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Exploring the Latest in Intellectual Property Law
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Exploring the Latest in Intellectual Property Law
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If Provider Knew Product Would Be Used to Infringe, It Is a Contributor

by | Oct 24, 2024 |

In a case brought by a group of record labels against an internet service provider (ISP) for contributory copyright infringement of more than 1,400 songs, the US Court of Appeals for the Fifth Circuit ruled that the provider, which knew how its product would be used by subscribers, could be contributorily liable for its subscribers’ actions, but that because the record companies registered albums – not individual songs – with the US Copyright Office, statutory copyright damages were not available for each infringed song. UMG Recordings, Inc. et al. v. Grande Communications Networks, LLC, Case No. 23-50162 (5th Cir. Oct. 9, 2024) (Higginson, Higginbotham, Stewart, JJ.)

The plaintiffs are a group of major record labels, while the defendant, Grande Communications Network, is a large ISP. To combat copyright infringement among individuals using peer-to-peer file-sharing networks such as BitTorrent, the plaintiffs used a third-party company, Rightscorp, to identify infringing conduct by engaging with BitTorrent users, documenting that conduct, and using the information to notify ISPs of its findings so that the ISPs could take appropriate action. However, for nearly seven years Grande did not terminate subscribers for copyright infringement but merely notified them of a complaint. In the district court, a jury found Grande liable for contributory copyright infringement of more than 1,400 of the plaintiffs’ sound recordings. The jury found that the infringement was willful and awarded nearly $47 million in statutory damages. Grande appealed.

The Fifth Circuit explained that to prove direct infringement by Grande’s subscribers, the plaintiffs had to show “(1) that Plaintiffs own or have exclusive control over valid copyrights and (2) that those copyrights were directly infringed by Grande’s subscribers.” To meet the elements of secondary liability for subscribers’ conduct, “Plaintiffs had to demonstrate (3) that Grande had knowledge of its subscribers’ infringing activity and (4) that Grande induced, caused, or materially contributed to that activity.”

In analyzing the fourth element, the Fifth Circuit noted that previous Supreme Court cases involving a single moment of sale (Sony Corp. of America v. Universal City Studios (1984) and Metro-Goldwyn-Mayer Studios v. Grokster (2005)) did not control because the plaintiffs’ theory of liability was “not based on Grande’s knowledge about its subscribers’ likely future activities after the moment of sale, but rather on Grande’s knowledge of its subscribers’ actual infringements based on its ongoing relationship with those subscribers.” Further, unlike Twitter v. Taamneh (2023) (a case in which family members of an ISIS terrorist attack victim alleged that US social media companies aided and abetted ISIS by permitting the group’s members to use the platforms for ISIS’s purposes), here the “direct nexus between Grande’s conduct and the tort at issue permits an inference that Grande’s knowing provision of internet services to infringing subscribers was actionable.”

The district court’s jury instructions – that Grande could be contributorily liable if Grande could have “take[n] basic measures to prevent further damages to copyrighted works, yet intentionally continue[d] to provide access to infringing sound recordings,” were not erroneous, as Grande had access to [...]

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Jurisdiction “Found”: Navigating E-Commerce Boundaries in Copyright Disputes

by | Oct 24, 2024 |

In a copyright case, the US Court of Appeals for the Tenth Circuit determined that the district court had jurisdiction over two Chinese companies that consented to jurisdiction in any judicial district in which a third-party e-commerce company could be “found.” The Tenth Circuit concluded that whether an e-commerce company is “found” in a district for purposes of jurisdiction is determined based on whether its officers or agents carry out the company’s business there, not on the manner in which it does business. DP Creations, LLC v. Adolly.com, Case No. 23-4126 (10th Cir. Oct. 15, 2024) (Tymkovich, Bacharach, Carson, JJ.)

