MITEK HOLDINGS, INCORPORATED and Mitek Industries, Incorporated, Plaintiffs-Counter-
Defendants-Appellants,

                                                     v.

   ARCE ENGINEERING COMPANY, INCORPORATED, Defendant-Counter-Claimant-Appellee,

                                  Emilio Sotolongo, Defendant-Appellee.

                                               No. 98-5257.

                                      United States Court of Appeals,

                                             Eleventh Circuit.

                                               Dec. 20, 1999.

Appeal from the United States District Court for the Southern District of Florida.(No. 91-2629-CIV-KMM),
Kenneth Michael Moore, Judge.

Before BIRCH and DUBINA, Circuit Judges, and SMITH*, Senior District Judge.

        BIRCH, Circuit Judge:

        Plaintiffs MiTek Holdings, Inc. and MiTek Industries, Inc. ("MiTek") appeal from an order awarding

attorney's fees pursuant to the Copyright Act, 17 U.S.C. § 505,1 to Defendant Arce Engineering Co., Inc.

("Arce"). We VACATE and REMAND for reevaluation of the attorney's fees issue.

                                           I. Procedural History

        On November 15, 1991, MiTek filed its complaint alleging copyright infringement under the

Copyright Act,17 U.S.C. § 101 et seq. Following a bench trial, the district court entered judgment for Arce

on MiTek's claim for copyright infringement and denied MiTek's motion of a preliminary injunction. We

affirmed the entry of judgment in favor of Arce. See MiTek Holdings, Inc. v. Arce Eng'g Co., 

(11th Cir.1996) ("MiTek I "). While MiTek I was pending in this court, the district court referred Arce's

request for attorney's fees and costs to a magistrate judge, who recommended that Arce be awarded the full



   *
    Honorable C. Lynwood Smith, U.S. District Judge for the Northern District of Alabama, sitting by
designation.
   1
   Section 505 states, in relevant part: "Except as otherwise provided by this title, the court may ...
award a reasonable attorney's fee to the prevailing party as part of the costs."
amount of fees requested. In discussing whether MiTek had brought the lawsuit in good faith, the magistrate

judge noted:

        [A] review of the record indicates that this case was closely contested and required the consideration
        of sophisticated issues of fact and law. The question of the scope of copyright protection for
        non-literal elements of computer programs is relatively new, has been litigated only a few times, and
        has produced varying results in different courts.

R5-145-4-5. The magistrate judge noted that fees could be awarded to a prevailing defendant despite the lack

of bad faith on the part of the plaintiff and that the relative abilities of the different parties to pay for the

requested attorney's fees could also be considered. See R5-145-5. Because MiTek "appear[s] to be more than

capable of funding an award" and because Arce "is a small family owned company with limited resources,"

the magistrate judge found that "considerations of compensation tip the balance in favor of an award to" Arce.

R5-145-5. While Arce had sought attorney's fees to cover 553 hours of work at $250.00 per hour, the

magistrate judge recommended that the district court award Arce attorney's fees to cover 550 hours of work

at $200.00. See R-5-145-7-8. The district court adopted the magistrate judge's report and recommendation

in its entirety. See R-5-159. MiTek then brought the instant appeal.

                                                  II. Analysis

         In reviewing a district court's decision to grant or deny fees under the Copyright Act, we first

determine whether "the district court weighed the relevant factors and exercised its discretion." Montgomery

v. Noga, 

, 1303 (11th Cir.1999) (footnote omitted). If the district court weighed the proper

factors, then "we will not question the court's decision to grant or deny fees absent an abuse of that

discretion." 

v. Fantasy, Inc., the Supreme Court stated:

        [W]e reject both the "dual standard" adopted by several of the Courts of Appeals and petitioner's
        claim that § 505 enacted the British Rule for automatic recovery of attorney's fees by the prevailing
        party. Prevailing plaintiffs and prevailing defendants are to be treated alike, but attorney's fees are
        to be awarded to prevailing parties only as a matter of the court's discretion.

