant unlawfully appropriated the plaintiff's protectable expression." The two works need not be exact copies to be substantially similar. Differences between the works have some effect on the inquiry, but the mere existence of differences is insufficient to end the matter in the defendant's favor.
Id. at 112 (citations omitted).
The court found many probative similarities between the two
works at issue in this case: the backwards-L-shaped footprint
with exactly the same dimensions; the location and similar size
of a kitchen "bump out" along the western wall; a central switch-
back staircase in precisely the same location; a lofted second
floor in the same location and of similar dimensions; identical
roof pitch and dimensions; similar wall heights; seeming
anticipation of an additional wing to be attached to the eastern
side of the building; as well as similar numbers and locations of
support posts. Considering those similarities, in the context of
a number of dissimilarities, the appeals court concluded that
" [a] reasonable jury, properly considering this combination of
elements, could conclude that VTW's frame was substantially
similar to Timberpeg's registered plans," id. at 114, keeping in
mind that "the definition of an 'architectural work [includes]
6 the overall form as well as the arrangement and composition of
spaces and elements in the design,'" Id. at 113-14 (quoting 17
U.S.C. § 101). Those similarities gave rise to material factual
disputes that precluded summary judgment and required a trial.
Upon remand, the case was set for trial. The evidence
presented was generally consistent with that considered by the
court of appeals, though defendants did present additional
evidence of dissimilarities between plaintiffs' work and the VTW
frame and shop drawings — e.g., many windows, skylights, and
doors as designed by plaintiffs would have had to be moved or
other adjustments made for the defendants' designed frame to
accommodate them. But that additional evidence of
dissimilarities, while relevant, did not, in the overall context,
preclude a jury's determination that the works were substantially
similar, nor did it establish the absence of copying beyond
legitimate contest.
Had this been a bench trial, the court would have reached
the same conclusion as the jury, finding that plaintiffs failed,
by a comfortable margin, to prove by a preponderance of the
evidence that defendants actually copied their registered plans.
That conclusion, perhaps like the jury's, would have followed
both from a comparison of the similarities and dissimilarities
7 between the respective works, and the very credible denial of
actual copying by Douglas Friant, coupled with the persuasive
explanation for the many similarities (and dissimilarities)
between the works offered by defendants — i.e., that both parties
interacted with a third party, Stanley Isbitski, the person
seeking to construct his "dream home." That the work done by
defendants reflected, in many respects, the same general "overall
form as well as the arrangement and composition of spaces and
elements," 17 U.S.C. § 101, should not come as a great surprise,
given that Isbitski no doubt pursued the same general vision with
both parties, likely relying on the general design details
reduced to plans by plaintiffs when directing defendants.
The jury's verdict, on the other hand, was not so inevitable
as to have reduced the trial to a mere play whose ending was
already written. Based on the evidence presented at trial, and
applying the law as articulated by the court of appeals, a
reasonable jury might have found by a preponderance that Isbitski
did provide plaintiff's registered plans to defendants, and that
defendants actually copied that work in developing substantially
similar shop drawings and constructing a frame. But, on balance,
plaintiffs had the appreciably weaker case on the merits. Contrary to defendants' persistent insistence, plaintiffs'
copyright infringement claim was a reasonable and viable one, as
determined on appeal, and one supported by the facts known to
defendants when they filed suit, and throughout the trial,
although comparatively weak on the merits. It is unarguable,
given the opinion by the court of appeals, that plaintiffs'
copyright claim rested upon a solid legal foundation. The claim
was not factually unreasonable; not legally unreasonable; and not
frivolous.
I reject the notion that plaintiffs' pursuit of their claim
was motivated by any improper purpose. Plaintiffs are entitled
to protect their legitimate intellectual property interests,
through litigation if necessary, particularly when the factual
and legal premises establish the objective reasonableness of
those claims, as they did here. The record does not, in my view,
support defendants' contention that the underlying motivation
here was plaintiffs' determination to run up costs for defendants
so as to adversely affect VTW's ability to compete in the
marketplace, or to extract an unwarranted settlement, or to
intimidate VTW and dissuade it and others from serving customers
who might have had prior contacts with plaintiffs. The record
simply does not suggest any bad faith on the part of plaintiffs.
9 Defendants also allude to discovery abuses by plaintiffs
("stonewalling"). But those discovery disputes were transitory
and, to the extent plaintiffs deviated from expected conduct in
that regard, the Magistrate Judge imposed corrective sanctions
that adequately addressed the issue.
Defendants also suggest bad faith by plaintiffs in the form
of misleading the court of appeals, as well as this court, with
respect to outcome-determinative facts. But the court of
appeals' opinion exhaustively and accurately recounted the
relevant facts, and recognized both the similarities and
dissimilarities between the works, noting that, in this case,
whether the works were substantially similar was essentially a
matter of degree, and that a jury would have to resolve the
issue. That a number of dissimilarities were apparent served to
contradict plaintiffs' claim that "precise" harmony existed
between the two works, but those argumentative statements (or
overstatements) did not constitute "bad faith," nor did they
establish any improper motivation. Neither this court nor, one
trusts, the court of appeals, based any critical determination on
such argumentative hyperbole.
Whether considerations of compensation and deterrence
warrant an award of fees presents a serious question. On the one
10 hand, plaintiffs' pursuit of their infringement claim plainly
fosters the purposes of copyright law — "to encourage the
production of original literary, artistic, and musical expression
for the public good." Lotus, 140 F.3d at 73. Protecting
intellectual property interests in such works is also consistent
with the purposes of the fee-shifting provision of Section 505,
one of which is to provide an incentive to copyright owners to
seek protection even when economic realities might otherwise
counsel abandonment.
