Invessys, Inc. v. McGraw-Hill Companies, Ltd.

United States Court of Appeals
For the First Circuit
No. 03-1954
INVESSYS, INC. and PETER HODGES,
Plaintiffs, Appellants,
v.
THE McGRAW-HILL COMPANIES, LTD. and
THE McGRAW-HILL COMPANIES, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Boudin, Chief Judge,
Cyr, Senior Circuit Judge,
and Howard, Circuit Judge.
Douglas H. Wilkins with whom Anderson & Kreiger LLP was on
brief for appellants.
John D. Donovan, Jr. with whom Crystal D. Talley, Levina Wong
and Ropes & Gray LLP were on brief for appellees.
May 21, 2004
BOUDIN, Chief Judge. Defendants--The McGraw-Hill
Companies, Ltd., and The McGraw-Hill Companies, Inc. (together
"McGraw-Hill")--successfully defended themselves against a lawsuit
brought by plaintiffs InvesSys, Inc. ("InvesSys"), and Peter
Hodges. One of the claims in the complaint was for copyright
infringement and, at the end of the case, the district court
awarded attorney's fees and costs to McGraw-Hill under the
Copyright Act. 17 U.S.C. § 505 (2000). Plaintiffs now appeal,
contesting the award.
The background facts are as follows. During the spring
of 2000, McGraw-Hill became interested in selling a subsidiary
called Micropal Accounting Portfolio Services, Inc. ("MAPSI").
MAPSI's primary business was the licensing and support of a
Windows-based software program called "MaPS." Hodges, who was an
employee of the McGraw-Hill subsidiary that owned MAPSI–Standard &
Poor's Fund Services, Inc. ("S&P")--expressed interest in
purchasing MAPSI.
Negotiations between Hodges and McGraw-Hill for the sale
of MAPSI began in the fall of 2000. The lead negotiator for
McGraw-Hill was Kevin Thornton, then the managing director of S&P.
At some point in the negotiations, Hodges requested that MaPS's
DOS-based predecessor programs be included in the deal. Thornton
agreed, and, because the additional programs Hodges sought were
-2-
considered obsolete, directed that they be added to the terms of a
draft sales agreement for no additional consideration.
When McGraw-Hill's lawyer (Susan Winter) added the
predecessor programs to the draft agreement, she also included a
program called "AIM," which was not obsolete, was not a part of the
MaPS line of programs, and in fact generated millions of dollars in
revenue for McGraw-Hill.1 Hodges had expressed interest in the AIM
program to McGraw-Hill manager Adrian Manning, who had referred
Hodges to Thornton. Hodges would later claim that he spoke with
Thornton about AIM and obtained his agreement to include the
program in the deal; Thornton would deny that Hodges ever
approached him about AIM.
The draft agreement--including its reference to the AIM
program--was reviewed several times by Thornton and other McGraw-
Hill officials before it was executed by the parties on May 29,
2001. The final purchase price was $19,600, and no McGraw-Hill
official raised any objection to the specification of the AIM
program as among those being transferred. After the sale was
completed, Hodges conveyed his rights to MAPSI and AIM to InvesSys.
1
Both MaPS and AIM were performance-measurement tools, but
they performed different functions and used different information.
MaPS was a management and accounting system that was designed
primarily to allow users to keep track of a portfolio of fixed
income investments through the periodic entry of data, such as the
price at which a particular security was acquired. By contrast,
AIM allowed users to analyze and compare data (separately supplied
by S&P) relating to some 60,000 mutual funds worldwide. The two
programs were marketed and supported separately.
-3-
Hodges is InvesSys's sole shareholder, sole officer, sole director,
and sole employee.
On August 2, 2002, Hodges called Thornton to arrange a
meeting for the following day. At the meeting, Hodges asked
Thornton for access to data feeds that were necessary to market the
AIM software. Thornton claimed that he had not been aware that AIM
had been included in the terms of the sales agreement. After
examination of the document, McGraw-Hill took the position that,
under New York law, inclusion of AIM was a scrivener's error and
maintained that it still owned the rights to AIM.
On November 26, 2001, Hodges and InvesSys filed suit
against McGraw-Hill in the federal district court for the district
of Massachusetts. The suit alleged copyright infringement--a
federal claim under the Copyright Act--as well as breach of
contract and a medley of other state law claims (fraud, conversion,
and claims under Mass. Gen. Laws ch. 93A). Because the parties
agreed that the scrivener's-error issue was central, the district
court directed that only the state law claims proceed to trial, the
copyright claim being held in abeyance.
