In the
United States Court of Appeals
For the Seventh Circuit
Nos. 08-2257, 08-3979 & 08-4176
H YPERQ UEST, INC.,
Plaintiff-Appellant,
Cross-Appellee,
v.
N’SITE S OLUTIONS, INC.,
Defendant-Appellee,
and
U NITRIN D IRECT INSURANCE C OMPANY,
Defendant-Appellee,
Cross-Appellant.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 08 C 483—Milton I. Shadur, Judge.
A RGUED A PRIL 20, 2010—D ECIDED JANUARY 19, 2011
Before F LAUM, W OOD , and E VANS, Circuit Judges.
W OOD , Circuit Judge. In 2001, Quivox Systems granted
N’Site Solutions, Inc. a non-exclusive license to certain
copyrighted software, called eDoc, that is used to process
2 Nos. 08-2257, 08-3979 & 08-4176
insurance claims. Quivox later fell on hard times and
sold its assets to Safelite Group, Inc., which continues to
own the copyright for the eDoc software. Eventually,
Safelite granted rights in the eDoc program to HyperQuest;
when it did so, the parties acknowledged the continued
existence of the N’Site license and they agreed that
Safelite itself would retain certain rights to use and de-
velop the software.
This case had its origins in a dispute between N’Site
and HyperQuest over the terms of these licenses. To
make matters worse, at least from HyperQuest’s vantage
point, N’Site sold the source code to its modified soft-
ware to Unitrin Direct Insurance Company in 2006.
HyperQuest filed suit on January 22, 2008, against both
N’Site and Unitrin, asserting that each had infringed the
copyrighted software. The district court concluded that
HyperQuest held only a non-exclusive license and thus
lacked statutory standing to sue; it therefore dismissed
HyperQuest’s case with prejudice. Later, the court
awarded attorneys’ fees and costs to N’Site and Unitrin
in the amount of $134,958.42. HyperQuest has ap-
pealed, challenging both the conclusion that it was not
an exclusive licensee (and thus not entitled to assert a
claim for copyright infringement) and the attorneys’ fee
award. Unitrin cross-appealed from the district court’s
decision to reduce the amount of the fees it had re-
quested. We conclude that the district court made no
error either in interpreting the license or in its fee deci-
sions, and we thus affirm its judgment.
Nos. 08-2257, 08-3979 & 08-4176 3
I
We begin by taking a closer look at HyperQuest’s inter-
est in the copyright for eDoc. Initially, as we have already
noted, Quivox, Safelite’s predecessor in interest, granted
a non-exclusive license for eDoc to N’Site. Under that
agreement N’Site was entitled to use the software only
within its own facilities; the license conferred no rights
to modify the software or to sell it to others. Apparently
after Safelite purchased Quivox’s assets, it saw further
opportunities for profit in eDoc. In the summer of
2004, Safelite entered into a licensing agreement with
HyperQuest (then called HQ, but essentially the same
company) for eDoc. The operative language appears
in paragraph 2 of the agreement, which spells out the
grant of the license and its scope. Subpart (a) says:
Subject to all limitations and obligations set forth
in this License Agreement, Safelite grants to HQ a
perpetual (subject to termination only as provided
in Section 4), worldwide, exclusive (except as set
forth in Section 2(b)) license (i) to use the eDoc Soft-
ware, in source code form, to support the development
and commercialization of HQ Services, and (ii) to
develop, modify and enhance the eDoc Software as
HQ in its sole discretion determines; provided, that
such modifications and enhancements are solely
related to the development and commercialization
of HQ Services. [The agreement then defines the
term “use” and addresses sublicensing rights. This
section then concludes:] Notwithstanding the fore-
going, HQ may not, without the prior written
consent of Safelite, which consent shall not be unrea-
4 Nos. 08-2257, 08-3979 & 08-4176
sonably withheld, rent, sell, lease, transfer or sub-
license the eDoc Software to any person or entity
that competes with Safelite in the manufacture, distri-
bution, or sale of automotive glass or related services,
including but not limited to, those competitors set
forth on Schedule 2(a).
