case of some of those representing users of copyrighted material, by the belief that a settlement with plaintiffs charging plagiarism, even for an amount justified by "nuisance value," is imprudent. It is thought that word gets around; and that more claims result. Consequently some clients are advised never to settle. This leads to occasional avoidable litigation: but it doubtless also disposes of many claimants who will not or cannot finance litigation.

Most lawyers will incline toward settlement, motivated largely, it appears, by the same considerations that apply in other branches of the law, notably the great expense of litigation. In some cases, and to an undeterminable extent, either the real hazard of substantial statutory awards, or the imagined hazard of enormous ones, is a factor in reaching and in putting a price on a settlement.

VI. COSTS AND ATTORNEY'S FEES

Section 116 directs that

In all actions, suits, or proceedings under this title, except when brought by or against the United States or any officer thereof, full costs shall be allowed, and the court may award to the prevailing party a reasonable attorney's fee as part of the costs.

The mandatory award of costs is sufficiently described in the Strauss study.48 It raises no problems special to copyright, and is not ordinarily of substantial magnitude unless there has been a reference to a special master.

The discretionary power to award attorney's fees to the prevailing party is, however, an element that should always be taken into account in appraising the substantiality of recovery in a copyright case. Awards of attorneys' fees are not unique in copyright practice; a variety of Federal regulatory and welfare legislation includes such provisions.49 In fields closely related to copyright they are also found, but with significant variations. In private antitrust actions a successful plaintiff, in addition to triple damages, is apparently entitled to attorney's fees as a matter of right.50 On the other hand, the patent law authorizes attorney's fees only "in exceptional cases." 51 Lanham Trade Mark Act permits the plaintiff to recover, "subject to the principles of equity," damages, profits, and "costs of the action." 52 As recently as 1937 the Second Circuit Court of Appeals held that attorney's fees could not be awarded in trademark cases, but more recently a practice has developed of making such awards to plaintiffs where "there is a showing of fraud." The award is apparently justified on general equitable principles.53

The

The Copyright Act differs from all these neighboring fields in that the allowance to the prevailing party is entirely a matter of judicial discretion a discretion that is, however, reviewable by the courts of appeals (in contrast to the supposed impregnability of statutory dam

4 See note 5, supra 29-31.

496 Moore, Federal Practice, sec. 54.71 (2).

50 Sherman Act, 26 Stat. 209, 15 U.S.C. sec. 7.

$1 66 Stat. 813, 35 U.S.C. sec. 285.

52 60 Stat. 439, 15 U.S.C. sec. 1117. This is substantially an amalgamation of secs. 16 and 19 of the 1905 set. 3 Gold Dust Corp. v. Hoffenberg, 87 F. 2d 451 (2d Cir. 1937); Century Distilling Co. v. Continental Distilling Corp., 205 F.2d 140, 149 (3d Cir. 1953); Admiral Corp. v. Penco, Inc. 106 F. Supp. 1015 (W.D.N.Y. 1952); aff'd 203 F.2d 517 (2d Cir. 1953) (flagrant violation); compare 4 Callmann, Unfair Competition and Trade Marks (1950) 1902 with id., 1956 supplement. There is a general equitable power to award attorney's fees to defendants where an action is "brought or maintained vexatiously, wantonly, or for oppressive reasons.” Moore, sec. 54.77(2).

6

age awards). That discretion may be exercised to withhold an allowance altogether if the courts consider the statutory damage award adequate or excessive. On the other hand, a liberal allowance may be made that has the effect of substantially enhancing any other form of recovery.

