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The Honorable Robert W. Kastenmeier · Page Three April 20, 1990

will quickly remind me that the judge doesn't like copyright cases or may be adverse to granting attorney's fees particularly if I am not "reasonable" in my negotiations with the defendant and if I press too hard to collect my expenses. My experiences are not unique.

I hope that we can gain your help in reconsidering the
above matter and that we can convincingly persuade you to
view HR-671 as a simple, practical means of reducing
piracy and other forms of copyright infringement, not only
faced by the training media industry, but also by numerous
other small business and individual copyright owners.

HR-671 will assist smaller copyright owners in their efforts to vindicate their rights, and improve reliance on private enforcement of copyright law which, as Mr. Oman aptly noted, is and should be the primary means of copyright protection. I know that representatives of the Training Media Association stand ready to meet with you to discuss this matter and look forward to having that opportunity in the near future.

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UNITED STATES DEPARTMENT OF COMMERCE
Office of the General Counsel
Washington, D.C. 20230

MAY 3 1990

Honorable Robert W. Kastenmeier
Chairman, Subcommittee on Courts,

Intellectual Property and the

Administration of Justice Committee on the Judiciary House of Representatives Washington, D.C. 20515-6216

Dear Mr. Chairman:
Thank you for the opportunity to provide the views of the
Department of Commerce on H.R. 671, which would amend section 505
of title 17 of the United States Code to require that Federal
district courts award a reasonable attorney's fee to the
"prevailing party" in an infringement action, when that party is
(i) the rights owner and (2) a small business concern or an
individual author.

Section 505 of the copyright law, 17 U.S.C. section 505, provides
in relevant part as follows:

In any civil action under this title, the court in its
discretion may allow the recovery of full costs by or
against any party [T]he court may also award a
reasonable attorney's fee to the prevailing party as part of
the costs.

Three reasons are often given to justify an award of attorney's
fees. See, eg., Oboler v. Goldin, 714 F. 2d 211, 213 (2d Cir.
1983). First, it helps to ensure that all litigants have equal
access to the courts. Second, it helps prevent copyright
infringements from going unchallenged where the commercial value
of the infringed work is small, and there is no economic
incentive to seek redress through expensive litigation. Third,
an award of attorney's fees serves to penalize the losing party
while compensating the prevailing party.
Under current law, the district courts have discretion to award
attorney's fees to the "prevailing party." H.R. 671 would remove
that discretion in cases where the "prevailing party" is the
owner of infringed rights and either an individual author or a
"small business concern," defined generally as any entity with no
more than 500 employees. The bill would not require such an
award of attorney's fees to an individual author or small
business concern when the alleged infringement involves
reproduction of works by non-profit educational institutions,

The apparent purposes of H.R. 671 are to encourage rights owners of small economic means to file infringement actions in cases where the claim is colorable or damages may be difficult to prove, and to encourage attorneys to take such cases. While these purposes are meritorious, we are not certain that enactment of the bill as currently drafted would necessarily serve them.

First, the bill would require an award of attorney's fees only when the "prevailing party" is the "owner of the infringed rights," generally, the plaintiff. Because section 505 is intended to penalize losing defendants and to deter infringement, however, awards of attorney's fees are generally granted to prevailing plaintiffs. See, e.g., Micromanipulator Co. v. Bough, 779 F. 2d 255 (5th Cir. 1985); Roth v. Pritikin, 787 F. 2d 54 (20 cir. 1986). Thus, we are not aware that there is a need for a provision for mandatory attorney's fees which would increase the incentive for would-be plaintiffs, whatever their economic status, to bring infringement actions. Also, the bill as currently drafted may not take into account the complexities involved in identifying the "prevailing party" in a given action. This might occur, for example, in cases with multiple plaintiffs who would be eligible for attorney's fees if more than one plaintiff prevails? Another example is the situation where the plaintiff makes several claims, only one of which is for statutory copyright irfringement. If the plaintiff were to win on the copyright claim, but the defendant on others, H.R. 671 could produce an inequitable result the court might be forced to award attorney's fees to the plaintiff even though the litigation was at least a partial success for the defendant. In some such cases, courts have held that neither party's success was sufficiently significant to justify an award of attorney's fees. See, e.g., Warner Bros., Inc. v. Dae Rim Trading, Inc., 877 F. 2d 1120 (2d Cir. 1989).

