Laches Cannot Block Copyright Claims Brought Within 3-Year Statute of Limitations

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By Tamlin H. Bason  

May 19 --The common law doctrine of laches cannot bar a copyright claim that was brought within the congressionally prescribed statute of limitations, the U.S. Supreme Court ruled May 19 in a 6-3 decision.

The court reversed the U.S. Court of Appeals for the Ninth Circuit's dismissal on laches grounds of a copyright infringement claim that was brought by the daughter of the author of the screenplay for the movie “Raging Bull.” The Ninth Circuit had determined that the complaint was barred by laches due to the lengthy delay between the plaintiff's first accrual of an infringement claim and the filing of the complaint.

But “courts are not at liberty to jettison Congress' judgment on the timeliness of suit,” Justice Ruth J. Bader Ginsburg wrote. The court therefore reversed and remanded, holding that laches cannot bar an infringement suit that is brought within the three-year statute of limitations period set forth in Section 507(b) of the Copyright Act, 17 U.S.C. §507(b).

Dissenting, Justice Stephen G. Breyer said the ruling robs federal courts of the ability to fashion an equitable remedy “no matter how unusual the circumstances.”

The unusual circumstances in copyright cases, Breyer said, are the result of the interplay between lengthy copyright terms and the separate-accrual rule. If unchecked, those two doctrines result in a rolling limitations period that permits the copyright owner to sit back and wait until that defendant has invested substantial sums in marketing the work before bringing suit, even if that occurs decades after the defendant first used the work.

“A 20-year delay in bringing suit could easily prove inequitable,” Breyer said. He would have allowed lowers courts to retain their discretion in fashioning equitable remedies for just such occasions.

The majority, however, said that the statute itself balances the equities by allowing a plaintiff to recover damages for infringements that occur only within the three-year window. Moreover, the court was not bothered by the interplay between the three-year limitations period and the separate-accrual rule.

“It allows a copyright owner to defer suit until she can estimate whether litigation is worth the candle,” the court said.

Practitioners offered mixed analysis, with some praising the “balanced decision” and others criticizing the court for issuing a “sweeping decision” that completely forecloses the possibility of a laches defense in a copyright infringement case.

Author's Daughter Waits 18 Years to File Suit

Boxer Giacobbe “Jake” LaMotta and Frank Peter Petrella, LaMotta's long-time friend and collaborator, wrote a total of three works about LaMotta's life and career: a screenplay registered in 1963, a memoir registered in 1970 and a second screenplay registered in 1976.

In 1976, LaMotta and Petrella assigned the rights in the memoir and screenplays to Metro-Goldwyn-Mayer Inc.'s predecessor in interest.

Petrella died in 1981 and in 1991 his daughter, Paula Petrella, secured the renewal rights for the 1963 screenplay. For years, the younger Petrella communicated with MGM, asking that the studio cease its exploitation of the film and threatening legal action if the exploitation continued. However, she did not initiate a legal action until 2009.


“Allowing Petrella's suit to go forward will put at risk only a fraction of the income MGM has earned.”
--Justice Ruth Bader Ginsburg

The U.S. District Court for the Central District of California granted summary judgment in favor of MGM, finding that Petrella's claims were barred by the equitable doctrine of laches. The U.S. Court of Appeals for the Ninth Circuit affirmed. 695 F.3d 946, 104 U.S.P.Q.2d 1144 (9th Cir. 2012) (182 PTD, 9/20/12). The Ninth Circuit rejected as irrelevant Petrella's reliance on the separate-accrual rule, which she invoked to seek redress only for infringing conduct that had taken place within three years of the filing of her complaint, pursuant to the statute of limitations period. Since Petrella had waited 18 years before filing a lawsuit, even claims that accrued between 2006 and 2009 were barred by the doctrine of laches, the Ninth Circuit held.

During oral argument in January the justices appeared to be struggling over various “unique” attributes of copyright law that seem to frustrate the traditional balance between the common law equitable defense and the statute of limitations that was created by Congress (14 PTD, 1/22/14).

The balancing of those attributes--the lengthy copyright term and the separate-accrual rule--featured prominently in Ginsburg's opinion and in Breyer's dissent. Ginsbug, however, would defer to Congress's own balancing of these interests whereas Breyer argued that courts should be permitted to engage in an ad hoc balancing to prevent inequitable results.

'Nothing Untoward About Waiting' to Sue

The court was wholly dismissive of MGM's argument that Petrella had sat on her rights until a favorable infringement claim had accrued. The Ninth Circuit had accepted that argument, noting that Petrella had seemed to wait until MGM had invested substantial sums in promoting and marketing special anniversary editions of the film before filing her law suit. Rejecting this argument, the court said:

It is hardly incumbent on copyright owners, however, to challenge each and every actionable infringement. And there is nothing untoward about waiting to see whether an infringer's exploitation undercuts the value of the copyrighted work, has no effect on the original work, or even complements it.  

