Capitol Records, LLC v. Redigi Inc.

Background

Capitol Records, LLC, Capitol Christian Music Group, Inc., and Virgin Records IR Holdings, Inc. sued ReDigi Inc., John Ossenmacher, and Larry Rudolph, also known as Lawrence S. Rogel, for copyright infringement. The earlier proceedings resulted in judgments for the plaintiffs on direct, contributory, and vicarious infringement claims. The district court also rejected ReDigi’s fair-use and first-sale defenses. The Second Circuit later affirmed the determination that ReDigi infringed the plaintiffs’ reproduction rights and affirmed the rejection of those defenses, without deciding whether ReDigi also violated the plaintiffs’ distribution rights.

The plaintiffs moved for attorneys’ fees under Section 505 of the Copyright Act. They requested $500,000 for proceedings in the district court, subject to a stipulated cap, and $97,920.12 for the appeal. The plaintiffs argued that ReDigi had changed its description of its technology during the summary-judgment proceedings, despite earlier admissions that the service copied music files. They also argued that, after summary judgment, the defendants asserted defenses that had been rejected, waived, or abandoned and served burdensome discovery requests despite earlier representations that no additional discovery would be needed.

Entitlement to District-Court Fees

The court concluded that fees were warranted for part of the summary-judgment litigation and for all of the later district-court proceedings. It found that ReDigi’s legal arguments before summary judgment were generally not objectively unreasonable because the case involved complex and unsettled questions about copyright law and digital technology. But the court found ReDigi’s factual descriptions of its copying process objectively unreasonable because they conflicted with its earlier admissions and with the evidence.

The court also found that the defendants’ post-summary-judgment legal positions and litigation conduct supported a fee award. The defendants asserted numerous affirmative defenses, including defenses based on fair use and the first-sale doctrine that the court had already rejected. The court found that other defenses had been waived, abandoned, or forfeited. It also found that the defendants’ discovery requests were frivolous, burdensome, and inconsistent with their earlier representations.

The court considered the statutory factors of objective reasonableness, litigation conduct, motivation, and compensation and deterrence. Objective unreasonableness and litigation misconduct strongly supported an award. Compensation and deterrence modestly supported an award, while motivation was neutral. The court also noted that the Second Circuit had described the defendants’ underlying infringement as undertaken in good faith, so the defendants’ motivation for the infringement did not weigh strongly for or against fees.

For the district-court summary-judgment proceedings, the court awarded specified portions of the fees connected with the plaintiffs’ briefing, counterstatement of facts, expert work by Doug Jacobson, and oral argument. The court also awarded fees for all district-court litigation after the March 30, 2013 summary-judgment opinion.

Fees for the Appeal

The court granted the fee request in part for the appeal. It awarded 15% of the plaintiffs’ reasonable appellate fees because the defendants continued to make factual assertions that contradicted their earlier admissions. The court declined to award additional appellate fees for the defendants’ legal arguments concerning fair use and the first-sale doctrine. Although those arguments ultimately failed, the court found that they involved difficult and unsettled copyright questions, were not objectively unreasonable, and were not accompanied by evidence of delaying tactics before the Second Circuit.

Amount and Disposition

The court found that an award was proper but did not decide the final dollar amount. It held that the plaintiffs had not yet provided enough documentation to determine whether the requested fees were reasonable. The plaintiffs were ordered to submit detailed, contemporaneous time records. The defendants were permitted to respond.

Judge Richard J. Sullivan ordered that the plaintiffs’ motion for attorneys’ fees be GRANTED IN PART. The defendants were required to pay fees for certain portions of the district-court summary-judgment proceedings, for litigation after the summary-judgment decision, and for 15% of the plaintiffs’ appellate fees. The court reserved decision on the reasonableness of the total fee amount pending review of the time records.