March 01, 2014

Strategic Use of Rule 68 Offers of Judgment in Copyright Litigation

©2014. Published in Landslide, Vol. 6, No. 4, March/April 2014, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Section 505 of the Copyright Act provides a trial court discretion to award costs, including “a reasonable attorney’s fee,” to the prevailing party in infringement actions. This fee-shifting provision applies regardless of whether the prevailing party is the plaintiff (so long as the work at issue was timely registered) or the defendant.1 Unlike the fee-shifting provisions of the Lanham Act and the Patent Act, no “exceptional” showing is required to recover fees in a copyright case.2

This relatively broad availability of attorneys’ fees, combined with the substantial discretion courts retain with respect to fee awards, introduces a great deal of uncertainty into many copyright cases. Particularly in matters involving a limited number of works, it is not uncommon for fee awards to exceed the amount of damages.

One way a copyright defendant can reduce its potential fee exposure is by making an offer of judgment under Federal Rule of Civil Procedure 68. If the offer is accepted, the litigation ends. If the plaintiff rejects the offer and prevails, but in a manner less favorable than the offer, then the plaintiff cannot recover its own subsequently incurred costs—including, in a copyright action, its attorneys’ fees. In some jurisdictions, the plaintiff also may be liable under Rule 68 for the defendants’ post-offer attorneys’ fees. Whereas awards of fees and costs under the Copyright Act are always discretionary, awards under Rule 68 are mandatory so long as the rule’s requirements are satisfied.

This article discusses offers of judgment in the context of copyright infringement actions. We address the application of Rule 68 under various scenarios and focus on two recent appellate decisions—UMG Recordings, Inc. v. Shelter Capital Partners LLC and Spooner v. EEN, Inc.—that illustrate the limits of Rule 68.3

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