United States District Court, S.D. New York
OPINION & ORDER
PAUL A. ENGELMAYER, District Judge.
This decision resolves a post-trial application for attorneys' fees and costs. Between May 27 and June 5, 2014, the Court presided over a jury trial in which the hip-hop group the Beastie Boys and affiliated plaintiffs (collectively, the "Beastie Boys") pursued claims against Monster Energy Company ("Monster"), the beverage company. The jury found for the Beastie Boys on all claims-for copyright infringement in violation of the Copyright Act, 17 U.S.C. § 101 et seq., and false endorsement in violation of the Lanham Act, 15 U.S.C. § 1051 et seq. -and awarded a total of $1.7 million in damages. On December 4, 2014, the Court denied Monster's post-trial motion for judgment as a matter of law.
Now pending is the Beastie Boys' motion for an award of fees and costs under § 505 of the Copyright Act and § 1117 of the Lanham Act. For the reasons that follow, the Court finds that the Beastie Boys are entitled to recover fees in connection with Monster's willful copyright infringement, although not in connection with Monster's violation of the Lanham Act. Considering all relevant circumstances, the Court finds that an award of $667, 849.14 in fees- substantially less than the award of $2, 385, 175.50 sought by the Beastie Boys-is warranted. The Court also holds that the Beastie Boys are entitled to costs, but under Local Rule 54.1 leaves to the Clerk of Court the tabulation, in the first instance, of such costs.
This decision proceeds in four parts. First, the Court recaps the pertinent background of this case. Second, the Court addresses the Beastie Boys' claims of entitlement to fees under the Copyright Act and the Lanham Act. Third, the Court explains the amount of its fee award. Fourth, the Court addresses the Beastie Boys' application for costs.
The Court assumes familiarity with this case's history, including the Court's December 4, 2014 Opinion denying Monster's post-trial motions. See Dkt. 182, reported at Beastie Boys v. Monster Energy Co., No. 12 Civ. 6065 (PAE), 2014 WL 6845860 (S.D.N.Y. Dec. 4, 2014) [hereinafter Beastie Boys] . The history most relevant to the pending fee application follows.
A. Factual Background
On May 5, 2012, Monster hosted a promotional event called the "Ruckus in the Rockies, " which consisted of a snowboarding competition and an after-party. See Trial Transcript ("Tr.") 1092-93. The performers at the after-party included Zach Sciacca, a disc jockey ("DJ") who records and performs under the name "Z-Trip." Tr. 356, 954, 964-65, 1096-99. In 2011, Z-Trip had entered into an agreement with the Beastie Boys to create a remix of some of their songs to promote the group's then-upcoming album, "Hot Sauce Committee Part II." Tr. 194-96, 278-79, 356-57, 954-58, 969. The remix was entitled "Beastie Boys All-Access Megamix" (the "Megamix"). See Tr. 429-30. Under the agreement, Z-Trip did not obtain any rights to the underlying Beastie Boys songs. See Tr. 278-79, 306, 358-59, 973, 975-76.
Soon after the 2012 Ruckus in the Rockies, Monster's regional marketing director, Nelson Phillips, oversaw the creation of a recap video with highlights from the event. Tr. 1114-16. The video promotes Monster's brand and its energy drinks. For the video's soundtrack, Phillips used excerpts of the Megamix that include portions of five Beastie Boys songs; these songs are the background music to approximately 80% of the four-minute video. Tr. 1114-15. The video also contains text referring to the band and one of its three members, Adam Yauch, a/k/a "MCA, " who had died days before the Ruckus event. See PX 211. Monster did not obtain, and never attempted to obtain, permission from the Beastie Boys or their management to use the Beastie Boys' music or names in the promotional video. See, e.g., Tr. 121-22, 256, 875-76, 1115-16, 1173, 1316-17. Phillips later testified that he believed that Z-Trip had provided legally sufficient authorization for him to use the Megamix, including the underlying Beastie Boys' songs, in the video. Tr. 1115-16, 1170. Phillips testified that Z-Trip had conveyed this authorization to him orally during the after-party, see Tr. 369-70, 456-57, 496, and again through a short email exchange in which Phillips sent the video to Z-Trip for "approv[al], " and Z-Trip responded, "Dope!, " see Tr. 1119, 1121. Z-Trip firmly denied giving any such authorization, or telling anyone at Monster that he had any rights to the Beastie Boys' music. See Tr. 369-70, 456-57, 496.