The accompanying table B [at page 91] shows the relation of fee allowances to damage awards in cases decided in the 20-year period 1938-57. Treated as an enhancement of damages, some of the amounts listed are substantial, at least when they are contrasted to the usual American civil practice of making no provision for the successful party's legal expenses. But if their purpose is to provide for the actual reasonable expenses of prosecuting or defending an infringement, the prevailing opinion among lawyers interviewed was that fee allowances rarely are sufficient. For one thing, they are likely to be scaled roughly in proportion to the amount recovered by successful plaintiffs; and though this approach may not be inconsistent with lawyers' own habits in billing clients, it may bear little relation to the time and energy expended on a case. Second, courts do not usually make an allowance at all if an unsuccessful plaintiff's claim was not "synthetic, capricious or otherwise unreasonable," or if the losing defendant raised real issues of fact or law.56 Several experienced practitioners said that they seldom received fee allowances, nor were their clients compelled to pay allowances, because the only cases they took to court involved unsettled questions of law or fact, and they did not expect the court to make an allowance to either side. Finally, there does not yet appear to be any discernible trend to adjust allowances to take account of the postwar inflation.

One expense of litigation that attorney's fees do not attempt to meet is the time lost by parties and witnesses, the cost of investigations undertaken by the client rather than the lawyer, and all the other peripheral but often major outlays attending litigation. However, no provision is ever made in our system for the recovery of such costs, except possibly in punitive damages. A few lawyers interviewed thought that fees were sometimes awarded punitively. This may be true in the sense that the court may grant fees rather than deny them because it reaches an unfavorable conclusion about the good faith of the losing party.57 But there is no indication that fee allowances include any amounts beyond actual fees and disbursements. The expected cost of litigation is, as we saw in part II, one of the factors that influence willingness to settle and the amounts acceptable in settlement. But the likelihood of getting a fee allowance at the end of litigation is so problematical that, according to our interview sources, it is not a factor that they will count on in deciding whether to settle or litigate.58

These observations about attorney's fees are not intended as an exhaustive treatment of the subject. The cases disclose a variety of

Hartfield v. Peterson, 91 F. 2d 998 (2d Cir. 1937). The circuit courts also exercise discretion to award a further allowance for fees on appeal.

Except by way of exemplary or punitive damages. See note, "Exemplary Damages in the Law of Torts," 80 Harv. L. Rev. 517, 519 (1957).

Cloth v. Hyman, 146 F. Supp. 185 (S.D.N.Y. 1956), quotation at 193. This opinion, awarding fees to a successful defendant, include a helpful discussion of the considerations involved. See also Eisenschiml v. Fawcett Publications, Inc., 246 F. 2d 598, 604 (7th Cir., 1957); Marks v. Leo Feist, Inc., 8 F. 2d 460 (2d Cir. 1925).

See Caruthers v. RKO Radio Pictures, 20 F. Supp. 906 (S.D.N.Y. 1937) ("The allowance of fees constitutes a sanction which tends to be a deterrent both on infringers of copyright, and on wholly unfounded copyright claims").

Performing-right licensors' cases seem to be the only area in which fees are routinely awarded.

miscellaneous reasons for denying fees, or for setting them at a particular figure, within a rubric that

the court should take into account the following elements, among others: the amount of work necessary; the amount of work done; the skill employed; the monetary amount involved; and the result achieved.59

The relevance of fee allowances to the overall operation of the damage provisions is that, as an exception to the general proposition that parties pay their own legal expenses, these allowances when made increase a prevailing plaintiff's recovery. Their deterrent effect on ill-founded litigation, whether by plaintiffs or defendants, is outside the scope of this inquiry.

VII. INDEMNITY AND INSURANCE

The incidence of damage awards may be shifted by indemnity agreements and distributed by insurance; therefore these two insitutions deserve some attention.

A. INDEMNITY

A right to indemnity may arise either from express warranties made by an author, from express contracts of indemnity made in the course of any dealings with copyright material, or from implied warranties and obligations to indemnify. Typical of the kind of warranty that may be made by an author is this provision in the uniform popular songwriters contract:

The writer hereby warrants that the composition is his sole, exclusive, and original work, that he has full right and power to make the within contract, and that there exists no adverse claim to or in the composition. * * *

(with exceptions respecting ASCAP licenses and any other rights specifically excepted).

