Defending Suits Brought By Copyright Trolls

Two law firms have been accused of repeatedly engaging in copyright troll litigation involving alleged infringement involving photographs. The firm that has received the most attention in the courts and the press is The Liebowitz Law Firm in New York, which filed nearly 2,000 copyright infringement cases from 2016 through 2019. Higbee & Associates of California has also been accused of engaging in troll-like tactics, although it filed only about 265 cases during that period. Based on my research, these two firms accounted for more than 13% of copyright cases filed in that three-year period. Indeed, in Sands v. Bauer Media Group USA LLC, 17-cv-9215 (S.D.N.Y. 2019), District Judge Lewis A. Kaplan attributed the "deluge" in photographic copyright infringement cases specifically to attorney Richard Liebowitz.

Copyright infringement disputes typically start with steps designed to stop the alleged infringement, such as sending a cease and desist letter, or a takedown notice pursuant to the Digital Millennium Copyright Act (DMCA). In contrast, copyright troll attorneys often begin by serving a complaint and follow up by contacting the defendant in an attempt to negotiate a monetary payment, frequently as high as $25,000.

Defense counsel in copyright infringement actions typically begin with an early case assessment of the strength of the plaintiff's case. Often this includes identifying errors in the complaint, such as failure to properly allege a registration, improperly seeking statutory damages, seeking relief barred by the statute of limitations and exploring issues regarding the deposit copy for the registration. Defense counsel can also evaluate a plaintiff's potential for recovering damages, both statutory and actual, and available defenses, such as fair use.

As with most litigation, investing resources up front to identify weaknesses in the plaintiff's position and develop meritorious defenses will improve the potential for obtaining a prompt resolution, whether through settlement or motion practice. Another potential strategy is to file a responsive pleading that does not contest liability and limits the case to damages. Of course, an appropriate litigation strategy must always be specific to the merits of a particular case and the behavior of plaintiff's counsel.

In troll cases, an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure may be useful. An offer of judgment is a formal offer made by a defendant at any point up to 14 days before trial to settle a case on specific terms. The plaintiff has 10 days to respond to the offer. If the judgment that the plaintiff obtains is not more favorable judgment than the unaccepted offer, per Rule 68 the plaintiff "must pay the costs incurred after the offer was made." Offers of judgment have increased impact in cases involving statutes that, like the Copyright Act, define costs as including attorney fees. See, 17 U.S.C. §505.

An offer of judgment can be especially effective in a troll case where there has been minimal unauthorized use that might entitle the plaintiff to a small recovery; the plaintiff is demanding an unreasonably high amount to settle; and the anticipated costs of a full defense will substantially dwarf the potential recovery. This is particularly true in the Southern District of New York, where the trend among district court judges is to allowing fee shifting under Rule 68, even where an award of attorney fees pursuant to §505 would be unavailable, following the decision of the U.S. Court of Appeals for the Eleventh Circuit in Jordan v. Time, 111 F.3d 102 (11th Cir. 1997). Additionally, a Rule 68 award is mandatory, while fee-shifting available under §505 of the Copyright Act is discretionary.

Furthermore, a Rule 68 offer may curtail a plaintiff's ability to recover its costs and attorney fees if the conditions of Rule 68 are satisfied. This trend is contrary to earlier district court decisions in the Second Circuit, such as Boisson v. Banian Ltd., 221 F.R.D. 378 (E.D.N.Y. 2004), that §505 limits fee awards to prevailing parties and that "any defendant who is entitled to invoke Rule 68 is by definition not a prevailing party." The Second Circuit itself has not yet ruled on the issue, but until it does, recent district court decisions suggest that Rule 68 can be effective in troll cases.

