Intellectual Property, Preemption, Prevailing Party: Defendants’ Prevailing On Preemption Claim Under State Statute With Mandatory Fees Clause Was Entitled To Appellate Fees For The Win

Even Though A Few Sliver Claims Remained, Defendants Prevailed Because Those Claims Are Not Subject To Fee Shifting.

            The Ninth Circuit, in an earlier appeal, had decided that plaintiffs’ claims for resale royalties under the California Resale Royalties Act (CRRA) largely were preempted by the 1976 Copyright Act for any claims occurring after January 1, 1978. However, they found some “sliver claims” were appropriate for dates before that 1/1/78 cutoff. Defendants then moved the Ninth Circuit for recovery of fees as the prevailing party on appeal under CRRA’s fee-shifting provision, California Civil Code section 986(a)(3), an application opposed by plaintiff.

            In Close v. Sotheby’s, Inc., Nos. 16-56234 et al. (9^th Cir. Dec. 3, 2018) (published), the Ninth Circuit granted the appellate fee application, remanding to the Appellate Commissioner to determine the amount of fees under Ninth Circuit Rule 39-1.9. It rejected a number of arguments made by plaintiff to the fee application.

            It first rebuffed the argument that anything in the prior decision implied that the CRRA was null and void (and, hence, the fees clause also). It simply found most claims preempted, not that CRRA was “non-existent” such that defendants prevailed on the preemption argument.

            The Ninth Circuit next found that nothing in the Copyright Act preempted the CRRA fee-shifting provision, so that the defense again prevailed and was entitled to fee recovery.

            Last, it determined that defendants indeed did prevail. Although there were a “sliver” of claims remaining, plaintiff’s residual claims were not subject to fee-shifting under CRRA such that there was finality for purposes of finding that the defense “prevailed.”