Seventh Circuit Affirms Dismissal of Non-Exclusive Licensee’s Copyright Infringement Suit and Award of Attorney’s Fees

Chicago, IL – The Seventh Circuit Court of Appeals affirmed the dismissal of a copyright infringement suit. Lawyers for HyperQuest, Inc., of Buffalo Grove, Illinois, filed a suit against N’Site, Inc. and Unitrin Direct Insurance Company alleging copyright infringement of copyrighted software used to process insurance claims. The software, eDoc, had been registered by the US Copyright Office. Although the license agreement used the phrase “exclusive licenses,” the trial court concluded that the specific words in the license granted only a non-exclusive license. Thus, the trial court determined that HyperQuest did not have standing to bring the lawsuit and dismissed the case. The district court also ordered HyperQuest to pay N’Site and Unitrin’s attorney’s fees of $134,958.42 for defending the copyright infringement suit. The plaintiff appealed, but the Court of Appeals, decided that the Copyright Act limits who can sue for infringement of a copyright to “the legal or beneficial owner of an exclusive right under a copyright” and affirmed the district court’s dismissal. The Court of Appeals also affirmed the award of attorney’s fees to N’Site and Unitrin.

Practice Tips: When making a license agreement for the use copyrighted material, attorneys should carefully review whether the terms of the agreement reflect the parties’ intentions. Even if an agreement uses the phrase “exclusive license,” the terms of the agreement must reflect actually exclusivity for the licensee to bring a copyright infringement suit.

Plaintiffs should carefully consider whether to file a Copyright infringement suit. The Copyright Act is one of the few laws that allows a prevailing defendant to collect attorneys fees from the plaintiff if the suit is unsuccessful.

The Court’s Opinion is below.

Because the Seventh Circuit includes Indiana, this opinion will affect copyright infringement litigation in Indiana. In general, recover of attorney’s fees by a prevailing party is easier in the Seventh Circuit than other jurisdictions.

Opinion – HyperQuest

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