The times they are “a-changin.” This primer discusses the copyright statute of limitations after the Supreme Court’s decision in Petrella and the Circuit Court opinions in Sohm and Starz.
Let’s begin with 17 U.S.C. § 507(b). It sets forth the statute of limitations for copyright infringement claims, providing “[n]o civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.”
1. The Copyright Statute of limitations For Infringement Claims
This statute is deceptively simple. It refers to two dates, the date when a claim “accrued” and the date when the action “commenced.” If the duration between accrual and commencement is less than three years, the action is timely.
A. When Does A Claim Accrue: the Injury v. Discovery Rule??
But when does a claim accrue? The courts are divided.
In one camp are those jurisdictions that follow the injury rule. There, a claim “‘accrues’ when an infringing act occurs” that violates a copyright holder’s exclusive rights, even though the copyright owner is unaware of the violation. In other words, in those jurisdictions, infringement and accrual occur simultaneously.
Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014), articulated this injury rule, referring to it as “the separate accrual rule.” The Court stated, “[i]t is widely recognized that the separate-accrual rule attends the copyright statute of limitations. Under that rule, when a defendant commits successive violations, the statute of limitations runs separately from each violation.” Id. at 671. The Court continued, “[e]ach wrong gives rise to a discrete ‘claim’ that ‘accrue[s]’ at the time the wrong occurs.” Id.
But as Petrella acknowledged, “‘[t]he overwhelming majority of courts use discovery accrual in copyright cases.’” Id. at 670 n. 4.The discovery rule provides a claim accrues when a plaintiff discovered or should have reasonably discovered the infringement. See William A. Graham Co. v. Haughey, 568 F.3d 425, 437 (3d Cir. 2009) (“[W]e hold that the federal discovery rule governs the accrual of civil claims brought under the Copyright Act.”).
The discovery rule rests on fairness. Polar Bear Products v. Timex Corp., 384 F.3d 700 (9th Cir. 2004), explained, “[i]t makes little sense . . . to bar damages recovery by copyright holders who have no knowledge of the infringement, particularly in a case in which much of the infringing material is in the control of the defendant.” Id. at 706-07. In other words, the discovery rule excuses a plaintiff’s “justified ignorance.” 3 Nimmer on Copyright § 12.05 (2022).
Thus, in a discovery rule case, accrual happens after the infringing act when plaintiff discovers the infringing conduct or is charged with constructive knowledge of the infringement. In such a case, until the claim accrues, the statute of limitations is tolled. See Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994) (“The statute of limitations begins to run ‘when one has knowledge of a violation or is chargeable with such knowledge.’”).
Further, in a discovery jurisdiction, a court looks back twice from the date the action is filed. First a court determines when the claims accrued (on actual or constructive discovery). Then assuming the action was filed within three years of accrual, the court looks back further to determine when the previously undiscovered infringements occurred and what damages they caused.
B. Impact of Petrella on Discovery Rule
Petrella deepened the division between courts that follow the injury and those that adhere to the discovery rule. The primer explains why.
Petrella dealt with the interplay between laches and section 507(b) of the Copyright Act. In that case, the issue was whether the doctrine of laches barred claims of infringement that accrued within the three-year window of § 507(b). The accused work was MGM’s 1980 film Raging Bull. 572 U.S. at 674. Plaintiff Petrella contended that Raging Bull was an infringing derivative of a 1963 screenplay written by her father. Id. Petrella had acquired the rights to the screenplay in 1991. Id. She became aware she had a copyright infringement claim against MGM for its continued exploitation of Raging Bull at least as early as 1998, but waited to commence the action until January 6, 2009, when the movie began to show profits. Id. at 674-75.
Petrella understood her claims arising from infringements committed more than three years before suit were time barred, She therefore sought damages only for infringements that occurred on or after January 6, 2006 on the grounds that each act of infringement gave rise to an entirely new claim. Id. In response, MGM argued that because Petrella was aware of the earlier acts of infringement but failed to sue with respect to them, laches barred all her claims. Id. at 675.
The Supreme Court rejected MGM’s argument. The Court held that laches cannot eliminate the three year statutorily prescribed period for copyright claims and that therefore, under the separate accrual rule, a copyright holder has three years from the accrual of each claim to sue on it. Id. at 667. In other words, as Petrella explained, laches was unnecessary to the result because “the copyright statute of limitations … itself takes account of delay.” Id. at 677.