, 534, 

, 1033, 

(1994). See also Sherry Mfg. Co. v. Towel King

of Fla., Inc., 

, 1034 (11th Cir.1987) (applying same rule to prevailing plaintiffs and
defendants). Fogerty cited with approval the Third Circuit's list of "several nonexclusive factors that courts

should consider in making awards of attorney's fees to any prevailing party" in a Copyright Act case; these

factor include " '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.' " 

n. 

n. 19 (quoting Lieb v. Topstone Indus.,

Inc., 

, 156 (3d Cir.1986)). However, the Supreme Court limited application of such factors to

where they "are faithful to the purposes of the Copyright Act and are applied to prevailing plaintiffs and

defendants in an evenhanded manner." 

magistrate judge was correct in noting that MiTek's good faith in bringing its suit was not

determinative of the issue of attorney's fees. See Sherry Mfg. 

; see also Original

Appalachian Artworks, Inc. v. Toy Loft, Inc., 

, 832 (11th Cir.1982) (applying § 505 to a

prevailing plaintiff's fees demand; "While the defendant's good faith and the complexity of the legal issues

involved likely would justify a denial of fees to a successful plaintiff, a showing of bad faith or frivolity is

not a requirement of a grant of fees. Rather, the only preconditions to an award of fees is that the party

receiving the fee be the 'prevailing party' and that the fee be reasonable.") (citation omitted; emphasis in

original). However, the district court erred in considering only the financial means of MiTek and of Arce in

determining that MiTek should be liable for Arce's attorney's fees.

         While several courts have held that issues of compensation may, in appropriate cases, be considered

in ruling on a motion for attorney's fees, see, e.g., Rosciszewski v. Arete Assoc., 

, 234 (4th

Cir.1993); 

, we have found no case affirming a grant of attorney's fees based solely on

an economic disparity between the prevailing and losing parties. Indeed, the First Circuit has held that

differences in financial wealth are irrelevant where both parties are able to pay for the costs of litigation. See

Lotus Dev. Corp. v. Borland Int'l Inc., 

, 75 (1st Cir.1998). It is unsurprising that no case law

supports the proposition that a difference in financial wealth, in and of itself, is sufficient to justify imposition

of attorney's fees under § 505. The touchstone of attorney's fees under § 505 is whether imposition of
attorney's fees will further the interests of the Copyright Act, i.e., by encouraging the raising of objectively

reasonable claims and defenses, which may serve not only to deter infringement but also to ensure "that the

boundaries of copyright law [are] demarcated as clearly as possible" in order to maximize the public exposure

to valuable works. 

, 114 S.Ct. at 1029-30 (discussing the varied goals of the

Copyright Act); see also Lotus 

("When close infringement cases are litigated, copyright

law benefits from the resulting clarification of the doctrine's boundaries. But because novel cases require a

plaintiff to sue in the first place, the need to encourage meritorious defenses is a factor that a district court

may balance against the potentially chilling effect of imposing a large fee award on a plaintiff, who, in a

particular case, may have advanced a reasonable, albeit unsuccessful, claim."). Thus, in determining whether

to award attorney's fees under § 505, the district court should consider not whether the losing party can afford

to pay the fees but whether imposition of fees will further the goals of the Copyright Act. See, e.g., 

(affirming denial of attorney's fees despite the claim that the prevailing defendant had "advanced the interest

of copyright law by litigating this case all the way through the Supreme Court against an unusually wealthy

plaintiff" and had "increased the availability of copyrighted works"). Because the district court did not assess

whether imposition of attorney's fees would further the goals of the Copyright Act, we vacate district court's

order as to the award of attorney's fees and remand for reevaluation of Arce's fee request.2

                                                III. Conclusion

        We VACATE the award of attorney's fees to Arce and REMAND for further consideration in light

of this opinion.




   2
    We also decline to address MiTek's argument that the district court erred in adopting the magistrate
judge's recommendation as the amount of fees to be assessed. We note only that, if the district court on
remand finds that attorney's fees are appropriate, that the district court should apply the standards
discussed in Cable/Home Communication Corp. v. Network Productions, Inc., 

, 853-54 & n.
37 (11th Cir.1990) in determining the reasonable fee and should also consider whether the fee should be
reduced for partial success as argued by MiTek.