UMG Recordings, Inc. et al v. Veoh Networks, Inc. et al

Filing 606

MEMORANDUM in Opposition to MOTION for Attorney Fees and Costs (REDACTED) 587 filed by Plaintiffs Songs of Universal, Inc., Universal-Polygram International Publishing, Inc., Rondor Music International, Inc., Universal Music - MGB NA LLC, UMG Recordings, Inc., Universal Music - Z Tunes LLC, Universal Music - MBG Music Publishing Ltd., Universal Music Corp.. (Attachments: # 1 Declaration of Brian D. Ledahl in Support of UMG's Opposition, # 2 Exhibit A to Ledahl Decl., # 3 Exhibit B to Ledahl Decl., # 4 Exhibit C to Ledahl Decl., # 5 Exhibit D to Ledahl Decl., # 6 Exhibit E to Ledahl Decl., # 7 Exhibit F to Ledahl Decl., # 8 Exhibit G to Ledahl Decl., # 9 Exhibit H to Ledahl Decl., # 10 Exhibit I to Ledahl Decl., # 11 Exhibit J to Ledahl Decl., # 12 Exhibit K to Ledahl Decl., # 13 Exhibit L to Ledahl Decl., # 14 Exhibit M to Ledahl Decl., # 15 Declaration Carter R. Batsell in Support of UMG's Opposition, # 16 Exhibit A to Batsell Decl., # 17 Exhibit B to Batsell Decl., # 18 Exhibit C to Batsell Decl., # 19 Exhibit D to Batsell Decl., # 20 Exhibit E to Batsell Decl., # 21 Exhibit F to Batsell Decl., # 22 Exhibit G to Batsell Decl., # 23 Exhibit H to Batsell Decl., # 24 Exhibit I to Batsell Decl., # 25 Exhibit J to Batsell Decl., # 26 Exhibit K to Batsell Decl., # 27 Exhibit L to Batsell Decl., # 28 Exhibit M to Batsell Decl., # 29 Exhibit N to Batsell Decl., # 30 Exhibit O to Batsell Decl., # 31 Exhibit P to Batsell Decl.)(Batsell, Carter)

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UMG Recordings, Inc. et al v. Veoh Networks, Inc. et al Doc. 606 1 IRELL & MANELLA LLP Steven A. Marenberg (101033) (smarenberg@irell.com) 2 Brian D. Ledahl (186579) (bledahl@irell.com) Carter R. Batsell (254396) (cbatsell@irell.com) 3 1800 Avenue of the Stars, Suite 900 Los Angeles, California 90067-4276 4 Telephone: (310) 277-1010 Facsimile: (310) 203-7199 5 Attorneys for Plaintiffs 6 7 8 9 10 12 13 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IRELL & MANELLA LLP A Registered Limited Liability Law Partnership Including Professional Corporations UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION Plaintiffs, vs. Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV-07-05744 AHM (AJWx) UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS Filed Concurrently Herewith: (1) Declaration of Brian D. Ledahl in Support of UMG's Opposition (2) Declaration of Carter R. Batsell in Support of UMG's Opposition Judge: Date: Time: Ctrm: Hon. A. Howard Matz December 21, 2009 10:00 AM 14 11 UMG RECORDINGS, INC., et al., 14 VEOH NETWORKS, INC., UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 Dockets.Justia.com 1 2 3 I. 4 II. 5 III. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 IV. 27 28 E. D. C. 3. TABLE OF CONTENTS Page INTRODUCTION...........................................................................................1 FACTS.............................................................................................................3 ARGUMENT .................................................................................................. 9 A. B. Veoh Cannot Meet The Standard For "Prevailing Party" Status ..................................................................................................... 9 Veoh Cannot Meet The Standard For Fee Awards Under 17 U.S.C. � 505 ................................................................................... 11 1. 2. UMG's Motivation Was Proper ............................................... 11 UMG's Claims Against Veoh Were Reasonable ..................... 13 a. b. UMG asserted reasonable substantive claims ................ 13 UMG pursued its claims in a reasonable manner. ........................................................................... 16 Awarding Attorneys' Fees To Veoh Would Disserve The Purposes of the Copyright Act ........................... 18 Rule 68 Does Not Provide An Independent Basis For Awarding Fees And Costs Veoh Incurred After October 2008.....................................................................................................19 1. 2. Veoh Must Satisfy Section 505 Even Under Rule 68 .............. 19 Veoh has not Shown that its Offer was More Favorable than the Injunctive Relief Obtained by UMG ......................................................................................... 20 More Than $4 Million In Attorneys' Fees And Costs Is Not Reasonable ................................................................................... 21 1. 2. Veoh has not Met its Burden of Showing that the Amount It Seeks Is Reasonable ................................................ 22 Veoh is not Entitled to Fees For Unreasonable Conduct.....................................................................................24 If The Court Will Not Deny Veoh's Motion, It Should Defer Ruling Pending UMG's Appeal................................................25 CONCLUSION ............................................................................................. 25 2164180 -i- 1 2 3 Cases TABLE OF AUTHORITIES Page(s) 4 A&M Records, Inc. v. Abdallah, 948 F. Supp. 1449 (C.D. Cal. 1449)................................................................ 9 5 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001)....................................................................... 16 6 7 Andretti v. Borla Performance Indus. Inc., 426 F.3d 824 (6th Cir. 2005)......................................................................... 21 8 Ariel (UK) Ltd. v. Reuters Group PLC, 2007 WL 194683, *1 (S.D.N.Y. Jan. 24, 2007)............................................ 18 9 10 Assessment Technologies, LLC v. WIREData, Inc., 361 F.3d 434 (7th Cir. 2004)......................................................................... 11 11 Azizian v. Federated Dept. Stores, Inc., 499 F.3d 950 (9th Cir. 2007)......................................................................... 20 12 13 Baker v. Urban Outfitters, Inc., 431 F. Supp. 2d 351 (S.D.N.Y. 2006)........................................................... 20 14 Buckhannon Bd. & Care Home, Inc. v. West Virginia Dept. of Health and Human Resources, 532 U.S. 598 (2001).................................................. 9 15 16 Childress v. Taylor, 835 F. Supp. 739 (S.D.N.Y. 1993) ....................................................................................... 9 17 Corbis Corp. v. Amazon.com, Inc., 351 F. Supp.2d 1090 (W.D. Wash. 2004) ..................................................... 16 18 19 Crescent Publ'g Group, Inc. v. Playboy Enters., Inc., 246 F.3d 142 (2d Cir. 2001) .......................................................................... 22 20 Crossman v. Marcoccio, 806 F.2d 329 (1st Cir. 1986) ......................................................................... 19 21 22 Data General Corp. v. Grumman Systems Support Corp., 825 F. Supp. 361 (D. Mass. 1993) ................................................................ 24 23 Domanski v. Funtime, Inc., 149 F.R.D. 556 (N.D. Ohio 1993)................................................................. 21 24 25 Donald Frederick Evans and Associates, Inc. v. Continental Homes, Inc., 785 F.2d 897 (11th Cir. 1986)............................................................... 13 26 E.E.O.C. v. Bailey Ford, Inc., 26 F.3d 570 (5th Cir. 1994)........................................................................... 19 27 28 Elektra Entertainment Group Inc. v. Brimley, 2006 WL 2367135, *4 (S.D. Ga. Aug. 15, 2006) ......................................... 12 2164180 - ii - 1 2 Page(s) 3 Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004)....................................................................... 16 4 Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) ............................................................................... passim 5 6 Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996)........................................................................... 16 7 Garnier v. Andin Intern., Inc., 884 F. Supp. 58 (D.R.I. 1995) ....................................................................... 13 8 9 Harbor Motor Co. v. Arnell Chevrolet-Geo, Inc., 265 F.3d 638 (7th Cir. 2001)......................................................................... 