On May 9, 2012, Monster posted the promotional video on its website, YouTube channel, and Facebook page. See Tr. 307, 531, 1119-21, 1124-26, 1266. Monster also sent press releases to various snowboarding magazines and websites to promote the video. Tr. 1126-29. The following month, Monster received a letter from counsel for the Beastie Boys, which stated that Monster did not have permission to use the Beastie Boys' music in the video. Tr. 1129, 1269. Phillips then removed the video from Monster's YouTube channel. Tr. 1130. He later edited the video, to replace the music and remove the references to the Beastie Boys, and then reposted it. Tr. 1130-31, 1277. As of August 2012, the video had been viewed 13, 341 times. Tr. 1275-76.
B. Procedural History
On August 8, 2012, the Beastie Boys filed suit against Monster in this District. Dkt. 1. The Complaint brought claims of copyright infringement in violation of the Copyright Act and false endorsement in violation of the Lanham Act.
On October 4, 2012, Monster filed an Answer. Dkt. 5. Monster denied almost every factual allegation in the Complaint or stated that it lacked knowledge sufficient to enable it to form a belief as to its truth. Monster also raised 12 affirmative defenses. Several sought to deflect responsibility for any infringement onto Z-Trip. In this vein, the Answer asserted that (1) Monster had received permission from Z-Trip to use the Beastie Boys' music; (2) in using the band's music in its video, Monster had reasonably relied on Z-Trip's apparent authority as an agent for the Beastie Boys; and (3) any injury to the Beastie Boys was due not to Monster but instead to a breach of contract or fraud by Z-Trip. Id. at 13.
The following day, October 5, 2012, Monster brought a third-party Complaint against Trip. Dkt. 9. Monster alleged that Z-Trip had caused any damage to the Beastie Boys for which Monster might be found liable by (1) contracting with Monster to allow it to make unrestricted use of the Megamix, and (2) fraudulently leading Monster to believe that Z-Trip had authority to license the Beastie Boys' recordings contained in the Megamix. Id. ¶¶ 12-23, 28-33.
On August 1, 2013, after discovery, Z-Trip moved for summary judgment on Monster's claims against him. Dkt. 36-38. The Beastie Boys filed a memorandum supporting Z-Trip's motion. Dkt. 39.
On November 4, 2013, the Court granted summary judgment in favor of Z-Trip on both of Monster's third-party claims. See Dkt. 51, reported at Beastie Boys v. Monster Energy Co., 983 F.Supp.2d 338 (S.D.N.Y. 2013) [hereinafter Z-Trip ]. As to the breach of contract claim, the Court held that, based on the informal, "sparse, " and "fleeting" communications between Phillips and Z-Trip, "a reasonable juror could not find an offer, sufficiently clear acceptance, or consideration... let alone all three, " and thus no contract between Monster and Z-Trip could be found. Id. at 348, 350. And even assuming that Phillips and Z-Trip had entered into some form of contract, it would have taken "an heroic effort of explication" and "flout[ed] common sense" to interpret the contract to include a license to use the Beastie Boys' music in the video. Id. at 351. As to Monster's fraud claim, the Court found the record devoid of evidence that Z-Trip had acted with fraudulent intent or that Monster had reasonably relied on Z-Trip's representations. Id. at 351-53. The Court stated that it had been reckless for Monster "to delegate to Phillips alone the responsibility by which Monster was to acquire, for commercial exploitation, various intellectual [property] rights presumptively belonging to an iconic band." Id. at 352. "Monster's reliance on Phillips to protect its interest in these matters was perforce unreasonable." Id. at 353.
