T-Peg, Inc. v. Vermont Timber Works, Inc.

United States Court of Appeals
For the First Circuit
Nos. 10-2234 and 10-2300
T-PEG, INC.; TIMBERPEG EAST, INC.,
Plaintiffs, Appellees/Cross-Appellants,
v.
VERMONT TIMBER WORKS, INC.; DOUGLAS S. FRIANT,
Defendants, Appellants/Cross-Appellees.
STANLEY J. ISBITSKI,
Defendant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Steven J. McAuliffe, U.S. District Judge]
Before
Torruella and Thompson, Circuit Judges,
and Saris,* District Judge.
William E. Whittington, with whom Whittington Law Associates,
PLLC was on brief, for appellants/cross-appellees.
Daniel E. Will, with whom Jonathan M. Shirley and Devine,
Milliment & Branch, P.A. were on brief, for appellees/cross-
appellants.
February 16, 2012
*
Of the District of Massachusetts, sitting by designation.
THOMPSON, Circuit Judge. Architectural firms T-Peg1 and
Vermont Timber Works2 (VTW) both appeal the district court's award
of fees to VTW following a jury's denial of T-Peg's copyright
claim. T-Peg says the award is too high — the court should have
awarded nothing at all rather than risk deterring future copyright
claimants. VTW says the award is too low — the court should have
simply applied the lodestar method rather than imposing a reduced
award. We think the award is just right — the district court has
broad discretion to fashion an appropriate fee award under the
Copyright Act, and its reasoned conclusion here was far from an
abuse of that discretion. We therefore affirm.
Because this is an appeal from a fee award, we present
only enough discussion of the underlying facts to provide the
reader with some context.3
Stanley Isbitski wished to build his dream house on a
plot of land he owned in Salisbury, New Hampshire. To this end, he
consulted with both T-Peg and VTW. T-Peg drew up a preliminary
design in 1999 and then worked with Isbitski to refine the design.
1
There are actually two related entities, T-Peg and Timberpeg
East, Inc., but we refer to the entities collectively as "T-Peg"
for convenience.
2
Both Vermont Timber Works, Inc. and its president Douglas S.
Friant are parties, but we refer to them collectively as "VTW" for
convenience.
3
Those craving more detail are directed to our earlier
decision addressing the merits of the case, T-Peg, Inc. v. Vt.
Timber Works, Inc., 459 F.3d 97 (1st Cir. 2006).
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In May 2001, T-Peg registered its updated design with the Copyright
Office. Meanwhile, in 2000, Isbitski showed T-Peg's unregistered
preliminary design to VTW, which began working on its own design.
VTW completed its plan in 2002 with significant, minutely detailed
input from Isbitski. Construction began not long thereafter but
was only completed after the property had been sold to a Mr. Dupee;
at that point, the home apparently reflected T-Peg's registered
design.
On October 23, 2003, T-Peg sued VTW and Isbitski for
copyright infringement. On February 9, 2005, the district court
granted summary judgment for VTW and Isbitski, concluding inter
alia that no reasonable jury could find that T-Peg's and VTW's
designs were substantially similar. T-Peg appealed, and we
reversed. T-Peg, Inc. v. Vt. Timber Works, Inc., 459 F.3d 97, 102
(1st Cir. 2006). Interpreting the Architectural Works Copyright
Protection Act (Pub. L. No. 101-650, §§ 701-706, 104 Stat. 5089,
5133-34 (1990)) for the first time, we held that a jury could find,
whether by direct or indirect evidence, that VTW had copied T-Peg's
design. Id. at 111-16. Accordingly, we remanded for trial. Id.
at 116.
After considerable delay involving more dispositive
motions, some mediation efforts, and an attempt at an interlocutory
appeal, the case went to trial on September 17, 2009. Six days
later, the jury found in VTW's favor and rejected T-Peg's
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infringement claims. VTW moved for fees that the district court,
in its discretion, may grant the prevailing party in a copyright
claim. 17 U.S.C. § 505. VTW voluntarily deducted certain fees
from its request but still sought over $200,000, a steep sum for a
case involving only $66,350 in damages. T-Peg opposed the motion,
arguing that equitable principles (e.g., the absence of any bad
faith on T-Peg's part) called for the court to exercise its
discretion to deny any fee award entirely.
In a fifteen-page order, the district court granted VTW
a fee award of $35,000. In doing so, the court carefully
considered the extent to which VTW actually prevailed, weighed the
equities as urged by T-Peg, and ultimately concluded that its
"modest award" struck the "appropriate balance." Both parties
appealed, T-Peg challenging the grant of any award at all and VTW
challenging the award's amount. We have jurisdiction under 28
U.S.C. § 1291.
