Kirtsaeng v. John Wiley & Sons, Inc.

KIRTSAENG, dba BLUECHRISTINE99 v. JOHN

WILEY & SONS, INC.

certiorari to the united states court of appeals for

the second circuit No. 15–375. Argued April 25, 2016—Decided June 16, 2016 In Kirtsaeng v. John Wiley & Sons, Inc., 568 U. S. 519, this Court held that petitioner Supap Kirtsaeng could invoke the Copyright Act's “first-sale doctrine,” see 17 U. S. C. § 109(a), as a defense to the copyright infringement claim filed by textbook publisher John Wiley & Sons, Inc. Having won his case, Kirtsaeng returned to the District Court to seek more than $2 million in attorney's fees from Wiley under the Copyright Act's fee-shifting provision. See § 505. The District Court denied Kirtsaeng's application because, it reasoned, imposing a fee award against a losing party that had taken reasonable positions during litigation (as Wiley had done) would not serve the Act's purposes. Affirming, the Second Circuit held that the District Court was correct to place “substantial weight” on the reasonableness of Wiley's position and that the District Court did not abuse its discretion in determining that the other factors did not outweigh the reasonableness finding. Held: 1. When deciding whether to award attorney's fees under § 505, a district court should give substantial weight to the objective reasonableness of the losing party's position, while still taking into account all other circumstances relevant to granting fees. Pp. 202–209. (a) Section 505 states that a district court “may . . . award a reasonable attorney's fee to the prevailing party.” Although the text “clearly connotes discretion” and eschews any “precise rule or formula,” Fogerty v. Fantasy, Inc., 510 U. S. 517, 533, 534, the Court has placed two restrictions on that authority: First, a court may not “award[ ] attorney's fees as a matter of course,” id., at 533; and second, a court may not treat prevailing plaintiffs and prevailing defendants differently, id., at 527. The Court also noted “several nonexclusive factors” for courts to consider, e. g., “frivolousness, motivation, objective unreasonableness[,] and the need in particular circumstances to advance considerations of compensation and deterrence,” id., at 534, n. 19, and left open the possibility of providing further guidance in the future, id., at 534–535. This Court agrees with both Kirtsaeng and Wiley that additional guidance respecting the application of § 505 is proper so as to further channel district court discretion towards the purposes of the Copyright

Act. In addressing other open-ended fee-shifting statutes, this Court has emphasized that “in a system of laws discretion is rarely without limits,” and it has “found” those limits by looking to “the large objectives of the relevant Act.” Flight Attendants v. Zipes, 491 U. S. 754, 758, 759. In accord with such precedents, this Court must determine what approach to fee awards under § 505 best advances the well-settled objectives of the Copyright Act, which are to “enrich[ ] the general public through access to creative works” by striking a balance between encouraging and rewarding authors' creations and enabling others to build on that work. Fogerty, 510 U. S., at 527, 526. Fee awards should thus encourage the types of lawsuits that advance those aims. Pp. 202–205.

(b) Wiley's approach—to put substantial weight on the reasonableness of a losing party's position—passes this test because it enhances the probability that creators and users (i. e., plaintiffs and defendants) will enjoy the substantive rights the Act provides. Parties with strong positions are encouraged to stand on their rights, given the likelihood that they will recover fees from the losing (i. e ., unreasonable) party; those with weak ones are deterred by the likelihood of having to pay two sets of fees. By contrast, Kirtsaeng's proposal—to give special consideration to whether a suit meaningfully clarified copyright law by resolving an important and close legal issue—would produce no sure benefits. Even accepting that litigation of close cases advances the public interest, fee-shifting will not necessarily, or even usually, encourage parties to litigate those cases to judgment. While fees increase the reward for a victory, they also enhance the penalty for a defeat—and the parties in hard cases cannot be confident if they will win or lose. Wiley's approach is also more administrable. A district court that has ruled on the merits of a copyright case can easily assess whether the losing party advanced an unreasonable position. By contrast, a judge may not know whether a newly decided issue will have broad legal significance. Pp. 205–208. (c) Still, objective reasonableness can be only a substantial factor in assessing fee applications—not the controlling one. In deciding whether to fee-shift, district courts must take into account a range of considerations beyond the reasonableness of litigating positions. Pp. 208–209. 2. While the Second Circuit properly calls for district courts to give “substantial weight” to the reasonableness of a losing party's litigating positions, its language at times suggests that a finding of reasonableness raises a presumption against granting fees, and that goes too far in cabining the district court's analysis. Because the District Court thus may not have understood the full scope of its discretion, it should have

the opportunity to reconsider Kirtsaeng's fee application. On remand, the District Court should continue to give substantial weight to the reasonableness of Wiley's position but also take into account all other relevant factors. Pp. 209–210. 605 Fed. Appx. 48, vacated and remanded. Kagan, J., delivered the opinion for a unanimous Court.

E. Joshua Rosenkranz argued the cause for petitioner. With him on the briefs were Annette L. Hurst, Lisa T. Simp-son, Thomas M. Bondy, Andrew D. Silverman, and Sam P . Israel.