20 10 Hendrickson v. eBay, Inc., 165 F. Supp.2d 1082 (C.D. Cal. 2001).......................................................... 16 11 12 In re Aimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003)......................................................................... 16 13 Io Group, Inc. v. Veoh Networks, Inc., 586 F. Supp.2d 1132 (N.D. Cal. 2008) ................................................. 5, 6, 14 14 15 Lifshitz v. Walter Drake & Sons, Inc., 806 F.2d 1426 (9th Cir. 1986)....................................................................... 13 16 Lotus Dev. Corp. v. Borland Int'l Inc., 140 F.3d 70 (1st Cir. 1998) ........................................................................... 13 17 18 Luken v. Int'l Yacht Council, Ltd., 581 F. Supp.2d 1226 (S.D. Fla. 2008).....................................................12, 18 19 Maljack Productions, Inc. v. Palisades Entertainment, 1995 WL 779154 at *3 (C.D. Cal. Jun. 23, 1995) ........................................ 22 20 21 Marek v. Chesny, 473 U.S. 1 (1985) .................................................................................... 19, 20 22 Matthew Bender & Co. v. West Publ'g Co., 240 F.3d 116 (2d Cir. 2001) .................................................................... 18, 25 23 24 Mercer v. Duke University, 401 F.3d 199 (4th Cir. 2005)........................................................................... 9 25 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 926 (2005) ...................................................................................... 16 26 27 Mitek Holdings, Inc. v. Arce Eng'g Co., 198 F.3d 840 (11th Cir. 1999)....................................................................... 18 28 - iii - 2164180 1 2 Page(s) 3 O'Brien v. City of Greers Ferry, 873 F.2d 1115 (8th Cir. 1989)....................................................................... 20 4 Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546 (1986) ...................................................................................... 24 5 6 Perfect 10, Inc. v. Amazon.com, Inc. 487 F.3d 701 (9th Cir. 2007)......................................................................... 16 7 Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007)...................................................................6, 16 8 9 Perfect 10, Inc. v. CWIE, LLC, 2005 WL 5957973, *3 (C.D. Cal. Feb. 10, 2005)......................................... 18 10 Queenie, Ltd. v. Nygard Int'l, 204 F. Supp. 2d 601 (S.D.N.Y. 2002)........................................................... 22 11 12 Reiter v. MTA New York City Transit Authority, 457 F.3d 224 (2d Cir. 2006) .......................................................................... 21 13 Robinson v. Lopez, 2003 WL 23162906, *3 (C.D. Cal. Nov. 24, 2003)...................................... 23 14 15 The Football Association Premier League Limited, et al, v. YouTube, Inc., et al., Case No. 07-CV-02103 LLS (S.D.N.Y.) .................................... 14 16 U.S. v. Trident Seafood Corp., 92 F.3d 855 (9th Cir. 1996)........................................................................... 20 17 18 UMG Recordings, Inc., et al. v. Grouper Networks, Inc., et al., 06-CV-6561 AHM (AJWx)........................................................................... 15 19 UMG Recordings, Inc., et al. v. MySpace, Inc., et al., 06-CV-7361 AHM (AJWx)........................................................................... 15 20 21 Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120 (2d Cir. 1989) ........................................................................ 10 22 Statutes 23 17 U.S.C. � 504(a) ................................................................................................... 11 24 17 U.S.C. � 505.................................................................................................passim 25 17 U.S.C. � 512(c) ............................................................................................ passim 26 17 U.S.C. � 512(c)(1) ................................................................................................ 9 27 17 U.S.C. � 512(j)................................................................................................6, 10 28 - iv - 2164180 1 2 3 Other Authorities Page(s) 4 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright � 12B.01 (Matthew Bender, Rev. Ed.).......................................................... 14 5 Rules 6 Fed. R. Civ. P. 54.....................................................................................................25 7 Fed. R. Civ. P. 54(d)(2)(B)(i) .................................................................................. 25 8 Fed. R. Civ. P. 68.........................................................................................19, 20, 21 9 Fed. R. Civ. P. 68(d) ................................................................................................ 20 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -v- 2164180 1 2 I. INTRODUCTION Defendant Veoh Networks, Inc. ("Veoh") fails to satisfy the standard for 3 recovering attorneys' fees in this case under 17 U.S.C. � 505, the Supreme Court's 4 Fogerty decision, and other applicable precedents. 5 Before this litigation began, Veoh operated an internet business that 6 reproduced, displayed, and offered free downloads of thousands of videos 7 embodying copyrighted sound recordings and musical compositions owned or 8 controlled by Plaintiffs UMG Recordings, Inc., et al. (collectively "UMG"). 9 Though Veoh reaped financial benefits from these uses of UMG's intellectual 10 property, it did so without permission from UMG. Despite objections from UMG, 11 Veoh indicated it had no obligation to compensate UMG for the use of UMG's 12 copyrighted material, had no obligation to use then-available filtering technologies, 13 and no obligation to take steps to remedy the obvious and rampant unauthorized use 14 of copyrighted works on its service. Indeed, Veoh contended that it needed to do 15 nothing but respond to specific notices of copyright infringement from UMG (or 16 other copyright holders) and remove only the specific videos identified in such 17 notices. UMG disagreed then with Veoh's contentions and still does. 18 This disagreement ultimately led to litigation between the parties (which was 19 actually initiated by Veoh, a fact unmentioned in Veoh's moving papers). After 20 Veoh brought a declaratory relief action in the Southern District of California, UMG 21 filed suit in this Court to stop Veoh's rampant unauthorized and uncompensated use 22 of UMG's copyrighted property. Veoh ultimately succeeded in obtaining a partial 23 summary judgment establishing its entitlement to a limitation on liability under the 24 Digital Millennium Copyright Act ("DMCA") � a ruling with which UMG 25 vigorously disagrees and is currently appealing. After that ruling, the parties entered 26 into a stipulation to facilitate the entry of final judgment. 27 By the time of that judgment, however, much had changed about Veoh. 28 Among other significant changes, Veoh completely reversed itself regarding the use UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 -1- 1 of filtering technology. Before this lawsuit began, Veoh had no content-based 2 filtering of any kind. During this lawsuit, Veoh began using the Audible Magic 3 filtering technology and eventually used that technology to screen all of its videos, a 4 fact called out by the Court in granting summary judgment. Veoh's implementation 5 of Audible Magic resulted in the removal of thousands of videos specifically 6 containing UMG's copyrighted works in response to UMG's assertions of 7 infringement in this case. Ultimately, even after the Court granted Veoh's motion 8 for partial summary judgment, Veoh entered into a stipulated judgment that the 9 videos UMG had identified were all removed from Veoh's service, that they could 10 not be reinstated to Veoh's service, and that Veoh would maintain the termination of 11 certain user accounts. Hence the relevant facts about Veoh at the end of this lawsuit 12 were vastly changed from the circumstances at the time UMG filed this action. 