For example, in Baker v. Urban Outfitters, 431 F. Supp. 2d 351 (S.D.N.Y. 2006), District Judge Loretta A. Preska awarded attorney fees pursuant to §505 and Rule 68. The defendant had inadvertently used the plaintiff's photograph as an insert in plastic picture frames that sold for a gross profit of less than $4,000. After the plaintiff rejected the defendant's settlement offer of more than double its profits, the defendant served an offer of judgment for approximately $9,000, which was also rejected. The plaintiff's motion for summary judgment was denied and the case subsequently dismissed. The district court awarded the defendant attorney fees of nearly $390,000 pursuant to §505, which subsumed a slightly lower award under Rule 68. On appeal, the Second Circuit affirmed the award under §505, but did not address the Rule 68 analysis. Baker v. Urban Outfitters, 249 F. App'x 845 (2d Cir. 2007).

Judge Cote reached a similar result in Mango v. Democracy Now! Productions, 18-cv-10588 (S.D.N.Y. 2019). In that case, the defendant had used the plaintiff's photograph of Kellyanne Conway and her husband George Conway in a news article published on its website. The defendant served an offer of judgment that the plaintiff rejected. At the initial pretrial conference, the district court required the plaintiff to post a bond of $10,000. The defendant then sought an additional bond of $100,000. Noting the defendant's Rule 68 offer was five times greater than a typical licensing fee for editorial use of similar images and that defendant may very well have complete defenses, including fair use, the district court concluded that Mango was unlikely to recover more than the Rule 68 offer and may be liable for defendant's post-offer costs, including attorney fees, and ordered the plaintiff to post an additional $50,000 bond. Other cases have applied this approach.

Security bonds are particularly effective when used in combination with an offer of judgment, as in Mango, but can also be used independently. In the Southern District of New York, for example, Local Civil Rule 54.2 allows a court on motion, or its own initiative, to require a plaintiff to post an original bond for costs or additional security for costs. Factors to be considered in requiring a bond include "the financial condition and ability to pay of the party at issue; whether that party is a non-resident or foreign corporation; the merits of the underlying claims; the extent and scope of discovery; the legal costs expected to be incurred; and compliance with past court orders." See, Seletti v. Carey, 173 F.3d 104 (2d Cir. 1999); Cruz v. American Broadcasting Companies, 17-cv-8794 (S.D.N.Y. 2017).

A security bond was also required in Reynolds v. Hearst Communications, 126 U.S.P.Q.2d 1051 (S.D.N.Y. 2018). The defendant had used a photo of Melania Trump in an Elle.com article about Mrs. Trump's fashion style. The photographer had provided the photo to the Trump campaign, which gave it to Elle and urged the magazine to use photos that Mrs. Trump had chosen. The complaint did not disclose that the plaintiff had provided the photo to the campaign and the plaintiff's counsel did not mention it when asked at the initial conference how the defendant could have obtained the photograph. Relying partly on attorney Richard Liebowitz's litigation practices in both the instant case and others, the district court granted the defendant's request for a bond. Because the amount of the bond should also take into account a plaintiff's financial situation, District Judge Cote required a limited bond of just $10,000.

Appellate security bonds for costs can also include attorney fees under the Copyright Act, as the Second Circuit held in Adsani v. Miller, 139 F. 3d 67 (2d Cir. 1998).

Courts have also imposed sanctions in troll litigation where a plaintiff's counsel did not comply with the rules, even after a case settled. Examples include Rule 11 sanctions for frivolous claims, Rule 16(f) sanctions for failing to appear at court-scheduled appearances and conferences, and Rule 37 sanctions for purposely failing to disclose important information during discovery. See, e.g., Sands v. Bauer Media Group USA LLC, 17-cv-9215 (S.D.N.Y. 2019).

Sanctions orders against Richard Liebowitz have been widely reported As explained, "it is no exaggeration to say that there is a growing body of law in this District devoted to the question of whether and when to impose sanctions on Mr. Liebowitz alone." Rice v. NBCUniversal Media, 19-CV-447 (S.D.N.Y. 2019).

While courts remain available for resolving meritorious infringement claims, the patience of the judiciary appears to be wearing thin in copyright troll cases. The above strategies may be helpful, either independently or in combination, in responding to troll litigation.

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Nancy J. Mertzel, founder of Mertzel Law PLLC in New York City, has more than 25 years' experience providing practical technology, copyright, trademark and related intellectual property counseling to clients across a wide variety of industries.