As background, the Digital Millenium Copyright Act (DMCA) “preserve[d] strong incentives for service providers and copyright owners to cooperate and detect and deal with copyright infringements that take place in the digital networked environment.” After a copyright owner notifies a service provider of an infringement, the service provider can avoid liability for a subscriber’s copyright infringement if the service provider expeditiously moves or disables access to the allegedly infringing material and notifies the subscriber of such actions taken. Under Section 512(g)(3)(D) of the DMCA, a subscriber with an address outside the United States may have the material replaced by submitting a written counter-notification to the service provider that includes a statement that the “subscriber consents to the jurisdiction of the Federal District Court . . . for any judicial district in which the service provider may be found.”

DP Creations, d/b/a Bountiful Baby, is a copyright owner for reborn doll sculptures. Bountiful Baby notified a third-party e-commerce company (service provider) that two Chinese companies (subscribers), including Adolly, were selling counterfeit copies of reborn dolls through the e-commerce company. The e-commerce company took down the infringing materials, and Adolly submitted counter-notifications, including consent to personal jurisdiction in “any judicial district in which [the e-commerce company] may be found and agreeing to accept service of process from” Bountiful Baby. Bountiful Baby subsequently filed a copyright infringement action in the District of Utah. After the Chinese companies failed to respond, the district court denied the motion for entry of default judgment against the defendants for lack of personal jurisdiction. In construing the scope of jurisdiction under § 512(g)(3)(D), the district court used Black’s Law Dictionary to understand the plain meaning of “found” and required Bountiful Baby to show that the e-commerce company did business in Utah such that it was subject to suit and service of process there. Bountiful Baby appealed.

Because § 512(g)(3)(D)’s phrase “may be found” is not defined in the statute, the Tenth Circuit (like the district court) undertook to construe the ordinary meaning of the phrase. The Court decided against using the definition found in Black’s to construe the meaning of “found” as it relates to service of process on corporations that are not a subscriber of the involved service provider. The Court concluded that in cases where the service provider is not a resident of the forum state and potentially not “at home” in the forum state, Black’s [...]

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Creative License: Fair Use Defense Paints Over Infringement Battle

by | Oct 3, 2024 | ,

Affirming the application of the fair use defense to copyright infringement, the US Court of Appeals for the Fifth Circuit determined that a district court’s sua sponte invocation of a fair use defense to parallel trademark claims was harmless error. The Court also affirmed that the district court did not abuse its discretion in awarding attorneys’ fees based on the prevailing party standard for copyright claims. Keck v. Mix Creative Learning Ctr., L.L.C., Case No. 23-20188 (5th Cir. Sept. 18, 2024) (Jones, Smith, Ho, JJ.)

Michel Keck, a multimedia artist, sued Mix Creative Learning Center, a Texas-based art studio, for copyright and trademark infringement after Mix Creative sold art kits featuring Keck’s dog-themed artwork and a brief biography, intended for at-home learning during the pandemic. Keck had registered her Dog Art series (in the form of decorative works) with the US Copyright Office and her name as a trademark with the US Patent & Trademark Office. Keck claimed that Mix Creative’s art kits violated her rights. After receiving notice of the lawsuit, Mix Creative promptly ceased selling its kits.

Following discovery, both parties filed cross-motions for summary judgment. The district court granted summary judgment in favor of Mix Creative on Keck’s copyright claim, finding fair use, and also granted summary judgment on the trademark claim sua sponte, as both parties had agreed that the fair use defense applied to both claims. The district court further awarded Mix Creative more than $100,000 in attorneys’ fees and costs, although it declined to hold Keck’s attorneys jointly and severally liable.

Keck appealed, challenging the copyright fair use finding and the district court’s sua sponte application of the fair use defense to the trademark claim. Mix Creative challenged the district court’s refusal to hold Keck’s attorneys jointly and severally liable for fees.

The Fifth Circuit affirmed the district court’s application of the fair use defense to Keck’s copyright claims. The Court focused on the first and fourth factors of the fair use defense (respectively, the purpose and character of the use and the effect of the use on the potential market for or value of the original work), noting that the courts typically give these two factors special attention.