 

The court, in fact, said that MGM's approach would lead to a flood of litigation because copyright owners would be forced to file lawsuits over “seemingly innocuous infringements” for fear of losing their ability to enforce their rights later. Section 507(b) prevents such needless litigation by allowing a copyright owner to only file suit where expensive litigation would be warranted, the court said. And, when such litigation does take place, the statute allows for recovery for only infringing activity that took place within the three year window, the court noted.

“Congress' time provisions secured to authors a copyright term of long duration, and a right to sue for infringement occurring no more than three years back from the time of suit,” the court said. “That regime leaves 'little place' for a doctrine that would further limit the timeliness of a copyright owner's suit.”

Resolution of Circuit Split

Petrella's petition for certiorari described an “entrenched” circuit split on the issue of whether laches can bar infringement claims that are brought under the statute of limitations.

Anchoring one side of that split was the Ninth Circuit, which allowed laches to bar both equitable and legal relief.

The Fourth Circuit was on the opposite end of the spectrum, exalting Congress's explicit intent, as evidenced by Section 507(b), over the common law doctrine. Indeed, the court in Lyons Partnership LP v. Morris Costumes Inc., 243 F.3d 789, 58 U.S.P.Q.2d 1102 (4th Cir. 2001), held that the “separation of powers” precluded a court from allowing a judicially created doctrine, laches, to bar a claim that fell within the statute of limitations.

The remaining circuit courts that had considered the issue had fallen somewhere in the middle. The Eleventh Circuit, for instance, said that there was a “strong presumption” against allowing laches to bar a timely filed copyright infringement claim. Peter Letterese & Assocs. v. World Institute of Scientology Enters., Intl., 533 F.3d 1287, 87 U.S.P.Q.2d 1563 (11th Cir. 2008) (136 PTD, 7/16/08).

The Sixth Circuit likewise permitted laches as a defense in only “the most compelling of cases,” Chirco v. Crosswinds Communities Inc., 474 F.3d 227, 81 U.S.P.Q.2d 1414 (6th Cir. 2007), and the Tenth Circuit allowed laches for the “rare case,” Jacobsen v. Deseret Book Co., 287 F.3d 936, 62 U.S.P.Q.2d 1491 (10th Cir. 2002) (91 PTD, 5/10/02).


“It is a decision that will make life more difficult for Hollywood studios and also the music industry.”
--Andrew Baum, Foley & Lardner

During oral argument there was little discussion of the circuit split. Indeed, the only notable exchange took place after MGM's attorney, Mark A. Perry of Gibson, Dunn & Crutcher LLP, tried to downplay the circuit split and to portray the Fourth Circuit as the outlier. Perry noted that all circuits other than the Fourth Circuit, “which doesn't get very many copyright cases,” have allowed laches to bar at least portions of an infringement suit.

Justice Sonia Sotomayor, however, challenged Perry. With respect to the Second, Sixth, Tenth and Eleventh Circuits, “I thought those circuits announced laches are available, but only in exceptional circumstances,” she said. Moreover, she said that she was not aware of any other circuit courts--apart from the Ninth Circuit--that have actually used laches to completely bar a copyright infringement claim.

In its resolution of the circuit split, the court seemed to adopt a somewhat modified version of the Sixth's Circuit approach, stating that in “extraordinary circumstances” a plaintiff's initial delay in filing suit could curtail the equitable relief to which she may be entitled.

Equitable Relief May Sometimes Be Curtailed

The “extraordinary circumstances” language echoes Chirco's “most compelling of cases” holding, and indeed the Supreme Court said that case was “illustrative” of what extraordinary circumstances may look like. But the court suggested that even in those cases laches can only bar equitable remedies. The government during oral argument had urged the court to adopt that position--that laches can apply even where Congress has legislated a statute of limitations, but only to bar equitable and not legal relief.

The court noted that here Petrella notified MGM of her claims before money was spent marketing the new edition of the film. She is also, the court noted, seeking equitable relief--an injunction against future infringements and disgorgement of unjust gains attributable to infringements that occurred within the statute of limitations--that would not completely destroy the film.

“Allowing Petrella's suit to go forward will put at risk only a fraction of the income MGM has earned,” the court said, noting that MGM has been selling the film for over three decades. Additionally, the court noted that Section 504(b) of the Copyright Act allows a defendant to offset against profits any money that went into generating those profits, such as money spent marketing the film.

“The circumstances here may or may not (we need not decide) warrant limiting relief at the remedial stage, but they are not sufficiently extraordinary to justify threshold dismissal,” the court held.

Breyer: Laches Rare But Important

Breyer said the court erred by inferring that Congress intended for the Copyright Act to displace common law equitable doctrines.

“The Copyright Act is silent on the subject,” Breyer noted. “And silence is consistent, not inconsistent, with the application of equitable doctrines,” he said.

