The dramatic surge in the number of so-called copyright troll cases filed in recent years has forced judges and counsel alike to develop creative approaches to manage them. This article will provide an overview of copyright troll litigation, briefly discuss proactive steps businesses can take to minimize the risk of being sued, and explore potential litigation strategies for responding to troll cases.

What Is a Copyright Troll?

A copyright troll is a plaintiff who is "more focused on the business of litigation than on selling a product or service or licensing their copyrights to third parties." "A copyright troll plays a numbers game in which it targets hundreds or thousands of defendants seeking quick settlements priced just low enough that it is less expensive for the defendant to pay the troll rather than defend the claim."

Recently, courts have used the term to describe the behavior of attorneys, rather than their clients. For example, in McDermott v. Monday Monday, 2018 U.S. Dist. LEXIS 184049 (S.D.N.Y. Oct. 26, 2018), Judge Cote denied a motion to redact the term copyright troll from an earlier opinion describing plaintiff's counsel.

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 Leibowitz 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, Judge Kaplan attributed the "deluge" in photographic copyright infringement cases specifically to Richard Liebowitz. See Sands v. Bauer Media Group USA, 2019 U.S. Dist. LEXIS 160421 (S.D.N.Y. Sept. 18, 2019).

Mitigating the Risk

The best way to minimize the risk of being sued for copyright infringement of any kind is to avoid using content that has not been properly cleared. Proper clearance means obtaining a license, unless you are confident the underlying work is in the public domain, the use will qualify as a fair use, or is permissible for some other reason. All third-party content should be cleared, especially photographs, images, screenshots, songs and videos. All personnel responsible for preparing content for distribution, including employees and outside contractors, should be trained on proper clearance procedures. This applies especially to social media content, which is usually posted online quickly, and often without formal clearance. Even licensed materials should be vetted, since many of the inexpensive licenses available online are limited to personal, non-commercial use.

First Steps in Responding to a Troll Case

Copyright infringement disputes typically start with steps designed to stop the alleged infringement, such as sending a cease and desist letter or takedown notice pursuant to the Digital Millennium Copyright Protection 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.

If you are sued or notified of an alleged infringement, immediately contact your copyright attorney. If the material is still online, your attorney can guide you on best practices to back it up before taking it down, so as to avoid claims of spoliation of evidence. You should also contact your insurance broker to determine whether any of your policies will cover the claim and defense costs.

Your attorney will 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. Your attorney can also evaluate plaintiff's potential for recovering damages, both statutory and actual, and available defenses, such as fair use.

The early case assessment should also consider which side is likely to prevail, since prevailing parties can recover costs and, unlike the traditional American Rule, §505 of the Copyright Act provides that costs include attorney fees. 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.

Offers of Judgment

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, the plaintiff "must pay the costs incurred after the offer was made." Fed. R. Civ. P. 68. 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 Eleventh Circuit decision 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. Lastly, a Rule 68 offer may curtail the 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 decisions in the circuit, such as Boisson v. Banian Ltd., 221 F.R.D. 378 (E.D.N.Y. May 18, 2004), which followed the Seventh Circuit holding in Harbor Motor Co. v. Arnell Chevrolet-Geo, 265 F.3d 638 (7th Cir. 2001) 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 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. May 8, 2006), Judge Preska awarded attorney fees pursuant to §505 and Rule 68. The defendant had inadvertently used plaintiff's photograph as an insert in plastic picture frames that sold for a gross profit of less than $4,000. After plaintiff rejected defendant's settlement offer of more than double its profits, defendant served an offer of judgment for approximately $9,000, which was also rejected. Plaintiff's motion for summary judgment was denied, and the case subsequently dismissed. The court awarded 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, 2019 U.S. Dist. LEXIS 123550 (S.D.N.Y. Case No. 18-cv-10588, July 24, 2019). Defendant had used plaintiff's photograph of Kellyanne Conway and her husband George Conway in a news article published on its website. Defendant served an offer of judgment that the plaintiff rejected. At the initial pretrial conference, the court required plaintiff post a bond of $10,000. Defendant then sought an additional bond of $100,000. Noting that 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 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 plaintiff to post an additional $50,000 bond.

Additional cases that have applied this approach include Rice v. Musee Lingerie, 2019 WL 2865210 (S.D.N.Y. July 3, 2019), reconsideration denied 2019 U.S. Dist. LEXIS 210092 (S.D.N.Y. Dec. 5, 2019) and Lee v. W Architecture, 2019 U.S. Dist. LEXIS 89335 (E.D.N.Y. May 28, 2019).

Security Bonds

Security bonds are particularly effective when used in combination with an offer of judgment, as in Mango v. Democracy Now!, but can also be used independently. 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, 2017 U.S. Dist. LEXIS 196317 (S.D.N.Y. Case No. 17-cv-8794, Nov. 17, 2017).

A security bond was also required in Reynolds v. Hearst Communications, 126 U.S.P.Q.2d 1051 (S.D.N.Y. March 5, 2018). Defendant 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 plaintiff had provided the photo to the campaign and plaintiff's counsel did not mention it when asked at the initial conference how defendant could have obtained the photograph. Relying partly on attorney Liebowitz's litigation practices in both the instant case and others, the court granted the defendant's request for a bond. Because the amount of the bond should also take into account plaintiff's financial situation, 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). See also Azizian v. Federated Dep't Stores, 499 F.3d 950 (9th Cir. 2007); Pedraza v. United Guar., 313 F.3d 1323 (11th Cir. 2002).

Sanctions

Courts have also imposed sanctions in troll litigation where plaintiff's counsel does not comply with the rules, even after a case has 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 Sands v. Bauer Media Group USA, 2019 U.S. Dist. LEXIS 160421 (S.D.N.Y. Sept. 18, 2019); Berger v. Imagina Consulting, 2019 U.S. Dist. LEXIS 213321 (S.D.N.Y. May 7, 2019); Steeger v. JMS Cleaning Services, 126 U.S.P.Q. 2d 1043 (S.D.N.Y. Feb. 28, 2018).

Sanctions orders against Liebowitz have been widely reported, and a comprehensive summary would exceed the space limitations for this article. As Judge Furman 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, 2019 U.S. Dist. LEXIS 114690 (S.D.N.Y. July 10, 2019).

Conclusion

While the 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.

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