Whelan Associates, Inc. v. Jaslow Dental Laboratory, Inc.
91 A.L.R. Fed. 827, 226 U.S.P.Q. (BNA) 1013, 609 F. Supp. 1325 (1985)
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Rule of Law:
A prevailing plaintiff in a copyright infringement action may be statutorily barred from recovering attorney's fees under 17 U.S.C. § 412 if the infringement commenced before the effective date of copyright registration, and courts have discretion under 17 U.S.C. § 505 to deny fees even for willful infringement when legal issues are novel and the losing party genuinely believed in their legal right to act.
Facts:
- Jaslow Dental Laboratory, Inc. had developed a computer program known as the Dentalab system, for which it had been granting licenses for several years.
- Rand Jaslow, the primary actor on behalf of the defendants, began developing an infringing IBM-PC system around January 1, 1983.
- Rand Jaslow surreptitiously and without authority took possession of a copy of the Dentalab system's source code.
- Dentcom, Inc. was formed on August 1, 1983.
- Around August 1, 1983, Dentcom, Inc. began advertising and aggressively marketing infringing copies of the Dentalab system.
- Jaslow Dental Laboratory, Inc. filed its first copyright registrations for the Dentalab system on August 16, 1983.
- In mid-August 1983, Dentcom, Inc. made an infringing sale of a license to Cooper Laboratories.
- Defendants, relying on legal advice, sincerely believed they were legally entitled to take the actions they took regarding the copyright infringement claims.
Procedural Posture:
- Jaslow Dental Laboratory, Inc. successfully sued Dentcom, Inc. in the U.S. District Court for the Eastern District of Pennsylvania for willful and intentional copyright infringement of computer software programs.
- On January 22, 1985, the District Court issued an opinion and order, entering judgment against all defendants, assessing damages, and awarding plaintiff counsel fees and costs.
- Following this judgment, defendants moved to set aside the findings of fact, conclusions of law, and judgment, and requested a new trial or amendment of judgment.
- Plaintiff also filed a motion to amend the judgment, seeking a further accounting, prejudgment interest, and a slightly increased award of damages.
- Plaintiff’s counsel filed a motion for an award of $187,568.91 in counsel fees plus $14,537.90 in costs.
- The District Court is now considering these post-judgment motions, including whether to reconsider the prior award of counsel fees and costs due to a lack of prior briefing on the entitlement issue.
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Issue:
Is a prevailing plaintiff in a copyright infringement action entitled to an award of attorney's fees under 17 U.S.C. § 505 when the infringement commenced before the effective date of copyright registration, and absent exceptional circumstances or bad faith by the infringer beyond deliberate use of copyrighted material?
Opinions:
Majority - VANARTSDALEN, District Judge
No, a prevailing plaintiff in a copyright infringement action is generally not entitled to an award of attorney's fees under 17 U.S.C. § 505 when the infringement commenced before the effective date of copyright registration, as prohibited by 17 U.S.C. § 412, and even if not statutorily barred, a court may decline to award fees when the legal and factual issues are novel and complex, and the losing party genuinely believed they had a legal right to their actions. The court concluded that plaintiff's application for attorney's fees should be denied. First, the court reiterated that while 17 U.S.C. § 505 grants courts discretion to award attorney's fees to the prevailing party, such awards are not routine. The court noted that the case presented novel and complex factual and legal issues regarding computer program copyright infringement and contractual relationships. Despite finding the defendants' infringement willful and deliberate—meaning knowingly and intentionally committed with full knowledge of plaintiff's ownership claim and involving reprehensible conduct—the court found that defendants sincerely believed they were legally entitled to their actions, having relied on competent legal advice. Citing Roy Export, etc. v. Columbia Broadcasting System, the court emphasized that a determination of bad faith for attorney's fees depends on whether the defendant genuinely believed they had a legal right to make such use, not merely on deliberate use. Applying this standard, the court would decline to award fees. Second and primarily, the court held that attorney's fees were statutorily precluded by 17 U.S.C. § 412, which bars fees for infringement commenced before copyright registration. The court found that the defendants' infringement 'commenced' prior to August 16, 1983, the date of registration, pointing to Rand Jaslow's development of the infringing system from January 1983, Dentcom's marketing around August 1, 1983, and an infringing sale in mid-August 1983. The court rejected the plaintiff's arguments that a single prior experimental sale did not constitute commencement or that each license sale was a discrete infringement, asserting that 'commencement of infringement' refers to the first act in a series of ongoing infringements to promote early copyright registration. Therefore, even if discretionary factors favored an award, Section 412 would prohibit it. The court also noted, as a minor point, that the fee petition was defective for failing to segregate fees incurred in the federal action from those in a related state action.
Analysis:
This case significantly clarifies the interplay between the discretionary award of attorney's fees under 17 U.S.C. § 505 and the statutory bar under 17 U.S.C. § 412 in copyright infringement cases. It underscores the critical importance of prompt copyright registration, as waiting until after infringement commences can forfeit the right to recover attorney's fees, even for willful infringement. The court's interpretation of 'commencement of infringement' as the first infringing act, rather than each discrete subsequent act, strengthens the incentive for early registration. Furthermore, the decision provides valuable guidance on the factors courts consider when exercising discretion under § 505, particularly emphasizing the novelty and complexity of legal issues and the defendant's good faith belief in their legal right, even if mistaken, as reasons to deny fees.
