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Supreme Court Allows Copyright Claim to Proceed Despite Delay

by  Mary Rasenberger and Danielle Efros (Cowan, DeBaets, Abrahams & Sheppard LLP)

On May 19th, the Supreme Court issued its decision in Petrella v. Metro-Goldwyn-Mayer, Inc. et al., 2014 WL 2011574 (U.S. May 19, 2014), ruling that laches, an equitable doctrine barring suits after unreasonable delay, cannot be used to preclude copyright infringement claims brought within the Copyright Act’s three year statute of limitations.

 Background

The motion picture, Raging Bull, is based on the life of boxing champion Jake LaMotta, portraying the story of LaMotta’s boxing career.  The bases of this movie was derived from a screenplay written by LaMotta and long time friend Frank Petrella, registered with the U.S. Copyright Office in 1963.  LaMotta and Petrella also later registered a book and an additional screenplay, ultimately assigning the rights to all three works to Metro-Goldwyn-Mayer, Inc. (“MGM”).  Shortly thereafter MGM released the movie Raging Bull in 1980, and registered a copyright in the film.

The tension arose when Petrella’s daughter, Paula Petrella, learned about her ability under the 1909 Copyright Act to renew the screenplay’s copyright after her father’s death.  Paula Petrella successfully renewed the screenplay’s rights in her own name and began to contact MGM regarding MGM’s potential copyright infringement.

It wasn’t until nine years after her renewal, on January 6, 2009, that Paula Petrella filed a copyright infringement suit in the Central District of California, accusing MGM of violating and continuing to violate her copyright in the 1963 screenplay by using, producing and distributing Raging Bull, identifying the film as a derivative work of the 1963 screenplay.  Because the Copyright Act has a three year statute of limitations, Petrella could seek relief only for acts of infringement occurring on or after January 6, 2006.  Under the Copyright Act, each new violation is deemed to constitute a “new wrong,” which triggers a new limitations period.  MGM believed that Paula Petrella’s delay in suing for so many years was unreasonable, however, and sought to have the case completely dismissed on grounds of laches.

The district court granted MGM’s motion for summary judgment, holding that all of Paula Petrella’s claims should be barred under the equitable doctrine of laches, in favor of MGM’s argument claiming Petrella’s 18-year delay in commencing suit to be unreasonable and prejudicial.  On appeal, the Ninth Circuit affirmed the laches-based dismissal, emphasizing that Paula Petrella was aware of her potential claims earlier and wrongly deferred suit until the film made money.

 Supreme Court’s Opinion

The Supreme Court, in an opinion written by Justice Ginsburg, overturned the Ninth Circuit, holding that laches cannot be invoked as a complete bar to Paula Petrella’s claim for damages brought within the applicable three year statute of limitations window.

At the outset, the Court held that the limitations period can be properly utilized as a period for copyright owners to defer suit until they can make a proper estimation regarding whether their claims are worth litigating.  The Court emphasized that an incumbent copyright owner should not be expected to challenge each and every actionable infringement.

MGM argued that one important application of laches, applicable to this case, is to prevent the loss of useful evidence, which would be implicated by the prolonged lapse in time.  Unconvinced by MGM’s argument, the Court held that such evidence should instead be taken into account during the copyright infringement analysis, whereby a copyright plaintiff bears the burden of proving infringement.  Moreover, there is a reduced need for extrinsic evidence because the Copyright Office’s registration mechanism makes both the certificate and original work available.  The Court found further support from Congress’ decision not to employ additional time limitations despite Congress’ awareness of potential evidentiary issues when implementing reversionary rights for author’s heirs.

Never having applied laches as a complete bar to an entire claim, the Court weighed the ramifications of permitting such a claim, and held that it would impermissibly invite courts to set time limits other than those Congress prescribed.

An alternative protection for defendants to explore in this situation, as suggested by the Court, is the doctrine of estoppel.  Estoppel may serve as a protection against copyright owners who engage in intentionally misleading representations regarding their delay in suit whereby the alleged infringer detrimentally relies on the copyright owner’s deception.  While estoppel does not undermine laches, if properly invoked, it may bar the copyright owner’s claims completely, eliminating all potential remedies.

Not completely ridding the application of laches as applied here, the Court ruled that when there are “extraordinary circumstances,” laches may, at the very beginning of litigation, curtail the relief equitably awarded.  An example cited was Chirco v. Crosswinds Communities, Inc., a case where an allegedly infringing housing project delayed suit until the project was substantially constructed and partially occupied.

The dissent, disagreeing with the majority, argued that the majority unfairly “erases the doctrine from copyright’s lexicon,” ultimately disabling a court from apply laches in copyright infringement cases, “irrespective of the length of the plaintiff’s delay, the amount of harm that it caused, or the inequity of permitting the action to go forward.”

Takeaway

The holding of Petrella v. Metro-Goldwyn-Mayer, Inc., et al., resolves a circuit split and makes clear that laches is prohibited as an applicable defense to completely bar claims for infringement that occurred within the three year statute of limitations and that litigants may wait to determine whether the recoverable damages support the cost of a lawsuit.  The Court’s analysis detailed both the ramifications of implementing the defense as a complete bar to future cases, as well as the implications of disallowing MGM to utilize the defense in this particular situation, which in the Court’s opinion, was not exceptionally damaging and would not result in “total destruction” of the film and only affecting a “fraction” of MGM’s income.