In an opinion handed down a week ago in the SDNY by Judge Denise Cote, Ninox Television Ltd. v. Fox Entertainment Group, Inc., 2006 WL 1643300, the tricky issue of award of attorney's fees where a complaint is voluntarily dismissed with prejudice was addressed.
Section 505 of the Copyright Act is straightforward, at least linguistically: the court may, in its discretion, award a reasonable attorney's fee to the prevailing party as part of costs. The Act does not define prevailing party, and hence general law principles apply. The most important articulation of those principles is Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, 532 U.S. 598 (2001). Buckhannon rejected the then-dominant "catalyst" theory in favor of a requirement that there be a "judicially sanctioned change in the legal relationship of the parties."
One problem that has arisen post-Buckhannon is what "judicially sanctioned" means. Court ordered dismissals on the merits clearly fall within such "judicial imprimaturs," Gardendance, Inc. v. Woodstock Copperworks, Ltd., 2006 WL 305220 (M.D.N.C. Feb. 8, 2006); NXIVM Corp. v. Ross Institute, 2005 WL 1843275 (N.D.N.Y. Aug. 2, 2005); Bridgeport Music, Inc. v. London Music, U.K., 345 F. Supp.2d 836 (M.D. Tenn. 2004)(extensive discussion). Voluntary dismissals without prejudice don't, TRF Music Inc. v. All Ett Music Group, 2006 WL 1376931 (S.D.N.Y. May 18, 2006)(Castel, J.); Philadelphia Stock Exchange v. International Securities Exchange, Inc., 2005 WL 2923519 (S.D.N.Y. Nov. 2, 2005)(Buchwald, J.).
But what about stipulated dismissals with prejudice? This is what the Ninox opinion addresses; its conclusion, moreover, departs from that of another opinion in the same district, Chambers v. Time Warner, Inc., 279 F. Supp.2d 362 (S.D.N.Y. 2003). Ninox involved a claim of infringement of a New Zealand reality show Dream Home by Fox's The Complex: Malibu. The claim was in the format. Dismissal came about due to the litigation in Australia involving an indirect licensor to Fox. Judge Cote found the stipulated dismissal with prejudice resulted in a sufficient judicial imprimatur to deem Fox the prevailing party. Indeed, where it otherwise, a perverse incentive would be created, whereby defendants would block such dismissals and require the court to rule on the merits in order to stand a chance of obtaining fees. Chambers, supra, however held to the contrary, and was not cited in Ninox.
Defendant did not obtain its fees in Ninox nevertheless, despite plaintiff "all but" conceding its claim was frivolous and the court's finding that Fox engaged in a successful and efficient litigation strategy. The court also stated that but for the dismissal the case would have required it to "appl[y] copyright principles to a relatively new field of intellectual property, format licensing," but this is perplexing: plaintiff conceded its claim was frivolous, and due to the skill of Fox's counsel the court did not have to engage in any merits analysis. Denying fees under such facts creates its own perverse disincentive: the better job you do and the less a burden you place on the court the less likely you are to get attorney's fees.