By: James Kachmar
Frequent readers of this column will recall our discussions concerning the defense of laches in copyright infringement actions. Last month, the Ninth Circuit revisited this issue and considered the willful infringement exception to the laches defense in the case, Evergreen Safety Council v. RSA Network, Inc.
Evergreen and RSA are both involved in providing training for pilot escort vehicles (these vehicles that help escort oversized vehicles). Evergreen and RSA publish training manuals in connection with state pilot vehicle training programs.
In 1991, RSA was retained by Utah to develop its certification program. RSA drafted a training manual which was adopted by the Utah state certification program and in 1993 the manual was registered with the U.S. Copyright Office. RSA’s president was retained as a consultant to the State of Washington which had designated Evergreen as the administrator of its pilot escort training program. In late 1998/early 1999, he met with Washington’s committee to discuss the development of their training program. In May 1999, Evergreen sent a draft of its training manual for Washington to RSA’s president and asked that he review it. RSA’s president claimed that the envelope containing the draft manual was never opened and sat in RSA’s offices for 10 years. RSA was paid a small consultation fee by Evergreen. After hearing nothing from RSA, Evergreen published its training manual in December 1999 and in 2003 received a copyright registration for a revision of that manual.
RSA claimed that it became aware in 2009 that several states, including Washington, were infringing on RSA’s copyrights in its training manual. RSA sent a demand letter to Evergreen and the Washington State Department of Transportation advising them of the claimed infringement. After a meeting to resolve their differences was unsuccessful, Evergreen filed a lawsuit against RSA seeking a declaration that its manual did not infringe on RSA’s copyrights. RSA filed a counterclaim for copyright infringement against Evergreen for its manual. Evergreen asserted the defense of laches and the district court granted summary judgment to Evergreen on this basis as to RSA’s copyright infringement claim.
In affirming the lower court’s decision, the Ninth Circuit began by recognizing that laches is an equitable defense that prevents “a plaintiff who `with full knowledge of the facts acquiesces in a transaction and sleeps upon his rights’”. To successfully assert a defense of laches, a defendant must show “both an unreasonable delay by the plaintiff and prejudice to itself.” The Ninth Circuit continued that to determine the first prong of unreasonable delay, the time starts when a plaintiff knows or should know about the infringing activity. Courts typically look at the cause of the delay in determining the issue of reasonableness and are especially cautious when the purpose of the delay “is to capitalize on the value of the alleged infringer’s labor by determining whether the infringing conduct will be profitable.”
The Ninth Circuit concluded that Evergreen demonstrated that there was an unreasonable delay in that RSA received Evergreen’s draft manual in 1999 and at that time knew or should have known of the allegedly infringing content despite the fact that RSA did not open the envelope. RSA then delayed for nearly a decade before filing its claim.
Turning to the issue of prejudice to Evergreen, the Court reiterated that there are two forms of prejudice: evidentiary and expectations based. The Ninth Circuit continued, “evidentiary prejudice includes such things as lost, stale, or degraded evidence, or witnesses whose memories have faded, or who have died …. Expectations-based prejudice occurs when a defendant `took actions or suffered consequences that it would not have had the plaintiff brought suit promptly.’” The Ninth Circuit found that Evergreen proved both types of prejudice.
First, Evergreen’s CEO, who had been involved in the negotiations with RSA, had passed away and other employees had relocated or forgotten about the matter over the intervening years. RSA conceded that its own records had been destroyed in 2004. Thus, evidentiary prejudice existed as a result of this lost evidence. With regards to expectations-based prejudice, the Ninth Circuit found that Evergreen had repeatedly published its manual with the expectation that its conduct was not infringement.
Next, the Ninth Circuit turned to RSA’s claim that Evergreen could not assert the laches defenses because of its alleged willful infringement. The Ninth Circuit recognized that “willfulness occurs where an infringer acts `with knowledge that the defendant’s conduct constitutes copyright infringement.’” The Court noted, however, that willfulness will not be found “where infringing works were produced under color of title, such as under a reasonable belief that the infringer possess a license or implied license.” Even if one continues to engage in an alleged infringement after receiving notice of the allegation of infringement that may not constitute willfulness so long as the one engaged in the continued use of the work “believes reasonably and in good faith that he or she is not infringing.”
The Ninth Circuit found that Evergreen acted in good faith in publishing its manual given that it had sent a draft of that manual to RSA (plus a consultation fee) in 1999 and never heard back from RSA for a decade that its manual was alleged to have infringed on RSA’s manual. Furthermore, the Ninth Circuit concluded that certain diagrams used by Evergreen were not infringement because they constituted “scenes a faire” (i.e., “scenes which must be done”) in that they represented common dangerous driving scenarios). The Court found that Evergreen was in good faith in continuing to use these diagrams even after being advised of the alleged infringement claim by RSA. The Ninth Circuit concluded that RSA’s “conduct caused Evergreen to believe that it was licensed to draw upon RSA’s works, and Evergreen’s continuing good faith after the letters demonstrated a lack of willfulness.”
The Ninth Circuit’s decision in the Evergreen case is a reminder that prospective plaintiffs who believe that they are the victim of copyright infringement should not sit on their rights, but should bring their claims as soon as possible.