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Ninth Circuit Holds That Section 505 Attorneys’ Fees Are Allowed in Declaratory Judgment Actions

By Sara Gates

The Ninth Circuit recently decided an issue of first impression when it vacated a district court order denying attorneys' fees under the Copyright Act in a declaratory relief action. Doc's Dream, LLC v. Dolores Press, Inc., 959 F.3d 357 (9th Cir. 2020). Rather than evaluate whether such an award under 17 U.S.C. § 505 was appropriate based on the guiding factors enumerated most recently in the Supreme Court's Kirtsaeng v. John Wiley & Sons, Inc. decision, the district court erroneously dismissed the prevailing party's motion on the ground that fees were not available under § 505 because the court believed its determination of whether the plaintiff was entitled to a declaratory judgment did not require a "construction" of the Copyright Act. The Ninth Circuit disagreed, finding the district court's reasoning was unpersuasive because it involved "two leaps of logic."

Background

The underlying case involved a dispute over the copyright ownership rights to video-recorded sermons by a late pastor, Dr. Eugene Scott, who had previously licensed the right to distribute the works to Dolores Press, Inc. ("Dolores"). At the same time, Dr. Scott was also making his works available through his own websites. When he died in 2005, Dr. Scott bequeathed his copyrights to his widow, who continued the license agreement with Dolores. In 2014, another minister, the sole owner of Plaintiff Doc's Dream, LLC ("Doc's Dream") asked for permission to share Dr. Scott's works. Ms. Scott refused, but Doc's Dream proceeded to use the copyrighted works anyway, sharing them online without permission. Litigation between Dolores and Doc's Dream ensued; Dolores asserted copyright infringement claims, and Doc's Dream argued, in an action seeking declaratory relief, that Dr. Scott had abandoned the copyrights in his works before his death.

The district court granted summary judgment in favor of Dolores, finding that Doc's Dream was not entitled to the declaratory relief it sought. Dolores, as the prevailing party, moved for its attorneys' fees § 505, which provides a court with discretion to "award a reasonable attorney's fee to the prevailing party" as a part of the recoverable costs incurred "in any civil action under" the Copyright Act. Dolores argued that Doc Dream's claim was unreasonable given its slim chance of success, was brought in bad faith, and was worthy of deterrence as a meritless claim. The court, however, denied the motion at the outset without considering these factors. As the Ninth Circuit had yet to explicitly hold that attorneys' fees are available under the Copyright Act in declaratory relief actions, the district court primarily relied on two sources in reaching its decision: (1) the Nimmer on Copyright treatise, and (2) the origin of the copyright abandonment defense.

The court focused on a section of Nimmer's treatise, which stated that attorneys' fees are available in such actions so long as the action requires "construction" of the Copyright Act. Applying this language, the district court concluded that the action was only superficially related to copyright and did not arise under the Copyright Act given that copyright abandonment is a judicially created doctrine that preceded the enactment of the Copyright Act of 1976 and was not included when Congress passed the Act. Accordingly, the court reasoned that the requisite elements for copyright abandonment were not included in the Copyright Act, so a court considering abandonment in the context of a declaratory action would not need to construe the statute.

Ninth Circuit Opinion

The Ninth Circuit questioned the "leaps of logic" that the district court took in denying Dolores its attorneys' fees. First, the court rejected the district court's interpretation of Nimmer, finding that the section relied upon was taken out of context. Indeed, one of Nimmer's examples of a declaratory action, in which the author said that attorneys' fees could be awarded, was analogous to the present case. The only example that Nimmer offered in the relevant treatise section, in which attorneys' fees would not be available, was an accounting claim, which arises under state law.

The Ninth Circuit likewise rejected the district court's judicial origin theory, noting that the court's summary judgment decision showed that the complaint raised at least three aspects of the Copyright Act: (1) the attribution requirement in 17 U.S.C. § 106A, (2) the licensing and a transfer of copyright ownership defined in § 101 and § 204, and (3) the affixing of copyright notices, the legal effect of which is governed by § 401. Similarly, in addressing the elements required for copyright abandonment—intent to abandon ownership and some overt act manifesting this intent—the court noted that it would be difficult, if not impossible, to properly evaluate a creator's alleged abandonment without invoking the Copyright Act.

The Ninth Circuit also addressed a final argument raised by Doc's Dream in opposition to awarding fees—that the action was brought under the Declaratory Judgment Act ("DJA"), not the Copyright Act. The court corrected this misconception, noting that the two acts work in tandem, and that the DJA alone does not create federal jurisdiction, so it is unclear how Doc's Dream would have asserted federal court jurisdiction without relying on the Copyright Act. In any event, Doc's Dream had expressly invoked the Copyright Act in the complaint, alleging jurisdiction under 28 U.S.C. § 1338(a) and requesting attorneys' fees under § 505 of the Copyright Act.

In declining to follow the unpersuasive reasoning of the district court, the Ninth Circuit adopted its own standard for determining when § 505 comes into play in the context of an action for declaratory relief. Rather than adopt Nimmer's "construction of the Copyright Act" analysis, which the district court showed could be subject to differing interpretations, the Ninth Circuit was more direct in its approach, holding that "any action that turns on the existence of a valid copyright and whether that copyright has been infringed sufficiently invokes the Copyright Act as to allow for the discretionary award of attorney's fees." The dispute at hand fell within this standard because the scope of the copyrights and their possible abandonment was at issue. The appellate court therefore vacated the district court's order and remanded the case to the for consideration of whether an attorneys' fees award was appropriate under the guiding Kirtsaeng factors.

While the decision does not expand or diminish the discretion a district court has in deciding whether to award attorneys' fees to a prevailing party under § 505 of the Copyright Act, it does clarify that parties to declaratory actions involving issues of copyright may seek to shift their costs if they prevail.

Sara Gates is an associate at Cowan, DeBaets, Abrahams & Sheppard LLP. Plaintiff was represented by Carlos A. Leyva and Linda S. McAleer, Digital Business Law Group, Palm Harbor, FL. Defendant was represented by Benjamin G. Schatz, Manatt Phelps & Phillips, Los Angeles.

 
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