Subpart (b) expressly addresses exclusivity. It says:
Except as otherwise provided in this Section 2(b),
HQ’s license to the eDoc Software is exclusive in
the Territory. Such exclusivity shall terminate if a
Sale of of [sic] HQ (as defined in the Master Agree-
ment) occurs prior to July 5, 2009. Safelite shall have
the right to use the eDoc Software and may license
the eDoc Software to third parties solely for purposes
of testing or development.
Further down, this subpart addresses the N’Site license:
Notwithstanding the foregoing, HQ acknowledges
the eDoc Software is licensed (“License”) to N’SITE
Solutions, Inc. (“N’SITE”). HQ further acknowl-
edges Safelite and N’SITE are presently negotiating
the terms of a revised license (“Revised License”) re-
garding N’SITE’s use of the eDoc Software.
From there, the paragraph includes promises by Safelite
to keep HQ apprised of the status of its negotiations
with N’Site. It ends with the following promise: “. . . in
the event the Revised License is modified to include
terms substantially different than the Revised License
provided to HQ, Safelite will advise and include HQ in
the determination of the final terms of the Revised Li-
cense.” Finally, paragraph 3(a) of the agreement pro-
Nos. 08-2257, 08-3979 & 08-4176 5
vides that “all right, title and interest in and to the eDoc
Software (including, but not limited to, all Intellectual
Property Rights) will remain the exclusive property of
Safelite, and all right, title and interest in and to the
HQ Modifications shall vest in Safelite upon creation.”
In the end, Safelite and N’Site did not succeed in their
efforts to renegotiate their agreement. Another part of
the contract between Safelite and HQ required Safelite
to notify N’Site by April 1, 2006, that Safelite was ter-
minating the License or Revised License with N’Site.
Before that date, however, N’Site had undertaken a
number of steps that HyperQuest believed were unautho-
rized.
On June 9, 2003, Safelite notified N’Site that it had
acquired the Quivox assets, including Quivox’s interest
in the eDoc copyright and the licensing agreement. In
October 2003, Safelite notified N’Site that the latter
had breached the licensing agreement because N’Site
had failed to pay certain licensing fees to Safelite. That
notification led to the negotiations in the spring of 2004
that are mentioned in the HyperQuest agreement.
Shortly before those talks broke down, N’Site told Safelite
that it was not using the eDoc software for any pur-
pose, because the software was obsolete and inadequate.
HyperQuest also points to numerous other acts that
N’Site took that (it says) were inconsistent either with
the terms of N’Site’s own license or with HyperQuest’s
understanding of its own license. Its list of grievances
includes at least the following four: (1) N’Site installed
the eDoc software at locations other than its own
facility; (2) N’Site did not restrict its use of the eDoc
6 Nos. 08-2257, 08-3979 & 08-4176
software to its immediate organization, its own use, or
for the purpose of electronic collection, storage, and
transfer of claims; (3) N’Site modified and created deriva-
tive works from the eDoc software; and (4) N’Site
marketed and sold either the eDoc software itself or the
derivative works to third parties. For example, Hyper-
Quest says, N’Site sold the source code of its N’Solutions
software to Unitrin in the summer of 2006 for more
than $700,000. In 2007, N’Site released a new version of
N’Solutions called ClaimHub, which it continues to
market and sell. HyperQuest asserts that all of these
products were derivative works based upon eDoc.
In November 2006, Safelite filed an application in the
U.S. Copyright Office for registration of eDoc; it was
promptly registered, and on January 7, 2008, HyperQuest
recorded the Safelite/HQ License with the Copyright
Office. As we noted, this lawsuit followed less than a
month later.
II
The Copyright Act restricts the set of people who are
entitled to bring a civil action for infringement to those
who qualify as “[t]he legal or beneficial owner of an
exclusive right under a copyright . . . .” 17 U.S.C. § 501(b).