Paul M. Smith argued the cause for respondent. With him on the brief were Matthew S. Hellman and Ishan K. Bhabha.

Elaine J. Goldenberg argued the cause for the United States as amicus curiae urging affirmance. With her on the brief were Solicitor General Verrilli, Principal Deputy Assistant Attorney General Mizer, Deputy Solicitor General Stewart, and Mark R. Freeman.*

Justice Kagan delivered the opinion of the Court.

Section 505 of the Copyright Act provides that a district court “may . . . award a reasonable attorney's fee to the prevailing party.” 17 U. S. C. § 505. The question presented here is whether a court, in exercising that authority, should give substantial weight to the objective reasonableness of the losing party's position. The answer, as both decisions

Petitioner Supap Kirtsaeng, a citizen of Thailand, came to the United States 20 years ago to study math at Cornell University. He quickly figured out that respondent John Wiley & Sons, an academic publishing company, sold virtually identical English-language textbooks in the two countries—but for far less in Thailand than in the United States. Seeing a ripe opportunity for arbitrage, Kirtsaeng asked family and friends to buy the foreign editions in Thai bookstores and ship them to him in New York. He then resold the textbooks to American students, reimbursed his Thai suppliers, and pocketed a tidy profit.

Wiley sued Kirtsaeng for copyright infringement, claiming that his activities violated its exclusive right to distribute the textbooks. See 17 U. S. C. §§ 106(3), 602(a)(1). Kirt-saeng invoked the “first-sale doctrine” as a defense. That doctrine typically enables the lawful owner of a book (or other work) to resell or otherwise dispose of it as he wishes. See § 109(a). But Wiley contended that the first-sale doctrine did not apply when a book (like those Kirtsaeng sold) was manufactured abroad.

At the time, courts were in conflict on that issue. Some thought, as Kirtsaeng did, that the first-sale doctrine permitted the resale of foreign-made books; others maintained, along with Wiley, that it did not. And this Court, in its first pass at the issue, divided 4 to 4. See Costco Wholesale Corp. v. Omega, S. A., 562 U. S. 40 (2010) (per curiam ). In this case, the District Court sided with Wiley; so too did a

Returning victorious to the District Court, Kirtsaeng invoked § 505 to seek more than $2 million in attorney's fees from Wiley. The court denied his motion. Relying on Second Circuit precedent, the court gave “substantial weight” to the “objective reasonableness” of Wiley's infringement claim. See No. 08–cv–07834 (SDNY, Dec. 20, 2013), App. to Pet. for Cert. 18a, 2013 WL 6722887, *4. In explanation of that approach, the court stated that “the imposition of a fee award against a copyright holder with an objectively reasonable”—although unsuccessful—“litigation position will generally not promote the purposes of the Copyright Act.” Id., at 11a (quoting Matthew Bender & Co. v. West Publishing Co., 240 F. 3d 116, 122 (CA2 2001); emphasis deleted). Here, Wiley's position was reasonable: After all, several Courts of Appeals and three Justices of the Supreme Court had agreed with it. See App. to Pet. for Cert. 12a. And according to the District Court, no other circumstance “overr[o]de” that objective reasonableness, so as to warrant fee-shifting. Id., at 22a. The Court of Appeals affirmed, concluding in a brief summary order that “the district court properly placed `substantial weight' on the reasonableness of [Wiley's] position” and committed no abuse of discretion in deciding that other “factors did not outweigh” the reasonableness finding. 605 Fed. Appx. 48, 49, 50 (CA2 2015).

We granted certiorari, 577 U. S. 1098 (2016), to resolve disagreement in the lower courts about how to address an application for attorney's fees in a copyright case. 1

In Fogerty v. Fantasy, Inc., 510 U. S. 517 (1994), this Court recognized the broad leeway § 505 gives to district courts— but also established several principles and criteria to guide their decisions. See id., at 519 (asking “what standards should inform” the exercise of the trial court's authority). The statutory language, we stated, “clearly connotes discretion,” and eschews any “precise rule or formula” for awarding fees. Id., at 533, 534. Still, we established a pair of restrictions. First, a district court may not “award[ ] attorney's fees as a matter of course”; rather, a court must make a more particularized, case-by-case assessment. Id., at 533. Second, a court may not treat prevailing plaintiffs and prevailing defendants any differently; defendants should be “encouraged to litigate [meritorious copyright defenses] to the same extent that plaintiffs are encouraged to litigate meritorious claims of infringement.” Id., at 527. In addition, we noted with approval “several nonexclusive factors” to inform a court's fee-shifting decisions: “frivolousness, motivation, objective unreasonableness[,] and the need in particular circumstances to advance considerations of compensation and deterrence.” Id., at 534, n. 19. And we left open the possibility of providing further guidance in the future, in response to (and grounded on) lower courts' evolving experience. See id., at 534–535; Martin v. Franklin Capital Corp., 546 U. S. 132, 140, n. (2005) (noting that Fogerty was not intended to be the end of the matter).

ing a totality-of-the-circumstances approach, without according special sig-nifcance to any factor), and with, e. g., Hogan Systems, Inc. v. Cybersource Int'l, Inc., 158 F. 3d 319, 325 (CA5 1998) (presuming that a prevailing party receives fees).

