Invessys, Inc. v. McGraw-Hill Companies, Ltd.

United States Court of Appeals
For the First Circuit

No. 03-1954

INVESSYS, INC. and PETER HODGES,

Plaintiffs, Appellants,

v.

THE McGRAW-HILL COMPANIES, LTD. and
THE McGRAW-HILL COMPANIES, INC.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, Jr., U.S. District Judge]

Before

Boudin, Chief Judge,

Cyr, Senior Circuit Judge,

and Howard, Circuit Judge.

Douglas H. Wilkins with whom Anderson & Kreiger LLP was on
brief for appellants.
John D. Donovan, Jr. with whom Crystal D. Talley, Levina Wong
and Ropes & Gray LLP were on brief for appellees.

May 21, 2004
 BOUDIN, Chief Judge. Defendants--The McGraw-Hill

Companies, Ltd., and The McGraw-Hill Companies, Inc. (together

"McGraw-Hill")--successfully defended themselves against a lawsuit

brought by plaintiffs InvesSys, Inc. ("InvesSys"), and Peter

Hodges. One of the claims in the complaint was for copyright

infringement and, at the end of the case, the district court

awarded attorney's fees and costs to McGraw-Hill under the

Copyright Act. 17 U.S.C. § 505 (2000). Plaintiffs now appeal,

contesting the award.

The background facts are as follows. During the spring

of 2000, McGraw-Hill became interested in selling a subsidiary

called Micropal Accounting Portfolio Services, Inc. ("MAPSI").

MAPSI's primary business was the licensing and support of a

Windows-based software program called "MaPS." Hodges, who was an

employee of the McGraw-Hill subsidiary that owned MAPSI–Standard &

Poor's Fund Services, Inc. ("S&P")--expressed interest in

purchasing MAPSI.

Negotiations between Hodges and McGraw-Hill for the sale

of MAPSI began in the fall of 2000. The lead negotiator for

McGraw-Hill was Kevin Thornton, then the managing director of S&P.

At some point in the negotiations, Hodges requested that MaPS's

DOS-based predecessor programs be included in the deal. Thornton

agreed, and, because the additional programs Hodges sought were

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considered obsolete, directed that they be added to the terms of a

draft sales agreement for no additional consideration.

When McGraw-Hill's lawyer (Susan Winter) added the

predecessor programs to the draft agreement, she also included a

program called "AIM," which was not obsolete, was not a part of the

MaPS line of programs, and in fact generated millions of dollars in

revenue for McGraw-Hill.1 Hodges had expressed interest in the AIM

program to McGraw-Hill manager Adrian Manning, who had referred

Hodges to Thornton. Hodges would later claim that he spoke with

Thornton about AIM and obtained his agreement to include the

program in the deal; Thornton would deny that Hodges ever

approached him about AIM.

The draft agreement--including its reference to the AIM

program--was reviewed several times by Thornton and other McGraw-

Hill officials before it was executed by the parties on May 29,

2001. The final purchase price was $19,600, and no McGraw-Hill

official raised any objection to the specification of the AIM

program as among those being transferred. After the sale was

completed, Hodges conveyed his rights to MAPSI and AIM to InvesSys.

1
Both MaPS and AIM were performance-measurement tools, but
they performed different functions and used different information.
MaPS was a management and accounting system that was designed
primarily to allow users to keep track of a portfolio of fixed
income investments through the periodic entry of data, such as the
price at which a particular security was acquired. By contrast,
AIM allowed users to analyze and compare data (separately supplied
by S&P) relating to some 60,000 mutual funds worldwide. The two
programs were marketed and supported separately.

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Hodges is InvesSys's sole shareholder, sole officer, sole director,

and sole employee.

On August 2, 2002, Hodges called Thornton to arrange a

meeting for the following day. At the meeting, Hodges asked

Thornton for access to data feeds that were necessary to market the

AIM software. Thornton claimed that he had not been aware that AIM

had been included in the terms of the sales agreement. After

examination of the document, McGraw-Hill took the position that,

under New York law, inclusion of AIM was a scrivener's error and

maintained that it still owned the rights to AIM.

On November 26, 2001, Hodges and InvesSys filed suit

against McGraw-Hill in the federal district court for the district

of Massachusetts. The suit alleged copyright infringement--a

federal claim under the Copyright Act--as well as breach of

contract and a medley of other state law claims (fraud, conversion,

and claims under Mass. Gen. Laws ch. 93A). Because the parties

agreed that the scrivener's-error issue was central, the district

court directed that only the state law claims proceed to trial, the

copyright claim being held in abeyance.