In examining how courts apply the statute of limitations, Petrella seemingly endorsed the injury rule. The Court explained, “an infringement is actionable within three years, and only three years, of its occurrence.” And “the infringer is insulated from liability for earlier infringements of the same work.” 572 U.S. at 671. The Court further observed that the Copyright Act’s three-year limitations provision “allows plaintiffs . . . to gain retrospective relief running only three years back from the date the complaint was filed.” Id. at 672. The Court added, “[n]o recovery may be had for infringement in earlier years [more than three years before time of suit]. Profits made in those years remain the defendant’s to keep.” Id. at 677.
This language would appear to bar recovery of damages occurring more than three years prior to a timely suit. were it not for footnote 4 in Petrella. That footnote has caused endless controversy and bred much litigation. There the Court, after noting the universal acceptance of the “discovery rule” in the circuit courts, announced it declined to “pass[] on the question” of that rule’s continuing applicability in copyright litigation. 572 U.S. at 670 n. 4.
C. The District Courts Are Split re Petrella’s Impact
Post-Petrella, district courts have divided whether the Court’s statement allowing “retrospective relief [in copyright cases] running only three years” from date of suit was binding precedent or dicta.
Navarro v. Procter & Gamble Co., 515 F.Supp.3d 718 (S.D. Ohio 2021), is representative of district court cases finding this statement binding. Navarro stated that the existence of the three-year look-back damage limitation “was integral to Petrella‘s broader holding about laches.” Navarro explained that Petrella found no need to incorporate laches as an incentive for plaintiff to sue promptly because the Copyright Act’s statute of limitations already takes account of delay by limiting damages to the three years before suit is filed. Id. at 760. As a result, Navarro concluded that Petrella’s three-year limitation on damages “cannot be dismissed as dicta.” Id. See also Papazian v. Sony Music Entm’t, 2017 U.S. Dist. LEXIS 164217, *13 (S.D.N.Y. Sept. 28, 2017). (Petrella’s three-year limitation on damages was “necessary to the result” in that case and was therefore binding.)
Other district courts disagree. See, e.g., Grant Heilman Photography, Inc. v. McGraw-Hill Cos., Inc., 28 F. Supp. 3d 399, 411 (E.D. Pa. 2014) (“The Court applied the incident of injury rule to determine the date of accrual in addressing the laches question. . . . Petrella was a case about laches, and the holding is limited to that issue.”). See also D’Pergo Custom Guitars, Inc. v. Sweetwater Sound, Inc., 516 F. Supp. 3d 121, 135 (D.N.H. 2021) (“[W]hen viewed in context, this court does not agree that Petrella is best understood as ‘limiting damages to the three years prior to when the suit is filed’ regardless of whether the suit is timely.”); Starz Entertainment, LLC v. MGM Domestic Television Distribution, LLC, 510 F. Supp. 3d 878, 884 (C.D. Cal. 2021) (Because Petrella “expressly declined to pass on the question of the discovery rule, any statement regarding the availability of damages outside the window was either dicta or otherwise had no effect on the discovery rule.”).
D. The Split Between the Second and Ninth Circuits
The division in the district courts between injury and discovery adherents has now percolated up the hierarchy to the circuit courts. Petrella’s discussion of the statute of limitations has created a circuit split regarding the impact of the discovery rule on damages. The Second Circuit in Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020), holds that Petrella construed the statute of limitations to limit damages to those incurred within three years before the action was commenced. Id. at 49-52. In contrast, the Ninth Circuits Starz Ent., LLC v. MGM Domestic Television Distrib., LLC, 39 F.4th 1236 (9th Cir. 2022) (“Starz”), rejected that three-year limitation because it “would eviscerate the discovery rule.” Id. at 1244.
1. The Second Circuit Adopts the Three-Year Lookback Damage Limitation
Although Sohm applied the discovery rule to determine when the copyright claims accrued, Sohm found that Petrella “explicitly delimited damages to the three years prior to the commencement of a copyright infringement action.” Id. at 51. Sohm added that “Petrella ‘s plain language explicitly dissociated the Copyright Act’s statute of limitations from its time limit on damages.” Id. at 52.
a. Impact of Sohm
As a result, those courts following Sohm in the Second Circuit and elsewhere must first fix when plaintiff discovered or should have discovered the infringement. That’s the accrual date which triggers the running of the statute of limitations. Then, if the court finds the action was timely commenced (within three years of when plaintiff discovers, or with due diligence should have discovered the infringement), the court must limit damages to those infringements that occurred within the three-year lookback period measured by when the complaint was filed. Thus, it is possible that timely actions brought within three years of discovery of the infringement would result in no monetary recovery if the infringement ended more than three years from filing.
