SAS Institute Inc. v. World Programming Limited

Filing 608

ORDER denying #571 Motion for Attorney Fees - Signed by District Judge Louise Wood Flanagan on 7/15/2016. (Tripp, S.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:10-CV-25-FL
SAS INSTITUTE, INC.,
Plaintiff,
v.
WORLD PROGRAMMING LIMITED,
Defendant.

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ORDER

This matter comes before the court on defendant’s motion for attorney’s fees, made pursuant
to 17 U.S.C. § 505. (DE 571). Plaintiff has responded in opposition and defendant has replied. The
motion is ripe for ruling. For the reasons that follow, the court denies defendant’s motion.
BACKGROUND
Plaintiff created and distributes certain software known as the “SAS System,” which allows
users to perform a variety of tasks related to data management and analysis, among other things.
SAS System users purchase a SAS System “license,” which allows them to use the software subject
to certain restrictions. In addition, plaintiff developed and distributed a functionally limited version
of the SAS System, known as the SAS Learning Edition. The Learning Edition is marketed as an
educational tool, to assist users in learning to use the SAS System. As a condition of use, each
Learning Edition purchaser must agree to the Learning Edition License Agreement, which restricts
his or her use of the Learning Edition to “non-production purposes” only and prohibits “reverse
engineering” of that software. Both versions interpret and compile a common set of inputs, known
as the “SAS Language.”

Defendant created and distributes competing software known as the “World Programming
System” (“WPS”). To develop WPS, defendant employed the Learning Edition, which it purchased
on several occasions from Amazon.com after being denied a license to the full SAS System by
plaintiff. As a condition of those purchases, defendant agreed to the Learning Edition License
Agreement, including its restrictions. Defendant wanted WPS to mimic the Learning Edition’s
output for a given input. To achieve that goal, defendant’s employees repeatedly modified WPS’s
source code in an effort to achieve a one-to-one correspondence between WPS’s and the Learning
Edition’s outputs, even when defendant’s employees believed those outputs to be incorrect. The
source code that produced that desired correspondence, a so-called “golden result,” then was
incorporated into a testing framework against which later versions of WPS were tested. Thus, even
though defendant moved away from use of the Learning Edition over time, each version of WPS has
been indirectly tested against it.
Plaintiff initially filed suit in the United Kingdom, where defendant is headquartered. As
relevant here, plaintiff claimed defendant violated several copyrights it held in the SAS System,
including that defendant violated its copyright in the SAS Language where WPS utilizes that
language. That action ended unfavorably for plaintiff; in 2013, both the “High Court” (trial court)
and the Court of Appeal of England and Wales ruled in favor of defendant on the basis of certain
provisions of law unique to the European Union.
Meantime, on January 19, 2010, plaintiff filed suit here. Plaintiff asserted six causes of
action: 1) copyright infringement of the SAS System, in violation of the Copyright Act, 17 U.S.C.
§ 101 et seq. (the “software claim”); 2) copyright infringement of certain SAS manuals, also in
violation of the Copyright Act (the “manual claim”); 3) breach of the Learning Edition License

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Agreement; 4) tortious interference with contract; 5) tortious interference with prospective economic
advantage; and 6) violation of North Carolina’s Unfair and Deceptive Practices Act (“UDPA”), N.C.
Gen. Stat. § 75–1.1 et seq. Plaintiff also sought a permanent injunction. On August 14, 2013,
plaintiff amended its complaint to add a fraud claim.
On April 14, 2014, plaintiff moved for summary judgment on claims for breach of the
Learning Edition License Agreement and tortious interference with contract. (DE 211). Defendant
cross-moved for summary judgment on all of plaintiff’s claims. (DE 220). By order entered
September 29, 2014, the court granted in part and denied in part each motion. SAS Inst., Inc. v.
World Programming Ltd., 64 F. Supp. 3d 755 (E.D.N.C. 2014). The court granted summary
judgment in plaintiff’s favor as to its breach of Learning Edition License Agreement claim, at least
on the issue of liability. The court granted summary judgment in defendant’s favor as to plaintiff’s
software claim, as well as plaintiff’s tortious interference with contract and tortious interference with
prospective economic advantage claims. The court set for trial the following claims: 1) the manual
claim; 2) fraud; 3) violation of the UDPA. In addition, the court set for trial plaintiff’s breach of
Learning Edition License Agreement claim on the issue of damages.
The case went to trial on September 22, 2015.1 Prior to trial, on September 9, 2015, plaintiff
dismissed with prejudice its manual claim. On October 9, 2015, following a three-week trial, the
jury returned a verdict in plaintiff’s favor on its fraud and UDPA claims. (DE 517). The jury
awarded plaintiff $26,376,635.00 in compensatory damages on each of plaintiff’s breach of Learning
Edition License Agreement, fraud, and UDPA claims. The jury also awarded plaintiff punitive

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The Honorable David A. Faber, Senior United States District Judge for the Southern District of West Virginia,
sitting by designation, tried this case.