On the first factor, the Fifth Circuit found Mix Creative’s use to be transformative. Although Mix Creative is a commercial enterprise, the art kits served an educational purpose, distinct from the decorative purpose of Keck’s original works. As a result, the likelihood of Mix Creative’s kits serving as a substitute for Keck’s original works in the market was low.

The fourth factor also favored Mix Creative, as the Fifth Circuit found no evidence that Mix Creative’s kits would harm the market value of Keck’s original decorative works. In fact, the Court suggested that the kits might enhance Keck’s reputation and sales by providing her with free advertising. Furthermore, Mix Creative operated in a different market (educational rather than decorative), and Keck had not demonstrated any history of selling derivative works for children’s art lessons. The [...]

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Dolly Pardon: American Girl Can Sue Foreign Counterfeiter for Internet Sales

by | Sep 26, 2024 | ,

The US Court of Appeals for the Second Circuit clarified its standards for establishing personal jurisdiction over foreign defendants that conduct business over the internet. American Girl, LLC v. Zembrka, DBA www.zembrka.com; www.daibh-idh.com, Case No. 21-1381 (2d Cir. Sept. 17, 2024) (Cabranes, Parker, Kahn, JJ.)

In 2021, American Girl, the famous doll manufacturer, filed suit against Zembrka in the US District Court for the Southern District of New York. American Girl brought multiple claims under the Lanham Act, including claims for trademark counterfeiting and trademark infringement, for advertising and sales of counterfeit American Girl dolls through Zembrka’s websites. Zembrka is located in and operates from the People’s Republic of China. American Girl was granted a temporary restraining order (TRO) that enjoined Zembrka from marketing, manufacturing, or distributing counterfeit American Girl products and from advertising counterfeit or confusingly similar American Girl marks.

Zembrka appealed and moved to dissolve the TRO and dismiss the complaint for lack of personal jurisdiction. Zembrka argued that it did not transact or do business in New York as required to establish personal jurisdiction under C.P.L.R. § 302(a)(1). American Girl asserted, with supporting evidence, that customers in New York could place orders through Zembrka’s interactive websites by inputting payment, billing, and shipping information, and that customers were sent confirmations of their orders to shipping addresses in New York. American Girl’s counsel purchased and paid for allegedly counterfeit American Girl merchandise through Zembrka’s website and received order confirmation emails. Zembrka conceded at oral argument that the allegedly counterfeit American Girl dolls were available via its website for purchase by people in New York.

The TRO was served on Zembrka. Two weeks later, Zembrka canceled the orders and refunded the payments for the purchases made by American Girl’s counsel. The district court granted the motion to dismiss for lack of personal jurisdiction, reasoning that because American Girl did not provide evidence that the allegedly counterfeit goods had shipped to New York, no business was transacted under § 302(a)(1). American Girl moved for reconsideration, providing evidence of other purchases of allegedly counterfeit merchandise by New York customers. It also produced evidence showing that New York customers purchased more than $41,000 worth of other Zembrka products over the past year via PayPal. The district court denied the motion because American Girl still did not demonstrate that any of the allegedly infringing products were actually delivered to New York, and customer payments were refunded. American Girl appealed.

The primary issue on appeal was whether American Girl sufficiently established that Zembrka transacted business in New York for the purposes of § 302(1)(a). The Second Circuit found that this requirement was easily satisfied, explaining that the district court had incorrectly interpreted the Second Circuit’s 2010 decision in Chloe v. Queen Bee of Beverly Hills as requiring a shipment to be an essential component of “transacting business.” It was enough that American Girl provided evidence that New York customers submitted orders and payments for allegedly counterfeit merchandise through Zembrka’s websites: “Section 302(a)(1) [...]

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Even Free Libraries Come With a Cost

by | Sep 12, 2024 |

The US Court of Appeals for the Second Circuit affirmed a district court’s judgment of copyright infringement against an internet book archive, holding that its free-to-access library did not constitute fair use of the copyrighted books. Hachette Book Group Inc. v. Internet Archive, Case No. 23-1260 (2d Cir. Sept. 4, 2024) (Menashi, Robinson, Kahn, JJ.)