At trial, the principal witnesses were Hodges, Winter,

Manning, and Thornton. The gist of plaintiffs' case was that there

had been a knowing sale of AIM by McGraw-Hill; defendants' position

was that inclusion of AIM was patently a scrivener's error by

Winter and that the parties' true intentions required reform of the

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contract to exclude AIM under well established legal doctrine. See

George Backer Mgmt. Corp. v. ACME Quilting Co., 385 N.E.2d 1062,

1066 (N.Y. 1978); 7 Corbin on Contracts § 2845 (rev. ed. 2002).

After the close of evidence, the court presented the jury

with a single initial question:

Have the defendants proven by clear and
convincing evidence, that the inclusion of
'AIM' in . . . the Share Purchase Agreement
was a scrivener's error that did not reflect
the actual agreement of the parties?

The jury answered "yes," and the district court entered judgment

for McGraw-Hill on all claims, including the claim of copyright

infringement. Thereafter, the court awarded McGraw-Hill $200,000

in attorney's fees and $28,583.78 in costs under section 505,

finding that plaintiffs' claim of copyright infringement was

objectively unreasonable and improperly motivated.

In its award, the district court declined to make any

reduction despite plaintiffs' claim (and defendants' admission)

that much, if not all, of the legal work performed in the case had

application to the state law claims as well as the copyright claim.

The district court included in its award payments by defense

counsel for computer-assisted legal research. The court also made

the award run against Hodges personally as well as InvesSys.

Plaintiffs now appeal, challenging the award itself and each of the

ancillary rulings.

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 Section 505 provides:

In any civil action under this title, the
court in its discretion may allow the recovery
of full costs by or against any party other
than the United States or an officer thereof.
Except as otherwise provided by this title,
the court may also award a reasonable
attorney's fee to the prevailing party as part
of the costs.

Unlike most fee-shifting statutes, section 505 allows

attorney's fees to be awarded to defendants on an "even-handed"

basis with plaintiffs. Fogerty v. Fantasy, Inc., 510 U.S. 517, 534

(1994); Lotus Dev. Corp. v. Borland Int'l, Inc., 140 F.3d 70, 72-73

(1st Cir. 1998). Fogerty said that the award rested in "the

[trial] court's discretion" and that there was no formula, but that

factors that could be taken into consideration included inter alia

the objective unreasonableness of the losing side's position. 510

U.S. at 534 & n.19.

Although fee awards are nominally reviewed on appeal for

"abuse of discretion," Matthews v. Freedman, 157 F.3d 25, 29 (1st

Cir. 1998), an award can also depend on legal issues that are

reviewed de novo. See United States v. Padilla-Galarza, 351 F.3d

594, 597 & n.3 (1st Cir. 2003). Plaintiffs' broadest position,

which falls in the latter category, is that no award was permitted

because the trial was directed only to state law claims and turned

on a state law issue; at the very least, say plaintiffs, the costs

had to be allocated and that most concerned the ownership issue

rather than anything peculiar to copyright.

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 The statute, drafted with claims under the Copyright Act

in mind, does not expressly address the problem of a case with a

mix of claims. However, here a federal copyright claim was

asserted in the complaint, so this is literally a "civil action

under this title [the Copyright Act]," 17 U.S.C. § 505; and the

case law has used common sense to carry out Congress' underlying

intent to provide for attorney's fees in copyright enforcement or

like matters but not for other civil claims that do not involve

copyright. See Entm't Research Group, Inc. v. Genesis Creative

Group, Inc., 122 F.3d 1211, 1230-31 (9th Cir. 1997), cert. denied,

523 U.S. 1021 (1998).

Implementing that intent presents the recurring problem

of form versus substance. The only claims posed for trial were

state law claims (most importantly, a contract claim) and the only

issue decided was ownership of AIM, turning on state law rules as

to contract and reformation. Ownership of a copyright is a

predicate to a federal copyright claim, see 17 U.S.C. § 501(b);

Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361

(1991), but the rules governing contractual transfer of ownership

have been left (for the most part) to state law.2

2
See, e.g., Walthal v. Rusk, 172 F.3d 481, 485 (7th Cir.
1999); 1 Nimmer on Copyright § 101(B)(3)(a) (2003) ("[I]t remains
true that the vast bulk of copyright contractual issues must be
resolved under state law, given the silence of the Copyright Act in
addressing such issues as . . . how to construe ambiguous
contractual language . . . .").