13 Against this backdrop, Veoh asks the Court to award it more than $4 million 14 in attorneys' fees and costs. Veoh seeks this award despite having been forced, in 15 response to this lawsuit, to change its business practices significantly. Though the 16 end result in this case was not the result sought by UMG, it is not an appropriate 17 case to award fees to Veoh. Under Section 505 of the Copyright Act, to obtain an 18 award of fees, Veoh must demonstrate that it is the prevailing party and that its fees 19 are appropriate to award under standards laid out by the Supreme Court in Fogerty 20 v. Fantasy, Inc., 510 U.S. 517 (1994). Under Fogerty, fees should only be awarded 21 where four factors warrant such an award: (1) whether the claim was frivolous; (2) 22 whether the claim was pursued with an improper motivation; (3) whether the claim 23 was objectively unreasonable; and (4) whether there is a need in the particular 24 circumstances to advance considerations of compensation and deterrence. 25 None of these factors supports an award of fees here. UMG's copyright 26 claims were brought in good faith, for a legitimate purpose, and were objectively 27 reasonable under any fair-minded view. UMG's claims and Veoh's defenses 28 addressed important issues of copyright law, particularly those related to the UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 -2- 1 DMCA, in which this Court found that there were no controlling precedents. For 2 example, the Court stated, with respect to UMG's summary judgment motion, that 3 key issues raised here concerning the DMCA were raised "in a context not 4 previously addressed judicially." To suggest that UMG's claims could be 5 objectively unreasonable under such circumstances defies logic and precedent. 6 In an implicit acknowledgement that UMG's claims were objectively 7 reasonable, Veoh also tries to paint UMG as needlessly overlitigating this case and 8 increasing its cost. The opposite is true, a careful review of the record reveals. 9 UMG litigated this case fairly and reasonably; Veoh did not. As described below, 10 and as confirmed by court orders in the case, Veoh repeatedly withheld relevant 11 evidence in discovery (leading to an Order requiring sworn certification of its 12 production), destroyed relevant data regarding its videos (leading to an Order 13 requiring the preservation of the data), and filed excessive and wasteful motions 14 (leading to, among other things, an Order that Veoh could no longer file ex parte 15 applications). Simply put, Veoh's suggestion that UMG was the party increasing 16 the costs of this case is pure fiction. 17 Finally, even if Veoh was entitled to some attorneys' fees here (and it is not), 18 its request for over $4 million is unsupportable. As explained below, Veoh's 19 attorneys' fees request � which seeks every penny it recorded in this case without 20 any discount for any reason � is excessive and unreasonable. On any and all of 21 these grounds, this Court should deny Veoh's motion for attorneys' fees and costs.1 22 23 II. FACTS Veoh's "Statement of Facts" paints a misleading picture of a lawsuit driven 24 by improper motives and devoid of any reasonable basis. Veoh further suggests that 25 during the course of the litigation, UMG drove up the costs of suit through over26 If the Court is inclined to award any fees, it should defer that award until 27 UMG's appeal of the Court's judgment is resolved. That resolution might confirm � even if the Ninth Circuit affirms this Court's rulings � that a fee award is 28 inappropriate. UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 1 -3- 1 litigation. This is a distortion, and the record reveals the opposite.2 2 This litigation began with a genuine dispute about the Copyright Act, the 3 DMCA, and how these statutes apply to a service like Veoh. Before any lawsuit 4 was ever filed, the parties met to discuss such issues. UMG had determined that 5 Veoh was hosting, displaying, and offering free downloads of thousands of videos 6 which embodied UMG's copyrighted works, all without UMG's permission. The 7 parties fundamentally disagreed about whether the DMCA offered Veoh a limitation 8 on liability for these actions, and what responsibilities Veoh had to avoid such 9 infringement. Ironically, given Veoh's claims in this motion, it was Veoh that filed 10 the first suit between the parties: a case filed in the Southern District of California 11 that was ultimately dismissed by the court as an improper, tactical declaratory relief 12 action. Only after Veoh sued UMG, did UMG file suit against Veoh in this district. 13 When UMG filed suit, Veoh had not implemented any content-based filtering 14 technology, such as the Audible Magic filter. Declaration of Brian Ledahl ("Ledahl 15 Decl.") Ex. A (9/11/2009 Order at 5) (Dkt. No. 575). Veoh maintained from the 16 beginning that its only obligation was to respond to specific notices of copyright 17 infringement and that it had no other obligations to identify infringing content on its 18 service, whether through the application of filtering technology or other means. 19 UMG fundamentally disagreed with this view as a correct application of the 20 requirements of the Copyright Act. Even after UMG's complaint identified various 21 infringed works and specific videos on Veoh's service that infringed UMG's 22 copyrights, Veoh did nothing to remove those videos or such content from its 23 service, still contending that only a formal DMCA infringement notice would lead 24 to removal of the videos. See Ledahl Decl. Exs. B & C (Letters from M. Elkin and 25 S. Marenberg re: videos available through Veoh). 26 27 UMG does not attempt here to respond to each individual factual error set forth in Veoh's motion, but rather to respond only to those most germane to the 28 instant motion. UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 2 -4- 1 The parties' disagreement over the requirements of the Copyright Act for 2 services such as Veoh's reflected complex issues of copyright law. Numerous 3 contemporaneous press accounts characterized Veoh as a mass infringer of 4 copyrights. Ledahl Decl. Exs. D-F. UMG had previously brought similar claims 5 against other user-uploaded video businesses, such as MySpace and Grouper. Those 6 cases were eventually resolved through confidential settlements. Academic 7 literature and legal professionals described the issues presented by this dispute as 8 largely unresolved. For example, at a June 2008 conference on internet businesses 9 held at Stanford University (approximately 9 months after UMG filed suit), panelists 10 expressed the view that the applicability of the DMCA to user-uploaded video 11 services like Veoh remained an unresolved issue. Ledahl Decl. Ex. G at minutes 12 28:04-28:45, 50:30-51:06 (audio from conference). The panelists included Andrew 13 Bridges, one of the attorneys for whom Veoh seeks fees here. 14 Veoh attempts to make much of an August 27, 2008 decision of a Magistrate 15 Judge in the Northern District of California in Io Group, Inc. v. Veoh Networks, Inc., 16 586 F. Supp. 2d 1132 (N.D. Cal. 2008). But the Io Group decision does not 17 remotely establish that UMG's claims were objectively unreasonable. The Io Group 18 decision was issued long after this suit was commenced and only a few days before 19 UMG was to file its motion for partial summary judgment here pursuant to a 20 briefing schedule agreed between the parties. Ledahl Decl., � 2. Further, as this 21 Court has held, the Io Group decision did not address issues raised by UMG in its 22 motion and UMG's motion "require[d] the Court to construe and apply the phrase 23 `by reason of the storage at the direction of a user' in a context not previously 24 addressed judicially." Ledahl Decl. Ex. L (12/31/2008 Order at 2) (Dkt. No. 294). 