Dismiss Copyright Infringement Action When You Agree to Arbitrate
(photo by Bansky)
If you and opposing counsel enter into a post-dispute arbitration agreement that involves a copyright infringement issue, be sure to dismiss the action that was pending in the US district court. If not, chances are you will be held liable for the winning party’s legal fees incurred in post-award proceedings under 17 USC § 505.
That is the lesson I draw from the decision of the US District Court for the Northern District of California in Brayton Purcell LLP v. Recordon & Recordon, --- F.Supp.2d ---, 2007 WL 1462365 (N.D. Cal., May 18, 2007) (currently available only on Westlaw).
What happened?
The law firm Brayton Purcell, headquartered in Novato, California (near San Francisco), discovered that the website of San Diego-based Recordon & Recordon had materials on elder abuse that looked a lot like Brayton Purcell’s page on that subject. Recordon brought the web designer, Apptomix, into the lawsuit, which argued that it had developed that page based on independent research.
The three parties decided to submit the dispute to binding arbitration. In May 2006, the arbitrator found in favor of Brayton Purcell, and the two defendants sought to vacate the award. The district court denied the motions to vacate and confirmed the award. Then Brayton Purcell filed a motion for post-arbitration fees and costs.
The Court’s Holding
The court found that Section 505 of the Copyright Act applied to this case.
As this case was not dismissed by the parties when they agreed to submit the dispute to arbitration, this case remains a “civil action under this title” within the literal meaning of § 505. In this regard, cases cited by Recordon denying post-arbitration fees are inapposite. They do not involve a continuation of a court case in which interim arbitration has taken place, but rather the initiation of an independent lawsuit seeking confirmation of an arbitration award.
In other words, [t]he analysis might be different had the parties in the case at bar stipulated to a dismissal of the case as part of their agreement to submit to binding arbitration. There would no longer have been a “civil action” under the Copyright Act pending before the Court, and any new court filing seeking to confirm the arbitration award arguably would not be a “civil action” under the Copyright Act.
Rather, federal jurisdiction for such a suit would have to have been independently established, e.g., diversity. To be absolutely clear on the matter, the court stressed that in agreeing to binding arbitration, the parties could have stipulated that fees would be awarded only in arbitration, and not for any post-arbitration proceedings.
They did not, however, and the Court will not infer a waiver of fees by Brayton Purcell based on silence.
In applying Section 505, the court analyzed in detail the factors to be considered, and found that for various reasons Recordon did not have to pay any additional fees and costs to the prevailing party. Apptomix, however, had not filed any opposition to Brayton Purcell’s motion for fees and costs, and case law indicates that it had essentially consented to whatever the court would decide on the issue.
The court found that Apptomix had to pay those fees and costs incurred by Brayton Purcell that were reasonably attributable to its conduct in the post-arbitration proceeding, which the court estimated at 70% of the total.
Conclusion
I strongly encourage litigators to enter into post-dispute mediation and arbitration agreements for the substantial savings in time and money they provide. If you do so, however, be sure to stipulate to a dismissal of the case pending in court.