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damages on its fraud claim in the amount of $3,000,000.00. The clerk entered the court’s judgment
on the claims tried to the jury on October 16, 2015. (DE 528).
Following trial, the court undertook certain post-trial motions. On November 13, 2015,
plaintiff filed a motion for permanent injunction. (DE 536). Same day, defendant filed a renewed
motion for judgment as a matter of law or, in the alternative, for a new trial, pursuant to Federal
Rules of Civil Procedure 50(b) and 59. (DE 542). By orders entered June 17, 2016, the court denied
plaintiff’s motion for permanent injunction and denied defendant’s renewed motion for judgment
as a matter of law or, in the alternative, for a new trial. See SAS Inst., Inc. v. World Programming
Ltd., No. 5:10-CV-25-FL, 2016 WL 3475281 (E.D.N.C. June 17, 2016) (denying plaintiff’s motion
for permanent injunction) (Faber, J.); SAS Inst., Inc. v. World Programming Ltd., No. 5:10-CV-25FL, 2016 WL 3435196 (E.D.N.C. June 17, 2016) (denying defendant’s renewed motion for
judgment as a matter of law or, in the alternative, for a new trial) (Faber, J.).
As now relevant, defendant filed the instant motion for attorney’s fees on February 5, 2016.
Defendant seeks its attorney’s fees related to plaintiff’s software claim under the Copyright Act, 17
U.S.C. § 505. Defendant seeks approximately $760,721.59 in attorney’s fees. That amount includes
$710,130.00 owed to the law firm Baker Hostetler and approximately $50,591.59 owed to U.K. law
firm Speechly Bircham, for its work in the earlier U.K. litigation.
In support of its motion, defendant argues that it is entitled to fees as the prevailing party on
plaintiff’s software claim, where it achieved significant success on the merits of that claim and
where plaintiff’s software claim was brought either in bad faith or in an objectively unreasonable
manner, since plaintiff did not abandon that claim after learning in the earlier-concluded U.K.
litigation that the factual predicate upon which its software claim was based did not exist. Plaintiff

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argues in response that defendant’s motion should be denied as untimely. Plaintiff further argues
that defendant was not “the” prevailing party; that attorney’s fees are not warranted here; and that,
even if attorney’s fees are warranted, defendant’s attorney’s fee award should be reduced
substantially because the amount claimed is unreasonable.
COURT’S DISCUSSION
1.

Timeliness of Defendant’s Motion

Plaintiff first argues that defendant’s motion summarily should be denied as untimely. In
support of its position, plaintiff directs the court to Federal Rule of Civil Procedure 54(d), which
provides that motions for attorney’s fees must “be filed no later than 14 days after the entry of
judgment.” Fed. R. Civ. P. 54(d)(2)(B)(I). Because the clerk entered judgment on the docket on
October 16, 2015, plaintiff maintains the instant motion for attorney’s fees, filed February 5, 2016,
comes well out of time. Defendant, in response, contends that the instant motion was timely filed.
In support of that position, defendant relies on the language of the judgment, which does not
reference plaintiff’s software claim.
Defendant’s instant motion for attorney’s fees was timely filed. The “judgment” referenced
in Rule 54(d) is a “final judgment” from which an appeal would lie. See Fed. R. Civ. P. 54(a) &
advisory committee note (1993) (“[Rule 54(d)(2)(B)] provides a deadline for motions for attorneys’
fees–14 days after final judgment unless the court or a statute specifies some other time.”) (emphasis
added); Fed. R. App. P. 4(a)(1) (appeal must be taken “within 30 days after the entry of judgment”).
Plaintiff’s argument rests on the assumption that the court’s October 16, 2015, judgment was “final”
for purposes of appeal. However, that is not so.

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Post-judgment motions that potentially could affect court’s judgment “interrupt the
judgment’s finality,” precluding appellate review of a case until after their disposition. Weyant v.
Okst, 198 F.3d 311, 314–15 (2d Cir. 1999); accord Barghout v. Bureau of Kosher Meat & Food
Control, No. 96-2366, 1998 WL 193106, at *2 (4th Cir. Apr. 23, 1998). A Rule 50(b) motion affects
the finality of the judgment. See Weyant, 198 F.3d at 315 (citing Fed. R. Civ. P. 59, advisory
committee notes (1995)). Because defendant timely filed its renewed motion for judgment as a
matter of law or, in the alternative, for a new trial on November 13, 2015, 28 days after the clerk
entered the court’s judgment on the docket, that motion “interrupted the judgment’s finality,” which
was not restored until June 17, 2016, when the court entered order denying the motion. See id. at
314–15.
After disposition of defendant’s renewed motion for judgment as a matter of law or, in the
alternative, for a new trial, the filing period for attorney’s fees motions began anew. See, e.g.,
Miltimore Sales, Inc. v. Int’l Rectifier, Inc., 412 F.3d 685, 687–88 (6th Cir. 2005); Members First
Fed. Credit Union v. Members First Credit Union, 244 F.3d 806, 806–07 (11th Cir. 2001); see also,
e.g., Roque-Rodriguez v. Lema Moya, 926 F.2d 103, 106 (1st Cir. 1991); Caperton v. Beatrice
Pocahontas Coal Co., 585 F.2d 683, 688 n.10 (4th Cir. 1978). Thus, defendant’s motion for
attorney’s fee, filed February 5, 2016, came before Rule 54(d)’s 14-day filing period elapsed on
July 1, 2016.
2.