25 Additionally, the Io Group decision was based upon a factual record very different 26 from this case. For example, in Io Group, the court noted that Veoh displayed no 27 advertising with the infringing videos � unlike the admitted facts here. See Io 28 Group, 586 F. Supp. 2d at 1136. Similarly, the Io Group case lacked any UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 -5- 1 meaningful evidence relating to Veoh's knowledge (either actual or "red flag") as 2 was adduced in this case. And in any event, this Court affirmatively disagreed with 3 the reasoning employed by the Io Group decision in important ways. For example, 4 although this Court concluded that the "right and ability to control" standard in the 5 DMCA is not the same as the common law standard for vicarious liability and used 6 that reasoning to support its decision to grant Veoh's motion, the Io Group Court 7 reached the opposite conclusion, stating that "[t]hese requirements [of right and 8 ability to control and direct financial benefit] grew out of the common law standard 9 for vicarious liability, and the Ninth Circuit has indicated that these elements under 10 the DMCA are to be interpreted consistently with common law." Id. at 1150 (citing 11 Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1117 (9th Cir. 2007)). Thus, if 12 anything, Io Group underscores the objective reasonableness of UMG's claims. 13 Veoh also asserts that this Court's December 31, 2008 Order somehow fully 14 resolved this case and that UMG's continued litigation of its claims after that 15 decision was improper and unreasonable. But this Court rejected that view in the 16 December 31, 2008 Order. There, the Court ruled that "Veoh asks that the Court 17 grant Veoh summary judgment `with respect to its eligibility for Section 512(c) safe 18 harbor.' The Court may not do so until Veoh has shown that it has met the other 19 requirements of that section (e.g., that it does not receive a financial benefit directly 20 attributable to the infringing activity)." Ledahl Decl. Ex. L at 16 n.10. These issues 21 remained properly unresolved until the Court's September 11, 2009 ruling on 22 Veoh's motion. And even that ruling did not dispose of all issues in the case 23 because of the potential availability of injunctive relief under 17 U.S.C. � 512(j), 24 notwithstanding the Court's summary judgment ruling. To facilitate the entry of 25 final judgment, Veoh stipulated to a judgment imposing the same obligations 26 contemplated by Section 512(j). 27 Veoh's "Statement of Facts" also strives to create the false impression that 28 UMG unnecessarily increased the costs of this litigation through discovery conduct. UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 -6- 1 Here, Veoh deliberately misstates or omits the true facts confirming that Veoh, not 2 UMG, increased the costs of litigation through sharp tactics. 3 UMG filed five discovery motions in this case (not eight as Veoh suggests), 4 and Magistrate Judge Wistrich granted all of them, in whole or in part. See 5 Declaration of Carter Batsell ("Batsell Decl.") Exs. C, E-H (Dkt. Nos. 220, 267, 6 289, 400, 401). These motions sought necessary, relevant discovery, improperly 7 withheld by Veoh. During the hearing on UMG's first motion to compel, Judge 8 Wistrich commented to Veoh, which had theretofor refused to conduct a reasonable 9 search for responsive documents, that "some of what you agree to do in your letter 10 you should have done from the very beginning. And I don't know why you're still 11 waiting to do that." Batsell Decl., � 6 & Ex. D (8/25/2008 Hrg. Tr. at 36). UMG 12 was likewise forced to pursue motions to stop Veoh's ongoing destruction of 13 evidence. Specifically, Veoh was actively destroying information it received from 14 Audible Magic about the copyrighted works the filter identified on Veoh's service. 15 Judge Wistrich issued an order directing Veoh to stop destroying this material. Id. 16 at Ex. I (11/18/2008 Order) (Dkt. No. 217). Finally, UMG was forced to bring a 17 motion to obtain discovery that Veoh was already ordered to provide, but 18 nonetheless continued to withhold. Judge Wistrich ruled that "[t]he court is 19 concerned about what appear to be unreasonably narrow interpretations by Veoh of 20 some of UMG's discovery requests, a practice which calls into question the 21 completeness of its entire production. Anomalies in Veoh's production, which may 22 or may not have an entirely innocent explanation, heighten that concern." Id. at Ex. 23 H (Dkt. No. 401). Judge Wistrich ordered Veoh to certify the completeness of its 24 production, under penalty of perjury. It did so only after producing thousands of 25 additional documents � essentially admitting that it had improperly withheld 26 documents it was ordered to produce. Id.; see also Ledahl Decl. Ex. H (Dkt. No. 27 430). Notably, as explained below, Veoh is seeking to recover attorneys' fees 28 incurred in opposing all of these discovery matters. UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 -7- 1 Veoh, however, pursued wasteful discovery practices. For example, Veoh 2 filed many meritless ex parte applications, so many in fact that Judge Wistrich 3 issued an order forbidding Veoh from filing any more without court permission. 4 Batsell Decl. Ex. P (12/05/2008 Order) (Dkt. No. 270) Judge Wistrich 5 unambiguously stated: "Although the Court has perhaps been more liberal than it 6 should have been in tolerating Veoh's use of the ex parte application mechanism, 7 Veoh has overused it to the point that it is unduly burdening both the Court and 8 UMG's counsel. Therefore, from this point forward, Veoh is forbidden from filing 9 ex parte applications regarding discovery disputes without obtaining the prior 10 telephonic permission of the Clerk." Id. Veoh also wasted resources by repeatedly 11 filing the same discovery motions. On August 25, 2008, the Court denied Veoh's 12 first motion to compel, which was filed even before Veoh conducted a reasonable 13 review of the documents produced by UMG. During the hearing, the court noted 14 that Veoh's motion contained "hundreds of requests," that it "exceed[ed] 30015 pages," that Veoh's grouping of requests was "so broad that [it] really [wasn't] 16 meaningful," and that many "of [Veoh's requests] probably have been largely 17 satisfied at this point." Id. at Ex. D (8/25/2008 Hrg. Tr.) (19:16-18, 22:12-13). The 18 Court therefore "den[ied Veoh's] motion to compel" without prejudice to Veoh's 19 right to "file [another] motion"--after "complet[ing its] review of [UMG's] 20 production" and provided that Veoh organized its subsequent motion "in a sensible 21 way." Id. (21:23, 21:25-22:1, 23:16-17). In defiance of Judge Wistrich's ruling, 22 Veoh renewed its motion on October 29, 2008, which the court denied (again) on 23 November 21, 2008, stating: "the court previously denied a motion to compel filed 24 by Veoh because that motion was presented in an unmanageable manner. Rather 25 than file a new motion including copies of the discovery requests and responses 26 thereto that are at issue, Veoh merely refers the court to a portion of the 314-page 27 joint stipulation filed in support of the previously denied motion." Id. at Ex. J 28 UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 -8- 1 (11/21/2008 Order) (Dkt. No. 219).3 Yet again, Veoh seeks fees related to this 2 activity. 3 4 A. 5 III. ARGUMENT Veoh Cannot Meet The Standard For "Prevailing Party" Status To recover any award of attorneys fees, Section 505 requires that the party 6 seeking such an award be the "prevailing party" in the litigation. 17 U.S.C. � 505. 7 Prevailing party status is not used colloquially to refer to the party who generally is 8 more satisfied with the overall result in the action. To the contrary, the "prevailing 9 party" for purposes of such awards is a party that "has been awarded some relief by 10 the court." Buckhannon Bd. & Care Home, Inc. v. West Virginia Dept. of Health 11 and Human Resources, 532 U.S. 598, 603 (2001). The Supreme Court further holds 12 that a party that receives "an award of nominal damages" or obtains relief through a 13 "settlement agreement[] enforced through a consent decree" qualifies as a prevailing 14 party. Id. at 604. Thus, although a defendant may be the party more satisfied with 15 the result of a copyright action, that defendant may not be the "prevailing party" for 16 purposes of an award of fees or costs. For example, a plaintiff that recovered only 17 $1 on her claims was nonetheless the "prevailing party" for purposes of such 18 considerations. Mercer v. Duke University, 401 F.3d 199, 203 (4th Cir. 2005).4 19 20 While these standards may not comport with a colloquial understanding of a 3 Veoh also tries to suggest that UMG unduly delayed in identifying the 21 infringing videos at issue. The record shows that the Court denied Veoh's motion to compel such information because it was not yet ripe. Batsell Decl. Ex. J 22 (11/21/2008 Order) (Dkt. No. 219). Further, the Court recognized that Veoh's own 23 destruction and delay in providing Audible Magic data hampered UMG's efforts and thus extended UMG's time to identify infringing videos to May 11, 2009. Id. at 24 Ex. G (4/6/2009 Order) (Dkt. No. 400). 