Supreme Court Rules Laches No Bar to Monetary Damages for Copyright Infringement Claim

June 20, 2014
Legal Update

On May 19 in Petrella v. Metro-Goldwyn-Mayer, Inc., the U.S. Supreme Court held that the doctrine of laches cannot be used to bar monetary damages for copyright infringement when the claim is brought within the Copyright Act’s three year statute of limitations. (No. 12-1315, 2014 WL 2011574 (S.Ct. May 19, 2014)).  Although laches is no longer viable within the statute of limitations period as a complete bar to damages, delay in bringing suit may be taken into account when determining the amount of damages.  In addition, estoppel may still be available to completely bar relief.  However, estoppel does not typically involve delay in bringing suit, but instead involves a misrepresentation and loss arising from that misrepresentation.

The Court had granted certiorari to resolve a split among the Circuits as to whether the equitable defense of laches could be applied to bar monetary damages for copyright infringement claims brought within the three-year statute of limitations within the Copyright Act.  The case before the Court involved the film Raging Bull, based on the life of boxing champion Ray LaMotta.  The screenplay for the film was written by the plaintiff’s father, Frank Petrella.  Mr. Petrella assigned his rights in the screenplay to MGM. The resulting critically-acclaimed 1980 film, a derivative work of the screenplay, was directed by Martin Scorsese and starred Robert DeNiro, who won a Best Actor Academy Award for his portrayal of LaMotta.

When Mr. Petrella died in 1981 during the first term of copyright, the renewal rights in the screenplay reverted Mr. Petrella’s daughter, Paula Petrella (Petrella), who timely renewed the work.  Under the Copyright Act, Petrella’s renewal was unburdened by any assignment to MGM previously made by her father.  In 1998, seven years after renewing the copyright, Petrella’s attorney informed MGM that exploitation of any derivative work, including Raging Bull, infringed Petrella’s copyright.  Nine years later, on January 6, 2009, Petrella filed a copyright infringement lawsuit in the United States District Court in the Central District of California, alleging that MGM violated and continued to violate her copyright in the screenplay by reproducing and distributing Raging Bull. 

Because the statute of limitations within the Copyright Act requires that a suit be commenced within three years after accrual of a claim, Petrella sought relief only for acts of infringement occurring within the three-year period immediately preceding her lawsuit: damages accruing on or after January 6, 2006.  MGM moved for summary judgment on several grounds including the equitable doctrine of laches. In essence, MGM claimed that Petrella lost her right to bring suit because she waited 28 years after the copyright in the screenplay vested solely in her and 11 years after her attorney first demanded that MGM cease infringing her copyright in the screenplay.

The lower court dismissed Petrella’s case based upon MGM’s laches defense, and the Ninth Circuit had affirmed, observing “[i]f any part of the alleged wrongful conduct occurred outside of the limitations period, courts presume that the plaintiff’s claims are barred by laches.”  The Ninth Circuit was concerned that without laches, plaintiffs could “game the system” by deferring suits until the work at issue was profitable.  The Supreme Court reversed.

In reversing, the Supreme Court held that the Ninth Circuit erred in failing to recognize that the three-year statute of limitations within the Copyright Act already takes into account delays in bringing suit—by limiting damages to three-years prior to the date the suit was brought. In this case, defendant MGM was entitled to keep all profits it made by exploiting Raging Bull more before January 6, 2006. 

MGM had argued that the defense of laches should be available to prevent a copyright holder from “sitting still, doing nothing, waiting to see what the outcome of an alleged infringer’s investment will be.”  The plaintiff had admitted that she had waited to file suit when she believed the film to be “deeply in debt and in the red.” However, the Court rejected MGM’s arguments pointing out that it was:

hardly incumbent on copyright owners…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, had no effect on the original work, or even complements it.  Fan sights prompted by a book or a film, for example, may even benefit the copyright owner.

The Court was troubled by a rule that would require a copyright owner to sue or “forever hold your peace.” According to the Court majority, the three year limitation period, coupled with the separate accrual rule, would adequately avoid a profusion of litigation that would result if a copyright owner had to upon discovering infringement or lose the right to sue later.   

The Court rejected MGM’s arguments that key evidence would be lost because of a copyright owner’s delay in bringing suit.  Since the copyright plaintiff bears the burden of proving infringement, any problem caused by unavailability of evidence will similarly affect the parties equally.  Key evidence in any litigation would be the registration certificate (which would be on file at the Copyright Office if the work was registered), the original work, as well as the allegedly infringing work.  Further, a determination of copyright infringement will turn on a direct comparison of the two works based upon the fact finders’ “good eyes and common sense” as well as the two works’ “total concept and overall feel.”  

Plaintiff’s delay in commencing suit could be considered in determining the appropriate injunctive relief.  The delay may also be taken into account in assessing profits awarded to a prevailing plaintiff, the delay may be taken into account by the court.  In addition, estoppel may be available in extraordinary cases where a copyright owner engages in intentionally misleading representations concerning his abstention from suit, and the alleged infringer detrimentally relies on the copyright owner’s deception.  In such cases, the doctrine of estoppel may bar the copyright owner’s claim completely, eliminating all potential remedies.  The gravamen of an estoppel claim, however, is misleading and consequent loss; delay is not involved in such a claim.   

Summary and Implications

In summary, laches can no longer be asserted to completely bar monetary damages in a copyright infringement lawsuit when the claim is brought within the statutory limitations period.   However, a delay in bringing suit may still be taken into account in a damages determination.  Moreover, estoppel may still be asserted to bar certain equitable relief in cases where the defendant has detrimentally relied on a misrepresentation made by a plaintiff.

Although Petrella was decided in the context of a copyright infringement claim, there is no reason that the Court’s ruling would not be applicable to other types of claims that are subject to express statutory limitations. Therefore, litigants should be wary of asserting such a defense in patent infringement lawsuits as well.  

For more information, please contact Melissa Kern or any other attorney in Frost Brown Todd’s Intellectual Property Law and Litigation Practice Group.

 

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