The IP Law Blog Focusing on legal trends in data security, cloud computing, data privacy, and anything E

Ninth Circuit: Watch Out for Statute of Limitations for Copyright Infringement

Posted in Copyright Law

 By: Audrey A. Millemann     

 

      In Seven Arts Filmed Entertainment, Ltd. v. Content Media Corp. PLC, 2013 US App. LEXIS 22517 (9th Cir., November 6, 2013), the Ninth Circuit Court of Appeals decided an issue of first impression in this circuit: whether a claim of copyright infringement based on disputed ownership would be time-barred if a free standing ownership claim was also time-barred. The court held that it would. 

            This dispute has a lengthy and complicated procedural history. It was litigated for over ten years in several different cases in two countries. The copyrights in issue are for three films: “Rules of Engagement,” “An American Rhapsody,” and “Who is Cletis Tout?.” The plaintiff is Seven Arts Filmed Entertainment, a British production company, who acquired the rights in the films from its predecessor.

 

         Seven Arts filed its first suit in 2002 against a Canadian company, CanWest Entertainment, in the Central District of California. Seven Arts alleged that it had co-ownership rights in the films pursuant to a written agreement. In 2003, Seven Arts filed suit for the same claim in Canada, because CanWest had asserted a forum selection clause in the written agreement in the California case. In the Canadian case, CanWest contended that the written agreement was not enforceable. In 2005, Seven Arts filed its third lawsuit, in the Central District of California, alleging claims against CanWest for copyright infringement, declaratory relief of ownership, and an accounting. In the 2005 case, Seven Arts claimed for the first time that it was the sole owner of the copyrights, based on its contention that it had rescinded the written agreement. The 2005 case was ultimately dismissed. The 2003 case in Canada was resolved on summary judgment in favor of Seven Arts, with the court holding that Seven Arts owned the copyrights, that Seven Arts had not granted any rights to the defendants, and that the defendants had infringed Seven Arts’ rights.

 

            In 2011, Seven Arts filed its fourth lawsuit, in the Central District of California, against CanWest’s successor and, for the first time, Paramount Pictures. Seven Arts sued for copyright infringement, a declaration of ownership, and an accounting. Seven Arts alleged that Paramount Pictures was a licensee and owed past royalties to Seven Arts. Paramount Pictures responded by admitting that it had infringed the copyrights, but disputed Seven Arts’ ownership of the copyrights. Paramount Pictures moved to dismiss the case on the grounds that the three-year statute of limitations for copyright infringement, provided for in 17 U.S.C. §507(b), barred Seven Arts’ claims. The district court granted the motion and entered judgment in favor of Paramount Pictures. Seven Arts appealed. 

 

            On appeal, the Ninth Circuit affirmed the district court’s decision. The court held that a claim for copyright infringement based on an ownership dispute is barred by the three-year statute of limitations if a freestanding ownership claim would be time-barred. The court explained that under existing law, with a typical copyright infringement claim, each new act of infringement triggers the accrual of a new claim; the three-year statute of limitations starts over with each new violation, and the plaintiff can sue for all acts of infringement occurring within the past three years. This is in contrast to claims of co-ownership, which accrue only once, when “plain and express repudiation of co-ownership is communicated to the claimant.” Id. at *8, quoting Zuill v. Shanahan, 80 F.3d 1366, 1369 (9th Cir. 1996). 

 

In deciding this case, as a matter of first impression in this circuit, the court held that the accrual rule that applies to claims of ownership also applies to claims of copyright infringement based on ownership. Thus, a claim for copyright infringement based on disputed ownership accrues when the other party first clearly repudiates the claimant’s ownerships rights, and is barred after three years.

 

            The court looked to other circuit Courts of Appeal and noted that both the Second and Sixth Circuit had adopted the same rule, that if an ownership claim is time-barred, an infringement claim based on disputed ownership is also time-barred. Although Seven Arts asked the court to split the circuits by ruling contrary to the Second and Sixth Circuits, the court declined.  The court emphasized that a split in the circuits would be a problem as copyright law is a matter of federal law and is intended to be applied uniformly throughout the United States. Id. at *14. 

The Court explained that the rule it adopted was sensible one, at *11-12:   

“Our sister circuits’ approach makes good sense – allowing infringement claims to establish ownership where a freestanding ownership claim would be time-barred would permit plaintiffs to skirt the statute of limitations for ownership claims and lead to results that are ‘potentially bizarre,’ [citing to Nimmer on Copyright]. An alternative approach would allow plaintiffs who claim to be owners but who are time-barred from pursuing their ownership claims forth rightly, simply to restyle their claims as ‘infringement’ and proceed without restriction. Such would negate our reasoning in Zuill.” 

 

            The court dismissed Seven Arts’ argument that the new rule should not apply here because Seven Arts and Paramount Pictures were not co-authors or in a close relationship, as Paramount Pictures was a downstream licensee. The court found that Seven Arts and Paramount Pictures were in a sufficiently close relationship based on the relationship of their predecessors, and that Seven Arts could not argue that it had been unaware of Paramount Pictures’ distribution of the films and its claimed rights in the films. 

 

            In applying the new rule, the court found that Paramount Pictures had “plainly and expressly repudiated Seven Arts’ copyright ownership more than three years before Seven Arts brought this suit.” Id. at *17. Seven Arts had sent several demand letters to Paramount Pictures in 2005 requiring Paramount Pictures to pay royalties to Seven Arts instead of to CanWest. Paramount Pictures had refused to pay royalties to Seven Arts, thereby repudiating Seven Arts’ ownership of the copyrights. Because this occurred in 2005 and Seven Arts filed its suit against Paramount Pictures in 2011, Seven Arts’ claim was barred by the three-year statute of limitations. In conclusion, the Court stated, at *20, that:

“We join our sister circuits in holding that an untimely ownership claim will bar a claim for copyright infringement where the gravamen of the dispute is ownership, at least where, as here, the parties are in a close relationship.”

 

            The court noted, however, that it did not need to decide whether the same rule would apply to copyright infringement suits against an unknown third party, leaving that issue for another case.

 

This case stands as a warning. Copyright owners must now make sure that they promptly bring any claim for copyright infringement against a party who has disputed ownership.