The decision in question, Eagle Services Corp. v. H2O Industrial Services, No. 071997 (7th Cir. 09 Jul 2008), concerns a frivolous copyright lawsuit. A company created a manual for cleaning up contaminated sites by selecting parts of various OSHA documents (by definition, the source documents are not copyrightable as US government publications). A few employees left, formed their own company, and copied that manual as a stopgap before creating their own. The first company sued for copyright infringement and lost, but the district court refused to award attorney's fees under the Copyright Act (17 U.S.C. § 505; see also Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (holding that § 505 is posture-blind and uses the identical considerations whether the prevailing party is plaintiff or defendant)). Judge Posner, writing for a panel of the Seventh Circuit, reversed, holding that the defendants should have been awarded their attorney's fees, because the lawsuit was in fact frivolous.
The real problem that I have with Judge Posner's reasoning is that it is under the wrong authority. This is not a case about copyright; it is a case about improper legal tactics:
By presenting to the court a pleading, written motion, or other paper whether by signing, filing, submitting, or later advocating it an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:
(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;
(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.
Fed. R. Civ. P. 11(b) (emphasis added). Here, I'm a civil procedure geek, not a copyright geek. Regardless of procedural posture, one does not present a pleading to the court for an "improper purpose"... and an "improper purpose" is precisely what Judge Posner found was at the heart of the litigation. The plaintiffs had, at best, a weak copyright in a compilation of US government documents that were slightly reorganized and had a little bit of additional commentary to them. We're not talking about reorganization and commentary as helpful and extensive as, say, the old Arthur Young (later Ernst & Young) personal income tax guides. Judge Posner also found, based on the record, that the purpose of the lawsuit was to harass competitors, not to enforce an intellectual property right.
It is apparent that the suit was filed in order to cramp the style of a competitor and perhaps warn off any other employee of Eagle who might have the temerity to set up in competition with it. Eagle engaged in extensive discovery that included deposing all of H2O's customers and a number of its prospective customers as well; the defendants claim without contradiction that as a result H2O lost many customers.
The suit could not have been brought in good faith because Eagle never had any basis for thinking that Indiana would have shut down H2O had H2O not copied Eagles manual. And not only for the reasons that we have explained already, but for another: if a manual had been required by law and H2O had not copied Eagles manual, then, given how simple it is to create a manual by copying OSHA regulations or buying a customized manual, H2O, rather than abandoning its business for want of a manual would have prepared or procured another manual post haste at some expense, to be sure, but, as we know, a trivial one; unsurprisingly, recovery of the negligible profit that H2O made by avoiding for a time that trivial expense is not sought by Eagle.
So the suit was frivolous even if there was a copyright violation. When a plaintiff is just suing for money and he has no ground at all for obtaining a money judgment, the fact that his rights may have been violated does not save his suit from being adjudged frivolous. At least this is true in a case in which there is no right to nominal damages, and there is none in a copyright suit. Eagle's only remedial theory was that H2O would have had to shut down had it not copied Eagle's manual; and the theory was groundless.
Eagle, slip op. at 45 (citations omitted).
For a variety of procedural reasons, Judge Posner was not free to directly impose Rule 11 sanctions originally at the appellate level, and it appears from the opinion that the no Rule 11 motion was filed below. This, however, was a failure of lawyering. It did not mean, as an artifact of copyright law, that this result should have followed. The real problem with Eagle is that it is too easy to wrench the juicy bits from context for ideological purposes, because it is founded on the wrong rule of decision. That is not Judge Posner's fault; it is somewhat more, but not entirely, Magistrate Judge Cherry's fault (who heard the matter below), for not making a sua sponte Rule 11 inquiry; it is mostly, however, H2O's counsel's fault, for not bringing a motion for misconduct that lies not at the limits, but at the core, of Rule 11, and not doing so much earlier. Admittedly, this may well have been a result of the inappropriate disfavor with which the federal courts (and particularly Magistrate Judges) treat Rule 11 motions due to their misuse under an earlier version. Also admittedly, this may well have been a tactical decision based upon the personalities of the various actors. The result, however, is not a copyright-law result, even though it will be treated that way. (And if only judges would be as disapproving of frivolous defenses as they are of frivolous claims...)