4 See also A&M Records, Inc. v. Abdallah, 948 F. Supp. 1449, 1460 (C.D. 25 Cal. 1449) (only "prevailing plaintiffs are entitled to an injunction prohibiting the 26 defendant from any further infringement of the plaintiffs' . . . copyrighted material."); Childress v. Taylor, 835 F. Supp. 739, 742-43 (S.D.N.Y. 1993) (a 27 plaintiff that "obtain[s] injunctive relief" but "fail[s] in significant measure to establish her claim for actual damages," even if "litigated to the hilt," is nonetheless 28 a prevailing party). UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 -9- 1 "prevailing party," they govern Veoh's motion, and under them, Veoh cannot 2 establish that it was the "prevailing party." The Court concluded that Veoh was 3 entitled to Section 512(c)'s safe harbor. That finding did not immunize Veoh's 4 infringement nor did it eliminate all relief available to UMG. See 17 U.S.C. 5 � 512(c)(1) ("A service provider shall not be liable for monetary relief, or, except as 6 provided in subsection (j), for injunctive or other equitable relief . . . "). The relief 7 under 17 U.S.C. � 512(j) remained available to UMG, as acknowledged in the 8 Court's October 2, 2009 minutes: "if Veoh seeks to have judgment entered in this 9 case it will have to move for summary judgment as to potential injunctive relief." 10 Ledahl Decl. Ex. J (Dkt. No. 579). Veoh ultimately stipulated to the injunctive 11 relief provided under 17 U.S.C. � 512(j) despite the Court's summary judgment 12 rulings. Veoh "agree[d] to continue to disable access to the Allegedly Infringing 13 Video Files [thousands of which Veoh did not remove until after UMG filed suit] 14 and to continue to use hash filtering to prevent video files with hash values that are 15 identical to the Allegedly Infringing Video Files from being accessed by users." 16 Ledahl Decl. Ex. K (� 1.a). Veoh also agreed "not [to] reinstate accounts that were 17 terminated as a consequence of Veoh receiving multiple DMCA notices concerning 18 the account holder posting allegedly infringing video files, and that included one or 19 more of the Allegedly Infringing Video Files," and "not [to] allow such terminated 20 account holders to open a new account with the same user name or email address 21 associated with the terminated account." Id. (� 1.b). While this is certainly not the 22 scope of relief that UMG sought, nor that UMG believes is appropriate, it 23 nonetheless renders Veoh unable to claim "prevailing party" status under the 24 applicable rules and precedents for purposes of seeking attorneys' fees. In similar 25 circumstances, courts conclude that no party may claim "prevailing party" status. 26 See Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1126-27 (2d Cir. 27 1989) ("neither [the plaintiff's] nor [the defendant's] success was sufficiently 28 significant to mandate an award of attorneys' fees" where the plaintiff withdrew one UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 10 - 1 claim of infringement, earned only $100 in statutory damages and a permanent 2 injunction on the other, and the defendant "had offered to consent to the entry of a 3 permanent injunction long before trial began"). 4 B. 5 Veoh Cannot Meet The Standard For Fee Awards Under 17 U.S.C. � 505 Even if Veoh was the prevailing party, the Court has "discretion" to award or 6 withhold Veoh's attorneys' fees. 17 U.S.C. � 505. The Court should grant a party's 7 request for fees only if "frivolousness, motivation, objective unreasonableness (both 8 factual and in the legal components of the case) and the need in particular 9 circumstances to advance considerations of compensation and deterrence" warrant 10 the award. Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994).5 11 These factors are absent here. UMG's claims against Veoh for direct, 12 contributory, vicarious, and inducing copyright infringement were non-frivolous, 13 objectively reasonable, and consistent with the purposes of the Copyright Act. Nor 14 has Veoh introduced evidence that UMG had an improper motive in bringing suit. 15 UMG sought to hold Veoh accountable for its infringement of thousands of UMG's 16 copyrights--it was undisputed that Veoh displayed and/or distributed videos 17 implicating copyrights owned or controlled by UMG. An award of fees for Veoh is 18 therefore inappropriate. 19 20 21 22 23 24 25 26 27 28 Veoh cites Assessment Technologies, LLC v. WIREData, Inc., 361 F.3d 434, 439 (7th Cir. 2004) to claim that for a prevailing defendant, there is a strong presumption in favor of attorneys' fees. Mot. at 12:5-7. The decision does not support this claim and is not the law of this Circuit. The court acknowledged its break from Supreme Court and other circuits' precedent, including the Ninth Circuit's. Id. at 436 ("[t]he courts have not said . . . that the symmetry of plaintiff and defendant in copyright cases requires a presumption that the prevailing party, whichever it is, is entitled to an award of attorneys' fees. They have instead left it to judicial discretion by setting forth a laundry list of factors, all relevant but none determinative"). Though breaking from precedent, the opinion still confirms that the strength of each party's case is a significant factor in determining the appropriateness of fees. Id. at 436-37. UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 1. UMG's Motivation Was Proper UMG sued Veoh to protect its copyrights. UMG asserted in this Court (and 5 - 11 - 1 now asserts in the Court of Appeals) that Veoh is liable to UMG for direct, 2 contributory, vicarious, and inducing copyright infringement and not entitled to 3 Section 512(c)'s liability limitations. UMG may pursue damages and injunctive 4 relief for such infringement, which here encompassed thousands of videos that were 5 collectively displayed and downloaded millions of times. See 17 U.S.C. � 504(a). 6 There is nothing untoward or inappropriate about pursuing those remedies. See 7 Luken v. Int'l Yacht Council, Ltd., 581 F. Supp. 2d 1226, 1245 (S.D. Fla. 2008) 8 ("[i]t goes without saying that protection of one's copyright constitutes a 9 permissible motivation in filing a copyright infringement case against one whom the 10 copyright holder believes in good faith to have infringed the copyright"). Veoh 11 argues that UMG was not "genuinely interested in attempting to stop the 12 infringements it alleges in this case" and should "have simply notified Veoh of them 13 as required by the DMCA." Mot. at 17:27-18:1. This argument misunderstands the 14 core dispute. As a music company, copyrights are UMG's core assets. Veoh used, 15 without permission, UMG's copyrighted content for Veoh's own financial gain. 16 Other businesses that operated similar services obtained licenses from UMG for the 17 use of its content and provided appropriate compensation for such use. UMG could 18 not simply allow Veoh's actions to go unchallenged. Such actions can devastate 19 UMG's business. See generally Elektra Entertainment Group Inc. v. Brimley, 2006 20 WL 2367135, *4 (S.D. Ga. Aug. 15, 2006) ("The creation of online media 21 distribution systems, like the one used by Defendant, has left Plaintiffs' sound 22 recordings vulnerable to massive worldwide infringement by potentially tens of 23 millions of users. Such widespread infringement, left unchecked will undoubtedly 24 result in recording companies' sustaining devastating financial losses."). 