Home » Copyright Law Updates » New Judicial Opinions » Current Summary
Copyright Law Summary
Seventh Circuit Remands Safety Manual Copyright Infringement Case to Award Attorneys' Fees to Prevailing Defendant
Eagle Services Corp. v. H2O Industrial Services, Inc.
No. 07-1997, United States Court of Appeals for the Seventh Circuit, 07/09/2008
Companies Mentioned: Eagle Services Corp., H2O Industrial Services, Inc.
Holding
In this infringement dispute over plaintiff-appellee Eagle Services Corp.'s ("Eagle") copyrighted safety manual, the U.S. Court of Appeals for the Seventh Circuit reversed the decision of the District Court for the Northern District of Indiana's decision, and remanded the case to compute and award reasonable attorneys' fees to defendant-appellant H20 Industrial Services, Inc. ("H2O"). Eagle sued H20 in the U.S. District Court for the Northern District of Indiana for copyright infringement for the use of Eagle's safety manual. H20 prevailed in the District Court on a motion for judgment as a matter of law, but appealed the District Court's refusal to grant attorneys fees. On appeal, the Seventh Circuit overturned the District Court's finding that the suit was not frivolous and was not filed in bad faith. The rule in a copyright case, under Copyright Act, 17 U.S.C. Section 505, is that a prevailing defendant receives an award of attorneys' fees unless the plaintiff shows its lawsuit was neither frivolous or filed in bad faith. Here, Eagle failed to demonstrate the validity of its suit against H2O and was ordered to pay attorneys' fees.
Detailed Summary
Plaintiff-appellee Eagle was in the business of cleaning up contaminated sites. Four staff members left their employment with Eagle to form their own company (defendant-appellant H2O) to compete with Eagle. Opinion, p.1.
Eagle had a copyrighted safety manual, pursuant to a compilation under 17 U.S.C. Sections 101 (“compilation”), 103(b), as the manual consisted mostly of quotations from Occupational Safety and Health Act ("OSHA") regulations. H2O later prepared its own manual, and other than two Eagle spies used by Eagle to obtain under cover its copies of its own manual from H20, no prospective customer of H2O was ever shown the Eagle manual. Id., p. 2. H2O derived no profits from the alleged copyright infringement; but Eagle argued that without a manual, H2O could not provide any services without violating OSHA regulations, and therefore that Eagle should be entitled to recover all the profits that H2O made in its business before it created its own manual. Id.
Eagle acknowledged that it could not prove actual damages and that it was not entitled to statutory damages. After jury trial, the district court granted H2O’s motion for judgment as a matter of law, on the basis that no evidence was presented that either OSHA or the regulations under it requires companies to have a safety manual. Id., citing 29 C.F.R. Sections 1910.2(f), 1926.21, and Danis-Shook Joint Venture XXV v. Secretary of Labor, 319 F.3d 805, 812-13 (6th Cir. 2003). Regardless of the dismissal of the action, the District Court refused to grant attorneys’ fees in favor of H20 as the prevailing party.
H20 appealed the District Court’s refusal to award attorneys’ fees. Disagreeing with the District Court, the Seventh Circuit found that Eagle’s suit was frivolous, filed in bad faith, and that the standards for what constitutes an “indirect profits” suit were ascertainable. According to the Seventh Circuit, the suit was filed in order to impede the competitor and intimidate other employees of Eagle from one day competing with Eagle. Id., p. 4. Eagle engaged in extensive discovery that included deposing all of H2O’s customers and a number of its prospective customers; H2O claimed that, as a result, H2O lost many customers. Id.
The Seventh Circuit held that the suit was not filed in good faith because Eagle never had any basis for thinking that H2O would have been shut down, notwithstanding that there was a copyright violation. A lawsuit may be frivolous if the plaintiff has no grounds for obtaining a money judgment. The Seventh Circuit held that attorneys’ fees should be awarded to the defendant where such a frivolous suit was filed. Id., p. 5, citing Durr v. Intercounty Title Co., 14 F.3d 1183, 1188 (7th Cir. 1994).
The Seventh Circuit found it doubtful that profits from the sale of noninfringing goods or services (in this case, H2O’s clean-up services) could be attributed to copyright infringement with enough confidence to support a judgment in Eagle’s favor. Id., citing 6 William F. Patry, Patry on Copyright, Section 22:131, pp. 312-15. Under the Copyright Act, 17 U.S.C. Section 505, a prevailing party receives an award of fees. On that basis, the Seventh Circuit reversed the District Court and remanded the case with instructions to compute and award reasonable attorneys’ fees to H20.
View a PDF of the judicial opinion.Service
Link to this article · 
Send via E-mail · 
Printable Version (opens in new window)
