The U.S. Supreme Court reversed the Ninth Circuit Court of Appeals and held on Monday in Petrella v. Metro-Goldwyn-Mayer, Inc. that the defense of laches (unreasonable delay) cannot entirely preclude a copyright claim when any acts of infringement occur within the Copyright Act’s three-year statute of limitations. Of the six circuit courts that had previously considered this issue, four had held that laches could be so invoked.
Petrella v. MGM revolved around the screenplay to the movie Raging Bull. In 1963, Frank Petrella and Jake LaMotta (a boxer on whom the film is based) assigned their rights in the screenplay to Chartoff-Winkler Productions, Inc. The rights were later acquired by a subsidiary of MGM. Although the assignment included the rights to any renewal term, because Petrella died before the renewal term began, MGM’s renewal rights under the assignment arguably depended on a grant from Petrella’s heirs.
Petrella’s daughter renewed the copyright in 1991. However, she waited until 1998 before contacting MGM. In letters back and forth between their respective counsel over the next two years, she asserted her rights and MGM denied infringement. Nine years later, in 2009, Petrella filed a copyright infringement action in California. Apparently, Petrella had believed that the movie was making so little money in the previous years, that the cost of a lawsuit would be more than any potential recovery from a copyright infringement lawsuit. MGM moved to dismiss on several grounds, including laches, based on Petrella’s 18-year delay in bringing suit. The district court granted MGM’s motion, and the Ninth Circuit Court of Appeals affirmed.
In a 6-3 decision penned by Justice Ginsburg, the Supreme Court reversed. The Court’s opinion centered on the central premise that the Copyright Act applies the separate accrual rule; namely, each time an infringing work is reproduced or distributed the infringer commits a new wrong. Accordingly, each infringing act effectively starts the statute of limitations period for that act. As stated by the Court “[u]nder the Act’s three-year provision, an infringement is actionable within three years, and only three years, of its occurrence. And the infringer is insulated from liability for earlier infringements.” The Court stated that “[i]nviting individual judges to set a time limit other than the one Congress prescribed, we note, would tug against the uniformity Congress sought to achieve when it enacted [the statute of limitations].”
Though sitting on their rights may not completely bar potential plaintiffs from bringing a copyright claim, the Court made clear that waiting could restrict what remedies are available. For example, the Court cited a case where a building was built using allegedly infringing plans and the plaintiffs did not assert their rights until much of the building was built. The Court noted that the court there had allowed a claim to go forward, but stated that under those facts, the plaintiffs’ remedies would be limited and destruction of the building would not be ordered. Arguably inconsistently however, the Court stated that the relief sought by Petrella, including an injunction against future infringement “would not result in the ‘total destruction’ of the film, or anything close to it.” It is hard to see how an injunction against future infringement – which would include barring MGM from any future reproduction or distribution of the film – is not tantamount to destruction, at least from MGM’s perspective. The Court did note however that on remand, the lower court in Petrella could “allow MGM to continue to use Raging Bull upon payment of a reasonable royalty to Petrella.”
Interestingly, the Court appeared to condone the use of “equitable tolling” to lengthen the time available for a copyright plaintiff to bring suit. That doctrine allows judges to extend the time for bringing suit when a potential plaintiff lacks the ability to bring suit in a timely fashion, for example, if he or she is incapacitated or is a minor. The Court distinguished equitable tolling from laches, noting that tolling is “tied to [the statute of limitations]” but laches was originally conceived to be used as a guide instead of the statute of limitations. Aside from the history of these two doctrines, however, the practical distinction drawn by the Court is not entirely clear. Equitable tolling extends the time for suit while laches contracts it, but both are equitable in nature and can alter the deadline for bringing a claim. Indeed, as Justice Breyer points out in his dissent, it is hard to understand the logic of “preserving doctrines that lengthen the period for suit when equitable considerations favor the plaintiff (e.g., equitable tolling), but . . . foreclosing a doctrine that would shorten the period when equity favors the defendant (i.e., laches.)”
Another important point to note is that this decision comes shortly after the Second Circuit joined eight other circuit courts in adopting the “discovery rule” to control the statute of limitations in copyright cases. See Psihoyos v. John Wiley & Sons, described in an earlier post here. The discovery rule triggers the statute of limitations when the plaintiff knew or should have known of the infringement, as opposed to the injury rule, which starts the clock when the infringing act occurs. Use of the discovery rule would seem to undermine the uniformity that the Court sought to impose in copyright actions by barring the use of laches. Indeed, in dicta the Court states that “[a] copyright claim . . . arises or ‘accrues’ when an infringing act occurs.” The underlying reasoning of that Petrella v. MGM decision, as well as that dicta, may give lower courts in the nine circuits using the discovery rule reason to re-evaluate its application.
Posted by Jason Sanders Law PLLC