The Copyright Act allows a district court, in its
discretion, to "award a reasonable attorney's fee to the prevailing
party" in a copyright-infringement case. 17 U.S.C. § 505. In
Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 & n.19 (1994), the
Supreme Court provided a non-exclusive list of essentially
equitable factors to guide the lower courts in deciding whether or
not to award attorney's fees, and if so how much. See also
Matthews v. Freedman, 157 F.3d 25, 29 (1st Cir. 1998) (affirming
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the district court's application of the Fogerty factors as a
"rational explanation for its decision to award fees" and "equally
so as to the amount awarded — $25,000 out of the $60,000 originally
sought"). Specifically, these factors are "frivolousness,
motivation, objective unreasonableness (both in the factual and in
the legal components of the case) and the need in particular
circumstances to advance considerations of compensation and
deterrence." Fogerty, 510 U.S. at 534 n.19 (internal quotation
marks omitted).
Because the district court has broad discretion to
fashion an appropriate award in line with the Fogerty factors, our
abuse-of-discretion review is "'extremely deferential.'" Airframe
Sys., Inc. v. L-3 Commc'ns Corp., 658 F.3d 100, 109 (1st Cir. 2011)
(quoting Latin Am. Music Co. v. ASCAP, 642 F.3d 87, 91 (1st Cir.
2011)). Indeed, we will set aside a fee award "'only if it clearly
appears that the trial court ignored a factor deserving significant
weight, relied upon an improper factor, or evaluated all the proper
factors (and no improper ones), but made a serious mistake in
weighing them.'" Id. at 108 (quoting Gay Officers Action League v.
Puerto Rico, 247 F.3d 288, 292-93 (1st Cir. 2001)). With these
principles in mind, we proceed.
T-Peg argues that no award was appropriate because the
district court applied a factor it says was improper: whether a fee
award would "deter plaintiffs with reasonable claims, and
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defendants with meritorious defenses, from litigating in a manner
greatly disproportional to the matter at stake." Although the
district court's reasoning flows directly from one of the Fogerty
factors — "considerations of compensation and deterrence," see
Fogerty, 510 U.S. at 534 n.19 — T-Peg nevertheless protests that
Fogerty does not allow a district court to use a fee award as a
mechanism for deterring certain trial strategies.4
T-Peg's protest is groundless. The Copyright Act allows
the district court to impose a "reasonable" fee award. The Supreme
Court has said broadly that a district court may consider
principles of deterrence in exercising its discretion to fashion a
reasonable award. T-Peg cites no law for the proposition that a
district court may deter only out-of-court and bad-faith conduct.
To the contrary, other courts have specifically held that a
district court applying Fogerty and its progeny may fashion a fee
award for the purpose of discouraging "overly aggressive litigation
tactics" and encouraging parties "to litigate in a more
responsible, realistic manner." Bridgeport Music, Inc. v. WB Music
Corp., 520 F.3d 588, 595 (6th Cir. 2008); cf. Woodhaven Homes &
Realty, Inc. v. Hotz, 396 F.3d 822, 824 (7th Cir. 2005) (remanding
4
T-Peg also argues that its litigation tactics were not, in
fact, "disproportional to the matter at stake." But the district
court was in the best position to assess the reasonableness of T-
Peg's litigation tactics, and we decline to reheat the by now
freezer-burnt record in order to second-guess almost a decade's
worth of motions and objections.
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for the imposition of an attorney-fee award with the caveat that
the requested amount, "over $220,000, seems quite excessive," given
that the plaintiff "claimed only $55,000 in damages").
Commentators agree. See 4 Melville B. Nimmer & David Nimmer,
Nimmer on Copyright § 14.10[D][3][b] (2011) (noting that "hard-ball
litigation tactics . . . merit an award of fees"). Despite T-Peg's
protestations, for the district court to rely on the same
principles here was simply not an abuse of discretion.5
For its part, VTW argues that by diverging from the
lodestar method for determining attorney fees, the district court
violated our "strong preference" for that method and therefore
5
T-Peg advances a few other arguments worth only brief
mention.
First, it says that deterring trial tactics is unrelated to
the Copyright Act's purpose: "to encourage the production of
original literary, artistic, and musical expression for the good of
the public." Fogerty, 510 U.S. at 524. But it hardly violates
that purpose to discourage scorched-earth litigation tactics that
tie up intellectual property for years.
Second, T-Peg says the determination of what constitutes
excessive litigation tactics is an "unworkable" exercise. The
exercise may be unworkable in some cases, but not so here: the
district court explained its reasoning, and its explanation makes
sense.
