Intellectual Property

C.C.R.E.A.M.: Copyright Costs Rule Everything Around Me

The issue of cost recovery is nothing with which to trifle.

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When the lovable lads from the Wu-Tang Clan first spit bars advising that “cash rule[d] everything around [them],” they most likely were not thinking of the correct interpretation of 17 U.S.C. § 505 and its definition of the phrase “full costs.” But, in copyright litigation, which often includes numerous depositions, expensive experts, and complex demonstrative exhibits, the issue of cost recovery is nothing with which to trifle. To the contrary, such litigation costs can reach well into the millions of dollars. And deciding which party should bear which costs is an often contested issue.

The question of when a litigation cost is a recoverable cost is the most recent copyright topic to be shown some love by the Supreme Court. The case granted writ, Oracle USA, Inc. v. Rimini Street, Inc., is one with a long and winding history. At the most basic, Oracle proved at trial that Rimini copied Oracle’s software in an unlawful manner by obtaining Oracle software from Oracle’s website with automated downloading tools in contravention of Oracle’s terms of use. Damages, attorneys’ fees, and costs were awarded against Rimini in favor of Oracle. This finding of infringement was upheld by the Ninth Circuit. We can skip over all the other scintillating aspects of the jury trial and appellate decision and home in on the issue that piqued the interest of the Supremes: whether a copyright holder that prevails in a copyright infringement case can recover full costs as set forth in the Copyright Act or only those costs allowed by the general federal costs statute. This distinction is one with real weight given that Oracle requested and was awarded more than $12,000,000 in non-taxable costs when all was said and done.

The specific issue, as posited to the Supreme Court by the petitioner, Rimini, was whether the Copyright Act’s allowance of “full costs” under 17 U.S.C. § 505 to a prevailing party is limited to taxable costs under 28 U.S.C. §§ 1920 and 1821, as the Eighth and Eleventh Circuits have held, or also authorizes non-taxable costs, as the Ninth Circuit holds. This position was not entirely above-board, as it omits the fact that the Sixth Circuit is in accord with the Ninth Circuit on the issue, but it does get to the heart of the issue.

Any way you slice it, this will be a veritable battle of the statutes. In one corner, sporting the blue shorts, you have the muscular Title 17 U.S.C. § 505 of the Copyright Act, which provides: “In any civil action under [the Copyright Act], the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof.” In the opposite corner, wearing the red shorts, is the more feeble 28 U.S.C. § 1920, which identifies only six categories of costs, including clerk and marshall fees, transcript fees, witness fees, and copying costs. This section does allow for expert fees, but only for court-appointed experts under Section 1828, which tends not to apply in copyright cases.

Section 1920’s disallowance of general expert costs to copyright litigants is problematic given that art, economics, history, musicology, technological, film, and other high-paid experts are consistently employed by both plaintiffs and defendants. Given the high cost of copyright litigation and that certain of the purposes of the Copyright Act are to motivate and encourage copyright holders to pursue meritorious infringement claims and to deter would-be infringers from violating copyright holders’ rights, it would seem preferable to give credence to the Copyright Act’s directive to allow for the recovery of full costs, including those for expensive experts.

With this in mind, the Ninth Circuit has long held that recovering “full costs” mean exactly that, the recovery of all costs incurred in connection with the successful copyright action. In the seminal case of Twentieth Century Fox v. Entertainment Distributing, the circuit, relying on the clear use of the term “full costs,” awarded the prevailing party all of its costs, both taxable and non-taxable. Following this case’s precedent, Oracle’s award of $12,774,550.26 in non-taxable costs was upheld by the Ninth Circuit.

A circuit split brings the case to the highest of courts, where Rimini will now argue to the Supremes that their 2013 decision in Marx v. General Revenue Corp. abrogates the Ninth Circuit precedent at issue and even if it didn’t the Copyright Act’s language does not support the interpretation urged by Oracle. In doing so, Rimini will most likely rely on the Supreme Court case, Crawford Fitting Co. v. J. T. Gibbons, Inc., to argue that cost recovery under any federal statute is limited by Sections 1920 and 1821. But, Crawford included the caveat that costs could be awarded beyond those delineated in said statutes upon a showing of “plain evidence of congressional intent to supersede” those sections. Here, Congress evinced an intent to supersede these sections by employing the term “full costs” as opposed to “partial costs,” “statutory costs,” or nothing at all. Had nothing at all been indicated, a prevailing copyright litigant still would have been able to recover its costs under Sections 1920 and 1821, so adopting Rimini’s argument would render the use of the term “full costs” surplusage. Such a construction, sayeth those well-versed in the canons (shout-out to Bryan Garner), is ill-favored.

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Notably, while the Copyright Act specifically address the issue of costs, it, unlike the Patent Act, which includes an interest award for victorious plaintiffs, makes no reference to the issue of interest. Interest on judgments in copyright cases is thus available to litigants as governed by the general interest statute. Should the drafters have wanted the general costs statute to govern costs under the Copyright Act, it could have omitted any reference to costs in the same way it omitted any reference to interest. The Act’s acknowledgment of costs and not interest seems to undermine Rimini’s position.

With this case now also in the mix, the Supreme Court will be construing the Copyright Act’s use of the phrase “full costs” as well its use of the word “registration” in the near term, providing ample fodder for the consideration of copyright litigators and etymologists alike.

Scott Alan Burroughs, Esq. practices with Doniger / Burroughs, an art law firm based in Venice, California. He represents artists and content creators of all stripes and writes and speaks regularly on copyright issues. He can be reached at scott@copyrightLA.com, and you can follow his law firm on Instagram: @veniceartlaw.

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