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In a copyright infringement suit between competing video game makers, long after the time for voluntary dismissal under Fed. R. Civ. Proc. 41(a)(1) had passed, the plaintiff filed a motion to dismiss its own claim without prejudice. The court, however, dismissed the case with prejudice and awarded costs to the defendant. The defendant then sought an award of its attorneys’ fees pursuant to § 505 of the Copyright Act. The district court denied the motion, holding that the defendant was not the “prevailing party” as required under § 505 because the court “did not in any way pass on the merits of the litigation. . . .”
The Seventh Circuit reversed and held that a litigant is a “prevailing party” for purposes of a fee award when it obtains a “material alteration of the legal relationship of the parties,” citing Buckhannon Board & Care Home, Inc. v. West Virginia Dep't of Health & Human Resources, 532 U.S. 598 (2001). The Seventh Circuit stated: “[Defendant] obtained a favorable judgment. That this came about when Riviera threw in the towel does not make Midwest less the victor than it would have been had the judge granted summary judgment or a jury returned a verdict in its favor. Riviera sued; Midwest won; no more is required.”
Having determined that defendant was a “prevailing party,” the Seventh Circuit then went on to determine whether this was an appropriate case for fee shifting under the standards of §505 of the Copyright Act. The court held: “Unlike many fee-shifting statutes, which entitle prevailing plaintiffs to recover fees as a matter of course but allow prevailing defendants to recover fees only if the suit was frivolous, § 505 treats both sides equally and allows an award in either direction. Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S. Ct. 1023, 127 L. Ed. 2d 455 (1994). Since Fogerty we have held that the prevailing party in copyright litigation is presumptively entitled to reimbursement of its attorneys' fees. See, e.g., Woodhaven Homes & Realty, Inc. v. Hotz, 396 F.3d 822, 824 (7th Cir. 2005); Assessment Technologies of Wisconsin, LLC v. WIREdata, Inc., 361 F.3d 434 (7th Cir. 2004).”
The Seventh Circuit also rejected the district court’s formulation for when a fee award is appropriate. In refusing to award fees, the district court had stated that “the Court rejects the suggestion that [Riviera's] pursuit of this action was frivolous, baseless, or objectively unreasonable.” The Seventh Circuit, however, held : “This is not, however, the standard for an award under § 505; it is the standard used under statutes such as 42 U.S.C. § 1988 that authorize an award to a prevailing defendant only if the suit is frivolous or vexatious. Fogerty rejects such an asymmetric approach for § 505.”
Although not expressly addressed, the Seventh Circuit indicated that the appropriate analysis for an award of fees is to determine whether there is “any reason not to honor the presumption that the prevailing party, plaintiff or defendant, recovers attorneys' fees under § 505?”