We join both parties in seeing a need for some additional guidance respecting the application of § 505. In addressing other open-ended fee-shifting statutes, this Court has emphasized that “in a system of laws discretion is rarely without limits.” Flight Attendants v. Zipes, 491 U. S. 754, 758 (1989); see Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U. S. 93 (2016). Without governing standards or principles, such provisions threaten to condone judicial “whim” or predilection. Martin, 546 U. S., at 139; see also ibid. (“[A] motion to [a court's] discretion is a motion, not to its inclination, but to its judgment; and its judgment is to be guided

In accord with such precedents, we must consider if either Wiley's or Kirtsaeng's proposal well advances the Copyright Act's goals. Those objectives are well settled. As Fogerty explained, “copyright law ultimately serves the purpose of enriching the general public through access to creative works.” 510 U. S., at 527; see U. S. Const., Art. I, § 8, cl. 8 (“To promote the Progress of Science and useful Arts”). The statute achieves that end by striking a balance between two subsidiary aims: encouraging and rewarding authors' creations while also enabling others to build on that work. See Fogerty, 510 U. S., at 526. Accordingly, fee awards under § 505 should encourage the types of lawsuits that promote those purposes. (That is why, for example, Fogerty insisted on treating prevailing plaintiffs and prevailing defendants alike—because the one could “further the policies of the Copyright Act every bit as much as” the other. 510 U. S., at 527.) On that much, both parties agree. Brief for Petitioner 37; Brief for Respondent 29–30. The contested

The objective-reasonableness approach that Wiley flavors passes that test because it both encourages parties with strong legal positions to stand on their rights and deters those with weak ones from proceeding with litigation. When a litigant—whether plaintiff or defendant—is clearly correct, the likelihood that he will recover fees from the opposing (i. e., unreasonable) party gives him an incentive to litigate the case all the way to the end. The holder of a copyright that has obviously been infringed has good reason to bring and maintain a suit even if the damages at stake are small; and likewise, a person defending against a patently meritless copyright claim has every incentive to keep fight-ing, no matter that attorney's fees in a protracted suit might be as or more costly than a settlement. Conversely, when a person (again, whether plaintiff or defendant) has an unreasonable litigating position, the likelihood that he will have to pay two sets of fees discourages legal action. The copyright holder with no reasonable infringement claim has good reason not to bring suit in the first instance (knowing he cannot force a settlement and will have to proceed to judgment); and the infringer with no reasonable defense has every reason to give in quickly, before each side's litigation costs mount. All of those results promote the Copyright Act's purposes, by enhancing the probability that both creators and users (i. e., potential plaintiffs and defendants) will enjoy the substantive rights the statute provides.

By contrast, Kirtsaeng's proposal would not produce any sure benefits. We accept his premise that litigation of close cases can help ensure that “the boundaries of copyright law [are] demarcated as clearly as possible,” thus advancing the public interest in creative work. Brief for Petitioner 19

Contrary to Kirtsaeng's view, placing substantial weight on objective reasonableness also treats plaintiffs and defendants even-handedly, as Fogerty commands. No matter which side wins a case, the court must assess whether the other side's position was (un)reasonable. And of course, both plaintiffs and defendants can (and sometimes do) make unreasonable arguments. Kirtsaeng claims that the reason-

much money Wiley will spend on Supreme Court lawyers? (D) More likely—the higher the stakes, the greater the rush. Only if lots of people answer (D) will Kirtsaeng's standard work in the way advertised. Maybe. But then again, maybe not.

All of that said, objective reasonableness can be only an important factor in assessing fee applications—not the controlling one. As we recognized in Fogerty, § 505 confers broad discretion on district courts and, in deciding whether to fee-shift, they must take into account a range of considerations beyond the reasonableness of litigating positions. See supra, at 202. That means in any given case a court may award fees even though the losing party offered reasonable

And on that score, Kirtsaeng has raised serious questions about how fee-shifting actually operates in the Second Circuit. To be sure, the Court of Appeals' framing of the inquiry resembles our own: It calls for a district court to give “substantial weight” to the reasonableness of a losing party's litigating positions while also considering other relevant circumstances. See 605 Fed. Appx., at 49–50; Matthew Bender, 240 F. 3d, at 122. But the Court of Appeals' language at times suggests that a finding of reasonableness raises a presumption against granting fees, see ibid.; supra, at 201— and that goes too far in cabining how a district court must structure its analysis and what it may conclude from its review of relevant factors. Still more, district courts in the Second Circuit appear to have overly learned the Court of Appeals' lesson, turning “substantial” into more nearly “dispositive” weight. As Kirtsaeng notes, hardly any decisions in that Circuit have granted fees when the losing party raised a reasonable argument (and none have denied fees when the losing party flailed to do so). See Reply Brief 15. For these reasons, we vacate the decision below so that the

* * *

The judgment of the Court of Appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.