25 While Veoh asserts that the DMCA shields it from liability, UMG contended 26 that Veoh was not entitled to such protections and was responsible for preventing 27 that infringement. UMG did not aim, as Veoh baselessly claims, to "extract an 28 extortionist settlement or cripple a young technology company" in pursuing UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 12 - 1 damages for that infringement. Mot. at 18:4-5. Rather, UMG sought to stop 2 rampant infringement of its rights and to obtain compensation for that unauthorized 3 use. The record is clear that UMG has worked with numerous "young technology 4 companies" in creative ways to make UMG content available in a variety of formats. 5 UMG produced dozens of license agreements in this case documenting various 6 business arrangements with comparably young technology companies in the digital 7 arena. Ledahl Decl., � 3. Likewise, through licenses (entered into without 8 litigation) with YouTube, or confidential settlements with MySpace and Grouper, 9 UMG has demonstrated its willingness to work with user-uploaded websites' 10 reliance on copyrighted audio-visual content. Veoh was different � it espoused 11 nominal respect for copyrights, yet used copyrighted material without compensating 12 the copyright holders for its use. As a business dependent on copyrighted content, 13 this was a practice UMG could not, and was not obliged to, ignore. 14 15 2. UMG's Claims Against Veoh Were Objectively Reasonable Veoh suggests that UMG's claims were objectively unreasonable and that 16 UMG litigated this case in an unreasonable manner. These arguments are belied by 17 an analysis of the record. 18 19 a. UMG asserted reasonable substantive claims Far from being objectively unreasonable, UMG's claims and Veoh's defenses 20 presented important issues that the Court acknowledged were previously unresolved, 21 relating to the application of copyright law to user-uploaded video services, and the 22 obligations and responsibilities of such services to police themselves and avoid 23 infringement. Where a case presents "substantial questions of first impression," an 24 award of attorneys' fees is not appropriate. See Lifshitz v. Walter Drake & Sons, 25 Inc., 806 F.2d 1426, 1435 (9th Cir. 1986) (denying attorneys' fees where issues 26 presented were "substantial questions of first impression in this circuit"). Similarly, 27 a court should not award attorneys' fees against a party that brought novel, complex, 28 or colorable claims, or took a "reasonable stand on an unsettled principle of law." UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 13 - 1 Garnier v. Andin Intern., Inc., 884 F. Supp. 58, 62 (D.R.I. 1995) (denying request 2 for attorneys' fees by defendant that obtained summary judgment); see also Donald 3 Frederick Evans and Associates, Inc. v. Continental Homes, Inc., 785 F.2d 897, 4 916-17 (11th Cir. 1986) (affirming denial of attorneys' fees where plaintiff asserted 5 "colorable copyright claims"). "When close infringement cases are litigated, 6 copyright law benefits from the resulting clarification of the doctrine's boundaries." 7 Lotus Dev. Corp. v. Borland Int'l Inc., 140 F.3d 70, 75 (1st Cir. 1998) (affirming 8 denial of attorneys' fees to prevailing defendant). 9 Veoh's contention that UMG's copyright claims were "objectively 10 unreasonable" borders on the preposterous. UMG's claims raised issues of 11 copyright law that third parties and Veoh's own lawyers recognized as important 12 and unresolved. When UMG brought suit, the press regularly referred to Veoh as a 13 massive copyright infringer. Ledahl Decl. Exs. D-F. The leading treatise on 14 copyright law has said "[a]mong the many particular questions to arise as to the 15 treatment of related defendants, one of the most difficult concerns the liability of 16 online service providers for copyright infringement by others that may traverse the 17 providers' facilities." 3 Melville B. Nimmer & David Nimmer, Nimmer on 18 Copyright � 12B.01 (Matthew Bender, Rev. Ed.). Similarly, at a June 2008 19 conference on internet businesses, panelists (including a Winston & Strawn partner 20 for whom Veoh seeks to recover fees) acknowledged that the issue of whether the 21 DMCA applied to services like Veoh's remained unresolved. Ledahl Decl. Ex. G. 22 This Court too acknowledged that UMG's motion for partial summary 23 judgment "require[d] [it] to construe and apply the phrase `by reason of the storage 24 at the direction of a user' in a context not previously addressed judicially." Ledahl 25 Decl. Ex. L (12/31/2008 Order at 2). And the Court acknowledged "labor[ing] 26 extensively" in reaching its decision on Veoh's motion for summary judgment. 27 Ledahl Decl. Ex. I (9/8/2009 Hearing Tr.) (1:21-22). The Court also suggested that 28 no case but Io Group has addressed the applicability of Section 512(c) to userUMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 14 - 1 uploaded video sites and, as noted, that Io Group left unresolved many of the issues 2 presented by UMG's claims. Ledahl Decl. Ex. L (12/31/2008 Order at 2). The 3 Court's rulings belie Veoh's claim that UMG's suit was "objectively unreasonable." 4 Further, at least three contemporaneous cases � none of which were resolved 5 when UMG brought this action � raise claims similar to those UMG brought here. 6 See Io Group, 586 F. Supp. 2d at 1132; The Football Association Premier League 7 Limited, et al, v. YouTube, Inc., et al., Case No. 07-CV-02103 LLS (S.D.N.Y.), 8 consolidated with Viacom Int'l, Inc. v. YouTube, Inc. Were UMG's claims as 9 frivolous as Veoh asserts, it is unlikely that other respected organizations and 10 companies would be asserting them as well.6 11 In any event, UMG position was not, and is not, without substantial case law 12 support. UMG's briefs and arguments were not based on speculation or 13 unreasonable assertions, but rather cited specific textual arguments from the DMCA 14 itself, its legislative history, and many case authorities. 15 Rather than meaningfully address the nature of UMG's claims, and the fact 16 that they presented important issues in a developing area of copyright law, Veoh 17 tries to parse out specific sub-issues in the case and suggest that UMG's position on 18 such issues was unreasonable. In each case, Veoh ignores the fact that the core 19 issues in this case were not the subject of settled decisions in Veoh's favor � far 20 from it. Such issues included the basic application of section 512(c) to Veoh's 21 activities, whether the facts supported a finding that Veoh had knowledge (actual or 22 "red flag" knowledge) of infringement on its service; whether Veoh had the right 23 and ability to control infringing activity, and whether Veoh received a direct 24 financial benefit from its infringing activity. 25 26 UMG's positions were not asserted in a vacuum. UMG cited substantial 6 Similarly, if Veoh were correct, UMG and the defendants in UMG 27 Recordings, Inc., et al. v. Grouper Networks, Inc., et al., 06-CV-6561 AHM (AJWx), and in UMG Recordings, Inc., et al. v. MySpace, Inc., et al., 06-CV-7361 28 AHM (AJWx), would not have amicably settled their disputes as they did. UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 15 - 1 textual, legislative history, and case authority in support of its positions on all of 2 these issues. With respect to issues of knowledge, UMG relied on various cases, 3 including Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007); In re 4 Aimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003); Hendrickson v. eBay, 5 Inc., 165 F. Supp. 2d 1082 (C.D. Cal. 2001); and Corbis Corp. v. Amazon.com, Inc., 6 351 F. Supp. 2d 1090 (W.D. Wash. 2004). Similarly, with respect to Veoh's right 7 and ability to control infringing activity for which it received a direct financial 8 benefit, UMG relied upon substantial authorities, including the Supreme Court's 9 decision in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 926 10 (2005), and the Ninth Circuit's decisions in Ellison v. Robertson, 357 F.3d 1072 (9th 11 Cir. 2004); A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001); 12 Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996), and Perfect 10, 13 Inc. v. Amazon.com, Inc. 487 F.3d 701 (9th Cir. 2007). Further, UMG provided a 14 detailed analysis of the facts of the case, applying the few cases to consider related 15 issues to those facts. Veoh relied heavily on aspects of its operations that changed 16 during the litigation (such as the implementation of filtering and the adoption of the 17 "UGC Principles") in asserting its entitlement to summary judgment. See Veoh 18 Motion for Summary Judgment (Dkt. # 449) at 7-9. The Court also credited these 19 changed facts in granting Veoh's motion. See Ledahl Decl. Ex. A at 5-6. That 20 Veoh, and even the Court, ultimately disagreed with UMG's analysis (and relied on 21 facts not present when UMG filed suit) cannot render UMG's position "objectively 22 unreasonable." Veoh suggests that UMG's positions ran directly counter to settled 23 law. As shown above, the exact opposite is true. 24 25 b. UMG pursued its claims in a reasonable manner Veoh also suggests that UMG pursued this action in an unreasonable manner 26 in discovery. The facts demonstrate that the opposite is true. UMG conducted 27 discovery in this action in an entirely reasonable manner while Veoh engaged in 28 abusive and non-meritorious tactics that increased the costs of this litigation. UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 16 - 1 Veoh falsely contends that UMG refused to identify Veoh's infringing videos 2 in this case. In fact, UMG timely identified infringing videos in response to an 3 interrogatory that Veoh did not serve until October 24, 2008. Ledahl Decl., � 4. 