H.R. 671 does not address the issue of fee apportionment among partially successful litigants. Some courts have exercised their discretion by ordering an apportionment of attorney's fees in such cases. See Edwin H. Morris & Co. v. Munn, 233 F. Supp. 71 (E.D.S.c. 1964). while the bill might require courts to award attorney's fees to partially successful plaintiffs, it does not provide guidance for making such awards in cases where a defendant or multiple plaintiffs may achieve some success. Consequently, the bill may unduly restrict the discretion of district courts to allocate fees in particular cases. Finally, we are concerned that H.R. 671 may not apply evenhandedly. While prevailing plaintiffs would receive attorney's fees automatically under the bill, prevailing defendants would not, even if they otherwise qualify as "small business concern(s)," and even if they were to prevail on all issues in

the case. Fee awards to prevailing defendants would still be a matter of judicial discretion under section 505, and under current law, these may be difficult to obtain. For instance, some circuits (such as the Second and Ninth) employ a double standard in determining when to award attorney's fees, depending on whether the prevailing party is the plaintiff or the defendant. Prevailing plaintiffs receive attorney's fees as a matter of course, but prevailing defendants may receive fees in the Second circuit only when the district court finds plaintiff's suit "to have been baseless, frivolous, unreasonable, or brought in bad faith." Rothy. Pritikin, supra, 787 F. 2d at 57. Likewise, the Ninth Circuit requires a finding of bad faith on the part of the plaintiff as a prerequisite to an award of fees to the prevailing defendant. Cooling Systems and Flexibles, Inc. V. Stuart Radiator, Inc., 777 F. 2d 485, 493 (9th cir. 1985).

We question whether it would be equitable in all cases to discriminate in favor of individuals and small entities who happen to be successful plaintiffs, as opposed to successful defendants. This inequity may be greatest in cases where the defendant, also a copyright owner, successfully proves a crossclaim of infringement by the plaintiff.

In sum, we question whether H.R. 671, or similar legislation, could be crafted to produce uniformly equitable results in light of the complexity of modern copyright litigation. Consequently, we cannot support the bill in its present form. The Office of Management and Budget has advised us that there is no objection to the submission of this report to the Congress from the standpoint of the President's program.

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Dan Haendel

APPENDIX 2.-NURSING HOME/MOTION PICTURE COMPANY ISSUE

MPLC

Motion Nature Licensing Corporation

UMBRELLA LICENSESN

AGREEMENT

August 16, 1988

This agreement when signed by you in the space provided below

shall, subject to the Terms and Conditions appearing on the reverse side hereof, constitute a license agreement between Motion Picture Licensing Corporation, 1177 Summer Street, Stamford, Connecticut 06905 ("MPLC") and Meridian Health Care, 21 West Road Baltimore, MD 21204 ("you").

The purpose of this license agreement is to allow you to "publicly perform, as that term is used in Sections 101 and 106 of Title 17, United States Code, copyrighted pre-recorded video cassettes and videodiscs which are otherwise by law for home use only.

This agreement is enclosed in duplicate original form. After signature, one copy should be retained by your for your records and the other copy should be returned to MPLC. Your check for the agreed license fee specified in Item 3 below should be sent to MPLC in accordance with the enclosed invoice, and may be sent to MPLC either concurrently with your return of this license agreement or under separate cover.

One Year
August 1, 1988
July 31, 1989

(1) Term of Agreement:

Start Date:

Expire Date:
(2) Facility Licensed:

Facility Address:
Purpose:
Audience Limitation:

Meridian Health Care
21 West Road Baltimore, MD
Entertain Residents and Staff
Residents and Staff

(3) License Fee:

$16,975.00

(4) Motion Picture Companies: Best Film & Video; Columbia Pictures; Walt Disney/Touchstone Pictures; MGM/United Artists; Orion Pictures; Republic Pictures; Warner Bros.; Learning Corporation of America (LCA)

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