Some courts (including this one in years past, see, e.g.,
Moran v. London Records, Ltd., 827 F.2d 180 (7th Cir.
1987)) have seen this as a limitation derived from Article
III’s standing requirement (which is discussed in Lujan
v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992),
among other cases), but we believe that it is preferable
Nos. 08-2257, 08-3979 & 08-4176 7
to be more precise in our language. Many parties who
have not crossed the “T’s” and dotted the “i’s” in their
copyright licenses would have no trouble demonstrating
injury in fact, causation, and redressability—the three
indispensable requirements for constitutional standing,
id. at 560-61, but their efforts to sue will nonetheless
be thwarted by the statutory requirement. Another pos-
sibility, closer to the mark, is that the Copyright Act
establishes criteria for the real party in interest, as that
term is used by Federal Rule of Civil Procedure 17(a).
See generally 6 W ILLIAM F. P ATRY, P ATRY ON C OPYRIGHT
§ 21:2 (2009). Or one could keep it simple and say that
the Copyright Act spells out who has enforceable
rights under the statute; someone who does may sue,
and someone who does not has failed to state a claim
upon which relief may be granted. Our understanding
of the law as it now stands, particularly in light of the
Supreme Court’s decision in Reed Elsevier, Inc. v. Muchnick,
130 S. Ct. 1237, 1243-44 (2010), is that the last of these
approaches is the correct one. In essence, it reflects the
way that the district court approached this case. Had
its dismissal of HyperQuest’s suit really been on the
basis of Article III standing, the dismissal would have
been without prejudice. See, e.g., In re African-American
Slave Descendants Litigation, 471 F.3d 754, 758 (7th Cir.
2006). Instead, the court correctly realized that its
ruling was one with prejudice—in other words, the kind
of ruling one would expect in response to a motion
under Federal Rule of Civil Procedure 12(b)(6).
The central question in HyperQuest’s appeal is thus
whether Safelite conveyed enough rights to it to make
it “[t]he legal or beneficial owner of an exclusive right”
8 Nos. 08-2257, 08-3979 & 08-4176
under the Copyright Act. Importantly, HyperQuest does
not have the burden of showing that it is the owner of
all exclusive rights; even one will suffice. The Act
entitles a copyright’s owner to a bundle of six different
exclusive rights:
(1) to reproduce the copyrighted work in copies
or phonorecords;
(2) to prepare derivative works based upon the copy-
righted work;
(3) to distribute copies or phonorecords of the copy-
righted work to the public by sale or other transfer
of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and
choreographic works, pantomimes, and motion pic-
tures and other audiovisual works, to perform the
copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and
choreographic works, pantomimes, and pictorial,
graphic, or sculptural works, including the individual
images of a motion picture or other audiovisual work,
to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the
copyrighted work publicly by means of a digital
audio transmission.
17 U.S.C. § 106. The three rights that are at issue in this
case are the right to reproduce the copyrighted work (#1),
the right to prepare derivative works based upon the
copyrighted work (#2), and the right to distribute copies
of the work to the public (#3). These rights are divisible,
Nos. 08-2257, 08-3979 & 08-4176 9
meaning that the owner may convey each one of them to
a different person. See 17 U.S.C. § 201(d)(2) (“Any of
the exclusive rights comprised in a copyright, including
any subdivision of any of the rights specified in section
106, may be transferred . . . and owned separately.”).
Thus, if the exclusive right to reproduce (meaning ex-
clusive of the grantor as well as all third parties) were
transferred to A, the exclusive right to prepare derivative
works were given to B, and the exclusive right to
distribute copies to the public were granted to C, each
transferee would be entitled to sue for infringement of
its particular right. The corollary to this rule is that a
person holding a non-exclusive license is not entitled
to complain about any alleged infringement of the copy-
right. See I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th Cir.
1996); 17 U.S.C. § 101 (defining a “transfer of copyright
ownership”); id. § 501(b) (providing that only the legal or
beneficial owner of an exclusive right may institute
an action).
