Appeals Court Uses Bogus Sherlock Holmes Case To Slam Copyright Trolling For License Fees, Suggests Antitrust Violations

from the could-be-worth-paying-attention-to-this-one dept

Back in June, we wrote about how the 7th Circuit appeals court, in a ruling written by Richard Posner, totally rejected the Sir Arthur Conan Doyle Estate's ongoing attempt to claim copyright over the character of Sherlock Holmes, even though everyone knows that all but 10 Holmes stories are in the public domain. The Estate asked the Supreme Court to put a stay on the ruling, which was quickly rejected, though it's still expected that the Estate will ask the Supreme Court to review the entire case (which the court seems unlikely to take).

In the meantime, Posner has again ruled on the case, concerning the plaintiff (remember, it was a declaratory judgment suit against the Estate), Leslie Klinger, and his request to have his attorneys' fees paid. The court grants the request but also uses the opportunity to trash the filing of bogus lawsuits around intellectual property with the hope of getting someone to pay up a small fee. In short, he bashes copyright and patent trolling pretty broadly in the ruling. Posner has been fairly vocal about his concerns with the patent system and patent trolling, but he clearly sees how it applies to copyright trolling as well. This ruling might be somewhat useful to those dealing with copyright trolling case (especially in the 7th circuit...).

Posner highlights a few recent papers about copyright trolling, and how troubling it is:
Copyright holders, the authors explain, have larger potential upsides and smaller downside risks to filing suit, since if they win they obtain damages but if they lose they don’t have to pay damages (although a loss, especially if recorded in a published opinion as in this case, may make it more difficult for them to play their extortionate game in future cases). So copiers or alleged copiers may be “induced into licensing [that is, paying a fee for a license to reproduce] the underlying work, even if this license is unnecessary or conveys non-existent rights."
He uses the example of the song Happy Birthday, which is currently involved in litigation, in a case that we've argued has some similarities to the Sherlock Holmes case. It's good to see Posner see the parallels. From there, he notes why it's so important to award attorneys' fees in these cases, otherwise trollish behavior will continue:
Unless Klinger is awarded his attorneys’ fees, he will have lost money—to be precise, $25,679.93 ($30,679.93 – $5,000)—in winning an appeal in which the defendant’s only defense bordered on the frivolous: a Pyrrhic victory if ever there was one.
And then, the bigger smackdown occurs:
The Doyle estate’s business strategy is plain: charge a modest license fee for which there is no legal basis, in the hope that the “rational” writer or publisher asked for the fee will pay it rather than incur a greater cost, in legal expenses, in challenging the legality of the demand. The strategy had worked with Random House; Pegasus was ready to knuckle under; only Klinger (so far as we know) resisted. In effect he was a private attorney general, combating a disreputable business practice—a form of extortion—and he is seeking by the present motion not to obtain a reward but merely to avoid a loss. He has performed a public service—and with substantial risk to himself, for had he lost he would have been out of pocket for the $69,803.37 in fees and costs incurred at the trial and appellate levels ($30,679.93 + $39,123.44). The willingness of someone in Klinger’s position to sue rather than pay Doyle’s estate a modest license fee is important because it injects risk into the estate’s business model. As a result of losing the suit, the estate has lost its claim to own copyrights in characters in the Sherlock Holmes stories published by Arthur Conan Doyle before 1923. For exposing the estate’s unlawful business strategy, Klinger deserves a reward but asks only to break even.
This is why fee-shifting and attorneys' fees are so damn important in both patent and copyright trolling cases. It's too bad that this year's patent reform bill was killed over this, just because some short-sighted trial lawyers hate fee shifting. Posner rightly explains just why it's important. Without it, it allows this extortion (and thank you to Posner for directly calling it that) to continue over and over again, because the cost of fighting back is just too high.

Posner also makes one other point that doesn't directly impact other trolling cases necessarily, but is interesting. He suggests that the Conan Doyle Estate may be playing with antitrust fire for abusing a "monopoly" it has no legitimate right over:
We note finally that the estate was playing with fire in asking Amazon and other booksellers to cooperate with it in enforcing its nonexistent copyright claims against Klinger. For it was enlisting those sellers in a boycott of a competitor of the estate, and boycotts of competitors violate the antitrust laws. The usual boycott is of a purchaser by his suppliers, induced by a competitor of the purchaser in order to eliminate competition from that purchaser.... This case is different, in its facts but not in economic substance or legal relevance, because the boycotters enlisted by the Doyle estate were buyers from the victim, rather than sellers to it. But functionally they were suppliers—suppliers of essential distribution services to Klinger.
In the end, the court tells the Estate to pay up $30,679.93 in legal fees to Klinger, which just covers the cost in the appeals court. Klinger is still seeking more for the cost of the district court ruling as well.

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  1. icon
    That One Guy (profile), 4 Aug 2014 @ 2:38pm

    Re:

    If the clients know that they might actually have to pay for bringing a frivolous suit, and can't just bury their opponent under legal fees until they cave, then they will be less likely to order those frivolous lawsuits, meaning less billable hours and money for the lawyer.

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