Hachette Book Group, HarperCollins Publishers, John Wiley & Sons, and Penguin Random House (collectively, the publishers) brought suit against Internet Archive alleging that its “Free Digital Library,” which loans copies of the publishers’ books without charge, violated the publishers’ copyrights. Internet Archive argued that its use of the publishers’ copyrighted material fell under the fair use exception to the Copyright Act because Internet Archive acquired physical books and digitized them for borrowing (much like a traditional library) and maintained a 1:1 ratio of borrowed material to physical copies except for a brief period during the COVID-19 pandemic.

The district court reviewed the four statutory fair use factors set forth in § 107 of the Copyright Act:

  • The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.
  • The nature of the copyrighted work.
  • The amount and substantiality of the portion used in relation to the copyrighted work as a whole.
  • The effect of the use upon the potential market for or value of the copyrighted work.

The district court found that Internet Archive’s use of the works was not covered by the fair use exception because its use was non-transformative, was commercial in nature due to its solicitation of donations, and was disruptive of the market for e-book licenses. Internet Archive appealed.

The Second Circuit affirmed, addressing each factor in turn.

The Second Circuit held that Internet Archive’s use of the copyrighted material was non-transformative because Internet Archive copied the works wholesale and the “transformation” of the material from a physical copy to a digital copy that could be loaned out was not sufficient to fundamentally alter the nature of the copyrighted material. The Court maintained that the “recasting of a novel as an e-book” is a “paradigmatic” example of a derivative work.

However, contrary to the district court, the Second Circuit found that Internet Archive’s use of the works was not commercial in nature despite its solicitation of donations, citing Internet Archive’s nonprofit status and free distribution of archived materials. The Court explained that the mere association with other platforms where users may buy print copies of the works combined with the existence of a “donate” button was insufficient to render the use commercial.

The Second Circuit held that the second fair use factor also weighed against Internet Archive, since both the fiction and nonfiction works digitized by Internet Archive were nonetheless original and creative. The Court held that the “greater leeway” that is allowed for fair use of “factual or informational” work was not sufficient to weigh in favor of Internet Archive since the nonfiction works nevertheless “represent the authors’ [...]

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Arguing Internet Availability to Establish Copyright Infringement Is Bananas

by | Aug 29, 2024 |

In an unpublished opinion, the US Court of Appeals for the Eleventh Circuit affirmed a district court’s decision finding that a pro se Californian artist failed to establish that an Italian artist had reasonable opportunity to access the copyrighted work simply because it was available to view on the internet. Morford v. Cattelan, Case No. 23-12263 (11th Cir. Aug. 16, 2024) (Jordan, Pryor, Branch, JJ.) (per curiam).

A plaintiff alleging copyright infringement may show factual copying by either direct or indirect evidence showing “that the defendant had access to the copyrighted work and that there are probative similarities between the allegedly infringing work and the copyrighted work.” To do so, however, the copyright owner must establish a nexus between the work and the defendant’s alleged infringement. Mere access to a work disseminated in places or settings where the defendant may have come across it is not sufficient.

Joe Morford’s Banana and Orange and Maurizio Cattelan’s Comedian both “involve the application of duct tape to a banana against a flat surface” (see images below from the court decision’s appendix). Cattelan’s Comedian went viral and sold for more than $100,000 at Miami’s Art Basel. Morford claimed that Comedian was a copy. The district court found that Morford failed to show that Cattelan had reasonable opportunity to access Banana and Orange and thus could not establish a copyright claim. Morford appealed.

On appeal, Morford argued that because he could show striking similarity between Banana and Orange and Comedian, he was not required to proffer evidence of access to show copyright infringement. In the alternative, he argued that he could show substantial similarity and that Cattelan had reasonable opportunity to access Banana and Orange as it was widely disseminated and readily discoverable online.