Finally, T-Peg says briefly that the fee award was
inappropriate because a magistrate judge had represented during
settlement negotiations that there would be no such award. T-Peg
cites no authority for this proposition, and we decline to mount an
expedition in search of any. The argument is waived. See, e.g.,
Rodríguez v. Municipality of San Juan, 659 F.3d 168, 176 (1st Cir.
2011) (citing Town of Norwood v. Fed. Energy Reg. Comm'n, 202 F.3d
392, 404-05 (1st Cir. 2000)).
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abused its discretion.6 True, the lodestar method provides "the
conventional framework that courts use in fashioning fee awards .
. . ." Spooner v. EEN, Inc., 644 F.3d 62, 67 (1st Cir. 2011). But
that does not mean it is the only method. See Hensley v.
Eckerhart, 461 U.S. 424, 433, 436-37 (1983) (describing the
lodestar method as a "useful starting point" but eschewing any
"precise rule or formula," and reaffirming district courts'
"discretion in making th[e] equitable judgment" of what fees to
award)7; see also Fogerty, 510 U.S. at 534 (quoting Hensley's
rejection of any "precise rule or formula" and again reaffirming
the importance of "equitable discretion"). Instead, district
courts have discretion to fashion an appropriate award as long as
they explain their reasoning in accordance with the equitable
principles spelled out by the Supreme Court and that reasoning
holds up to scrutiny. Fogerty, 510 U.S. at 534 & n.19; see also
Matthews, 157 F.3d at 29; Bridgmon v. Array Sys. Corp., 325 F.3d
572, 577-78 (5th Cir. 2003) (affirming award of $50,000 out of a
requested $177,507 because the district court based the award's
6
In brief, the lodestar method "requires the district court
to ascertain the number of hours productively expended and multiply
that time by reasonable hourly rates." Spooner v. EEN, Inc., 644
F.3d 62, 68 (1st Cir. 2011).
7
Although Hensley involved an attorney-fee award under the
Civil Rights Act, "[t]he standards [it] set forth . . . are
generally applicable in all cases in which Congress has authorized
an award of fees to a 'prevailing party'" — as in the Copyright
Act. Hensley, 461 U.S. at 433 n.7.
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amount on the Fogerty factors). Indeed, the cases VTW relies on
stand not for the principle that a district court's failure to
apply the lodestar method is an abuse of discretion, but rather
that a court's failure to provide an adequate explanation for a fee
award is such an abuse. Janney Montgomery Scott LLC v. Tobin, 571
F.3d 162, 166 (1st Cir. 2009) ("the district court's lack of
explanation ma[de] it impossible to assess" the fee award); Coutin
v. Young & Rubicam P.R., Inc., 124 F.3d 331, 336 n.2, 342 (1st Cir.
1997) (the district court based its award on "the equities
involved" but did not elaborate on what that phrase meant, and
"offered no plausible reason for eschewing the lodestar method").
Here, the district court provided plenty of reasoning in
support of its award. It faithfully applied the Fogerty factors —
again, "frivolousness, motivation, objective unreasonableness[,] .
. . and . . . compensation and deterrence," Fogerty, 510 U.S. at534 n.19 (internal quotation marks omitted) — one by one. First it
determined that "plaintiffs' copyright infringement claim was a
reasonable and viable one" (and therefore neither frivolous nor
unreasonable)8; next it "reject[ed] the notion that the plaintiffs'
pursuit of their claim was motivated by any improper purpose"; and
finally it carefully considered principles of "compensation and
8
In fact, in a show of evenhandedness, the court credited
plaintiffs with the "noteworthy success" of having "obtained an
extensive and detailed explication and clarification of the law —
one largely favorable to their own general interest," even though
their particular claims here failed to win the day.
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deterrence," concluding that a $35,000 award would be "sufficient
to both encourage innocent defendants to (reasonably) present and
pursue meritorious defenses, without discouraging copyright owners
from (reasonably) seeking to enforce their rights when a sound
basis to assert a claim exists . . . ." And the district court
elaborated on its decision to invoke deterrence, expressing its
intent "to deter plaintiffs with reasonable claims, and defendants
with meritorious defenses, from litigating in a manner greatly
disproportional to the matter at stake . . . ." The district
court's explanation and analysis were more than sufficient under
Fogerty, were not just reasonable but thoughtful, and, in any
event, certainly do not indicate an abuse of discretion.
For the foregoing reasons, we affirm the district court's
attorney-fee award. VTW seeks a further attorney-fee award on
appeal, but it supplies no clear reason for us to grant this
request and we can discern none. We think $35,000 seems "an
adequate sum . . . for the litigation as a whole . . . ."
Matthews, 157 F.3d at 29. We therefore decline to make any further
award of fees, and likewise order that each party shall bear its
own costs.
So ordered.
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