Prevailing copyright defendant acts as private AG, deserves fees

Klinger v. Conan Doyle Estate, Ltd., No. 14-1128 (7th Cir. Aug. 4, 2014)
Judge Posner throws his usual rhetorical bombs around, this time to the delight of copyright restrictionists.  In Klinger v. Conan Doyle Estate, Ltd., 2014 WL 2726187 (7th Cir. June 16, 2014), the court explained that you can’t infringe a copyright on works in the public domain, even if those works include characters who are later further developed with non-public domain material.  This was not a hard case.
Despite this obvious truth, the Doyle estate (setting aside the controversies over who exactly holds the remaining rights) told Random House that it needed to pay the estate $5000 for a license in order to publish an earlier Klinger anthology using only the public domain elements.  Random House paid up. 
When Klinger put together a sequel, the Doyle estate told Klinger’s publisher Pegasus that it too would need to pay.  Per the estate: “If you proceed … to bring out [the sequel] unlicensed, do not expect to see it offered for sale by Amazon, Barnes & Noble, and similar retailers. We work with those compan[ies] routinely to weed out unlicensed uses of Sherlock Holmes from their offerings, and will not hesitate to do so with your book as well.”  This was both a threat to sue Pegasus for copyright infringement, and to sue ISPs who distributed it.  Pegasus caved and refused to publish the anthology until Klinger obtained a license.
Instead, Klinger sued for declaratory relief, and of course won.  (Although he was nominally the plaintiff, for these purposes, he is a defendant.)  “There is no ground known to American law for extending copyright protection beyond the limits fixed by Congress. The estate’s appeal bordered on the quixotic.”  So, Klinger sought fees for the appeal (fees for the district court litigation were not at issue here, but he also sought them).
The two most important considerations in awarding attorneys’ fees under the Copyright Act are the strength of the prevailing party’s case and the amount of relief the party obtained—if there’s no hefty damages award, the case for a fee award is stronger than if there is.  For a successful defense, “the defendant is entitled to a ‘very strong’ presumption in favor of receiving attorneys’ fees, in order to ensure that an infringement defendant does not abandon a meritorious defense in situations in which ‘the cost of vindication exceeds the private benefit to the party.’”  This provides some counterweight to copyright owners’/claimants’ incentive to seek, and defendants’ incentives to pay, nuisance settlements.  The court cited several articles by Michael Meurer, Ben Depoorter & Robert Kirk Walker, and Robert Brauneis, noting in particular Brauneis’s argument that Happy Birthday collects $2 million a year in royalties despite being, most likely, in the public domain.
This was a perfect case illustrating the problem of nuisance claims.  “Unless Klinger is awarded his attorneys’ fees, he will have lost money—to be precise, $25,679.93 ($30,679.93 – $5,000 [that the estate sought in license fees])—in winning an appeal in which the defendant’s only defense bordered on the frivolous.”  The Doyle estate’s business strategy was to charge “a modest license fee for which there is no legal basis,” inducing rational writers and publishers to pay rather than engage in expensive litigation.  Both of Klinger’s publishers succumbed.  Klinger was, in effect, a private attorney general fighting “a form of extortion.” 
Klinger performed a public service, at substantial risk to himself.  His willingness to sue was important to add risk to the estate’s business model.  He deserved a reward; paying his fees just let him break even.
Now for the moment without which no Posner opinion would be complete: the Doyle estate, in asking Amazon and other sellers to cooperate with it (via DMCA claims etc.) in enforcing its nonexisting copyright claims, was “enlisting those sellers in a boycott of a competitor of the estate, and boycotts of competitors violate the antitrust laws.”  In economic substance, this was the same as a competitor-led boycott of suppliers against a purchaser, although here the boycotters were nominally buyers from Klinger rather than sellers to him.  “[F]unctionally they were suppliers—suppliers of essential distribution services to Klinger.”  The estate had better change its business model “in its own self-interest.”
Fees of over $30,000 were awarded to Klinger for the appeal.

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