The Eleventh Circuit explained that in circuits adopting a widespread dissemination standard, that standard requires showing that the work enjoyed “considerable success or publicity.” Morford showed that Banana and Orange was available on his public Facebook page for almost 10 years and featured on his YouTube channel and in a blog post, with views in more than 25 countries. But Banana and Orange’s availability on the internet, without more, was “too speculative to find a nexus” between Cattelan and Morford to satisfy the factual copying prong of a copyright infringement claim, according to the Court.

The Eleventh Circuit also found that Morford failed to meet the high burden of demonstrating that the original work and accused infringement were so strikingly similar as to establish copying. Such similarity exists if the similarity in appearance between the two works “is so great that [it] precludes the possibility of coincidence, independent creation or common source,” but identical expression does not necessarily constitute infringement. In this analysis, a court addresses the “uniqueness or complexity of the protected work as it bears on the likelihood of copying.” Morford argued that he [...]

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It’s All Grecco to Me: No “Sophisticated Plaintiff” Exception to Discovery Rule

by | Aug 29, 2024 |

In a case of first impression, the US Court of Appeals for the Second Circuit held that there is no “sophisticated plaintiff” exception to the Copyright Act’s discovery rule, which provides that a copyright claim only accrues upon the copyright owner’s discovery of the infringement or when the copyright owner (in the exercise of due diligence) should have discovered the infringement. Michael Grecco Productions, Inc. v. RADesign, Inc., Case No. 23-1078 (2d Cir. Aug. 16, 2024) (Wesley, Chin, Lee, JJ.)

Michael Grecco Productions (MGP) is a photography studio and business owned by commercial photographer Michael Grecco, who presents himself as an industry leader in copyright registration and enforcement. This case arose in the context of Grecco’s January 2017 photos of a model wearing shoes designed by Ruthie Davis. The photos were published in a magazine in August 2017. MGP claimed that Davis republished at least two of these photos on her brand’s website and social media platforms without a license. In its complaint, MGP alleged that Davis’s use of the photos began on August 16, 2017, but that MGP did not discover this infringement until February 8, 2021. On October 12, 2021 (more than four years after the infringement began but less than one year after its discovery), MGP filed suit against Davis alleging copyright infringement. MGP’s complaint also pled facts describing Grecco’s “efforts to educate photographers concerning the benefits of copyright registration” and how Grecco himself “spends time and money to actively search for hard-to-detect infringements, and how he enforces his rights under the Copyright Act.”

Davis moved to dismiss the suit as time-barred, arguing that the complaint was deficient on its face based on the Copyright Act’s three-year limitations period. Purporting to apply the governing “discovery rule,” the district court found that MGP’s “relative sophistication as an experienced litigator in identifying and bringing causes of action for unauthorized uses of Grecco’s copyrighted works leads to the conclusion that it should have discovered, with the exercise of due diligence,” the alleged infringement within the statute’s three-year limitations period. Based on this rationale, the district court granted Davis’s motion to dismiss. MGP appealed.

Reviewing the district court’s ruling de novo, the Second Circuit found that the district court erred as a matter of law in concluding that MGP’s complaint was barred by the three-year limitations period.

The Second Circuit explained that it (and 10 other circuit courts) had already held that in enacting the Copyright Act, Congress intended to employ “the discovery rule” as the measure of when a claim for infringement accrues. Under this rule, a claim for copyright infringement accrues when a diligent plaintiff discovers or should have discovered the infringement. This timing is in contrast to “the injury rule,” under which the claim would accrue when the infringement in-fact occurred. As the Court explained, the discovery rule is not an equitable tolling or estoppel doctrine available to some “worthy” plaintiffs but not others. Rather, it is the rule used to determine when a cognizable claim for copyright [...]

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Insuring Innovation: Software Code May Be Protected as an Arrangement

by | Aug 22, 2024 | ,

The US Court of Appeals for the Eleventh Circuit once again remanded a trade secret and copyright dispute involving software for generating life insurance quotes, finding that the district court erred by failing to consider the copyrightability of the source code’s arrangement. As to the trade secret claim, however, the Eleventh Circuit found that the district court did not err in finding that the defendants misappropriated the trade secrets at issue and could be held jointly and severally liable, despite varying levels of culpability. Compulife Software, Inc. v. Newman, Case No. 21-14074 (11th Cir. Aug. 1, 2024) (Jordan, Brasher, Abudu, JJ.)