Trial on the Beastie Boys' claims against Monster commenced on May 27, 2014. At the final pretrial conference on May 22, 2014, Monster, for the first time, conceded liability as to the copyright infringement claims. See Dkt. 141, at 48. Accordingly, the issues litigated at trial were liability for the Lanham Act claim, and damages as to both the Copyright and Lanham Act claims. During the eight-day trial, the parties called a dozen witnesses, including four experts. See Dkt. 149-63.
On June 5, 2014, the jury returned its verdict. See Dkt. 147. On the Copyright Act claims, the jury found that each of Monster's 10 acts of infringement had been willful and awarded a total of $1.2 million in statutory damages and, alternatively, a total of $1 million in actual damages. Id. at 2. On the Lanham Act claim, the jury found Monster liable, found that it had engaged in intentional deception, and awarded the Beastie Boys $500, 000 in damages. Id. at 4. The jury also found that Monster had acted in bad faith in causing the false endorsement. Id.
On December 4, 2014, the Court issued a lengthy decision, denying Monster's post-trial challenges to the verdict. See Dkt. 182
C. The Beastie Boys' Motion for Fees and Costs
On January 16, 2015, the Beastie Boys moved for an award of attorneys' fees and costs. Dkt. 188, 189 ("Anderson Decl."), 190 ("Beastie Br."). On March 6, 2015, Monster filed its opposition. Dkt. 205 ("Kahn Decl."), 206 ("Schiano-Strain Decl."), 207 ("Monster Br."). On March 20, 2015, the Beastie Boys submitted a reply. Dkt. 210 ("Beastie Reply Br."), 211 ("Garrity Decl."). On March 30, 2015, the Court heard argument.
II. The Legal Basis for Beastie Boys' Asserted Entitlement to Fees
The Beastie Boys move for attorneys' fees under both the Copyright Act, 17 U.S.C. § 505, and the Lanham Act, 15 U.S.C. § 1117(a). Because these Acts set different standards for fee awards, the Court addresses the Beastie Boys' claim of entitlement to fees under each fee-shifting provision in turn.
A. Attorneys' Fees Under the Copyright Act
1. Applicable Legal Standards
The Copyright Act provides that "the court in its discretion may allow the recovery of full costs by or against any party other than the United States" and "may also award a reasonable attorney's fee to the prevailing party as part of the costs." 17 U.S.C. § 505. Fee awards, however, are not "automatic" or given "as a matter of course." Fogerty v. Fantasy, Inc., 510 U.S. 517, 533 (1994).
Rather, courts award attorneys' fees only where doing so is "faithful to the purposes of the Copyright Act." Matthew Bender & Co. v. W. Pub. Co., 240 F.3d 116, 122 (2d Cir. 2001) (quoting Fogerty, 510 U.S. at 534 n.19). The "principal purpose" of the Copyright Act is "to encourage the origination of creative works by attaching enforceable property rights to them." Davis v. Blige, 505 F.3d 90, 105 (2d Cir. 2007) (quoting Diamond v. Am-Law Publ'g Corp., 745 F.2d 142, 147 (2d Cir. 1984)); see also Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975) ("The immediate effect of our copyright law is to secure a fair return for an author's creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good.").
Under the Copyright Act, Where is no precise rule or formula' that district courts must apply in determining whether to award attorney's fees." Zalewski v. Cicero Builder Dev., Inc., 754 F.3d 95, 108 (2d Cir. 2014) (quoting Fogerty, 510 U.S. at 534) (alteration in original). However, "the Supreme Court has suggested a list of non-exclusive factors that courts may consider, " which are commonly referred to as the "Fogerty factors"; these include "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Id. (quoting Fogerty, 510 U.S. at 534). "Of these factors, objective reasonableness... should be given substantial weight in determining whether an award of attorneys' fees is warranted.'" Id. (quoting Matthew Bender, 240 F.3d at 122).
