Courts do what they can to encourage parties to resolve disputes and limit litigation costs. So the Federal Courts adopted Rule 68, which provides:
(a) At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.
If the plaintiff refuses the Offer of Judgment and if the judgment that the plaintiff finally obtains is not more favorable than the unaccepted offer, the plaintiff must pay the costs incurred after the offer was made. In a copyright case, in a minority of circuits, those costs can include attorneys’ fees incurred after the offer was made, even though the plaintiff is still the prevailing party in the case (17 U.S.C. § 505 says that a winning party may be awarded reasonable attorneys’ fees).
Even in those circuits that do not include attorneys’ fees, an Offer of Judgment puts pressure on the plaintiff to guess whether it will be awarded more after a jury trial. Costs can add up, even without including the defendant’s attorneys’ fees. The plaintiff risks losing the case or not being awarded more than the Offer. In every case, it is important to evaluate all your options with your attorney before deciding to accept or reject an Offer of Judgment.
In 2009, Car-Freshner Corporation sued Getty Images for licensing photos that included Car-Freshner’s trademarked trees. After the court made some preliminary rulings that weren’t favorable to Getty, Getty made a Rule 68 Offer of Judgment. Car-Freshner accepted the offer to finalize/settle the matter. Was it the right thing to do? We’ll never know for sure, but the parties then were allowed to move forward and put the lawsuit behind them.
–Thanks to Leslie Burns for adding the notes about Offers of Judgment for copyright cases!