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 Yet the question of ownership of AIM was common to both

the plaintiffs' claim under the Copyright Act and their claims

under state law. If plaintiffs lost as to ownership, all claims

failed. The fact that the district court chose to extract this

common issue and try it first, nominally deferring the copyright

claim, does not alter the fact that the copyright claim was in the

case and depended on the ownership issue being tried. Had

plaintiffs' complaint set forth only the copyright claim, exactly

the same contractual issue would have had to be tried.

Had plaintiffs never asserted a copyright claim but only

claims under state law, it would be hard to describe this as a

"civil action under" that statute. But here a copyright claim was

made, thereby permitting Copyright Act remedies, and the issue

actually litigated was necessary to the assertion of that claim.

So it serves Congress' purpose to compensate the winning side for

attorney's fees and costs. C.f. Maljack Prods., Inc. v. Goodtimes

Home Video Corp., 81 F.3d 881, 884-86, 889 (9th Cir. 1996).

Plaintiffs argue that because the ownership issue is

governed by state law, it cannot carry out "the purposes" of the

Copyright Act to award attorney's fees and costs. We think this is

too cramped a reading of the statute. On the contrary, in section

505 Congress aimed to provide a potential incentive to the winner

who asserts a successful copyright claim or defends against an

unworthy one. This practical concern is present whether the case

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happens to decide a landmark issue of copyright law or, in the end,

turns on matters that have nothing to do with the statute.

Consider that a copyright case may turn solely on a

question of fact such as whether the defendant copied a protected

work or stumbled on the same jingle by chance. Or a copyright case

might be won because the defendant failed to answer the complaint

or be lost because of a discovery violation by the plaintiff--civil

procedure questions in which copyright law plays no part. Yet in

both sets of cases, surely the winner could claim attorney's fees

and costs (subject as always to the trial court's discretionary

judgment). See McGaughey v. Twentieth Century Fox Film Corp., 12

F.3d 62, 64-65 (5th Cir. 1994).

Plaintiffs also argue that, at a minimum, there should

have been an allocation of fees and costs between the copyright and

state law claims. If there were any indication that significant

extra moneys were expended by the defense because of the presence

of state law claims, we would agree that allocation was required.

See Entm't Research Group, 122 F.3d at 1230. That could easily be

so if, for example, independent issues were raised and litigated as

to fraud that were unnecessary to resolving the ownership issue.

Plaintiffs claim that such unrelated issues were raised

in the district court and that the district court erred by failing

to reduce the award to reflect work done on them. Specifically,

plaintiffs say that the parties disagreed as to whether the

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plaintiffs would be able to establish "benefit of the bargain"

damages on their contract claim and whether such damages were

limited to the amount of the purchase price by the terms of the

contract. All indications are that these were minor points; but,

in any event, the plaintiffs did not make this argument before the

district court so it is forfeited. Daigle v. Maine Med. Ctr.,

Inc., 14 F.3d 684, 687 (1st Cir. 1994).

Plaintiffs next say that the ownership claim was a

reasonable one and that the district court should therefore have

not awarded attorney's fees. Section 505, quoted in full above,

says that the district court "in its discretion may allow the

recovery of full costs" including an attorney's fee. Under the

case law, dishonesty is not required for an award; even a case that

is merely objectively quite weak can warrant such an award.

Matthews, 157 F.3d at 29.

This case is perhaps unusual because at first blush it

might appear as if the plaintiffs had a colorable claim that Hodges

had purchased, and InvesSys now owned, the AIM copyright. The

clear language of the written contract, presumed to reflect the

parties' intent, explicitly included AIM, and McGraw-Hill obviously

exhibited remarkable negligence in failing to detect the apparent

error despite its officials' review of the written contract.

Further, under the applicable New York law, McGraw-Hill had a

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heightened burden to prove the error by clear and convincing

evidence.

Nevertheless, the closer one looks at the circumstances,

the more dubious plaintiffs' ownership claim appears. Most

important is the underlying transaction related to MaPS, which was

purchased for a quite modest sum just under $20,000. The DOS-based

predecessor programs were added at Hodges' request after the

original bargaining and at no additional cost. AIM was not a

predecessor program, was not part of MaPS and--most

significantly–was generating about $3-4 million per year. Even

though there was evidence that McGraw-Hill was planning to replace

AIM reasonably soon, the idea that it deliberately intended to

transfer a program then generating millions for nothing is

perverse.