HyperQuest’s right to recover for N’Site’s alleged
infringement therefore hinges on its ability to prove that
it was an exclusive licensee of at least one of the
divisible rights recognized by the Act. Although
Unitrin argues that HyperQuest never showed that it
obtained the license from its predecessor in interest, HQ,
we see no need to dwell on this point. The easy response
is that Unitrin waited too long to raise the argument,
since it introduced it only in its reply brief in the
district court. Cf. India Breweries, Inc. v. Miller Brewing
Co., 612 F.3d 651, 659 n.2 (7th Cir. 2010). Even if we were
inclined to forgive the forfeiture, we see nothing of sub-
10 Nos. 08-2257, 08-3979 & 08-4176
stance here. HyperQuest specified in its complaint that
it was formerly known as HQ. On appeal, it has pro-
vided corporate records confirming that all of HQ’s
contract rights passed to HyperQuest when HQ entered
into a migratory merger that shifted its status from
an Illinois to a Delaware corporation. That is more than
enough. And we do find that Unitrin forfeited the new
argument that it has tossed into the case for the first
time on appeal, namely, that HyperQuest may have
owned only the rights to eDoc and not to the separately
copyrighted eDocexpress software. The license refers
generally to the “software commonly referred to as eDoc.”
It appears that the parties drew no distinction between
eDoc and eDocexpress, since the 2004 license agreement
acknowledged that the eDoc software was licensed to
N’Site, even though the 2001 Quivox/N’Site license
spoke only of eDocexpress. These kinds of scorched-earth
tactics are an unfortunate waste of everyone’s time.
This part of the case turns entirely on the language of
the 2004 license. We must read that agreement, however,
as a whole. The fact that it uses the phrase “exclusive
license” or its equivalent from time to time is something
of which we take note, but it is not dispositive. It is the
substance of the agreement, not the labels that it uses,
that controls our analysis. See generally In re Isbell
Records, Inc., 586 F.3d 334, 337-38 (5th Cir. 2009) (stressing
the importance of viewing the copyright agreement as a
whole); SCO Group, Inc. v. Novell, Inc., 578 F.3d 1201, 1209-
10 (10th Cir. 2009) (applying California law and holding
that agreements transferring copyrights must be read as
a whole); Kennedy v. National Juvenile Detention Ass’n,
Nos. 08-2257, 08-3979 & 08-4176 11
187 F.3d 690, 694 (7th Cir. 1999) (noting that normal
rules of contract construction govern copyright agree-
ments and applying principles of Wisconsin law,
including the rule that every term of the agreement
must be given meaning). We must decide whether
HyperQuest can prove that it received one or more divisi-
ble rights, and if so, whether it is entitled to enforce them.
At first blush, it seems apparent that HyperQuest
has never been the sole holder of any of the three ex-
clusive rights that it has identified—reproduction, deriva-
tive works, or distribution. Under the 2004 agreement
Safelite explicitly reserved a limited right to use the eDoc
software and to distribute it to third parties for develop-
ment. But, HyperQuest responds, each of the three
rights it has identified can themselves be subdivided
into smaller bundles of rights. Although one would
reach the point of absurdity going too far down that
line, it does not follow that any subdivision is too much.
To the contrary, HyperQuest is correct to observe that
subdivision is possible. See 1 M ELVILLE B. N IMMER &
D AVID N IMMER, N IMMER ON C OPYRIGHT § 10.02[A] (2009)
[hereinafter “N IMMER”] (“[T]here would appear to be
no limit on how narrow the scope of licensed rights may
be and still constitute a ‘transfer’ of ownership, as long
as the rights thus licensed are ‘exclusive.’ ”). The typical
example is that of the author of a novel who gives an
exclusive license for the hardcover edition to one
person and an exclusive license for the movie version to
a second. See Silvers v. Sony Pictures Entertainment, Inc.,
402 F.3d 881, 886-87 (9th Cir. 2005) (noting that the legis-
lative history of the Copyright Act supports allowing
12 Nos. 08-2257, 08-3979 & 08-4176
parties to subdivide exclusive rights). But it appears
that these subdivisions must be done cleanly, so that the
limits of each holder’s rights can be defined. See Kepner-
Tregoe, Inc. v. Vroom, 186 F.3d 283, 287 (2d Cir. 1999).
