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Fair Use defense fails in Newegg brief copying row

Newegg and Sakar Appeal Denial of Attorneys' Fees and Costs

A federal judge sitting in the Central District of California recently denied an IP attorney’s bid to set forth a fair use defense in a copyright infringement lawsuit.  While the judge allowed Ezra Sutton to amend the final pretrial order to include a fair use defense, the judge granted Newegg’s motion for summary judgment regarding its copyright infringement claims.

Newegg Alleges Ezra Sutton Attorney Improperly Copied Newegg Appellate Brief

The suit, between Newegg, Inc. and Ezra Sutton, P.A., alleges that an Ezra Sutton attorney improperly copied Newegg’s appellate brief and filed it with the Federal Circuit Court of Appeals, even after the attorney agreed that he would “submit[ ] a separate brief for [Ezra Sutton’s client],” and that his use of Newegg’s draft brief would be purely “for reference and resource purposes.”

Newegg and its “Patent Troll” Defense

According to Newegg’s complaint, Newegg has been sued a number of times in recent years for alleged patent infringement by what it calls “patent trolls and other entities that Newegg believes abuse the patent laws by targeting end-users and resellers of technology.”  Newegg says that it “routinely and aggressively defends itself” against patent troll suits, and works together with co-defendants and their outside counsel to achieve common goals, which causes Newegg to incur considerable expenses in attorney’s fees, costs, and other resources to defend itself from meritless lawsuits.”

Newegg and Sakar Appeal Denial of Attorneys’ Fees and Costs

In July 2010, Newegg along with Sakar International and 56 other defendants were sued by Adjustacam, LLC in Texas federal court for alleged patent infringement.  Well in advance of trial, each of the other 56 defendants settled with Adjustacam, leaving only Newegg and Sakar as the remaining defendants.  Subsequently, Adjustacam moved to dismiss its patent infringement claims against Newegg and Sakar.  The district court granted Adjustacam’s motion, and Newegg and Sakar thereafter moved for attorneys’ fees and costs pursuant to 35 U.S.C. § 285 and 28 U.S.C. § 1920.

Newegg Offers to Help, But Ezra Sutton Attorney Unwilling to Share in Legal Fees

The district court denied Newegg’s and Sakar’s motions for attorney’s fees and costs.  As a result, both companies separately appealed to the Federal Circuit.  The companies’ opening appellate briefs were due to be filed on September 25, 2014.  Nine days before the briefs were due, Sakar’s attorney contacted Newegg’s outside counsel about the Adjustacam appeal.  Sakar’s attorney asked Newegg’s counsel if Newegg “need[ed] any sections from Sakar in order to prepare Sakar’s section of the appeal brief.”  In response, Newegg’s counsel said it would be willing to help, and would “incorporate Sakar’s arguments into Newegg’s brief, so that a joint brief could be filed, if Sakar would share the legal fees incurred by Newegg.”

Newegg Shares Draft Brief, But Only on “For Reference and Resource Purposes”

The Ezra Sutton attorney declined Newegg’s offer to share fees.  However, the Ezra Sutton attorney said he would file a “short brief” of not more than ten pages, making arguments and record citations specific to Sakar “so as not to be duplicative of Newegg’s brief or derail Newegg’s briefing process.”  In order to assist the Ezra Sutton attorney, Newegg’s counsel agreed to provide him with a copy of the most current draft of Newegg’s appellate brief “for reference and resource purposes.”

As part of Newegg’s agreement to assist the Ezra Sutton attorney, the Ezra Sutton attorney agreed in writing that he would “not circulate [Newegg’s] communications or any of Newegg’s work product to any third party without [Newegg’s] consent.”  Newegg also asked the Ezra Sutton attorney to confirm that he would submit a separate brief on Sakar’s behalf.  The Ezra Sutton attorney agreed to Newegg’s request, and a copy of the Newegg draft brief was sent to the Ezra Sutton attorney.

