Tavory v. Ntp, Inc. , 297 F. App'x 986 ( 2008 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2008-1090
OREN TAVORY,
Plaintiff-Appellant,
v.
NTP, INC.,
Defendant-Appellee.
G. Donovan Conwell, Jr., Conwell Kirkpatrick, P.A., of Tampa Florida, argued for
plaintiff-appellant.
Kevin P. Anderson, Wiley Rein LLP, of Washington, DC, argued for defendant-
appellee. With him on the brief was James H. Wallace, Jr. Of counsel were John B. Wyss
and Robert J. Scheffel.
Appealed from: United States District Court for the Eastern District of Virginia
Chief Judge James R. Spencer
NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2008-1090
OREN TAVORY,
Plaintiff-Appellant,
v.
NTP, INC.,
Defendant-Appellee.
Appeal from the United States District Court for the Eastern District of Virginia in case
no. 3:06-CV-628, Chief Judge James R. Spencer.
__________________________
DECIDED: October 28, 2008
__________________________
Before MICHEL, Chief Judge, NEWMAN and BRYSON, Circuit Judges.
MICHEL, Chief Judge.
Plaintiff-Appellant Oren Tavory appeals from the district court's award of
attorneys' fees under 17 U.S.C. § 505, which was based on the court's earlier holding
that defects in Tavory's copyright registration divested the court of subject matter
jurisdiction over his copyright infringement claim. Because we hold that the district
court's holding regarding Tavory's copyright registration materially altered the legal
relationship between Tavory and Defendant-Appellee NTP, Inc., and the district court
did not abuse its discretion in determining that a fees award was appropriate in the
amount of $36,899.57, we affirm.
I. BACKGROUND
The facts of this case are set out in detail in our opinion in Tavory v. NTP, Inc.,
No. 2007-1130, slip op. at 2-5 (Fed. Cir. Oct. 27, 2008). We do not repeat them all here
but only relate those facts relevant to the disposition of this appeal.
In 1991, Tavory participated in writing certain software for Telefind, a company
that operated a nationwide pager network. The software was written as part of a joint
project between Telefind and ESA, an engineering consulting firm whose president,
Tom Campana, was also an executive at Telefind. The project sought to develop a
system for AT&T whereby the system could take e-mail from a conventional e-mail
system, transmit it wirelessly to a pager via the Telefind network, and then transfer the
e-mail from the pager to a laptop computer for easier viewing. Tavory was involved as
a programmer for this project, as were Mike Ponschke and Gary Thelen, two
programmers at ESA.
Although the project for AT&T was ultimately a failure, Campana and his ESA
colleagues eventually filed and received patents on the technology they developed for
the project. Tavory was not listed as a co-inventor. Included in the patent applications
was a copy of software code that Tavory had helped write. Campana founded a new
company, NTP, and the patents were assigned to NTP. NTP then filed a high-profile
patent infringement suit against Research in Motion ("RIM"), which ultimately reached
this court on appeal. See NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed.
Cir. 2005). As part of that litigation, in 2002, Tavory was deposed as a witness for NTP.
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He did not make any claims of copyright infringement by NTP at that time. RIM
ultimately elected to settle the case with NTP and paid $612.5 million for a license to
NTP's patents.
In September 2006, less than a year after the RIM settlement, Tavory filed the
present suit seeking: (1) correction of inventorship to add Tavory as a co-inventor to
each of the patents at issue, (2) copyright infringement as to the software Tavory had
allegedly written as part of the AT&T project, and (3) unjust enrichment. The district
court ultimately dismissed the unjust enrichment claim. See Tavory v. NTP, Inc., 495 F.
Supp. 2d 531, 533 (E.D. Va. 2007). Upon NTP's motion for summary judgment on the
inventorship and copyright claims, the court ruled in favor of NTP and awarded
summary judgment. Id. at 541. Regarding the copyright infringement claim, the court
held that Tavory's copyright registration was defective because the purported copy of
his software that he deposited with the Copyright Office was not a bona fide copy of
Tavory's original software. Id. at 535-37. As a result, the district court held that it lacked
jurisdiction over the copyright infringement claim. Id. at 536-37. The court also held, in
the alternative, that NTP was entitled to judgment on the copyright claim under the
doctrines of equitable estoppel, judicial estoppel, laches, and fair use. Id. at 537-39.
Tavory did not appeal the portion of the district court's summary judgment order relating
to his copyright claim.