Still, it might well have made the case arguable if there

had been substantial negotiations about the transfer of the AIM

program. Yet, while McGraw-Hill admitted that Hodges had

approached Manning about the subject and had been told to take it

up with Thornton, Thornton testified at trial that he had not

offered AIM to Hodges; Hodges said that there was discussion and a

deal. It is a fair inference, from both the result and the

surrounding circumstances, that the jury and the trial judge both

credited Thornton's version of events over Hodges'.

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 There were other circumstances supporting McGraw-Hill's

position. The evidence did not show that a launch date for McGraw-

Hill's supposed successor system was so clearly imminent that AIM

was going to be obsolete in McGraw-Hill's hands at the time of

Hodges' alleged purchase of AIM, nor did the contract contain any

provision by which Hodges licensed AIM back to McGraw-Hill so that

it could continue, for the present, to service its current AIM

clients. It is difficult to believe that McGraw-Hill would have

sold an essential component of a multi-million dollar business

without such a license back.

Of course, in determining whether to award attorney's

fees, the district court's judgment as to the reasonableness of the

original claim had to rest on what Hodges knew when he made and

pressed his claim and not merely on the unfavorable outcome. Cf.

Tang v. State of R.I., Dep't of Elderly Affairs, 163 F.3d 7, 13

(1st Cir. 1998). But in this case, Hodges certainly knew at the

outset of the raw facts supporting McGraw-Hill's position (e.g.,

the disparity between price and value) and also knew in fact

whether he had had any detailed negotiations with Thornton about

whether AIM should be included in the deal.

So long as the district court correctly stated the legal

standard or criteria, review of the award is only for abuse of

discretion. Matthews, 157 F.3d at 29; cf. Lotus Dev. Corp., 140

F.3d at 72. Plaintiffs complain that the district court did not

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seriously consider the plaintiffs' own evidence in support of the

claim; but the district court, having sat through the trial, was

fully familiar with the background and the direct testimony of

Hodges and Thornton. We have no basis for overturning the district

court's decision that an award was appropriate.

We turn next to one disputed item in the award. The

district court allowed recovery under section 505 of the costs of

legal research done using one of the standard services (Westlaw;

Lexis). Plaintiffs have not preserved any claim that the amount

was excessive or that research was not needed. Rather, they urge

(as they did unsuccessfully in the district court) that such a cost

should be treated as part of law firm overhead (covered by the

firm’s hourly fee) rather than as a separately reimbursable item.

This is an issue on which the courts have been divided;3

and, given the ubiquity of computer-aided research in law practice,

the issue deserves our full attention. Section 505, taken alone,

is not illuminating: it says only that the court may allow the

3
Compare, e.g., Uniroyal Goodrich Tire Co. v. Mutual Trading
Corp., 63 F.3d 516, 526 (7th Cir. 1995), cert. denied, 516 U.S.
1115 (1996) (holding that expenses paid for computer-assisted
research were recoverable), and United Nuclear Corp. v. Cannon, 564
F. Supp. 2d 581, 591-92 (D.R.I. 1983) (Selya, J.) (same), with,
e.g., Standley v. Chilhowee R-IV Sch. Dist., 5 F.3d 319, 325 & n.7
(8th Cir. 1993) (holding that the cost of computerized research
must be factored into attorneys' hourly rates and is not separately
compensable), BD v. Debuono, 177 F. Supp. 201, 209 (S.D.N.Y. 2001)
(holding that computerized research expenses are properly
considered overhead), and Yankee Candle Co. v. Bridgewater Candle
Co., 140 F. Supp. 2d 111, 126 (D. Mass. 2001) (same).

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prevailing party “full costs” and may award “a reasonable

attorney’s fee to the prevailing party as part of the costs.” 17

U.S.C. § 505. There is no reason to think that Congress gave any

particular thought to computer-aided research.

Although section 505's “full costs” language could be

distinguished from more familiar and slightly narrower wording in

other fee shifting statutes, e.g., 42 U.S.C. § 1988 (2000) ("the

court, in its discretion, may allow the prevailing party . . . a

reasonable attorney's fee as part of the costs"), the tendency of

the courts has been to treat most statutes similarly whether in

allowing or disallowing particular items. The starting point in

many cases–-and the ending point in some-–is that another federal

statute specifies various taxable “costs” (e.g., "[f]ees of the

clerk and marshal" and "[f]ees and disbursements for printing and

witnesses"), but the list does not include computer-assisted

research. 28 U.S.C. § 1920 (2000); Yasui v. Maui Elec. Co., 78 F.