Ezra Sutton Attorney Files Newegg Brief With Federal Circuit

Despite the Ezra Sutton attorney’s promises, on September 24, 2014, the Ezra Sutton attorney filed what appeared to be a substantial copy of the Newegg draft brief with the Federal Circuit Court of Appeals.  Newegg thereafter filed its appellate brief, which was almost identical to the draft brief Newegg had provided to the Ezra Sutton attorney.  Upon discovering the similarities between the Sakar brief and the Newegg draft brief, Newegg wrote a letter to the Federal Circuit “explaining the circumstances so as not to unnecessarily burden the Court with duplicative briefing.”  Newegg also demanded that Sakar withdraw its brief and replace it with the “short brief” it had agreed to file originally.

Sakar Withdraws Brief, But Files Second Brief That Still Contains Much of Newegg Draft Brief

In response to Newegg’s request, Sakar withdrew its first brief on October 14, 2014.  Sakar then filed a shorter, revised appeal brief on October 15, 2014.  However, again, Sakar’s revised brief contained “a considerable amount of material from Newegg’s Draft Brief.”  Given Sakar’s failure to file its own brief, Newegg filed suit against Ezra Sutton and its attorney in February 2015.

Newegg’s MSJ Argues Fair Use Defense Unavailable

Following discovery, Newegg moved for summary judgment against Ezra Sutton and its attorney, claiming it was entitled to judgment as a matter of law regarding its copyright infringement claim and that Ezra Sutton and its attorney could not succeed on their fair use defense.  As it relates to the fair use defense, Newegg set forth that, in the Ninth Circuit, the fair use defense has four factors: “(1) the purpose and character of the use, including whether such use is commercial or nonprofit; (2) the nature of the copyrighted work; (3) the amount of copying involved; and, (4) the effect of the copying on the market of the copyrighted work.”  Newegg further noted that the first factor, the purpose and character of the use, “is decisive.”

As to the first factor, Newegg argued that courts have traditionally found that “fair use is not triggered where, as here, a work has been specifically created for use in litigation, and the infringing work is not transformative.”  According to Newegg:

Defendants’ First Brief was utilized for the same intrinsic use as Newegg’s Draft Brief – namely, both were utilized as legal briefs to convince the Federal Circuit to award attorney’s fees – and thus there can be no fair use.

Based on the foregoing, it is clear that fair use is inapplicable because: (1) the use made by Sutton of Defendants’ First Brief was the same intrinsic use to which Newegg’s Draft Brief was created; and (2) Sutton never raised fair use as a defense in their Answer, Memorandum of Contentions of Fact and Law, or the Final Pretrial Conference Order and thus the defense is waived.

Ezra Sutton Attorney Argues That Fair Use Defense Applies Because, Among Other Things, its Brief is “Transformative”

In its opposition, Ezra Sutton and its attorney argued that its use was transformative, claiming Sakar’s brief “added new sections … and substantial revisions were made,” that Sakar withdrew its initial brief and filed a “shortened, revised appeal brief,” and filed a second an revised appeal brief that “did not copy Newegg’s brief.”

Ezra Sutton and its attorney also argued that the other factors weighed in favor of fair use, claiming: 1) Newegg had “failed to identify any adverse effect whatsoever on any actual or potential market for its briefing arising from its use by Defendants”; 2) “Although even nonfiction works may have creative elements that are entitled to some weight under factor two, the straightforward, functional presentation of fact and law in Plaintiff’s brief places it on the less creative end of the nonfiction spectrum and, accordingly, tips factor two in favor of fair use”; and 3) “Where, as here, the transformative purpose of the copying necessitates the use of the entire work, the third factor does not weight against a finding of fair use.”

Ezra Sutton and its Attorney Move to Amend Pretrial Order to Include Fair Use Defense

During the time Newegg’s motion for summary judgment was pending, Ezra Sutton and its attorney moved to amend the pre-trial order to assert fair use as an additional defense, arguing that “[t]he Copyright Act provides a specific exclusion for using copyrighted works in judicial proceedings.”  Newegg opposed Ezra Sutton and its attorney’s motion to amend the pretrial order on the grounds that the defendants could not show good cause under Rule 16, Federal Rules of Civil Procedure.