On October 9, 2007, the district court granted in part NTP's motion for attorneys'
fees, awarding fees on Tavory's dismissed copyright claim under 17 U.S.C. § 505 but
denying fees on Tavory's inventorship claims. Tavory v. NTP, Inc., 2007 WL 2965048(E.D. Va. 2007). The court weighed the four factors prescribed in Rosciszewski v. Arete
2008-1090 3
Associates, 1 F.3d 225, 234 (4th Cir. 1993), and awarded $36,899.57 to NTP, less than
12% of the amount requested. Tavory moved to vacate the award, arguing that NTP
was not a "prevailing party" because the claim was dismissed for lack of subject matter
jurisdiction. On December 3, 2007, the district court denied Tavory's motion and upheld
its award of fees, holding that NTP was a prevailing party. Tavory timely appealed to
this court. Because Tavory's suit was based in part on 28 U.S.C. § 1338(a), we have
jurisdiction over this appeal under 28 U.S.C. § 1295(a)(1).
II. DISCUSSION
On issues of copyright law, we apply the law of the regional circuit. Amini
Innovation Corp. v. Anthony Cal., Inc., 439 F.3d 1365, 1368 (Fed. Cir. 2006). In the
Fourth Circuit, an award of attorneys' fees under 17 U.S.C. § 505 is reviewed for an
abuse of discretion. Ale House Mgmt., Inc. v. Raleigh Ale House, Inc., 205 F.3d 137,
144 (4th Cir. 2000).
A. "Prevailing Party"
In relevant part, the fees statute of the Copyright Act provides: "[T]he court in its
discretion may allow the recovery of full costs [including] a reasonable attorney's fee to
the prevailing party." 17 U.S.C. § 505 (emphasis added). The Supreme Court has held
that the term "prevailing party," as that term is used in various federal attorney's fees
statutes, requires that the party have obtained some kind of relief from the court on the
merits of the claim such that a "material alteration of the legal relationship of the parties"
has occurred. Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human
Res., 532 U.S. 598, 603-04 (2001). The question then is whether the district court's
dismissal here of Tavory's copyright infringement claim was a decision on the merits
2008-1090 4
that materially altered the legal relationship between Tavory and NTP. We conclude
that it did materially alter their legal relationship, and that it rendered NTP the prevailing
party within the meaning of § 505 and Buckhannon.
Tavory argues that the district court dismissed his claim because it lacked
subject matter jurisdiction 1 and that a dismissal for want of jurisdiction cannot create a
"prevailing party" within the meaning of Buckhannon. The district court recognized, as
both parties concede, that the circuits appear to be split on whether a dismissal for want
of jurisdiction materially alters the legal relationship of the parties. Compare Citizens for
a Better Env't v. Steel Co., 230 F.3d 923, 925-28 (7th Cir. 2000) ("[A] court may lack
authority to resolve the merits of a claim yet have jurisdiction to award costs and
attorneys' fees to the prevailing party."), with Elwood v. Drescher, 456 F.3d 943, 948
(9th Cir. 2006) ("Where a claim is dismissed for lack of subject matter jurisdiction, the
defendant is not a prevailing party . . . ."). The Fourth Circuit has explicitly reserved
ruling on this issue; thus, we can discern little guidance from Fourth Circuit precedents.
See Wendt v. Leonard, 431 F.3d 410, 414 (4th Cir. 2005).
Many dismissals for want of jurisdiction do not affect the legal relationship of the
parties because they are not decisions on the merits of the claim. For example, a
district court must dismiss a claim for lack of subject matter jurisdiction when the plaintiff
relies on diversity jurisdiction, but her complaint alleges that all parties are citizens of
the same state. See 28 U.S.C. § 1332(a). In dismissing the claim, the court has not
found any facts, examined any evidence, or decided any issue in the case relating to
1
In the Fourth Circuit, as the district court correctly held, a valid copyright
registration is a "jurisdictional prerequisite" to suit, and an invalid registration divests the
court of subject matter jurisdiction. Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 283
(4th Cir. 2003).
2008-1090 5
the merits of the claim. The plaintiff may, in most such cases, simply refile the exact
same claim in state court and obtain an adjudication.
But some dismissals for want of jurisdiction do effectively alter the legal
relationship of the parties. For example, a district court may dismiss a claim for lack of
subject matter jurisdiction if it determines that the claim is "essentially fictitious, wholly
insubstantial, obviously frivolous, and obviously without merit." Hagans v. Levine, 415
U.S. 528, 537-38 (1974) (internal quotation marks and citations omitted); see also Bell
v. Hood, 327 U.S. 678, 682-83 (1946). Such a case may arise when governing
precedents have so clearly decided an issue as to "inescapably render the claims
frivolous." Hagans, 415 U.S. at 538. While the court is dismissing the claim for want of
jurisdiction, it is clearly making a decision on the merits of the claim. No formal
preclusion or prejudice may prevent the plaintiff from refiling the same claim elsewhere,
but the district court has nonetheless decided that the claim is so deficient on the merits
that it cannot ever succeed. As such, that decision materially altered the legal
relationship of the parties within the meaning of Buckhannon.