Here, plaintiffs need not be deterred from bringing
insubstantial claims — their claims, though weak, were
objectively reasonable, factually and legally, and plaintiffs
proceeded in good faith. Indeed, having found themselves in a
more vigorous (and expensive) legal contest than they perhaps
anticipated, plaintiffs persevered and succeeded in overturning a
judgment entered against them. In the process, they obtained an
extensive and detailed explication and clarification of the law —
one largely favorable to their own general interest, and the
general interest of all creators of architectural works
(including the defendants). That is, plaintiffs, though not
ultimately successful on the merits at trial, did achieve other
noteworthy successes in the litigation.
11 On the other hand, defendants did prevail. And to prevail,
they unrelentingly persevered in asserting and presenting a
meritorious defense to a factually weak infringement claim, at
great expense. (Both parties incurred substantial, one might
easily say "excessive," expenses in prosecuting and defending
this case — which at bottom involved a claim of copying plans
worth, at most, some ten or fifteen thousand dollars. But, for
reasons apparently satisfactory to them, each elected to exercise
its legitimate prerogative to fight to the bitter end.)
As noted in Foqertv, an award of fees can properly encourage
copyright defendants to assert meritorious defenses. Foqertv,
510 U.S. at 527; Lotus, 140 F.3d at 75. Helpful guidance on that
point is set out in Lotus:
Turning to the need to encourage meritorious defenses, a copyright defendant's success on the merits in a case of first impression may militate in favor of a fee award, but we are unwilling to hold that a successful defense in an important case necessarily mandates an award of attorney's fees. When close infringement cases are litigated, copyright law benefits from the resulting clarification of the doctrine's boundaries. But because novel cases require a plaintiff to sue in the first place, the need to encourage meritorious defenses is a factor that a district court may balance against the potentially chilling effect of imposing a large fee award on a plaintiff who, in a particular case, may have advanced a reasonable, albeit unsuccessful claim. Foqertv made clear that courts are to evaluate cases on an individualized basis, with the primary responsibility resting on the shoulders of the district judge.
12 Id.
Striking a balance in this case is necessarily fraught with
ambiguity and contradiction. The British Rule (losing parties
automatically pay opponent's fees) has not been established in
copyright cases — something more than that defendant prevailed
must militate in favor of a fee award, and the fee award itself
is both discretionary and ought to reflect the purposes of
copyright law. Factors relating to plaintiff misconduct,
oppressiveness, bad faith, unreasonableness — that is, some
suggestion of culpable behavior — are not present here, but are
no longer necessary to justify a fee award to a prevailing
defendant.
The court finds that a modest award (modest in comparison to
the actual fees incurred) in favor of defendants is warranted. A
trial on the merits was practically unavoidable, and defendants
proceeded to trial and were vindicated — plaintiffs failed to
prove copying. While perhaps not a "novel case of first
impression" in every classical sense, the issues raised were
reasonably new, and the decision by the court of appeals did
confirm the expanded reach and broad protections afforded
architectural works under the AWCPA, to the decided benefit of
plaintiffs and defendants, as well as others involved in the same
13 industry. Plaintiffs, of course, had "to sue in the first place"
to obtain that beneficial decision.
Given all of these circumstances, and balancing the interest
in encouraging the assertion of meritorious defenses against the
potentially chilling effect that imposition of a large fee award
may have on these and other plaintiffs, who may, as here, advance
reasonable, albeit comparatively weak and ultimately
unsuccessful, architectural copyright infringement claims, the
court will award the prevailing defendants $35,000.00 in
attorney's fees. That sum is well below the requested amount of
$232,905.07 (plus a small amount for work related to the fee
request itself). But the full amount requested is not reasonable
for several reasons. It includes substantial fees incurred
during the appeal (which defendants lost and for which the court
of appeals awarded costs to plaintiffs. T-Peq, 459 F.3d at 116);
includes sums related to litigation of issues in this court on
which defendants did not prevail; and includes fees agreed to be
shared.
In the main, however, an award of $35,000.00 represents the
striking of an appropriate balance. It is a sum sufficient to
both encourage innocent defendants to (reasonably) present and
pursue meritorious defenses, without discouraging copyright
14 owners from (reasonably) seeking to enforce their rights when a
sound basis to assert a claim exists (thereby encouraging the
production of original architectural works). Yet, it is a sum
sufficient to deter plaintiffs with reasonable claims, and
defendants with meritorious defenses, from litigating in a manner
greatly disproportional to the matter at stake (arguably the case
here). No award, a lesser award, even a larger award, could each
be supported by legitimate argument in this case. But having
carefully considered all of the pertinent factors and having
weighed the many interests at stake, and having presided over
this lengthy litigation, and having observed the often
unnecessary and unproductive contentiousness between the parties,
I conclude that a discretionary award of partial attorney's fees
as described above is fair and adequate.
Conclusion
Defendants' Motion to Award Attorneys Fees (document no.
224) is granted in part and denied in part. Defendants are
awarded $35,000.00 in attorney's fees and recoverable costs.
SO ORDERED.
Steven J/ McAuliffe 'Chief Judge
September 30, 2010
15 cc: Daniel E. Will, Esq. Jonathan M. Shirley, Esq. W. E. Whittington, Esq.