The Central District of California recently awarded over $5 million in attorneys’ fees and over $400,000 in costs, emphasizing the degree of success obtained by Defendants and the improper motivations of Plaintiff.  The court rejected the notion that the fee award was unreasonable simply because it was sizeable.  In Perfect 10, Inc. v. Giganews, Inc., Plaintiff Perfect 10 initially filed copyright, trademark, unfair competition, and right of publicity claims against Defendants.  On amendment, Perfect 10 reasserted only copyright claims.  The parties filed seven motions for partial summary judgment, and judgment was entered in favor of Defendants.  Subsequently, Defendants moved for an award of attorneys’ fees and costs under the Copyright Act, the Lanham Act, California Civil Code §3344, and California’s Unfair Competition Law.

Under 17 U.S.C. §505 of the Copyright Act, courts may allow recovery of reasonable attorneys’ fees by the prevailing party as a matter of discretion.  When determining whether to exercise that discretion, courts generally consider the following factors: 1) degree of success, 2) frivolousness, 3) motivation, 4) objective unreasonableness, and 5) considerations of compensation and deterrence.  Here, the court found Defendants unqualified victories weighed heavily in support of an award of attorneys’ fees.

Defendants attained significant victories through motions to dismiss with respect to the first and amended complaints, and Defendants achieved a complete victory on the remaining claims on summary judgment.  The court also found that Perfect 10’s motivation weighed in favor of attorneys’ fees.  Perfect 10’s President and CEO described the company as a tax write-of that he was able to deduct from his personal income taxes.  The court found Perfect 10’s “undisputed conduct in this action has been inconsistent with a party interested in protecting its copyrights,” and that it was in the business of litigation, not stimulating artistic creativity.  The court had little concern that awarding attorneys’ fees would discourage the protection of copyrights.  Its decision to award fees in this case was in part driven by Perfect 10’s own conduct, and thus, the court found nothing inequitable about it.  While the court did not find Perfect 10’s claims to be frivolous or objectively unreasonable, this did not undermine the court’s ultimate decision to award fees.

Under the Lanham Act, attorney fees are awarded in “exceptional cases.”  Here, the court declined to find Perfect 10’s trademark claims were groundless, unreasonable, vexatious, or pursued in bad faith, noting that claim is not unreasonable or vexatious simply because it is novel.  There was nothing about Perfect 10’s trademark claims that made the action exceptional, and therefore, the court declined to award attorneys’ fees under 15 U.S.C. §1117.

Because the statutory and common law claims for right of publicity were inextricably intertwined, and California Civil Code §3344 mandates the recovery of fees, fees were recoverable for these claims.  The court declined to award fees under California’s Unfair Competition Law.

Once the court determined that Defendants were entitled to fees, it was tasked with determining the amount to be awarded.  The court started with the “lodestar calculation,” which entails multiplying the number of reasonable litigation hours by the reasonable hourly rate.  While Perfect 10 argued that Defendants’ hourly rates were too high, the court disagreed.  The actual rate counsel is able to charge and command in the market is highly relevant to what is reasonable.  Moreover, when the tables were turned in a different litigation nearly a decade earlier, Perfect 10 asserted a reasonable range of attorney rates which Defendants’ attorneys’ rates in this case largely fell within.  Although Perfect 10 argued this was not a complex case requiring the engagement of pre-eminent firms and attorneys, the court noted that the case comprised over 30 motions, nearly 700 docket entries, and over 38,000 pages in the docket, resulting in decisive results for Defendants.  Moreover, Defendants’ attorneys had successfully represented Google and Microsoft in similar actions against Perfect 10, making them perfectly logical choices for counsel.  Perfect 10 quibbled about the number of hours billed as well, but the court found they were generally reasonable, and that Perfect 10 grossly underestimated the number of hours it had spent on the case.

The court also found Defendants’ non-taxable cost request was reasonable and that Perfect 10 offered no evidence to demonstrate the unreasonableness of the request.

Although the court made several minor reductions for certain clerical work and a few entries it described as “modest padding,” it awarded Defendants $5,213,117.06 in attorneys’ fees and $424,235.47 in costs.  A well-reasoned analysis which should apply equally to exceptional cases under the Lanham and Patent Acts as well.