Tuesday, May 19, 2015

No Does Not Mean No, When It Comes To Copyright Legal Fees

In a case of first impression, the Ninth Circuit held today that attorneys' fees may be awarded to a prevailing copyright owner even though the Copyright Act prohibits an award of fees.

Section 412 of the Copyright Act prohibits an award of attorneys' fees to a prevailing copyright owner if the claimed infringement occurs after first publication and prior to registration of the work, unless the work is registered within three months of first publication. In other words, if the work is not registered within three months of first publication, then no attorneys' fees are awarded as to any infringement that occurs prior to registration. This prohibition is intended to encourage prompt registration of a work following publication.

In today's case of Ryan v. Editions Limited West, the copyright owner failed to register her work within three months of first publication, and the defendant's acts of infringement occurred prior to registration of the work. So, the copyright owner was not awarded attorneys' fees under Section 412.

But wait. The parties entered into an agreement, prior to the claimed infringement, by which Ryan granted a license to Editions Limited West to sell posters of Ryan's art work. The agreement contained a clause that awarded attorneys' fees to the prevailing party in the event of breach. Ryan eventually sued for copyright infringement, among other things, claiming that Editions Limited West violated the license by allowing a third party to sell derivative works -- wall murals -- of Ryan's art. The trial court determined that copyright infringement had occurred. The court also determined that Ryan was entitled to an award of her attorneys' fees under the license even though she was not entitled to an award of attorneys' fees under Section 412 of the Copyright Act.

Editions Limited West appealed to the Ninth Circuit, arguing among other things that the Copyright Act preempts conflicting state law. Because the prohibition on fees under Section 412 is in conflict with a fee shifting clause of a license agreement, Editions Limited West argued that there can be no recovery by Ryan of attorneys' fees at all.

The appellate court acknowledged that this issue -- the preemption conflict between Section 412 and a fee shifting clause -- had not previously been reviewed by the Ninth Circuit and was largely an unanswered question. But the Ninth Circuit determined that there is no conflict -- and no preemption under the Copyright Act -- because rights under the license agreement are not exactly the same as rights under Section 412. That is, the contract contains an extra element not present under a copyright claim; the extra element of consent.

So even though Congress sought to punish a copyright owner for registration delay by denying attorneys' fees, the parties can work around the Congressional prohibition by their private agreement. No other circuit court has specifically determined that the Section 412 prohibition on fees does not work a preemption as to a fee shifting clause in a private agreement. But at least for now in the Ninth Circuit, No does not mean No when it comes to recovering attorneys' fees on a copyright infringement claim when a fee shifting agreement is in place.

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