Papazian v. Sony decided in the Southern District of New York is an example. There plaintiff filed suit on October 10, 2016, seeking damages for infringing conduct that ended in 2005. The court, applying the discovery rule, found the action timely because plaintiff had only discovered the infringement within three years of suit. But, although “the discovery rule ‘saved’ the claims [in Papazian], it was a pyrrhic victory.” Starz Entertainment, 510 F. Supp. 3d at 887. That was because Papazian dismissed the action finding no infringing conduct during the three-year lookback period. Papazian, 2017 WL 4339662, at *4-6.
b. Criticism of Sohm
Commentators have found Sohm “inherently self-contradictory” and have extensively criticized it. Nimmer stated, “[i]n sum, the practical import of this case is to adopt the injury rule and reject the discovery rule that it had previously upheld.” Nimmer on Copyright § 12.05 (2022). Prof. Tyler Ochoa in his amicus brief in the Ninth Circuit in Starz similarly argued, “[b]y limiting damages to three years before the date the suit was filed, [Sohm] in effect was adopting an injury rule of accrual, even though it claimed that it was using the discovery rule of accrual. Sohm effectively eliminates the discovery rule while purporting to preserve it.”
2. The Ninth Circuit Rejects the Three-Year Damage Limitation
Starz agreed with these commentators holding that the “Supreme Court did not create a damages bar separate from the statute of limitations in Petrella. 2022 U.S. App. LEXIS 194226, *20-1. Starz reasoned, “[a]pplying a separate damages bar based on a three-year ‘lookback period’ that is ‘explicitly dissociated’ from the Copyright Act’s statute of limitations in § 507(b) would eviscerate the discovery rule. There is no reason for a discovery rule if damages for infringing acts of which the copyright owner reasonably becomes aware years later are unavailable.” Id. at 19.
Starz added, “[n]owhere in § 507(b), or anywhere else in the Copyright Act, is there any reference to a separate three-year damages bar based on the complaint’s filing date. Id. at 22. The Ninth Circuit further stated that “[a]dopting a damages bar would mean that ‘a copyright plaintiff who, through no fault of its own, discovers an act of infringement more than three years after the infringement occurred would be out of luck.’” Id. at 23. Focusing on fairness to the copyright holder, Starz observed a damage bar “makes little sense” “where the alleged infringer knows of and controls the infringing acts and the copyright holder has little means of discovering those acts. This would incentivize violation of the copyright holder’s exclusive rights, not protect those rights, which is the purpose of the Copyright Act.” Id. at 23-4. Recognizing the impact of technology, the court added, “copyright infringement is now “easier to commit, harder to detect, and tougher to litigate.” Id. at 24.
Starz got it right. There is no reason to reward infringers who conceal their inequitable conduct for the three-year period before suit is filed. A successful coverup means plaintiff may only be limited to injunctive relief.
E. Application of the Discovery Rule
The primer now turns to the application of the discovery rule in those jurisdictions that apply it. That rule creates a “disjunctive two-prong test of actual or constructive notice, under which the statute begins running under either prong.” Pincay v. Andrews, 238 F.3d 1106, 1109 (9th Cir. 2001).
1. Shifting Burdens
In determining whether to impose constructive notice triggering the running of the limitations period, a court first determines when the infringing act causing injury occurred. Then, defendant has the burden of identifying “facts or circumstances [sometimes referred to as storm warnings] that would have prompted” plaintiff to inquire about possible wrongdoing. Sohm, 959 F.3d at 51. If defendant satisfies this burden, plaintiff must then show it “exercised reasonable due diligence” and yet was unable to discover the infringement before it did. Graham, 568 F.3d at 438.
In evaluating the parties’ conduct, courts apply an objective test. PK Music Performance, Inc. v. Timberlake, 2018 WL 4759737, at *7 (S.D.N.Y. Sept. 30, 2018).
2. When the Duty to Investigate Is Triggered
I offer no exhaustive list of what constitutes a storm warning triggering the duty to investigate because these cases are so fact dependent. Although a copyright holder has a “duty of diligence” to investigate potential infringements, “inquiry notice must be triggered by some event or series of events that comes to the attention of the aggrieved party.” Warren Freedenfeld Assocs., Inc. v. McTigue, 531 F.3d 38, 45 (1st Cir. 2008) (“The familiar aphorism teaches that where there is smoke there is fire; but smoke, or something tantamount to it, is necessary to put a person on inquiry notice that a fire has started.”).
But “if the infringement is open and notorious,” a court will likely expect plaintiff to have discovered it within a three-year period. Design Basics, LLC v. Roersma & Wurn Builders, Inc., 10-civ-696, 2012 WL 1830129, at *2 (W.D. Mich. Apr. 23, 2012). Further, a plaintiff need not have “absolute certainty” about an infringement before the discovery rule starts the running of the limitations period. Wolf v. Travolta, 167 F. Supp. 3d 1077, 1102 (C.D. Cal. 2016). Instead, courts will likely find the infringement was discoverable if plaintiff “had enough information to warrant an investigation which, if reasonably diligent, would have led to discovery of the claim.” Oracle Am., Inc. v. Hewlett Packard Enter. Co., 971 F.3d 1042, 1047 (9th Cir. 2020).