Supp. 2d 1124, 1129-30 (D. Haw. 1999).

Nevertheless, the Supreme Court has endorsed the view

that disbursements made by an attorney and ordinarily billed

directly to the client (that is, separately from the hourly or

fixed fee) can properly be encompassed within the phrase

“attorney’s fee,” see W. Va. Univ. Hosps., Inc. v. Casey, 499 U.S.

83, 87 n.3 (1991); and it is not uncommon for courts to allow such

costs as travel, long distance calls, and parking on top of the

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hourly fee. E.g., Downes v. Volkswagen of Am., Inc., 41 F.3d 1132,

1144 (7th Cir. 1994); Data Gen. Corp. v. Grumman Sys. Support

Corp., 825 F. Supp. 361, 367-68 (D. Mass. 1993).

In our view, computer-assisted research should be treated

similarly and reimbursed under attorney’s fee statutes like section

505, so long as the research cost is in fact paid by the firm to a

third-party provider and is customarily charged by the firm to its

clients as a separate disbursement. If it saves attorney time to

do research this way, probably the hours billed are fewer, Haroco,

Inc. v. Am. Nat'l Bank & Trust Co., 38 F.3d 1429, 1440-41 (7th Cir.

1994); and in any event Westlaw and Lexis are now as much part of

legal service as a lawyer's taxi to the courthouse.

Courts that have resisted reimbursement of computer-

assisted research as part of attorney’s fees have asked why that

cost should be distinguished from the law firm’s cost of

maintaining its law book library–-a cost that is customarily

treated as overhead to be covered by the hourly or other fee rather

than billed as a disbursement. E.g., Debuono, 177 F. Supp. 2d at

209. Some courts may also think that, as the hourly fee

generically covers “legal research,” there is a taint of double

billing in charging separately for Westlaw or Lexis. See Scanlon

v. Kessler, 23 F. Supp. 2d 413, 418 (S.D.N.Y. 1998).

The answer to these concerns has something to do with

economics but also with history and record-keeping practice. As

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configured by the provider, computer-aided research is often a

variable cost in an individual case–-that is, the cost varies (from

zero upward) depending on the amount of Westlaw or Lexis service

used in the case. By contrast, the firm pays no more or less for

its library books, regardless of whether they are pulled off the

shelf for a given law suit, so it is described as a fixed rather

than a variable cost.

In professional legal services, variable costs that are

both large and easily assigned–-especially those paid directly to

third-party vendors--tend often to be separately billed to the

client; those not so easily assigned or inconvenient to track are

covered by the hourly fee.4 Separate billing does not mean double

billing: the computer services directly paid to Lexis or Westlaw do

not reappear in some concealed form as part of the hourly rate.

Indeed, if such services were treated as overhead, the hourly rate

would likely be higher.

It is common knowledge that large law firms regularly

track computer-assisted research costs “by client” (both Westlaw

and Lexis make this easy) and then bill clients directly for those

4
In economics, there are efficiency arguments for collecting
variable costs from the cost causer–“efficiency” meaning that
resources will be used more productively. Cf. 1 Kahn, The
Economics of Regulation: Principles and Institutions 71-72 (1970).
But it is impractical to track and collect all variable costs
(e.g., yellow pads used by each lawyer), and anyway the hourly fee
is a crude proxy for many variable costs (the more hours spent, the
more yellow pads used–-roughly speaking).

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costs. See, e.g., Case v. United Sch. Dist. No. 233, 157 F.3d

1243, 1257-58 (10th Cir. 1998); Crosby v. Bowater Inc. Ret. Plan

for Salaried Employees of Great N. Paper, Inc., 262 F. Supp. 2d

804, 817 (W.D. Mich. 2003). The practice being so, we see no

reason why such costs–-if paid to third-party providers--should not

be recovered under section 505. In sum, we align ourselves with

the courts that have allowed computer-assisted research costs to be

recovered as a separate item.5

The final claim on appeal, made only by Hodges, is that

he did not personally claim ownership of the AIM copyright, so he

personally should not have been held liable by the district court

for fees and costs imposed under that section. McGraw-Hill defends

the district court’s award against Hodges as well as InvesSys, but

admits that it has little at stake as to Hodges’ personal liability

because full recovery by it is assured by the appeal bond covering

both plaintiffs. Still, the issue of Hodges' liability is not

moot: under the judgment, McGraw-Hill is free to collect against

Hodges personally.