Newegg further argued that, even if the defendants could show good cause under Rule 16, they could not demonstrate that amendment was proper under Rule 15.  Specifically, Newegg set forth that Ezra Sutton and its attorney did not move to include the fair use defense until just before trial, and that Newegg would be prejudiced if defendants were allow to assert the fair use defense at this late stage of the litigation.  Newegg also argued that an amendment would be futile because fair use was not a viable defense for Ezra Sutton and its attorney based upon the arguments set forth in Newegg’s motion for summary judgment.

District Court Grants motion to Amend Pretrial Order to Include Fair Use Defense

In its order, the district court first dealt with the motion to amend the pretrial order.  There, the district court concluded:

There would be no prejudice to Newegg if the Final Pretrial Conference Order is amended because Newegg competently dealt with the affirmative defense [of fair use] in its partial summary judgment motion.  Next, the amendment would not adversely affect the conduct of the trial. Finally, there is no evidence that Sutton acted in bad faith.  Accordingly, the Final Pretrial Conference Order will be amended to include the affirmative defense of fair use.

District Court Grants Summary Judgment on Newegg’s Copyright Infringement Claim, Holding Fair Use Not a Valid Defense

Turning to Newegg’s motion for summary judgment, the district court recited the “four statutory factors that should be considered before fair use can be successfully raised as an affirmative defense to copyright infringement.”  As to the first factor, the “purpose and character of the use,” the district court explained:

Here, Sutton did not add new expression, meaning or message to Newegg’s draft brief. Sutton merely made minor and cosmetic changes to the draft brief.  Further, Sutton’s brief and Newegg’s draft brief had the same intrinsic use – to persuade the Federal Circuit.  Therefore, Sutton’s brief cannot be said to be a transformative use of the draft brief. Thus, the first statutory factor weighs heavily in favor of Newegg.

In relation to the second factor, “the nature of the copyrighted work,” the district court found:

Because Sutton’s brief is a functional presentation of fact and law, and in accordance with the Supreme Court’s priority in disseminating factual works, the second statutory factor weighs slightly in favor of [defendants].

Turning to the third factor, the district court said it had to “consider the amount and substantiality of the portion copied in relation to the copyrighted work as a whole.”  There, the court concluded, “Given that [defendants] copied most, if not all, of the substantive portions of the draft brief, and that [defendant’s] use of the draft brief was not transformative, this factor weighs heavily in favor of Newegg.”

Finally, as it relates to the fourth factor, “the degree of harm to the potential market,” the district court stated that, “because Newegg has failed to identify a market for its legal briefs, the fourth statutory factor weighs slightly in favor of [the defendants].”

First and Third Factors Doomed Ezra Sutton and its Attorney

Having considered the four applicable factors, the district court concluded:

Upon consideration of all four factors, with more weight given to the first and third factors based on the facts, circumstances and particular nature of this case, [the defendants] did not meet [their] burden of establishing a prima facie case that his copying of Newegg’s draft brief was fair use.

Finally, Fed. R. App. P. 28(i) cannot be used to justify Sutton’s copying of the draft brief. Rule 28(i) specifically permits a party to either join in or adopt by reference a part of a co-party’s brief. By copying Newegg’s draft brief, Sutton went beyond joining the brief or incorporating parts of it by reference.

Make Sure Your Work is “Transformative”

The above-described case should serve as a cautionary tale for attorneys who copy and paste from other attorney’s brief, especially in cases where the brief copied from belongs to a co-defendant in the same case.  This means that, while an attorney is free to consult another party’s briefing, he or she is not free to simply cut and past the opposing party’s brief into their own.  As a result, attorney’s seeking to piggyback of the work product of another attorney must be careful and their work must be transformative, and not just a regurgitation of their co-defendant’s work.  If not, the copying attorney may find him or herself the subject of a copyright infringement lawsuit.