At trial, the principal witnesses were Hodges, Winter,
Manning, and Thornton. The gist of plaintiffs' case was that there
had been a knowing sale of AIM by McGraw-Hill; defendants' position
was that inclusion of AIM was patently a scrivener's error by
Winter and that the parties' true intentions required reform of the
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contract to exclude AIM under well established legal doctrine. See
George Backer Mgmt. Corp. v. ACME Quilting Co., 385 N.E.2d 1062,
1066 (N.Y. 1978); 7 Corbin on Contracts § 2845 (rev. ed. 2002).
After the close of evidence, the court presented the jury
with a single initial question:
Have the defendants proven by clear and
convincing evidence, that the inclusion of
'AIM' in . . . the Share Purchase Agreement
was a scrivener's error that did not reflect
the actual agreement of the parties?
The jury answered "yes," and the district court entered judgment
for McGraw-Hill on all claims, including the claim of copyright
infringement. Thereafter, the court awarded McGraw-Hill $200,000
in attorney's fees and $28,583.78 in costs under section 505,
finding that plaintiffs' claim of copyright infringement was
objectively unreasonable and improperly motivated.
In its award, the district court declined to make any
reduction despite plaintiffs' claim (and defendants' admission)
that much, if not all, of the legal work performed in the case had
application to the state law claims as well as the copyright claim.
The district court included in its award payments by defense
counsel for computer-assisted legal research. The court also made
the award run against Hodges personally as well as InvesSys.
Plaintiffs now appeal, challenging the award itself and each of the
ancillary rulings.
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Section 505 provides:
In any civil action under this title, 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.
Except as otherwise provided by this title,
the court may also award a reasonable
attorney's fee to the prevailing party as part
of the costs.
Unlike most fee-shifting statutes, section 505 allows
attorney's fees to be awarded to defendants on an "even-handed"
basis with plaintiffs. Fogerty v. Fantasy, Inc., 510 U.S. 517, 534
(1994); Lotus Dev. Corp. v. Borland Int'l, Inc., 140 F.3d 70, 72-73
(1st Cir. 1998). Fogerty said that the award rested in "the
[trial] court's discretion" and that there was no formula, but that
factors that could be taken into consideration included inter alia
the objective unreasonableness of the losing side's position. 510
U.S. at 534 & n.19.
Although fee awards are nominally reviewed on appeal for
"abuse of discretion," Matthews v. Freedman, 157 F.3d 25, 29 (1st
Cir. 1998), an award can also depend on legal issues that are
reviewed de novo. See United States v. Padilla-Galarza, 351 F.3d
594, 597 & n.3 (1st Cir. 2003). Plaintiffs' broadest position,
which falls in the latter category, is that no award was permitted
because the trial was directed only to state law claims and turned
on a state law issue; at the very least, say plaintiffs, the costs
had to be allocated and that most concerned the ownership issue
rather than anything peculiar to copyright.
-6-
The statute, drafted with claims under the Copyright Act
in mind, does not expressly address the problem of a case with a
mix of claims. However, here a federal copyright claim was
asserted in the complaint, so this is literally a "civil action
under this title [the Copyright Act]," 17 U.S.C. § 505; and the
case law has used common sense to carry out Congress' underlying
intent to provide for attorney's fees in copyright enforcement or
like matters but not for other civil claims that do not involve
copyright. See Entm't Research Group, Inc. v. Genesis Creative
Group, Inc., 122 F.3d 1211, 1230-31 (9th Cir. 1997), cert. denied,
523 U.S. 1021 (1998).
Implementing that intent presents the recurring problem
of form versus substance. The only claims posed for trial were
state law claims (most importantly, a contract claim) and the only
issue decided was ownership of AIM, turning on state law rules as
to contract and reformation. Ownership of a copyright is a
predicate to a federal copyright claim, see 17 U.S.C. § 501(b);
Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361
(1991), but the rules governing contractual transfer of ownership
have been left (for the most part) to state law.2
2
See, e.g., Walthal v. Rusk, 172 F.3d 481, 485 (7th Cir.
1999); 1 Nimmer on Copyright § 101(B)(3)(a) (2003) ("[I]t remains
true that the vast bulk of copyright contractual issues must be
resolved under state law, given the silence of the Copyright Act in
addressing such issues as . . . how to construe ambiguous
contractual language . . . .").
