A prevailing defendant is less likely to receive attorney's fees.

How defendants are treated is relevant because if courts impose a more stringent standard for attorney's fee awards on all prevailing parties then plaintiffs may feel disinclined to implement the copyright system.

The bill before us today, H.R. 671, requires a court automatically to award attorney's fees in cases where the prevailing party is both the owner of the infringed rights and either a small business or an individual author. We are asked to consider whether a special class of plaintiff should be granted attorney's fees as a matter of right or whether attorney's fees should continue to be discretionary with the courts in all

cases.

A. Granting Attorney's Fees in American Copyright Law

Although fee awards are exceptions in American law, they are not unique in the legal system. While fee shifting is the exception under the American rule, it is common in most other countries. Attorney's fees are also awarded in other cases involving intellectual property, but patent and trademark cases require courts to find exceptional circumstances to grant attorney's fees. Thus there is already a fundamental difference between copyright fee awards and awards in other cases dealing with intellectual property. Award of attorney's fees is common in copyright cases, but less likely in patent and trademark cases.

Fee shifting in the American legal system is neither limited to copyright particularly nor intellectual property in general. Antitrust actions and other treble damages statutes are similarly aimed at deterring unlawful conduct and encouraging private enforcement of rights. Civil

Rights Statutes, the Freedom of Information Act, the Privacy Act, and the Equal Access to Justice Act allow discretionary fee awards. Rule 11 of the Federal Rules of Civil Procedure provides for sanctions in the form of attorney's fees as a penalty for improperly brought legal actions. Here, as in other cases, Congress indicates that attorney's fees are closely associated with penalizing wrong doing. The awarding of fees in other cases may also reflect a social allocation of costs where the plaintiff may not otherwise have been able to pursue an action.

1. Attorney's Fees under the 1909 Act

Section 116 of the 1909 copyright law provided for an award of "full costs." It also provided that "the court may award to the prevailing party a reasonable attorney's fee as part of the costs." In general attorney's fees were warranted because damage awards did not compensate plaintiff adequately.

A 1917 commentator, Weil, observed that if there were not some provision for fee awards many plaintiffs would not find causes worth suing, in view of the small damage awards flowing from successful copyright infringement actions. Noting that while the costs of defending a lawsuit might be "trifling," he observed that the expense of any litigation is considerable. "Unless, therefore, some provision is made for financial protection to a litigant, if successful, it may not pay a party to defend rights, even if valid, a situation opposed to justice.... It is increas

to vindicate, or defend, a right should bear the expense of such engagement and not his successful opponent." 1

While awarding costs was mandatory under the 1909 Act, awarding
Thus awards were

attorney's fees was a matter of judicial discretion.
withheld where statutory damage awards were in the court's judgment
sufficient for plaintiff's total recovery. The general consensus among
attorneys interviewed in the 1950's revealed that they did not rely on such
awards as a factor in deciding whether to settle or litigate; no awards were
expected in cases where the law was settled, which represented most of their
practice, and in any event, the amount awarded would be small. Their
perception that expenses of prosecuting or defending a case were insuffi-
ciently compensated in most cases appears supported.

Of 29 cases decided between 1938 to 1957 (See Appendix I), awards of attorney's fees from $150 to $33,000 were made. With one $10,000 exception, all other awards were $2,500 and below, more than half of which are $1,000 and below. By 1916, a court could be influenced by a defendant's innocence in determining the amount to be awarded as attorney's fees or in refusing to give attorneys fees at all. Haas v. Leo Feist, Inc. 234 F.105 (S.D.N.Y. 1916); Gross v. Van Dyk Gravure Co., 230 F.2.412 (2d Cir. 1916).

When the copyright law was revised, the provision regarding attorney's fees remained substantially the same, but the provision for costs

1. WEIL, Law of Copyright, 530, 531 (1917). See also, Revision Study No. 22: The Damage Provisions of the Copyright Law, Senate Committee on the Judiciary (1960), 86th Cong. 2d Sess. 31.

became discretionary as well. Section 505 states that "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."

The first clause refers to the condition placed on awarding all extraordinary remedies under the statute, which is registration before the commencement of the infringement or within three months of first publication. This is an important feature of the U.S. registration system, and is designed to encourage prompt registration for creation of a complete registration record in the Copyright Office. The award of statutory damages and attorney's fees is conditioned on registration in the Copyright Office before commencement of the infringement, except for the three month grace period.

3. Judicial Interpretation of Fee Shifting Provisions

Two schools of thought have developed toward plaintiff's entitlement to consideration for attorney's fees. The majority view is that a prevailing plaintiff should be more favorably considered than a prevailing defendant. This school awards attorney's fees to prevailing plaintiffs on a routine basis and requires a higher standard, such as a vexatious or harassing plaintiff, for the court to award fees to a prevailing defendant. The Second and Ninth Circuits have articulated the theory clearly in Diamond v. Am-Law Publish Corp., 745 F.2d 142 (2d Cir. 1984) and McCulloch v. Albert E. Price, 823 F.2d 316 (9th Cir. 1987). Diamond held that unless plaintiff's case was objectively unreasonable an award to a prevailing defendant would not be made. Similarly, McCulloch held that plaintiff's

however, attorney's fees may be denied a prevailing plaintiff if the defendant is comparatively blameless. For example, in Encyclopedia Britannica v. Crooks, 558 F.Supp. 1247, 1252 (W.D.N.Y 1982), where a school district was the losing defendant, the court denied attorney's fees to plaintiffs on the ground that "attorney's fees in copyright cases have been sparingly used."

Other circuits, with the exception of the Third, Fourth, and Eleventh Circuits, can be considered as implicitly following the rule of routinely awarding attorney's fees to prevailing plaintiffs but generally denying the award to prevailing defendants.

Courts in three circuits, the Third, Fourth, and Eleventh, have either expressly rejected the "double standard" or explicitly followed the unified approach of awarding attorney's fees to either prevailing party on the same basis. Lieb v. Topstone Industries, Inc., 788 F.2d 151 (3rd Cir. 1986); Cohen v. Virginia Electric & Power Co., 617 F.Supp. 619 (E.D.Va. 1985), aff'd on other grounds, 788 F.2d 247 (4th Cir. 1986); Sherry Mfg. Co. v. Towel King, Inc., 822 F.2d 1031 (11th Cir. 1987). Some of these cases establish higher standards for either prevailing party to receive fee awards than are applied in the Second and Ninth Circuits. Where the prevailing plaintiff has to prove fault, its ability to receive compensation is prejudiced.

In summary it appears that courts usually will award attorney's fees where the losing party has acted in bad faith. They divide on whether to award such fees in the absence of bad faith and on what the standards