We believe that the dismissal of Tavory's copyright claim in the present case is
also a decision on the merits of Tavory's claim such that the legal relationship of the
parties was materially altered. Under 17 U.S.C. § 408, Tavory was required to "deliver[]
to the Copyright Office . . . one complete copy or phonorecord" of the work he sought to
protect in order to obtain a copyright registration. Most circuits have held that the
deposit copy must be either an original or "bona fide" copy of the work. See, e.g.,
Kodadek v. MTV Networks, Inc., 152 F.3d 1209, 1211 (9th Cir. 1998). The district court
here found that Tavory's deposit copy was not an original or bona fide copy, and that
2008-1090 6
Tavory's copyright registration is thus invalid. Tavory, 495 F. Supp. 2d at 535-37. 2
Although the legal consequence of that decision was that the district court had to
dismiss the case for want of jurisdiction, the court's decision bore on the merits of
Tavory's copyright infringement claim. Tavory alleges that NTP illegally copied the work
covered by his copyright registration, namely the work he deposited with the Copyright
Office. By finding the deposit copy of that work to be an invalid reconstruction, the court
essentially decided that Tavory cannot ever succeed in a copyright infringement claim
against NTP based on the work represented in that invalid copy. In our view, this is
similar to a Hagans dismissal and also materially alters the legal relationship of the
parties. In fact, the dismissal here effects a greater alteration than a Hagans dismissal
in that the district court's holding that Tavory's copyright registration is invalid would
preclude him from ever asserting it against NTP, or indeed any other party, in the
future—Tavory must obtain a new registration with a different (and valid) deposit copy to
file another copyright infringement action against NTP for the allegedly infringing acts at
issue here.
Therefore, we hold that the district court's dismissal of Tavory's copyright
infringement claim was a decision on the merits of the claim that materially altered the
2
The court relied heavily on Tavory's own admission that the deposit copy
of his software's code was produced "only by referring to modified versions of the code
and redacting those modifications to the best of his recollection in order to create an
'original.'" Tavory, 495 F. Supp. 2d at 536. This admission was made in an affidavit
Tavory filed with the court with his opposition to NTP's motion for summary judgment.
See J.A. at 972. The affidavit also attached the deposit copy, which the district court
also considered. Tavory also gave testimony at a deposition where he gave the same
admission. See J.A. at 767-77. And he made the same admission in his briefing to this
court. See Appellant's Br. at 9 (admitting that Tavory reconstructed the code he wrote
by copying from a later version of the software and omitting those portions "that w[ere]
added after the original source code was created").
2008-1090 7
legal relationship between the parties. 3 As a result, we affirm the district court's holding
that NTP was the prevailing party within the meaning of § 505.
B. Determination of the Fees Award
Tavory also argues that the district court abused its discretion in its determination
of the amount of fees awarded to NTP by failing to correctly apply the applicable tests.
In the Fourth Circuit, the district court must first evaluate whether an attorney's fees
award is justified under the four-factor test in Rosciszewski by weighing: (1) the
motivation of the parties, (2) the objective reasonableness of the legal and factual
positions advanced, (3) considerations of compensation and deterrence, and (4) any
other relevant factor. 1 F.3d at 234.
The district court here addressed each of these prongs separately. It found that
Tavory was motivated to mislead the court, namely by suing based on a facially
inadequate copyright registration and providing misleading discovery responses
regarding that registration. The district court then found that Tavory's legal and factual
positions on his copyright claim were generally meritless and objectively unreasonable
because he knowingly filed a reconstruction rather than a bona fide copy of his software
with the Copyright Office and deliberately hid its true nature. The district court also
3
We acknowledge that the First Circuit came to the opposite conclusion in
Torres-Negron v. J&N Records, LLC, 504 F.3d 151, 164-65 (1st Cir. 2007). There, the
First Circuit held that the district court's grant of judgment as a matter of law did not
confer prevailing party status when it was based on the holding that the court lacked
subject matter jurisdiction over a copyright infringement claim because of a defective
registration. Id. It held that a party cannot be a prevailing party if "it has not received a
judgment on the merits." Id. (emphasis added). We are not persuaded by the brief
treatment of the issue given in Torres-Negron and decline to follow it. Further, we note
that the Buckhannon Court indicated that dispositions other than judgments on the
merits could also confer prevailing party status. See Buckhannon, 532 U.S. at 604 ("In
addition to judgments on the merits, we have held that settlement agreements enforced
through a consent decree may serve as a basis for an award of attorney's fees.").
2008-1090 8
found that his positions were weak because Tavory largely sought to recover for NTP's
copying for the purposes of the RIM litigation, which the court held was clearly fair use.