5
A different problem would be presented if the firm paid a
flat monthly fee to Westlaw or Lexis and then allocated amounts
among clients; similarly, any markup by the firm would raise
questions. However, the plaintiffs in this case did not make any
such claim in the district court, and we take the defendants' brief
to assert that the costs in question were simply a straight pass-
through of time-based charges paid to the service providers for
work done in this case.

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 Hodges' argument rests on the proposition that only the

owner of a copyright may sue for infringement under the Copyright

Act, and, because Hodges had previously transferred any ownership

interest he had in AIM to his corporation, he therefore could not

properly claim under the Copyright Act but only under state law

(e.g., for fraud or breach of contract). This might be beside the

point if Hodges had in this case purported to claim under the

Copyright Act, but in this instance the complaint--although

somewhat ambiguous--suggests that only InvesSys was claiming under

the Copyright Act.

The statute says that the court may allow “full costs”

“against any party” (other than the government or its officers) and

that this may include attorney’s fees in favor of the prevailing

party. 17 U.S.C. § 505. At first blush one might think that this

gives the district court carte blanche to award attorney’s fees

against anyone on the losing side as to any claim “in any civil

action under” the Copyright Act–-the subject matter with which

section 505 deals--but this is surely too broad a reading.

A civil action in which a federal copyright claim is

asserted arises “under” the Copyright Act, see T.B. Harms Co. v.

Eliscu, 339 F.2d 823, 828-29 (2d Cir. 1964), cert. denied, 381 U.S.

915 (1965), regardless of whether non-copyright claims are asserted

as well. Yet, Congress’ obvious concern in section 505 was in

facilitating the assertion and defense of copyright claims-–not

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other kinds of claims. Cf. Entm't Research Group, 122 F.3d at

1230, 1232; Yankee Candle, 140 F. Supp. 2d at 122-23.

This is why courts implementing section 505 tend almost

automatically to allocate attorney’s fees and costs between

copyright and non-copyright claims where this can feasibly be done,

limiting recovery to costs causally associated with the copyright

claim. E.g., Yankee Candle, 140 F. Supp. 2d at 122-123. There was

no apportionment here only because the litigated issue was common

to both copyright and non-copyright claims, so the same costs would

have been incurred for the former alone.

The same apportionment philosophy ought presumptively to

guide liability as among parties. If Hodges had no association

with the copyright claim but were a party to the case for unrelated

reasons, an award of attorney’s fees against Hodges under section

505 would be improper even though McGraw-Hill would still have

prevailed against InvesSys in an action “under” the Copyright Act.

Such a situation is not that difficult to imagine, given that

federal joinder rules tend to be generous as to both parties and

claims. See Fed. R. Civ. P. 18, 20.

However, this does not mean that Hodges ought

automatically be exempted from liability merely because he is not

properly a claimant under the Copyright Act and did not explicitly

assert such a copyright claim in the complaint. In this instance,

Hodges was a party to the complaint but not only that: he was

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intimately involved in the transaction allegedly giving rise to the

copyright claim, owned the company asserting the claim, was a key

witness in fostering the claim in this case, and stood to benefit

substantially if the imposture had succeeded.

Under such circumstances, we think that section 505's

policy, as well as its language, permits the award to run against

Hodges as well as against InvesSys. Hughes v. Novi American, Inc.,

724 F.2d 122, 126 (Fed. Cir. 1984), may lend a measure of support

to this view; in any event, nothing flatly to the contrary has been

cited to us. Hodges was peculiarly responsible for this copyright

claim on several different levels and was a party to that case and

the deterrence policy of the statute well fits his conduct. That

is enough for this case. Future decisions will have to mark out

the boundary as new fact situations present themselves.

There are certainly arguments for a flat rule that only

a losing party formally on one side of a copyright claim can be

held liable for costs under section 505. It would be easy to

administer and avoid possible asymmetries; if Hodges had not been

a party then (veil piercing aside) he would not be liable even

though equally "responsible" for the claim. But such a mechanical

approach would also be a judicial creation, since the statute's

language imposes no such flat rule; and it would be less responsive

to the underlying policies. Imagine that there had been no appeal

bond and InvesSys had no assets of its own.

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 This case was well handled and properly decided.

However, whatever fault can be imputed to the plaintiffs for making

the claim, all but one of the issues raised on appeal presented

serious legal questions, and the appeal was legitimately pursued.

We have no inclination to make a separate award of attorney’s fees

to McGraw-Hill for work done on the appeal, although the usual

award of statutory costs is allowed.

Affirmed.

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