4 Veoh suggests that UMG did so only in response to a motion to compel. In fact, the 5 motion to which Veoh refers was denied by Judge Wistrich because Veoh was 6 seeking to compel a response to its interrogatory before any response was due. 7 Batsell Decl. Ex. J (11/21/2008 Order). Because Veoh destroyed information from 8 Audible Magic during the lawsuit and subsequently delayed production of such 9 information until late February 2009, the Court granted UMG until May 11, 2009 to 10 complete its identification. Id. at Ex. G. All of these facts put the lie to Veoh's 11 assertion that UMG refused to identify infringing videos. 12 Similarly, Veoh's suggestion that UMG pursued improper or unnecessary 13 discovery motions is belied by the record. As set forth Section II, supra, UMG filed 14 five discovery motions, each of which was granted in whole or in part. Judge 15 Wistrich specifically criticized Veoh at the hearing on UMG's first discovery 16 motion for its continuing failure to produce material that was "very plainly 17 relevant." Batsell Decl. Ex. D (8/25/2008 Hearing Transcript at 36:22-23). Veoh 18 suggests that UMG made false accusations of spoliation, but fails to acknowledge 19 that UMG obtained an Order from Judge Wistrich specifically directing Veoh to 20 retain evidence that it had previously been destroying. Id. at Ex. I (11/18/2008 21 Order). UMG also filed a subsequent motion seeking sanctions because Veoh failed 22 to produce materials the Court had ordered it to produce. Among other things, 23 UMG identified documents produced by third parties that were plainly called for by 24 the Court's prior orders, indicated that Veoh should have had copies of such 25 documents, but had nonetheless withheld them from production. Judge Wistrich 26 ruled that Veoh must provide a sworn certification from both in-house and outside 27 counsel that its production was complete. Id. at Ex. H. The Court stated that "The 28 court is concerned about what appear to be unreasonably narrow interpretations by UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 17 - 1 Veoh of some of UMG's discovery requests, a practice which calls into question the 2 completeness of its entire production. Anomalies in Veoh's production, which may 3 or may not have an entirely innocent explanation, heighten that concern." Id. Judge 4 Wistrich's rulings in UMG's favor render Veoh's arguments nonsensical. If UMG's 5 motion practice was unreasonable, as Veoh suggests, Judge Wistrich presumably 6 would not have granted UMG's motions. 7 8 9 3. Awarding Attorneys' Fees Would Disserve The Purposes of the Copyright Act Few courts have construed 17 U.S.C. � 512(c) � even fewer in the context of 10 user-uploaded video sites. Thus the statute's reach remains ill-defined. Deterring 11 plaintiffs from litigating the boundaries of that section will ill-serve the Copyright 12 Act. Awarding attorneys' fees in this action is therefore inappropriate. 13 "[T]he imposition of a fee award against a copyright holder with an 14 objectively reasonable litigation position will generally not promote the purposes of 15 the Copyright Act." Matthew Bender & Co. v. West Publ'g Co., 240 F.3d 116, 122 16 (2d Cir. 2001) (citing Mitek Holdings, Inc. v. Arce Eng'g Co., 198 F.3d 840, 842 17 (11th Cir. 1999). Courts recognize that parties should not be discouraged from 18 asserting claims in unresolved areas by fear of massive attorneys' fee awards. "This 19 is because such attorney fee awards may chill litigation of close cases, preventing 20 the clear demarcation of the boundaries of copyright law. Ariel (UK) Ltd. v. Reuters 21 Group PLC, 2007 WL 194683, *1 (S.D.N.Y. Jan. 24, 2007) (citing Fogerty, 510 22 U.S. at 527); see also Luken v. Int'l Yacht Council, Ltd., 581 F. Supp. 2d 1226, 1246 23 (S.D. Fla. 2008) ("a party that advances a reasonable position should not be deterred 24 from doing so for fear that it will have to pay attorney's fees if it loses"); Perfect 10, 25 Inc. v. CWIE, LLC, 2005 WL 5957973, *3 (C.D. Cal. Feb. 10, 2005) (finding no 26 reason to award attorneys' fees for deterrent purposes; "[a]warding attorney's fees 27 would . . . punish the Plaintiff for advancing a theory in an unclear area of copyright 28 law"). Thus, under the facts of this case, an award of attorneys' fees to Veoh would UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 18 - 1 not serve the principles of the Copyright Act and should be rejected. 2 C. 3 4 Rule 68 Does Not Provide An Independent Basis For Awarding Fees And Costs Veoh Incurred After October 2008 Veoh argues that Federal Rule of Civil Procedure 68, coupled with Veoh's 5 $100,000 offer of judgment, is an independent basis for awarding fees. That 6 contention is meritless. Rule 68 adds nothing to Veoh's request for attorneys' fees 7 because even under Rule 68, Veoh still must establish its entitlement to such fees 8 under the applicable standards of Section 505 of the Copyright Act. IN addition and 9 in any event, Veoh has not demonstrated that its offer was more favorable than the 10 injunctive relief ultimately obtained by UMG and thus cannot avail itself of Rule 68. 11 12 1. Veoh Must Satisfy Section 505 Even Under Rule 68 UMG does not dispute that Rule 68 may, at times, permit the award of 13 attorneys' fees as costs when the underlying statute is so worded. Marek v. Chesny, 14 473 U.S. 1, 3-4 (1985). But Veoh improperly suggests that Rule 68 automatically 15 justifies an award of fees. According to Veoh, so long as the judgment obtained by 16 the plaintiff is less favorable than the defendant's offer of judgment, attorneys' fees 17 are recoverable, whether or not Veoh can satisfy the requirements of Section 505. 18 Mot. at 21:19-25. Veoh's argument has been rejected by clear precedents from the 19 Ninth Circuit and other courts. 20 Specifically, a defendant may recover fees under Rule 68 only if it satisfies 21 the otherwise-applicable standard for such recovery. Thus, notwithstanding a Rule 22 68 offer, "a civil rights defendant may not be awarded attorney's fees under section 23 1988 unless the trial court determines that the plaintiff's action was `frivolous, 24 unreasonable, or without foundation.'" Crossman v. Marcoccio, 806 F.2d 329, 334 25 (1st Cir. 1986); see also E.E.O.C. v. Bailey Ford, Inc., 26 F.3d 570, 571 (5th Cir. 26 1994) ("[E]ven if appellee were entitled to recover costs under Rule 68, its 27 attorneys' fees are not among the properly recoverable costs without a determination 28 that the action was frivolous, unreasonable or without foundation") (citing O'Brien UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 19 - 1 v. City of Greers Ferry, 873 F.2d 1115, 1120 (8th Cir. 1989)). The Ninth Circuit 2 holds the same. See U.S. v. Trident Seafood Corp., 92 F.3d 855, 860 (9th Cir. 1996) 3 (holding that an award of attorneys' fees under Rule 68 is only allowed if the 4 requirements of the underlying statute � in that case the Clean Air Act � for 5 awarding such fees are satisfied); see also Harbor Motor Co., Inc. v. Arnell 6 Chevrolet-Geo, Inc., 265 F.3d 638, 646-47 (7th Cir. 2001) (denying fees under Rule 7 68 to non-prevailing party because "the award of Rule 68 fees" is limited "to only 8 those costs that are properly awardable under the substantive statute at issue," and 9 "only the prevailing party is permitted to recover its attorney's fees" under the 10 Copyright Act).7 11 Veoh cites Baker v. Urban Outfitters, Inc., 431 F. Supp. 2d 351 (S.D.N.Y. 12 2006), as contrary authority. The Baker court found that the defendant separately 13 satisfied the standards of Section 505 and only then awarded fees under Rule 68. 