Mere suspicion of wrongdoing may be enough to trigger an investigation if the plaintiff is a sophisticated litigant. See, e.g., Minden Pictures, Inc. v. Buzzfeed, Inc., 390 F. Supp. 3d 461, 467 (S.D.N.Y. 2019) (“A plaintiff need not know every permutation of their injury…. The test is not whether a plaintiff could have learned of their injury; rather, it is whether, with the application of reasonable diligence, they should have known of their injury.”).[1]
3. No Obligation to Police Your Copyrights
However, copyright holders do not have “to troll for infringements.” Beasley v. John Wiley & Sons, Inc., 56 F. Supp. 3d 937, 946 (N.D. Ill. 2014). Nor do copyright holders “have a general duty to police their copyrights” to discover potential infringements. PK Music, supra, 2018 WL 4759737, at *7. Copyright owners also do not have to “ferret out potential acts of infringements before they occur.” Graham, 568 F.3d at 438-39. In addition, knowledge about infringement generally in an industry does not trigger a duty to investigate. If there were such a duty, “photographers likely would spend more money monitoring their licenses than they receive from issuing licenses.” Frerck v. John Wiley & Sons, Inc., 2014 WL 3512991, *6 (N.D. Ill. July 14, 2014). In other words, “it would be unreasonably burdensome to impose on a copyright owner a ‘never ending obligation to discover whether anyone to whom he ever supplied his [copyrighted material] would copy it.’” Design Basics, LLC v. Chelsea Lumber Co., 977 F. Supp. 2d 714, 725 (E.D. Mich. 2013).
Underlying these shifting burdens is that the statute of limitations is an affirmative defense for which defendant bears the burden of proof. See, e.g., Hirsch v. Rehs Galleries, Inc., 2020 U.S. Dist. LEXIS 32926, *6 (S.D.N.Y. Feb. 26, 2020).
II. The Statute of Limitations for Ownership/Authorship Issues Continues to Be Three Years From Repudiation
Although Petrella’s separate accrual rule applies to infringement claims, courts surprisingly has never adopted that rule in disputes about copyright ownership or authorship. Instead, post-Petrella, courts continue to apply the “express repudiation rule” when co-ownership of a copyrighted work is challenged. That rule provides that the three-year limitations period accrues “only once, ‘when plain and express repudiation of co-ownership is communicated to the claimant, and [suits] are barred three years from the time of repudiation.’” Seven Arts Filmed Entm’t Ltd. v. Content Media Corp., 733 F.3d 1251, 1254 (9th Cir. 2013).
Consumer Health Info. Corp. v. Amylin Pharms., Inc., 819 F.3d 992 (7th Cir. 2016), is the only circuit court to consider the “express repudiation rule” post-Petrella. Consumer Health reasoned that plaintiff could not benefit from the separate-accrual rule because Petrella “had no reason to—and did not—address” whether that rule “applies to disputes about copyright ownership.” Id. at 996. Thus, although Petrella expressly provides that each new infringement accrues or triggers a new claim that will be timely if asserted within three years, courts continue to treat a claim arising from a repudiation of co-ownership differently for statute of limitations purposes. Even a repudiation within the three-year window will not trigger a timely ownership claim if there was also an earlier repudiation outside that window.
III. Conclusion
Supreme Court clarification is needed. While seemingly limiting damages to three years from commencement of suit while simultaneously preserving the discovery rule, Petrella’s fence straddling will continue to prompt confusion and breed motion practice. The injury rule Petrella seemingly endorsed furthers damage certainty. But the discovery rule the Court never passed on is the better alternative because it does not reward defendant’s successful concealment of infringement. At present, plaintiffs seeking damages arising from continuing infringements begun years before accrual may wish to avoid the Second Circuit and the other jurisdictions that follow Sohm.
Footnotes
[1] © 2021-2022 Andrew Berger
[1] Plaintiff invoking the discovery rule may anticipate a statute of limitations defense by alleging in its complaint the difficulty of detecting online infringements, even after using various detection software and search strategies. In Michael Grecco Prods., Inc. V. Bdg. Media, Inc., 834 Fed. Appx. 353, 354 (9th Cir. 2021), those allegations promoted the circuit court to reverse an action dismissed by the district court on statute of limitations grounds.