Calling the district court’s action an “abuse of discretion,” the 11th Circuit reversed a decision that cut by more than 90 percent a successful copyright infringement plaintiff’s request for attorney’s fees and costs. Yellow Pages Photos, Inc. v. Ziplocal, L.P., No. 16-11868 (January 24, 2017). This is the latest decision issued in the long-running dispute between Yellow Pages Photos, Inc. (YPPI) and Ziplocal, L.P. (Ziplocal) related to the layout and assembly of phonebook products.

YPPI is the owner of a library of stock photographs, grouped in various “collections” or “headings” (e.g., “Plumbers, “Roofers,” etc.), that are marketed and sold to publishers of Yellow Page phonebook products. In March 2004, Ziplocal agreed to purchase a license to use YPPI’s photographs and headings. The agreement prohibited transfer of the images licensed to Ziplocal without YPPI’s consent.

In 2010, Ziplocal outsourced the manufacture of its phonebooks to a larger firm, Yellow Pages Group, LLC (YPG). Ziplocal sent YPG the YPPI photos, but failed to obtain consent from YPPI. YPG, although not a party to the earlier agreements between YPPI and Ziplocal, promised in its outsourcing agreement not to infringe any third-party intellectual property rights.

Upon discovering the unlicensed use of its images, YPPI brought suit against Ziplocal and YPG, alleging that Ziplocal breached its licensing contract with YPPI thereby infringing YPPI’s copyrights, and that YPG infringed YPPI’s copyrights.

A.  The Jury Decision

The jury concluded that Ziplocal breached its contract, but no damages flowed from the breach. The jury also found that YPPI’s copyright was infringed and awarded $123,000 statutory damages against YPG and $1.00 of actual damages against Ziplocal. On the claim against Ziplocal for contributory copyright infringement, the jury awarded YPPI an additional $100,000 in actual damages. All of these findings were subsequently upheld on appeal.

B.  Motion for Fees and Costs

YPPI then sought $1,422,661.75 in attorney’s fees and $269,484.96 in costs against both YPG and Ziplocal, pursuant to both § 505 of the Copyright Act and the licensing agreement between YPPI and Ziplocal. The district court reduced the amounts of the fees and costs dramatically, based largely on its views of YPPI’s block billing practices, the contentiousness of the litigation, and its belief that hours spent pursuing YPPI’s copyright claims were not recoverable pursuant to the licensing agreement.

Accordingly, the district court’s order provided for a 35 percent across the board reduction in attorney’s fees and set the lodestar amount at $924,730.14. Then, after determining the lodestar amount, the court further reduced the award by an additional 92.5 percent to reflect YPPI’s relative degree of success in the litigation. The court explained that YPPI’s $100,001 recovery against Ziplocal, was “approximately 10% of the lowest amount Plaintiff sought . . . and approximately 5% of the top range [of damages sought].” The district court then split the difference between those two figures – or 7.5 percent – and awarded that percentage of the lodestar amount in fees, and did the same calculation for the costs.

C.  The 11th Circuit Opinion

The Court of Appeals found clear error in the district court’s refusal to count hours expended in pursuit of YPPI’s copyright claims against Ziplocal in the court’s initial “lodestar” calculation. Since the copyright claims were inextricably tied to the license agreement between the parties, to prevail on its copyright infringement claims, YPPI needed to prove that the license agreement with Ziplocal was breached.

The 11th Circuit then noted that the language of the licensing agreement between YPPI and Ziplocal “plainly suggests a full recovery of the fees expended in litigation related to the contract.” By slashing the award by more than 90 percent, the district court effectively made the fees provision of the contract meaningless, the court said, explaining that “[s]uch a significant reduction in fees functioned as a penalty and undermined the contractual provision that enabled the award of attorney’s fees in the first instance.”

The district court’s error stemmed from what the 11th Circuit considered to be an unduly rigid mathematical approach calculating attorney’s fees based on a ratio of total claims to successfully litigated claims. As noted above, the district court

a) found that damages actually awarded by the jury were only 5 percent of the maximum amount sought by YPPI and approximately 10 percent of the minimum damages sought,
b) then found the mid-range of these percentages, 7.5 percent,
c) concluded that 7.5 percent reflected the amount of success YPPI enjoyed, and
d) therefore concluded that 7.5 percent represented the percentage of the lodestar amount YPPI was entitled to receive.

The 11th Circuit reproached, “[i]t is difficult to frame this process as anything other than a rote application of a mathematical formula to ensure proportionality between the litigation success of the plaintiff and a subsequent award of attorney’s fees.”

A word of caution to unsuccessful copyright litigants: formulaic reduction of fee requests or lodestar amounts must be avoided!