Perhaps for that reason, rights are usually subdivided
along geographical lines or distinctions among forms
of production. See generally N IMMER, supra, § 10.02[A].
It may be easiest, by comparing what rights other
parties had in the software, to see if there is anything
left over that HyperQuest held exclusively. Beginning
with N’Site, we know that its interest in eDoc is defined
solely by the 2001 Quivox/N’Site agreement. That agree-
ment imposed a geographical limitation on N’Site: it
could use the software only in its own facilities. It
was not entitled otherwise to reproduce, distribute, or
create any derivative works. Since HyperQuest has not
asserted that any of N’Site’s internal activities amounted
to copyright infringement, that takes N’Site out of the
picture. Putting the licensor itself to one side, the 2004
agreement gave HyperQuest the right to engage in
the relevant activities in all settings not defined by the
N’Site license.
Matters become more complicated when we look at the
remainder of the 2004 Safelite/HyperQuest agreement.
Safelite retained a significant package of rights, including
the right (1) to use eDoc in a manner that did not
compete directly with HyperQuest, and (2) to license eDoc
software to third parties solely for testing and develop-
ment. HyperQuest urges us to read the latter carve-out
narrowly, so that it covers only Safelite’s ability to add
Nos. 08-2257, 08-3979 & 08-4176 13
modifications to fix bugs in the program. See 17 U.S.C.
§ 117; Krause v. Titleserv, Inc., 402 F.3d 119, 125-29 (2d
Cir. 2005). But we see nothing in the language of this
agreement to signal that such a limited right was re-
served. The use of the term “development” naturally
suggests a more open-ended reservation—one looking
to new generations of the software, or new applications,
for example.
Our case is more complicated than the one the Second
Circuit faced in Kepner-Tregoe, since that court was
dealing with only two parties (licensor/owner and li-
censee), 186 F.3d at 285, while we have three parties
(owner, licensee, third-party alleged infringer). If it is
easy to distinguish between the owner’s and the
licensee’s rights, then application of the divisibility rule
is still relatively straightforward. For example, if the
owner of a copyrighted novel retains the right to
publish a conventionally printed book and grants a
license to another to produce the novel in all forms (in-
cluding conventional printing of a book), the license
is exclusive with respect to every form except a
printed book and it is non-exclusive as to the printed
books. If a third-party published an infringing book,
then the person entitled to enforce the copyright
remains the owner, not the holder of the non-exclusive
license. If a third-party publishes an e-book, however,
then the licensee has the right to sue for infringement.
It is more difficult to trace exclusive rights when they
are not restricted by geography or production form. In
our case, HyperQuest received broad rights to reproduce,
14 Nos. 08-2257, 08-3979 & 08-4176
distribute, and create derivative works, but Safelite re-
tained a wide array of rights also. The most gaping hole
in HyperQuest’s license occurs in paragraph 2(b),
quoted earlier. HyperQuest acknowledged that it took
its license not only subject to the existing N’Site license
(which as we have explained does not destroy very
much of its exclusivity), but also subject to the open-ended
new license that Safelite and N’Site were working
on during the spring of 2004. HyperQuest retained no
right to veto any terms that might have appeared in
that license. All it got, essentially, was the right to a seat
at the table if the eventual planned license deviated
materially from the version that HyperQuest had
already seen. Confirming that understanding is the lan-
guage in paragraph 3(a) of the 2004 agreement that
we quoted earlier, providing that “all right, title and
interest in and to the eDoc Software (including, but not
limited to, all Intellectual Property Rights) will remain
the exclusive property of Safelite, and all right, title
and interest in and to the HQ Modifications shall vest in
Safelite upon creation.” We understand that there are
qualifications to this assertion, but when all is said and
done, we cannot find in this license the kind of clearly
delineated exclusivity over at least one strand of the
bundle of rights that would permit HyperQuest to sue
for infringement.