Merits of Defendant’s Motion

In any civil action brought under the Copyright Act, “the court in its discretion may allow
the recovery of full costs by or against any party other than the United States or an officer thereof.”
17 U.S.C. § 505. “Costs” generally includes the prevailing party’s reasonable attorney’s fees. Id.

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Awarding attorney’s fees under the Copyright Act is a three-step procedure. See, e.g.,
Diamond Star Bldg. Corp. v. Freed, 30 F.3d 503, 505–07 (4th Cir. 1994); Barber v. Kimbrell’s, Inc.,
577 F.2d 216, 226 & n.28 (4th Cir. 1978). First, the court determines whether the movant is the
“prevailing party.” Diamond Star, 30 F.3d at 505. Second, the court asks whether it should exercise
its “equitable discretion” to award attorney’s fees on the facts of the case. See Kirtsaeng v. John
Wiley & Sons, Inc., 579 U.S. __, 136 S. Ct. 1979, 1985 (2016); Fogerty v. Fantasy, Inc., 510 U.S.
517, 533–34 (1994). Third, and finally, the court asks whether the attorney’s fees claimed by the
movant are “reasonable,” using a 12-factor test. See Barber, 577 F.2d at 226 & n.28.
Relevant to the instant motion for attorney’s fees is the second step. The court’s “equitable
discretion” is governed by four factors: 1) the motivation of the parties; 2) the “objective
reasonableness” of the legal and factual positions advanced; 3) the need in particular circumstances
to advance considerations of compensation and deterrence; and 4) any other relevant factor
presented. Fogerty, 510 U.S. at 534 & n.19; Diamond Star, 30 F.3d at 505–06. The open-ended
fourth factor may be any consideration germane to the case, so long as it is “faithful to the purposes
of the Copyright Act.” Lieb v. Topstone Indus., Inc., 788 F.2d 151, 156 (3d Cir. 1986).
Defendant argues that it is entitled to attorney’s fees where plaintiff took an objectively
unreasonable position on its software claim. Assuming that to be true, the court declines to exercise
its “equitable discretion” and award defendant attorney’s fees on the basis of other factors and the
circumstances of this case. See Kirtsaeng, 136 S. Ct. at 1988 (“[O]bjective reasonableness can be
only an important factor in assessing fee applications–not the controlling one.”).
In this case, the first and fourth factors weigh heavily against an award of attorney’s fees.
On the open-ended fourth factor, defendant’s fraudulent conduct outweighs the objective

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unreasonableness of plaintiff’s litigation position. The court may base its award of attorney’s fees
under the Copyright Act on any issue related to the copyright claim. See InvesSys, Inc. v. McGrawHill Cos., 369 F.3d 16, 19–22 (1st Cir. 2004). Here, the fraudulent means by which defendant
obtained the Learning Edition is an antecedent to plaintiff’s software claim. The jury found that
defendant obtained the Learning Edition by making false, intentionally deceptive statements. See
Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 323 N.C. 559, 568 (1988) (defining “fraud”).
The jury’s damages award implies that defendant could not have created WPS, including any portion
of WPS that uses SAS Language inputs, without use of the fraudulently obtained Learning Edition.
On the first factor, although plaintiff’s litigation position was objectively unreasonable,
defendant has not shown that it was subjectively so. In other words, defendant has produced no
evidence to show that plaintiff pursued its copyright claim in bad faith. Without showing that
plaintiff acted in bad faith, rather than in an objectively unreasonable manner, the court declines to
reward defendant’s fraud with attorney’s fees.
In sum, without committing fraud defendant would not have been in the position to undertake
the conduct that served as the basis of plaintiff’s software claim. Accordingly, the court declines
to award attorney’s fees.
CONCLUSION
Based on the foregoing, the court DENIES defendant’s motion for attorney’s fees. (DE
571).
SO ORDERED, this the 15th day of July, 2016.

_____________________
LOUISE W. FLANAGAN
United States District Judge

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