The district court found that the compensation and deterrence prong did not support
awarding fees, but the court held that its findings on the first two prongs and the
additional fact that NTP prevailed on every claim raised by Tavory in the case strongly
supported a fees award.
Tavory argues this analysis was an abuse of discretion for four major reasons.
First, he argues that his discovery responses were not misleading because his
indication that he had documents from 1991 "evinc[ing]" the copy of the software he
used for his registration was technically correct since he reconstructed the code partly
based on a 1991 fax. But even if his answers were not technically false, the district
court focused on the overall misleading nature of his case and found his answers
misleading in that context. We are not persuaded this was incorrect. Second, Tavory
argues that his registration was valid or close enough to demonstrate good faith
because the Copyright Office now permits the use of later versions of software if given
special dispensation. But not only was this procedure not available when he filed his
copyright claim (thus belying good faith), he has not established why or how he would
have won this special dispensation. Third, Tavory argues that his infringement claims
were meritorious because NTP's copying of his software for the RIM litigation was not
fair use and because he also sought relief for other copying activities unrelated to
litigation. But he cites no authority that has held copying for litigation under a protective
2008-1090 9
order is a copyright violation or not fair use, 4 and he does not specify what those non-
litigation activities were. Lastly, he argues that the district court erred by weighing as a
factor the fact that NTP prevailed in the lawsuit generally. Even were we to agree with
this last argument, Tavory has clearly failed to establish that the district court abused its
discretion in its overall determination that fees were warranted under Rosciszewski.
After determining fees are appropriate under Rosciszewski, the district court
must then consider the twelve factors outlined in Barber v. Kimbrell's, Inc., 577 F.2d
216, 226 n.28 (4th Cir. 1978), to determine the amount of the award. The district court
here provided a relatively brief but specific description of its fact-finding as to these
factors. It did not make express findings as to every factor. It concluded that most of
the fees sought were speculative and awarded $36,899.57 out of the $323,756 sought
by NTP.
Tavory raises two sets of objections to the district court's determination of the
award amount. He first argues that the district court erred by not making findings as to
each and every Barber factor. His only support for such a rule is the statement in
Rosciszewski that a district court "must make specific findings on each of the factors set
forth in Barber." 1 F.3d at 234 n.8. This statement, however, is unquestionably dicta.
Further, Barber itself holds that "any award must be accompanied by detailed findings of
fact with regard to the factors considered." 577 F.2d at 226 (emphasis added).
Logically then, no detailed findings are required as to the factors not considered.
Further, it is illogical to require district courts to mechanically address every factor when
4
His authorities, inter alia, only hold that fair use must be decided on a
case-by-case basis and that per se rules are generally improper. See, e.g., Sony Corp.
of Am. v. Universal City Studios, 464 U.S. 417, 448 (1984).
2008-1090 10
many clearly do not apply at all—for example, the tenth factor is "the undesirability of
the case within the legal community in which the suit arose." Id. at 226 n.28. That
factor is not relevant here. Barber was not a copyright case, and the Fourth Circuit
applies the Barber factors to a wide variety of fee awards; clearly, different types of
cases and different factual scenarios will implicate different combinations of the twelve
factors. Thus, we do not consider the district court's failure to make detailed findings as
to all twelve Barber factors an abuse of discretion.
Tavory next argues that the findings that the district court did make were not
supported in the record. He first complains that NTP never provided sufficient evidence
to demonstrate that the "standard rates" it listed in its documentation were actually
standard market rates. But the very case he cites eviscerates his argument. In Spell v.
McDaniel, the Fourth Circuit upheld a fees award in which the district court had to
"substitute its personal knowledge and experiences in lieu of substantive evidence" to
determine if the sought fees were reasonable. 824 F.2d 1380, 1402-03 (4th Cir. 1987).
The district court here did the same. Tavory also relies on E.E.O.C. v. Service News
Co., but there the district court erred by not making particularized findings as to any
specific factors and by not doing a Barber analysis. Serv. News, 898 F.2d 958, 965 (4th
Cir. 1990). That is hardly the case here. Tavory's best argument is that the time
records submitted by NTP entirely redacted the narratives for the time entries so it is
impossible to know whether the billed time was "reasonably expended." See Daly v.
Hill, 790 F.2d 1071, 1079 (4th Cir. 1986). Although this argument is well-taken, the
district court denied most of the fees sought by NTP and instead awarded less than
2008-1090 11
12% of them for a total of merely $36,900. It can hardly be said that this award is
unreasonable, particularly when reviewed under an abuse of discretion standard.
CONCLUSION
For the reasons provided above, the district court's award of attorneys' fees
under 17 U.S.C. § 505 is affirmed.
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