-7-
Yet the question of ownership of AIM was common to both
the plaintiffs' claim under the Copyright Act and their claims
under state law. If plaintiffs lost as to ownership, all claims
failed. The fact that the district court chose to extract this
common issue and try it first, nominally deferring the copyright
claim, does not alter the fact that the copyright claim was in the
case and depended on the ownership issue being tried. Had
plaintiffs' complaint set forth only the copyright claim, exactly
the same contractual issue would have had to be tried.
Had plaintiffs never asserted a copyright claim but only
claims under state law, it would be hard to describe this as a
"civil action under" that statute. But here a copyright claim was
made, thereby permitting Copyright Act remedies, and the issue
actually litigated was necessary to the assertion of that claim.
So it serves Congress' purpose to compensate the winning side for
attorney's fees and costs. C.f. Maljack Prods., Inc. v. Goodtimes
Home Video Corp., 81 F.3d 881, 884-86, 889 (9th Cir. 1996).
Plaintiffs argue that because the ownership issue is
governed by state law, it cannot carry out "the purposes" of the
Copyright Act to award attorney's fees and costs. We think this is
too cramped a reading of the statute. On the contrary, in section
505 Congress aimed to provide a potential incentive to the winner
who asserts a successful copyright claim or defends against an
unworthy one. This practical concern is present whether the case
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happens to decide a landmark issue of copyright law or, in the end,
turns on matters that have nothing to do with the statute.
Consider that a copyright case may turn solely on a
question of fact such as whether the defendant copied a protected
work or stumbled on the same jingle by chance. Or a copyright case
might be won because the defendant failed to answer the complaint
or be lost because of a discovery violation by the plaintiff--civil
procedure questions in which copyright law plays no part. Yet in
both sets of cases, surely the winner could claim attorney's fees
and costs (subject as always to the trial court's discretionary
judgment). See McGaughey v. Twentieth Century Fox Film Corp., 12
F.3d 62, 64-65 (5th Cir. 1994).
Plaintiffs also argue that, at a minimum, there should
have been an allocation of fees and costs between the copyright and
state law claims. If there were any indication that significant
extra moneys were expended by the defense because of the presence
of state law claims, we would agree that allocation was required.
See Entm't Research Group, 122 F.3d at 1230. That could easily be
so if, for example, independent issues were raised and litigated as
to fraud that were unnecessary to resolving the ownership issue.
Plaintiffs claim that such unrelated issues were raised
in the district court and that the district court erred by failing
to reduce the award to reflect work done on them. Specifically,
plaintiffs say that the parties disagreed as to whether the
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plaintiffs would be able to establish "benefit of the bargain"
damages on their contract claim and whether such damages were
limited to the amount of the purchase price by the terms of the
contract. All indications are that these were minor points; but,
in any event, the plaintiffs did not make this argument before the
district court so it is forfeited. Daigle v. Maine Med. Ctr.,
Inc., 14 F.3d 684, 687 (1st Cir. 1994).
Plaintiffs next say that the ownership claim was a
reasonable one and that the district court should therefore have
not awarded attorney's fees. Section 505, quoted in full above,
says that the district court "in its discretion may allow the
recovery of full costs" including an attorney's fee. Under the
case law, dishonesty is not required for an award; even a case that
is merely objectively quite weak can warrant such an award.
Matthews, 157 F.3d at 29.
This case is perhaps unusual because at first blush it
might appear as if the plaintiffs had a colorable claim that Hodges
had purchased, and InvesSys now owned, the AIM copyright. The
clear language of the written contract, presumed to reflect the
parties' intent, explicitly included AIM, and McGraw-Hill obviously
exhibited remarkable negligence in failing to detect the apparent
error despite its officials' review of the written contract.
Further, under the applicable New York law, McGraw-Hill had a
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heightened burden to prove the error by clear and convincing
evidence.
Nevertheless, the closer one looks at the circumstances,
the more dubious plaintiffs' ownership claim appears. Most
important is the underlying transaction related to MaPS, which was
purchased for a quite modest sum just under $20,000. The DOS-based
predecessor programs were added at Hodges' request after the
original bargaining and at no additional cost. AIM was not a
predecessor program, was not part of MaPS and--most
significantly–was generating about $3-4 million per year. Even
though there was evidence that McGraw-Hill was planning to replace
AIM reasonably soon, the idea that it deliberately intended to
transfer a program then generating millions for nothing is
perverse.