This conclusion is most consistent with the treatment
of the rights that HyperQuest is emphasizing. With
respect to derivative works, it appears that HyperQuest
and Safelite have similar licensing authority. Safelite
reserved the right to license any third-party for the pur-
Nos. 08-2257, 08-3979 & 08-4176 15
poses of “testing or development,” and HyperQuest
also had the right to prepare derivative works on its
own or to grant sublicenses for that purpose. With
respect to the rights to reproduce and to distribute the
eDoc software, HyperQuest runs into a different prob-
lem. Its only complaint in this case is that N’Site
was engaging in both of these acts, but for the reasons
we have already explained, the 2004 agreement is com-
pletely open-ended about the rights that Safelite was
entitled to give to N’Site. All it had to do was to give
HyperQuest a seat at the table—in the words of the
agreement, “Safelite will advise and include HQ in the
determination of the final terms of the Revised License.”
(Emphasis added.) HyperQuest has tried to stretch
this into a requirement that it had to give Safelite its
permission for any changes in the N’Site license, but
we cannot bend the language of the agreement that far.
The fact that hindsight reveals that Safelite did not
exercise its right to confer greater rights on N’Site
does not matter. We must determine the scope of
HyperQuest’s rights as of the time it received them.
The agreement demonstrates that HyperQuest did not
receive the degree of exclusivity in the realms of repro-
duction and distribution that it may have wanted.
It was HyperQuest’s burden to show that the agree-
ment conferred this type of exclusivity upon it. Viewed
this way, the problem for HyperQuest is that the bound-
aries between its rights, those that Safelite retained,
and those that N’Site was entitled to exercise, are blurry
at best. HyperQuest argues that as long as it has the
right to exclude a third-party defendant from using the
16 Nos. 08-2257, 08-3979 & 08-4176
copyrighted software, then it holds the right to sue for
infringement. But the right to exclude, standing alone, is
not enough. Suppose that Amy, a copyright owner,
licenses her copyright to Bill and promises Bill that she
will not also give a license to Charlie. Under Hyper-
Quest’s theory, if Charlie now uses the copyright
without authorization, Bill would be entitled to sue for
infringement. But this seems contrary to the intent of
the Copyright Act; Amy’s promise of exclusivity ex-
tended only to Charlie—she gave Bill no right of exclu-
sivity vis-à-vis Dave, Ellie, or Francesca. It therefore
seems that Bill might have a contract action against
Amy, but no more, if Amy is content to tolerate Charlie’s
infringement. HyperQuest resists this conclusion with a
number of citations to patent cases, but they are not
helpful in this regard, because patent licensees who
do not have sole authority over the patent are permitted
to sue only if they join the patent owner. See generally
35 U.S.C. § 281; Waterman v. MacKenzie, 138 U.S. 252,
255 (1891). HyperQuest did not join Safelite as a co-plain-
tiff, nor has it ever expressed any interest in doing so.
We hasten to add that we are not adopting the rigid
position that N’Site and Unitrin have urged—namely,
that a copyright owner’s retention of ownership rights
renders all subsequent licenses non-exclusive. Such a
broad statement is inconsistent with the language in
the Copyright Act that recognizes the divisibility of
exclusive rights. It is also unnecessarily formalistic; just
as the use of the word “exclusive” here and there in the
license is not enough to resolve the question of the
nature of HyperQuest’s interest, the failure to use any
Nos. 08-2257, 08-3979 & 08-4176 17
particular word is not dispositive. The decision whether
Safelite, as the owner of the copyright, has conveyed
clear exclusive rights to HyperQuest is one that can be
made only after careful analysis of the agreement
between the parties.
