Section 505 of the Copyright Act provides that a court may award reasonable attorneys' fees to the prevailing party as part of the costs in any copyright infringement action. In Fogerty v. Fantasy, Inc., the U.S. Supreme Court (Court) recently held that attorneys' fees awarded in copyright infringement actions must be made on the same basis to both prevailing plaintiffs and prevailing defendants. In so holding, the Court reversed a Ninth Circuit decision and rejected its "dual standard", under which prevailing defendants needed to show that the lawsuit was brought frivolously or in bad faith in order to recover attorneys' fees. Prior to the Court's decision, the various circuit courts of appeal were divided in their approach in awarding attorneys' fees under the Copyright Act. The Second, Seventh and District of Columbia Circuits, for example, also followed this dual standard, whereas the Third, Fourth and Eleventh Circuits adopted an "evenhanded" approach, wherein no distinction is made between prevailing plaintiffs and defendants.

In Fogerty, Fantasy, Inc. brought a lawsuit against singer/songwriter John Fogerty, claiming that a song written by Fogerty in 1985 was copied from a song which Fogerty had written in 1970, but the copyright of which was owned by Fantasy. After successfully defending against this copyright infringement claim, Fogerty moved for attorneys' fees under the Copyright Act. The district court denied the motion because Fantasy did not bring the suit frivolously or in bad faith. The Ninth Circuit affirmed.

Fantasy presented several arguments to the Court in support of the Ninth Circuit's dual standard, each of which was rejected by the Court.

Fantasy argued that the statutory language of Section 505 supported this dual standard. In support of its position, Fantasy pointed to the Civil Rights Act of 1964, which has identical language with respect to attorneys' fees awards, but under which different standards for awarding attorneys' fees to prevailing plaintiffs and prevailing defendants have been routinely upheld. The Court rejected this argument, differentiating between the objectives of the Copyright and Civil Rights Acts. Civil rights plaintiffs, for example, often cannot afford to bring lawsuits against defendants with greater resources. Accordingly, Congress sought to provide incentives for these plaintiffs by treating them more favorably than defendants. Unlike the Civil Rights Act, where Congress sought to provide incentives to plaintiffs to bring meritorious lawsuits, the objective of the Copyright Act is to encourage the production of "original literary, artistic and musical expression for the good of the public" and, contrary to civil rights cases, both plaintiffs and defendants in copyright infringement actions range from "corporate behemoths to starving artists."

Fantasy had also argued that the policies and objectives of the Copyright Act support the dual standard because it encourages plaintiffs to bring meritorious copyright infringement claims. The Court rejected this argument, reasoning that the objective of the Copyright Act is to stimulate artistic creativity for the general public good and not simply to maximize the number of meritorious copyright infringement actions. A successful defense of copyright infringement may advance the policies of the Copyright Act as much as the successful prosecution of a copyright claim.

Interestingly, the Court also rejected Fogerty's argument that, consistent with the so-called "British Rule", attorneys' fees should be awarded automatically to prevailing plaintiffs and prevailing defendants as a matter of course. According to the Court, the word "may" in Section 505 clearly connotes discretion. The Court was also unconvinced that Congress, absent explicit statutory language to that effect, intended to adopt the "British Rule".

Although the Court did not set forth any precise formula for making a determination of when to award attorneys' fees, the Court noted that factors such as "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence" may be considered so long as they are applied equitably to both plaintiffs and defendants.