"In an appropriate case, " however, "the presence of other factors might justify an award of fees despite a finding that the non-prevailing party's position was objectively reasonable." Matthew Bender, 240 F.3d at 122. Each factor is relevant only insofar as it guides the Court in resolving, in its discretion, the ultimate inquiry: whether awarding attorneys' fees is consistent with the purposes of the Copyright Act. See id. (citing Fogerty, 510 U.S. at 534 n.19).
Considering the Beastie Boys' fee application in light of the principles governing fee awards under the Copyright Act, the Court's judgment is that, on balance, an award of fees is consistent with, and would further, the purposes of the Act. But the analysis is textured, not unitary: Although there are arguments favoring a fee award that ultimately carry the day, there are also countervailing considerations. These have contributed to the Court's decision to impose a fee award below that sought by the Beastie Boys. See Section III, infra. The Court's assessment of the most relevant factors follows.
Objective reasonableness: Monster's conduct and legal positions during and after trial- and, with one significant exception discussed below, before trial-were objectively reasonable. As the Court explained in its post-trial opinion, the issues tried with respect to the Copyright Act claims were difficult and close.
One issue at trial, which affected whether the maximum available statutory damages for each act of infringement was $30, 000 or $150, 000, was whether Monster's conduct had been willful. See 17 U.S.C. §§ 504(c)(1)-(2). As the Court concluded, "the issue of willfulness was vigorously disputed at trial and certainly could have been resolved for either side." Beastie Boys, 2014 WL 6845860, at * 13. To be sure, "there was sufficient circumstantial evidence of reckless disregard to support the jury's finding" of willfulness, id., but a jury could also have reached the opposite conclusion. Monster was not unreasonable in contesting willfulness during, and after, trial. Nor was Monster unreasonable in its arguments to the jury as to specific factors bearing on the amount of the statutory damages award, which included "the deterrent effect of such an award on Monster and third parties, " "the revenue lost by the plaintiffs, if any, as a result of the infringement, " and "the conduct and attitude of the parties." Tr. 1613 (jury charge); see also Tr. 1690-91 (Monster's summation).
Monster's litigation as to actual copyright damages was also objectively reasonable. The calculation of actual damages turned on the jury's subjective assessment of the infringing video. In litigating the cost of an assumed license authorizing Monster to use the Beastie Boys' songs as the soundtrack for Monster's promotional video, counsel for each side vigorously advocated as to the most apt comparator for that unusual video. This inquiry was complicated by the fact that the Beastie Boys had never licensed their music for traditional product advertisements, Tr. 118-20, 275, 864-65, and that the Ruckus video was, by its nature, far from a standard product promotion. "[T]he quirky, indeed new-age, nature of the advertising medium in this case, and the Beastie Boys' extensive licensing history... provided fodder for a wide range of potential valuations." Beastie Boys, 2014 WL 6845860, at *35. The Beastie Boys compared the video to a movie trailer, for which the group had received up to $800, 000 for a license to use a single song, see PX 219, at 9, whereas Monster compared the video, inter alia, to Internet "webisodes" produced by a watch company, for which the Beastie Boys had received just a few hundred dollars per copyright, see PX 220, at 2. The jury's verdict indicates that it ultimately accepted a valuation more in line with those urged by the Beastie Boys. But Monster's decision to vigorously litigate actual damages, including presenting expert testimony on this point, was reasonable. Presiding over trial, this Court could not reliably have forecasted, with any level of confidence, the jury's actual damages award.