As a musical or other work moves into commercial channels of use, the person who supplies it usually agrees to indemnify the user against any liability arising from its use. These indemnities are elaborately developed in the complex of relationships among advertising agencies, producers of programs, licensors of musical performing rights, and broadcasters.

An illustration of the precise allocation of responsibility as between agency and broadcaster is found in a contract form approved by the American Association of Advertising Agencies and the National Association of Radio & Television Broadcasters for spot telecasting:

(a) Indemnification by Agency.-Agency agrees to hold and save Station harmless against any or all liability resulting from the telecast of programs or program material prepared, produced or furnished by Agency excepting such liability as may result from the telecast on Agency-produced telecasts of material furnished by Station and musical compositions, the performances of which are licensed by a music licensing organization of which Station is a licensee.

(b) Indemnification by Station.-Station will hold and save Agency and Advertiser harmless against all such liability on Station-produced telecasts excepting only such liability as may result from the telecast of commercial credits, and other material furnished by Agency. In addition, Station will hold and save Agency and advertiser harmless with respect to material furnished by Station for Agency-produced telecasts and the performances of musical compositions on Agency-produced telecasts provided the performances of such musical compositions are licensed for telecasting by a music licensing organization of which Station is a licensee.60

9 Cloth v. Hyman, note 56, supra.

60 Both this form, and the songwriters contract quoted above, are copyrighted.

Magazine publishers, it appears, routinely require indemnity from agencies and advertisers with respect to material supplied by them. Major newspaper publishers do also. A publication called Standard Rate and Data Service for newspapers includes an indemnity clause as No. 34 in a long list of suggested contract provisions and copy regulations. Newspapers using the service indicate by number which of these clauses they considered applicable. An interviewee reports, on the basis of a random sampling of this service, that smaller newspapers sometimes do and sometimes do not include No. 34.

The enforcibility of express warranties or indemnity agreements seems to be taken as a matter of course; we have not found any reported cases on indemnity undertakings relating directly to copyright, except for the extreme and unsuccessful claims of the indemnitee in Loew's Inc. v. Wolff.61

There seems to be no modern case considering the rights of an assignee or licensee of copyrighted material when no express warranty or agreement to indemnify has been given. If the user has been held liable to a third party for infringement, it would seem that the supplier of the infringing material might, by analogy to sales law, be held to an implied warranty of title and of fitness for the intended use. Another approach, where the supplier of the material is a consciously plagiarizing author or properietor, would be to recognize that though both the supplier and the infringing user are tort feasors as against the owner of the material, between themselves the "active" infringeri.e., the plagiarist-would be liable over to the "passive" infringeri.e., the secondary and presumably innocent user. If both infringers were "active," which in this context one would take to mean that both were aware of the copying of the original plaintiff's work, or if they were both "passive," then there would be presumably no common-law right of indemnity, and perhaps no right even to contribution.62

However, it is not the purpose of this study to speculate about liabilities which seem not to arise in practice. The prevalence of express warranties and indemity agreements, in fields where infringement claims are common, and their accepted enforceability, have already been mentioned. We are informed that indemnity agreements are enforced, as a matter of course, among business enterprises. Some variation occurs when the process of recovery overreaches the individual author. In the music-publishing world, we are advised, the erring composer is held to his SPA contract. In the book-pub

61 101 F. Supp. 981 (S.D. Cal. 1951). This case involved an assignment of an unpublished manuscript, accompanied by extensive warranties of title and originality, and an agreement to indemnify the purchaser "against any and all loss, damage, costs, charges, legal fees, recoveries, judgments, penalties, and expenses which may be obtained against, imposed upon, or suffered by the purchaser by reason of any infringement or violation or alleged violation of any copyright or any other right or from any use which may be made of said work by the purchaser." The assignors were sued by a person claiming an interest in the work, and successfully defended. The assignee, having attempted to rescind while this other suit was pending, now asserted that the seller had breached a warranty of "marketable and perfect title", by analogy to real estate title warranties. The court held that the assignor had given no such warranty, and that the warranties he did give were no more extensive than those ordinarily implied in a sale of personal property, in which the doctrine of "marketable title" had no place. The assignee also claimed that he was entitled to recover, under the indemnity agreement, his expenses in the instant case. The court held that these expenses were self-imposed, and not within the contemplation of the indemnity agreement.