The Court today comes to a different conclusion. It reads §507(b)'s silence as preserving doctrines that lengthen the period for suit when equitable considerations favor the plaintiff (e.g., equitable tolling) but as foreclosing a doctrine that would shorten the period for when equity favors the defendant (i.e., laches.)  

 

Breyer said he could “not understand the logic of reading a silent statute” that way.


“I see no reason to erase the [laches] doctrine from copyright's lexicon.”
--Justice Stephen G. Breyer

Breyer noted that the court's evisceration of the laches doctrine was not likely to have a profound impact on the vast majority of cases. But, in cases where a plaintiff's unreasonable delay in filing a suit results in inequitable harm to the defendant, the doctrine is necessary “to bring about a fair result,” Breyer said. “I see no reason to erase the doctrine from copyright's lexicon, not even in respect to limitations periods applicable to damages actions.”

Copyright Owner's Gain is Hollywood's Pain?

“It is a decision that will make life more difficult for Hollywood studios and also the music industry,” Andrew Baum of Foley & Lardner, New York, told Bloomberg BNA.

Baum said copyright infringement claims are very fact specific in that ownership determinations often hinge on recollections of those involved in the creation of a work and on documents that existed when the work was created. “Pulling those things together decades later can be very difficult,” Baum said. He said the court's “sweeping decision,” which all but destroys the doctrine of laches as a defense to copyright infringement claims, could work undue prejudice on defendants in the future.

Dylan Ruga of Steptoe & Johnson LLP, agreed with Baum that the decision could have broad implications.

“We should expect to see a lot more copyright infringement actions filed, especially with respect to older works, where the actions would be barred today,” Ruga told Bloomberg BNA. “Laches is now virtually unavailable as a defense.”

“I think it will have an impact because it is going to give plaintiffs in these disputes more leverage,” Mark Haddad of Sidley Austin said. “This decision allows them to have more flexibility in picking their timing in when they file a lawsuit.”

But unlike Baum and Ruga, Haddad told Bloomberg BNA he was not surprised by the court's decision, calling it “understandable.” Specifically, he said that it was reasonable for the court to conclude that the three-year statute of limitations period was Congress's own attempt to balance the “enormously long period” of copyright protection.

Haddad was not alone in seeing the decision as a delicate balance of competing interests.

“It is a very balanced opinion,” William K. Kane of BakerHostetler, Chicago, told Bloomberg BNA. “The court tempered its decision by reaffirming that not only are damages only available for three years, but also by noting that the producer can offset expenses accrued against profits.”


“The decision by Justice Ginsburg almost has a populist tone to it.”
--Donald J. Curry, Fitzpatrick, Cella, Harper& Scinto,

Corey Field of Ballard Spahr, Los Angeles, also thought that it was a balanced opinion, though he was speaking more to the court's ability to address, albeit indirectly, the litigation strategies of the respective parties.

“I think that notion that [Petrella] may have been waiting until money was made before filing suit was completely balanced against the somewhat sympathetic notion that this is the daughter of a writer, who may be unsophisticated when it comes to a highly complex revision of copyright, who was just trying to feel her way through this daunting area,” Field told Bloomberg BNA. He noted that the court detailed how upon first securing the rights to the work Petrella contacted and was repeatedly rebuffed by MGM and was told that the film was not profitable. By “reading between the lines” Field said he got the feeling that the decision was in part a validation of rights held by smaller copyright holders, noting that the court compared the relatively short limitations period against the lengthy duration of copyright protection.

Donald J. Curry of Fitzpatrick, Cella, Harper & Scinto, New York, also saw a broader message to the court's opinion.

“The decision by Justice Ginsburg almost has a populist tone to it,” Curry told Bloomberg BNA. “Here you had an individual up against a big studio, MGM, and the court rejected the notion that a plaintiff, when faced with ongoing infringement, has to sue with respect to each and every infringement that comes across the horizon.”

Curry also said that the court “signaled in a footnote that it may be interested in taking up a similar question in the patent context --whether the Federal Circuit has been wrong for the last 20 years in allowing the defense of laches to bar damages claims in patent infringement suits.” Curry was referencing footnote 15 of the court's decision where it says that it has “not had occasion to review the Federal Circuit's position.”

Justices Samuel A. Alito Jr., Elena Kagan, Antonin G. Scalia, Sonia M. Sotomayor and Clarence Thomas joined the court's opinion. Chief Justice John G. Roberts Jr. and Justice Anthony M. Kennedy joined Breyer's dissent.

Petrella was represented by Stephanos Bibas of the University of Pennsylvania Law School Supreme Court Clinic. The government was represented by Nicole A. Saharsky, assistant to the Solicitor General.

 

To contact the reporter on this story: Tamlin Bason in Washington at tbason@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com


Text is available at http://pub.bna.com/ptcj/PetrellaMay19.pdf