Compulife’s software generates life insurance quotes using a proprietary database of insurance rates. The software produces a quote by using blocks of code, arranged in a particular manner, that correspond to different data points such as state, birth month, birthday, birth year, sex and smoking status. Compulife licenses its software to customers and offers an online version to the public.

David Rutstein is a former insurance agent who is permanently barred from the profession. Rutstein misled Compulife into giving him its software by pretending that he worked with someone who had a license to use it. Rutstein then created and registered several websites in his son’s name using Compulife’s software in connection with the sites. One of the websites was later owned by Aaron Levy. Rutstein and Levy directed an employee, Moses Newman, to launch a scraping attack on Compulife’s website to get millions of quotes, which they used for their own websites. Compulife’s sales declined as a result.

Compulife sued Rutstein, Rutstein’s son, Levy and Newman for copyright infringement and misappropriation of trade secrets, among other claims. After a bench trial, the parties appealed, and the Eleventh Circuit directed the district court to make more specific findings. After a second bench trial, the district court determined that the defendants did not infringe Compulife’s software by copying it and using it for their own website, but they did misappropriate Compulife’s trade secrets. The defendants were held jointly and severally liable despite differing degrees of culpability. All parties appealed.

Compulife argued that the district court erred in concluding that the defendants did not infringe its copyright. The Eleventh Circuit agreed in part, finding that the district court incorrectly applied the abstraction-filtration-comparison test used in software copyright infringement analyses. Compulife claimed that the arrangement of its various source code elements (e.g., state, birth month, birthday, birth year and sex) was a creative and therefore protectable form of expression. The Court agreed that the arrangement was potentially protectable, similar to its holding in another case that the arrangement of yacht listings in a boat guide could be protectable. BUC Int’l v. Int’l Yacht Council (11th Cir. 2007). The Court remanded the copyright infringement analysis to the district court, finding that it erred in the abstraction step because it “never identified the entire arrangement of these variables in the code as a constituent component of the code.” The Eleventh Circuit disagreed, however, with [...]

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Digital Rights, Digital Wrongs: The DMCA Lives On

by | Aug 15, 2024 |

The US Court of Appeals for the District of Columbia affirmed that the Digital Millennium Copyright Act’s (DMCA) laws against bypassing digital locks and distributing circumvention tools are designed to prevent piracy and are not unconstitutionally broad. Matthew D. Green, et al. v. United States Department of Justice, et al., Case No. 23-5159 (D.C. Cir. Aug. 2, 2024) (Pillard, Henderson, Millett, JJ.)

As technology has advanced, access to copyrighted content has expanded dramatically, with billions of people now able to stream or download content instantly. In response to this digital revolution, Congress enacted the DMCA 26 years ago to address the growing threat of digital piracy and unauthorized access to copyrighted materials online. The DMCA reinforces the use of technological protection measures, or “digital walls,” to secure copyrighted works from unauthorized access. The DMCA’s anticircumvention provision prohibits bypassing these technological protections, treating such acts as akin to digital trespassing.

Matthew Green, a computer science professor at Johns Hopkins University, and Andrew Huang, a tech inventor, challenged the constitutionality of key sections of the DMCA. They argued that the DMCA’s anticircumvention and antitrafficking provisions, which prohibit the circumvention of technological protections on copyrighted works and the distribution of circumvention tools, violated their First Amendment rights. They claimed that these provisions excessively restricted their ability to engage in lawful speech, particularly in the context of fair use.

While the DMCA leaves the fair use defense intact, Green and Huang argued that the DMCA unduly restricts fair use, particularly when the DMCA prohibits activities that would otherwise be considered lawful under copyright law. The district court dismissed Green and Huang’s facial First Amendment challenges, finding that they had not demonstrated that § 1201 of the DMCA overwhelmingly restricted protected speech to the extent that it warranted facial invalidation. Green and Huang appealed.