See Alfred Bell & Co. v. Catalda Fine Arts, 86 F. Supp. 399, 409 (S.D.N.Y. 1949), aff'd 191 F. 2d 99 (2d Cir. 1951), where the court points out that the defendant printer had been given judgment over against the principal defendant on an indemnity agreement, and therefore had little reason to complain about certain aspects of the judgment against him.

62 See Pacific Iron Works v. Newhall, 34 Conn.57 (1867) (common-law indemnity by patent licensee against licensor); Duke of Queensberry v. Shebbeare, 2 Eden 329 (1758) (reporters's notes re recovery by defendant who was enjoined from printing a manuscript of Lord Clarendon's "History," for misrepresentation by his assignor of latter's right to publish); Weil, "Copyright Law," 558 (1917).

On indemnity to "passive" from "active" tort feasors, see Schwartz v. Merola Bros. Constr. Corp., 290 N.Y. 145, 48 N.E. 2d 299 (1943).

lishing world, and among other users of literary material, resort to the author depends on the relationship between him and the publisher or other user of this material. Sometimes authors are expected to pay; sometimes they are not. Of course, the practical limit of claims against authors (and for that matter, against small enterprises) is a question of solvency. Authors are often able to make contracts that limit their liability on warranties to the amount received in royalties, or some small multiple thereof.63

To the extent that indemnity agreements exist and are enforced, they of course mitigate the situation of the innocent infringer. A "hold harmless" provision that includes expenses, legal fees, and the like, lifts his burden almost entirely.

B. INSURANCE

The form of insurance which is applicable to copyright damages is commonly referred to as "errors and omissions" insurance. Its coverage is far more extensive than claims of copyright infringement. Policies issued by one leading company, which seem representative in coverage, protect against liability for

(a) Libel, slander, defamation, or

(b) Any infringement of copyright of or title or of slogan, or

(c) Piracy, or unfair competition or idea misappropriation under implied contract, or

(d) Any invasion of rights of privacy.

The language of the undertaking in this policy is that of indemnity against loss resulting from a judgment; but the insurer also undertakes to defend any suits brought against the insured, "even if such suit is groundless, false, or fraudulent." The insurer has power to settle any suit. Another form of policy indemnifies against "claims" rather than judgments. The insurer has the power to take over the defense of a case, but is not bound to contest a claim unless a neutral attorney so advises; the approval of the insured is required for a settlement.

The practical consequence of either type of contract is that any claim is referred to the insurer; and most claims are settled by the insurer.

The industries which make extensive use of this insurance protection are about the same as those which have thoroughly systematized the use of indemnity agreements: broadcasters, producers for broadcasting, advertising agencies, advertisers. However, insurance seems to be little used in the music field. Apparently only one major recording company is insured. Producers of feature motion pictures sometimes obtain insurance, especially for film libraries used on television, and recently for current production. One carrier writes insurance for newspapers, but its use is apparently not widespread in that field, nor in magazine publishing. Apparently book publishers do not insure at all.

The fact that this form of insurance is concentrated among a few carriers, with one of them seemingly dominant in fields related to broadcasting, means that the administration of the indemnities described in the first part of this section is often a matter of concern primarily to the insurer, since the same company may insure all the 63 Colton, "Contracts in the Entertainment and Literary Field," "1953 Copyright Problems Analyzed," 144 (1953).