III
We now turn to the court’s decision to award attor-
neys’ fees. HyperQuest attacks both the award of any
fees at all and the amount of the fees that the court im-
posed. Unitrin, for its part, has filed a cross-appeal in
which it complains that the district court cut the award
down too far. Before addressing each of these argu-
ments, we must address a jurisdictional issue that affects
Unitrin’s cross-appeal. (N’Site did not file a separate cross-
appeal.)
The district court granted the defendants’ motion to
dismiss on May 1, 2008, and HyperQuest filed a
timely notice of appeal on May 20, 2008. The district
court then entered its order granting attorneys’ fees to
the defendants on November 3, 2008; final judgment on
that matter was docketed on November 10, 2008. The
court then amended its judgment on November 12, 2008,
to clarify that the fee award ran in favor of both Unitrin
and N’Site. HyperQuest filed another notice of appeal
on November 19, 2008.
The complication arises with the timing of the cross-
appeal. Unitrin waited to file its notice of appeal
until December 12, 2008, more than 30 days after the
18 Nos. 08-2257, 08-3979 & 08-4176
November 10 judgment. See F ED . R. A PP. P. 4(a)(3) (pro-
viding party with either 14 days after another party files
a notice of appeal to lodge its own notice, or the normal
30 days given by Rule 4(a)(1)(A)). Unitrin’s notice is thus
timely only if the 30-day period for taking an appeal
began to run on November 12 rather than November 10.
But the court’s entry of November 12 was not prompted
by a motion under Rule 59(e) by Unitrin or any other
party, nor did it respond to any of the other motions
that toll the period for filing a notice of appeal. See F ED.
R. A PP. P. 4(a)(4)(A). The later order appears to be an
effort to correct a mistake—though whether it can be
called “clerical” is doubtful. The November 10 judgment
stated that “final judgment is entered in the sum or [sic]
$134,958.42 in favor of Unitrin and against Hyperquest
for attorney’s fees and expenses.” The November 12
judgment said that “final judgment is entered in the
sum of $134,958.42 in favor of Unitrin and N’Site Solu-
tions, Inc., and against Hyperquest, Inc., for attorney’s
fees and expenses.”
Changing a fee award from one that runs solely in
favor of one party (Unitrin) to one that runs jointly and
severally in favor of two parties is not a clerical move.
It changes parties’ legal entitlements. We thus do not
believe that Rule 60(a) provided the authority to make
this change; that rule can be used only to correct
clerical mistakes that subvert the court’s intention with
respect to the original judgment. F ED. R. C IV. P. 60(a);
American Federation of Grain Millers, Local 24 v. Cargill
Inc., 15 F.3d 726, 728 (7th Cir. 1994). Rule 59(d), however,
permits the court to act on its own initiative to order a
Nos. 08-2257, 08-3979 & 08-4176 19
new trial. F ED. R. C IV. P. 59(d). It does not mention amend-
ing a judgment, but it seems only sensible, if the court
has detected a problem within such a short period of
time, to permit it to take that step. In our opinion, the
November 12 judgment did effect “[a] significant change
in a judgment,” and thus it started all time periods
anew. Charles v. Daley, 799 F.2d 343, 348 (7th Cir. 1986).
Unitrin’s notice of appeal was therefore filed in time
and we can proceed to the merits.
The Copyright Act gives the district court discretionary
authority to grant attorneys’ fees in favor of the
prevailing party. 17 U.S.C. § 505. See generally Fogerty
v. Fantasy, Inc., 510 U.S. 517 (1994). Following the
Supreme Court’s decision in Buckhannon Board and Care
Home, Inc. v. West Virginia Department of Health and
Human Resources, 532 U.S. 598 (2001), we have held that “a
litigant ‘prevails’ (for the purpose of fee-shifting statutes)
when it obtains a ‘material alteration of the legal rela-
tionship of the parties.’ ” Riviera Distributors, Inc. v. Jones,
517 F.3d 926, 928 (7th Cir. 2008) (quoting Buckhannon, 532
U.S. at 604). Defendants who defeat a copyright infringe-
ment action are entitled to a strong presumption in
favor of a grant of fees. Mostly Memories, Inc. v. For Your
Ease Only, Inc., 526 F.3d 1093, 1099 (7th Cir. 2008).