The DC Circuit explained that the DMCA’s anticircumvention provisions primarily target conduct – specifically, the act of bypassing digital protections – rather than expression. The Court noted that such conduct is not inherently expressive and does not typically implicate the First Amendment. The Court also found that the DMCA’s anticircumvention provisions serve a legitimate and extensive purpose in preventing piracy. While Green and Huang cited examples of potential overreach, such as a teacher circumventing a DVD’s encryption for classroom use, the Court explained that these examples did not convincingly demonstrate that the statute’s unconstitutional applications outweighed its lawful ones. The Court further explained that existing exemptions, such as those allowing circumvention for educational purposes, reduce the burden on free speech.

Green and Huang also argued that § 1201(a) imposes an unconstitutional prior restraint on speech by requiring fair users to obtain exemptions from the Librarian of Congress before circumventing technological protections. They likened this process to a speech-licensing regime, claiming that it invites content and viewpoint discrimination without sufficient judicial oversight. However, the DC Circuit rejected this claim, ruling that the DMCA’s exemption process is not a prior restraint on speech. The Court reiterated and emphasized that § 1201(a) regulates conduct, [...]

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Go Home: No “Prevailing Party” Status After Voluntary Dismissal Without Prejudice

by | Aug 15, 2024 |

The US Court of Appeals for the Eleventh Circuit affirmed a district court’s ruling that a copyright holder’s voluntary dismissal of its claims did not render the defendant a prevailing party entitled to attorneys’ fees under the Copyright Act. Affordable Aerial Photography, Inc. v. Prop. Matters USA, LLC, Case No. 23-12563 (11th Cir. July 30, 2024) (Wilson, Grant, Lagoa, JJ.)

Affordable Aerial Photography (AAP) filed suit against Property Matters and Home Junction over alleged copyright infringement of a 2010 photograph titled “Presidential Place Front Aerial 2010 AAP,” which provides an aerial view of a residential condominium complex. AAP owns all real estate photos and related products (slide shows, virtual tours, stock photography) of Robert Stevens and licenses them for limited use by customers, such as luxury real estate companies. Property Matters is a real estate brokerage, and Home Junction is a real estate marketing solutions and services provider that designed and maintained Property Matters’ website.

The work was posted with copyright management information and registered with the Copyright Office in April 2018. During or before April 2017, the work appeared on Property Matters’ website without authorization, but AAP did not discover the alleged infringement until February 2022. After AAP filed suit, Property Matters filed a motion to dismiss arguing (in relevant part) that 17 U.S.C. § 507(b) sets a three-year statute of limitations from when the claim accrued (i.e., April 2017) to bring civil action and, therefore, AAP’s suit was untimely by more than two years. The district court denied the motion without prejudice. AAP then filed a notice of voluntary dismissal without prejudice under Rule 41(a)(1)(A)(i) with respect to its action against Property Matters and filed a joint notice of settlement with Home Junction soon after, which closed the case.

Property Matters then moved for attorneys’ fees under 17 U.S.C. § 505, asserting that “the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.” AAP argued that Property Matters was not the prevailing party because the voluntary dismissal was without prejudice and the limitations period had not yet expired. The district court found that the voluntary dismissal did not materially alter the legal relationship between the parties. The district court applied the “discovery rule” to conclude that AAP’s copyright infringement claim did not accrue until it discovered the alleged infringement in February 2022 and therefore AAP was not time-barred from raising its copyright infringement claim in a separate suit against Property Matters through February 2025. Property Matters appealed.

Reviewing the legal question on appeal de novo, the Eleventh Circuit affirmed. The Court reasoned that a defendant is not the prevailing party when a plaintiff’s action is voluntarily dismissed without prejudice under Rule 41(a)(1)(A)(i). This is true regardless of whether a statute of limitations has expired. The Court explained that a defendant does not attain prevailing party status merely because, as a practical matter, a plaintiff is unlikely or unable to refile its claims. Instead, the district court itself must act to reject [...]

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