Still, it might well have made the case arguable if there
had been substantial negotiations about the transfer of the AIM
program. Yet, while McGraw-Hill admitted that Hodges had
approached Manning about the subject and had been told to take it
up with Thornton, Thornton testified at trial that he had not
offered AIM to Hodges; Hodges said that there was discussion and a
deal. It is a fair inference, from both the result and the
surrounding circumstances, that the jury and the trial judge both
credited Thornton's version of events over Hodges'.
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There were other circumstances supporting McGraw-Hill's
position. The evidence did not show that a launch date for McGraw-
Hill's supposed successor system was so clearly imminent that AIM
was going to be obsolete in McGraw-Hill's hands at the time of
Hodges' alleged purchase of AIM, nor did the contract contain any
provision by which Hodges licensed AIM back to McGraw-Hill so that
it could continue, for the present, to service its current AIM
clients. It is difficult to believe that McGraw-Hill would have
sold an essential component of a multi-million dollar business
without such a license back.
Of course, in determining whether to award attorney's
fees, the district court's judgment as to the reasonableness of the
original claim had to rest on what Hodges knew when he made and
pressed his claim and not merely on the unfavorable outcome. Cf.
Tang v. State of R.I., Dep't of Elderly Affairs, 163 F.3d 7, 13
(1st Cir. 1998). But in this case, Hodges certainly knew at the
outset of the raw facts supporting McGraw-Hill's position (e.g.,
the disparity between price and value) and also knew in fact
whether he had had any detailed negotiations with Thornton about
whether AIM should be included in the deal.
So long as the district court correctly stated the legal
standard or criteria, review of the award is only for abuse of
discretion. Matthews, 157 F.3d at 29; cf. Lotus Dev. Corp., 140
F.3d at 72. Plaintiffs complain that the district court did not
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seriously consider the plaintiffs' own evidence in support of the
claim; but the district court, having sat through the trial, was
fully familiar with the background and the direct testimony of
Hodges and Thornton. We have no basis for overturning the district
court's decision that an award was appropriate.
We turn next to one disputed item in the award. The
district court allowed recovery under section 505 of the costs of
legal research done using one of the standard services (Westlaw;
Lexis). Plaintiffs have not preserved any claim that the amount
was excessive or that research was not needed. Rather, they urge
(as they did unsuccessfully in the district court) that such a cost
should be treated as part of law firm overhead (covered by the
firm’s hourly fee) rather than as a separately reimbursable item.
This is an issue on which the courts have been divided;3
and, given the ubiquity of computer-aided research in law practice,
the issue deserves our full attention. Section 505, taken alone,
is not illuminating: it says only that the court may allow the
3
Compare, e.g., Uniroyal Goodrich Tire Co. v. Mutual Trading
Corp., 63 F.3d 516, 526 (7th Cir. 1995), cert. denied, 516 U.S.
1115 (1996) (holding that expenses paid for computer-assisted
research were recoverable), and United Nuclear Corp. v. Cannon, 564
F. Supp. 2d 581, 591-92 (D.R.I. 1983) (Selya, J.) (same), with,
e.g., Standley v. Chilhowee R-IV Sch. Dist., 5 F.3d 319, 325 & n.7
(8th Cir. 1993) (holding that the cost of computerized research
must be factored into attorneys' hourly rates and is not separately
compensable), BD v. Debuono, 177 F. Supp. 201, 209 (S.D.N.Y. 2001)
(holding that computerized research expenses are properly
considered overhead), and Yankee Candle Co. v. Bridgewater Candle
Co., 140 F. Supp. 2d 111, 126 (D. Mass. 2001) (same).
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prevailing party “full costs” and may award “a reasonable
attorney’s fee to the prevailing party as part of the costs.” 17
U.S.C. § 505. There is no reason to think that Congress gave any
particular thought to computer-aided research.
Although section 505's “full costs” language could be
distinguished from more familiar and slightly narrower wording in
other fee shifting statutes, e.g., 42 U.S.C. § 1988 (2000) ("the
court, in its discretion, may allow the prevailing party . . . a
reasonable attorney's fee as part of the costs"), the tendency of
the courts has been to treat most statutes similarly whether in
allowing or disallowing particular items. The starting point in
many cases–-and the ending point in some-–is that another federal
statute specifies various taxable “costs” (e.g., "[f]ees of the
clerk and marshal" and "[f]ees and disbursements for printing and
witnesses"), but the list does not include computer-assisted
research. 28 U.S.C. § 1920 (2000); Yasui v. Maui Elec. Co., 78 F.