HyperQuest acknowledges that it is not easy to over-
turn an award of fees. It asserts, however, that the
award is tainted by legal error: the district court, it says,
applied an irrebuttable presumption in favor of
granting fees to these defendants. Moreover, it adds, the
district court’s explanation of its decision fell far short of
20 Nos. 08-2257, 08-3979 & 08-4176
the standards the Supreme Court imposed in Fogerty. See
510 U.S. at 535 n.19. It is referring to the following non-
exclusive factors, all of which were highlighted as poten-
tially helpful in guiding the district court’s discretion:
“frivolousness, motivation, objective unreasonableness
(both in the factual and in the legal components of the
case) and the need in particular circumstances to
advance consideration of compensation and deterrence.”
Id. (internal quotation marks omitted).
Although the district court’s explanation could have
been more fulsome, HyperQuest has not shown that the
court abused its discretion. We accept, as the district
court apparently did too, that HyperQuest’s suit was
filed in good faith and had some merit. But this does not
distinguish it from a great many copyright infringe-
ment cases. The district court was satisfied that the de-
fendants were entitled to prevail and had done a good
job of litigating the case.
This leaves the dispute about the amount of the fee
award: HyperQuest says that it is too high, and Unitrin
thinks it is too low. Both sides appear to concede that we
are reviewing only for abuse of discretion. See People
Who Care v. Rockford Bd. of Educ., School Dist. No. 205, 90
F.3d 1307, 1314 (7th Cir. 1996). Unitrin and N’Site asked
for over $200,000 in fees, but the district court cut that
amount to $134,958.42 (including costs). There was no
dispute about the hourly rates that Unitrin’s and N’Site’s
attorneys charged; the question instead was whether
the number of hours the defendants submitted was rea-
sonable. The district court used the hours spent by
Nos. 08-2257, 08-3979 & 08-4176 21
HyperQuest as a benchmark and decided to award the
defendants an amount equal to 150% of the fees that
the plaintiff had paid. In explaining that decision, the
court reminisced a bit about its own experience in the
practice of law. Unitrin believes that it was the victim
of “nebulous eyeballing,” a practice this court criticized
in People Who Care. See 90 F.3d at 1314 (“[T]he record
ought to assure us that the district court did not ‘eyeball’
the fee request . . . .”) (internal quotation marks omitted).
Although it would have been helpful if the court
had offered a more detailed explanation, we conclude
that it said enough. Though it did not dive into the
minute details of the defendants’ billing records, it used
HyperQuest’s records as a useful comparator in order
to anchor its analysis. In doing so, it acknowledged that
the defendants were entitled to recover substantially
more fees than HyperQuest, since there were two of
them and it would have been impossible for them to
have coordinated perfectly. The court also took note
of some of HyperQuest’s challenges to particular entries
on the ground that they reflected duplicative work and
overbilling by high-level partners. The record is ade-
quate to assure us that the district court did not
reduce Unitrin’s fee award arbitrarily. To the contrary,
the district court’s analysis provides adequate support
for the final number the court chose, and we conclude
that the award cannot be regarded as an abuse of dis-
cretion.
* * *
In the final analysis, we conclude that HyperQuest
did not have the kind of interest in the eDoc software
22 Nos. 08-2257, 08-3979 & 08-4176
that it needed in order to be entitled to bring this suit
for copyright infringement. The defendants—Unitrin
and N’Site—were thus entitled to judgment in their
favor. This in turn made them prevailing parties for
purposes of attorneys’ fees under section 505 of the Copy-
right Act. Finally, we find no reversible error in the fee
award itself. We therefore A FFIRM the judgments of the
district court.
1-19-11