Finally, and relatedly, the Court is not persuaded that the settlement positions Monster took were unreasonable. Following trial, the Court received briefing as to the settlement process, with each party contending that the settlement history supported its position on the Beastie Boys' fee application. To be sure, there is some factual dispute as to Monster's final offer: The Beastie Boys' counsel represented that the highest offer had been $250, 000, see Anderson Decl. ¶ 28, whereas Monster's counsel attested that Monster's final offer had been $650, 000, see Kahn Decl. ¶ 17. Regardless, viewed in real time and not in hindsight, either figure was defensible. Under Monster's theory of the case, the Beastie Boys' maximum possible recovery on the Copyright Act claims was $300, 000: Without a finding of willfulness, the statutory damages would have been capped at $30, 000 per infringement. See 17 U.S.C. §§ 504(c)(1)-(2). And actual damages would have been significantly lower than that had the jury accepted Monster's view, and that of its expert, as to the most appropriate analogue for the Ruckus video.
To be sure, the Beastie Boys' final demand of $1.65 million appears prescient in light of the jury's $1.7 million verdict. But, particularly given the idiosyncrasies of this controversy, Monster was not unreasonable in offering either $250, 000 or $650, 000, or, at an August 2013 settlement conference, in refusing to negotiate until the Beastie Boys demanded "less than $1 million." See Anderson Decl. ¶ 27.
However, one significant aspect of Monster's approach to litigating the copyright claims was objectively unreasonable: It refused, until the brink of trial, to concede that it had infringed the Beastie Boys' copyrights, and it attempted to shift legal responsibility for any infringement to Z-Trip. Putting aside the question of whether Monster had acted willfully in trenching on the Beastie Boys' copyrights, Monster's liability for infringing the 10 copyrights at issue was open and shut. Monster had taken a host of the Beastie Boys' copyrighted musical compositions and sound recordings and exploited them, at length, in an extended web advertisement for its products, without any license to do so. There was no claim that Monster ever had the Beastie Boys' permission to use these songs, and Monster's anemic pretrial claim (echoing its employee, Phillips) to have received a legally valid license from Z-Trip to use the group's compositions and songs in the promotional video was blatantly meritless. The infringement here thus was flagrant. Yet Monster, strikingly, did not concede liability on the Copyright Act claims until the final pretrial conference, days before trial. See Dkt. 141, at 48; Anderson Decl., Ex. E; Garrity Decl. Exs. A-B.
This refusal positioned the parties needlessly far apart on a foundational issue and, it can be assumed, made pretrial settlement less likely. Further, as a result of Monster's adamancy that it was not liable for infringement, the Beastie Boys were obliged to prepare for trial on this point, so as to prove "ownership of a valid copyright and copying of the protectable elements of the copyrighted work." Scholz Design, Inc. v. Sand Custom Homes, LLC, 691 F.3d 182, 186 (2d Cir. 2012) (listing elements of copyright infringement). This entailed, inter alia, procuring certificates of copyright registration to prove that the Beastie Boys owned the rights to the songs in question, and hiring a musicologist to establish that the video did, in fact, contain the Beastie Boys' music. These basic facts were never subject to reasonable dispute.
Relatedly, Monster needlessly prolonged this litigation and increased the Beastie Boys' attorneys' fees through its pretrial attempt, via a third-party complaint, to shift blame to Z-Trip. After denying any responsibility for the copyright infringement in its Answer, Dkt. 5, Monster brought claims of breach of contract and fraud against Z-Trip, Dkt. 9. Both Z-Trip and the Beastie Boys, whose interests were affected by Monster's claims against the DJ, spent time and money litigating these meritless claims.
As the Court held in granting summary judgment for Z-Trip, Monster's arguments were patently unreasonable: On Monster's contract claim, no communications between Phillips and Z-Trip "could be plausibly read to involve an offer, " Z-Trip, 983 F.Supp.2d at 348, and there was "no evidence on which a reasonable juror could find acceptance of contractual terms, " id. at 350. And, it would "flout common sense" to conclude that Z-Trip "granted Monster the rights necessary here." Id. at 350-51. As to Monster's fraud claim, "Monster ha[d] not adduced any evidence tending to show that Z-Trip acted with fraudulent intent" or had any motive to defraud Monster. Id. at 351 (emphasis in original). Nor had Monster offered "any credible argument why it was reasonable to rely on ...