Supp. 2d 1124, 1129-30 (D. Haw. 1999).
Nevertheless, the Supreme Court has endorsed the view
that disbursements made by an attorney and ordinarily billed
directly to the client (that is, separately from the hourly or
fixed fee) can properly be encompassed within the phrase
“attorney’s fee,” see W. Va. Univ. Hosps., Inc. v. Casey, 499 U.S.
83, 87 n.3 (1991); and it is not uncommon for courts to allow such
costs as travel, long distance calls, and parking on top of the
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hourly fee. E.g., Downes v. Volkswagen of Am., Inc., 41 F.3d 1132,
1144 (7th Cir. 1994); Data Gen. Corp. v. Grumman Sys. Support
Corp., 825 F. Supp. 361, 367-68 (D. Mass. 1993).
In our view, computer-assisted research should be treated
similarly and reimbursed under attorney’s fee statutes like section
505, so long as the research cost is in fact paid by the firm to a
third-party provider and is customarily charged by the firm to its
clients as a separate disbursement. If it saves attorney time to
do research this way, probably the hours billed are fewer, Haroco,
Inc. v. Am. Nat'l Bank & Trust Co., 38 F.3d 1429, 1440-41 (7th Cir.
1994); and in any event Westlaw and Lexis are now as much part of
legal service as a lawyer's taxi to the courthouse.
Courts that have resisted reimbursement of computer-
assisted research as part of attorney’s fees have asked why that
cost should be distinguished from the law firm’s cost of
maintaining its law book library–-a cost that is customarily
treated as overhead to be covered by the hourly or other fee rather
than billed as a disbursement. E.g., Debuono, 177 F. Supp. 2d at
209. Some courts may also think that, as the hourly fee
generically covers “legal research,” there is a taint of double
billing in charging separately for Westlaw or Lexis. See Scanlon
v. Kessler, 23 F. Supp. 2d 413, 418 (S.D.N.Y. 1998).
The answer to these concerns has something to do with
economics but also with history and record-keeping practice. As
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configured by the provider, computer-aided research is often a
variable cost in an individual case–-that is, the cost varies (from
zero upward) depending on the amount of Westlaw or Lexis service
used in the case. By contrast, the firm pays no more or less for
its library books, regardless of whether they are pulled off the
shelf for a given law suit, so it is described as a fixed rather
than a variable cost.
In professional legal services, variable costs that are
both large and easily assigned–-especially those paid directly to
third-party vendors--tend often to be separately billed to the
client; those not so easily assigned or inconvenient to track are
covered by the hourly fee.4 Separate billing does not mean double
billing: the computer services directly paid to Lexis or Westlaw do
not reappear in some concealed form as part of the hourly rate.
Indeed, if such services were treated as overhead, the hourly rate
would likely be higher.
It is common knowledge that large law firms regularly
track computer-assisted research costs “by client” (both Westlaw
and Lexis make this easy) and then bill clients directly for those
4
In economics, there are efficiency arguments for collecting
variable costs from the cost causer–“efficiency” meaning that
resources will be used more productively. Cf. 1 Kahn, The
Economics of Regulation: Principles and Institutions 71-72 (1970).
But it is impractical to track and collect all variable costs
(e.g., yellow pads used by each lawyer), and anyway the hourly fee
is a crude proxy for many variable costs (the more hours spent, the
more yellow pads used–-roughly speaking).
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costs. See, e.g., Case v. United Sch. Dist. No. 233, 157 F.3d
1243, 1257-58 (10th Cir. 1998); Crosby v. Bowater Inc. Ret. Plan
for Salaried Employees of Great N. Paper, Inc., 262 F. Supp. 2d
804, 817 (W.D. Mich. 2003). The practice being so, we see no
reason why such costs–-if paid to third-party providers--should not
be recovered under section 505. In sum, we align ourselves with
the courts that have allowed computer-assisted research costs to be
recovered as a separate item.5
The final claim on appeal, made only by Hodges, is that
he did not personally claim ownership of the AIM copyright, so he
personally should not have been held liable by the district court
for fees and costs imposed under that section. McGraw-Hill defends
the district court’s award against Hodges as well as InvesSys, but
admits that it has little at stake as to Hodges’ personal liability
because full recovery by it is assured by the appeal bond covering
both plaintiffs. Still, the issue of Hodges' liability is not
moot: under the judgment, McGraw-Hill is free to collect against
Hodges personally.