14 Baker, 431 F. Supp. 2d at 356-60 (holding fees awardable under Section 505 15 because the plaintiff (1) lied in discovery, (2) filed the case in bad faith to obtain 16 publicity for the plaintiff and his counsel, and (3) advanced an objectively 17 unreasonable damages claim). Baker confirms that a defendant must satisfy the 18 Fogerty factors, even under Rule 68. Thus, Veoh's arguments under Rule 68 add 19 nothing to the analysis of its claim for fees. 20 21 22 24 Veoh suggests that Azizian v. Federated Dept. Stores, Inc., 499 F.3d 950 (9th Cir. 2007) holds otherwise. It does not. The Ninth Circuit affirmed the 26 Supreme Court's conclusion that Rule 68 "`refers to all costs properly awardable under the relevant substantive statute or other authority.'" Id. at 957 (citing Marek, 27 473 U.S. at 9) (emphasis added). Thus Azizian only confirms that attorneys' fees must be awardable "under the relevant substantive statute" (i.e., "properly 28 awardable") before a court may award them under Rule 68. Id. at 959. 25 UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 2. Veoh has not Shown that its Offer was More Favorable than the Injunctive Relief Obtained by UMG Rule 68 allows an award of costs only where the judgment obtained by the 23 plaintiff is less favorable than the defendant's offer. Fed. R. Civ. P. 68(d) ("If the 7 - 20 - 1 judgment that the offeree finally obtains is not more favorable than the unaccepted 2 offer . . . "). The "burden is on the defendant-offeror to demonstrate that its `offer 3 was more favorable than the judgment . . . .'" Harbor Motor, 265 F.3d at 648. 4 Under Rule 68, "a favorable judgment and an injunction can be more valuable to a 5 plaintiff than damages." Andretti v. Borla Performance Indus. Inc., 426 F.3d 824, 6 837 (6th Cir. 2005). Thus in Reiter v. MTA New York City Transit Authority, 457 7 F.3d 224, 231 (2d Cir. 2006), the court held that the defendant "failed to carry" the 8 burden of "showing that [its] Rule 68 offer was more favorable than [a] judgment" 9 awarding injunctive relief. See also Domanski v. Funtime, Inc., 149 F.R.D. 556, 558 10 (N.D. Ohio 1993) (holding injunctive judgment was more favorable than money 11 offered). Veoh offers no evidence or argument to explain how its offer of judgment 12 was more favorable than the injunctive relief to which it ultimately stipulated. 13 D. 14 15 In Any Event, Veoh's Request For More Than $4 Million In Attorneys' Fees And Costs Is Not Reasonable Should the Court determine that some fee award is warranted, it should still 16 not award the more than $4 million sought by Veoh. That amount is unreasonable. 17 It exceeds fees incurred in comparable cases, and Veoh's own misconduct and waste 18 produced this exorbitant sum. Having obtained partial summary judgment, Veoh 19 has simply totaled every dollar it spent on any aspect of this case (and some that 20 were not even part of this case) and seeks to charge them all to UMG. These 21 charges include numerous wasteful expenditures and unsuccessful activities pursued 22 by Veoh that had nothing to do with the result in this case. Veoh pursues fees spent 23 bringing failed discovery motions. It seeks fees spent opposing UMG's successful 24 discovery motions. It seeks fees spent bringing ex parte applications that the Court 25 ruled were abusive. These and many similar expenditures are simply unreasonable. 26 Even if Veoh were entitled to some recovery of fees (it is not), the amount it seeks is 27 grossly excessive and should be drastically reduced. 28 UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 21 - 1 2 3 1. Veoh has not Met its Burden of Showing that the Amount It Seeks Is Reasonable Veoh is not entitled to any fee recovery because it has not met its required 4 burden. The burden is on Veoh to "demonstrat[e] the time spent and that it was 5 reasonably necessary." Maljack Productions, Inc. v. Palisades Entertainment, 1995 6 WL 779154 at *3 (C.D. Cal. Jun. 23, 1995); see also Queenie, Ltd. v. Nygard Int'l, 7 204 F. Supp. 2d 601, 608 (S.D.N.Y. 2002) ("[w]hile a party to a litigation may 8 choose its own level of litigation expense, it may not impose its own approach on a 9 losing adversary"). Veoh has not met this burden. 10 Veoh fails to establish that its aggregate fees are reasonable. As noted above, 11 Veoh simply lumps all of its expenditures together and asserts that every dollar 12 should be awarded. Veoh fails to establish that such expenditures were reasonable 13 or necessary. Instead, Veoh includes numerous unnecessary and irrelevant 14 activities. Veoh ultimately prevailed in defeating UMG's motion for partial 15 summary judgment and in obtaining partial summary judgment itself. Veoh's 16 expenditures in connection with these two motions amounted to a total of 17 approximately $500,000. See Batsell Decl., �� 12-13. While Veoh fails to show 18 that even this amount was reasonable for such motions, it nonetheless is far less than 19 Veoh's excessive request for more than $4 million. 20 Even if Veoh were permitted to recover aggregate fees for the case, the fees 21 claimed by Veoh far exceed those incurred in connection with comparable cases. 22 See Ledahl Decl. Ex. M (American Intellectual Property Law Association: Report of 23 the Economic Survey 2009) (in copyright infringement cases seeking over $25 24 million, the average litigation cost was $1,696,000, and even cases in the third 25 quartile only cost $2,325,000). Veoh seeks more than twice the average � more than 26 $4 million in fees. This reveals the inherent unreasonableness of Veoh's request. 27 Further, Veoh's evidence is either incomplete or inconsistent, leaving the 28 Court and UMG unable to determine the sum Winston & Strawn actually billed to UMG'S OPPOSITION TO VEOH'S MOTION FOR ATTORNEYS' FEES AND COSTS 2164180 - 22 - 1 Veoh. In this respect, Veoh again fails to carry its burden. See Crescent Publ'g 2 Group, Inc. v. Playboy Enters., Inc., 246 F.3d 142, 151 (2d Cir. 2001) ("the actual 3 billing arrangement is a significant . . . factor in determining what fee is 4 `reasonable'" under the Copyright Act, and in no event should the fees awarded 5 amount to a windfall for the prevailing party"); Robinson v. Lopez, 2003 WL 6 23162906, *3 (C.D. Cal. Nov. 24, 2003) ("The actual billing arrangement provides a 7 strong indication of what private parties believe a `reasonable' fee would be"). 8 Winston & Strawn claims to have billed at a blended rate of $480/hour through 9 December 2007; $490/hour through December 2008; and "in a manner consistent 10 with Winston & Strawn's customary billing practices" in 2009, but Veoh's 11 supporting documents are either incomplete or inconsistent on the issue of the firm's 12 billing practices. Ranahan Decl. Ex. D at 381 (Lane billed at $598.98/hour; Elkin 13 billed at $636.43/hour; Golinveaux billed at $502.72/hour); Supp. Ranahan Decl. 14 Ex. 4 at 26 (Golinveaux at $460.00/hour; Elkin at $750.00/hour). Nor do the 15 summary statements in its declarations match the totals in the accompanying 16 exhibits. See, e.g., Ranahan Decl. at � 7 (T. Lane billed 1,217.70 hours, and J. 17 Golinveaux billed 1,803.70 hours); id. at Ex. D at 381 (T. Lane billed 1219 hours, 18 and J. Golinveaux billed 1813.60 hours); id. at � 19 ("Fees Billed" equals 19 $4,613,062.20); id. at Ex. D at 385 ("Matter Time Client Summary Total" equals 20 $5,004,164.05). These inconsistencies (or deficiencies) are not explained; no actual 21 invoices accompany Veoh's motion. Hence UMG is unable to confirm Winston & 22 Strawn's true billing practices, and the amount it in fact billed Veoh. 23 These inconsistencies and the grievously high a

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