5
A different problem would be presented if the firm paid a
flat monthly fee to Westlaw or Lexis and then allocated amounts
among clients; similarly, any markup by the firm would raise
questions. However, the plaintiffs in this case did not make any
such claim in the district court, and we take the defendants' brief
to assert that the costs in question were simply a straight pass-
through of time-based charges paid to the service providers for
work done in this case.
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Hodges' argument rests on the proposition that only the
owner of a copyright may sue for infringement under the Copyright
Act, and, because Hodges had previously transferred any ownership
interest he had in AIM to his corporation, he therefore could not
properly claim under the Copyright Act but only under state law
(e.g., for fraud or breach of contract). This might be beside the
point if Hodges had in this case purported to claim under the
Copyright Act, but in this instance the complaint--although
somewhat ambiguous--suggests that only InvesSys was claiming under
the Copyright Act.
The statute says that the court may allow “full costs”
“against any party” (other than the government or its officers) and
that this may include attorney’s fees in favor of the prevailing
party. 17 U.S.C. § 505. At first blush one might think that this
gives the district court carte blanche to award attorney’s fees
against anyone on the losing side as to any claim “in any civil
action under” the Copyright Act–-the subject matter with which
section 505 deals--but this is surely too broad a reading.
A civil action in which a federal copyright claim is
asserted arises “under” the Copyright Act, see T.B. Harms Co. v.
Eliscu, 339 F.2d 823, 828-29 (2d Cir. 1964), cert. denied, 381 U.S.
915 (1965), regardless of whether non-copyright claims are asserted
as well. Yet, Congress’ obvious concern in section 505 was in
facilitating the assertion and defense of copyright claims-–not
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other kinds of claims. Cf. Entm't Research Group, 122 F.3d at
1230, 1232; Yankee Candle, 140 F. Supp. 2d at 122-23.
This is why courts implementing section 505 tend almost
automatically to allocate attorney’s fees and costs between
copyright and non-copyright claims where this can feasibly be done,
limiting recovery to costs causally associated with the copyright
claim. E.g., Yankee Candle, 140 F. Supp. 2d at 122-123. There was
no apportionment here only because the litigated issue was common
to both copyright and non-copyright claims, so the same costs would
have been incurred for the former alone.
The same apportionment philosophy ought presumptively to
guide liability as among parties. If Hodges had no association
with the copyright claim but were a party to the case for unrelated
reasons, an award of attorney’s fees against Hodges under section
505 would be improper even though McGraw-Hill would still have
prevailed against InvesSys in an action “under” the Copyright Act.
Such a situation is not that difficult to imagine, given that
federal joinder rules tend to be generous as to both parties and
claims. See Fed. R. Civ. P. 18, 20.
However, this does not mean that Hodges ought
automatically be exempted from liability merely because he is not
properly a claimant under the Copyright Act and did not explicitly
assert such a copyright claim in the complaint. In this instance,
Hodges was a party to the complaint but not only that: he was
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intimately involved in the transaction allegedly giving rise to the
copyright claim, owned the company asserting the claim, was a key
witness in fostering the claim in this case, and stood to benefit
substantially if the imposture had succeeded.
Under such circumstances, we think that section 505's
policy, as well as its language, permits the award to run against
Hodges as well as against InvesSys. Hughes v. Novi American, Inc.,
724 F.2d 122, 126 (Fed. Cir. 1984), may lend a measure of support
to this view; in any event, nothing flatly to the contrary has been
cited to us. Hodges was peculiarly responsible for this copyright
claim on several different levels and was a party to that case and
the deterrence policy of the statute well fits his conduct. That
is enough for this case. Future decisions will have to mark out
the boundary as new fact situations present themselves.
There are certainly arguments for a flat rule that only
a losing party formally on one side of a copyright claim can be
held liable for costs under section 505. It would be easy to
administer and avoid possible asymmetries; if Hodges had not been
a party then (veil piercing aside) he would not be liable even
though equally "responsible" for the claim. But such a mechanical
approach would also be a judicial creation, since the statute's
language imposes no such flat rule; and it would be less responsive
to the underlying policies. Imagine that there had been no appeal
bond and InvesSys had no assets of its own.
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This case was well handled and properly decided.
However, whatever fault can be imputed to the plaintiffs for making
the claim, all but one of the issues raised on appeal presented
serious legal questions, and the appeal was legitimately pursued.
We have no inclination to make a separate award of attorney’s fees
to McGraw-Hill for work done on the appeal, although the usual
award of statutory costs is allowed.
Affirmed.
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