In a ruling that could potentially increase the number of copyright infringement actions, the Supreme Court of the United States has resolved a conflict among the circuits, holding that the equitable defense of laches cannot be invoked to preclude a claim for damages that is brought within the Copyright Act’s three-year statute of limitation window.
On May 19, 2014, in a 6-3 ruling, the Supreme Court of the United States in Petrella v. Metro-Goldwyn-Mayer, Inc. et. al., resolved a conflict among the circuits courts holding that the equitable defense of laches cannot be invoked to preclude a claim for damages that is brought within the Copyright Act’s three-year statute of limitation window under § 507(b). Justice Ginsburg’s majority opinion was joined by Justices Thomas, Alito, Sotomayor and Kagan. The Supreme Court’s analysis focused on the “gap-filling, not legislation-overriding” purpose of laches, and addressed the U.S. Court of Appeals for the Ninth Circuit’s failure to recognize that the copyright statute of limitations “itself takes account of delay” because a successful plaintiff can obtain retrospective relief only three years back from the time of suit for each new instance of infringement. Justice Breyer wrote a dissent joined by Chief Justice Roberts and Justice Kennedy.
Background of the Case
The alleged infringing work at issue is the 1963 copyrighted screenplay for the film Raging Bull. Although Frank Petrella wrote the screenplay (as well as a book and a second screenplay) in cooperation with his longtime friend and the film’s subject, boxer Jake LaMotta, the U.S. copyright registration for the 1963 screenplay listed Frank Petrella as the sole author of the work. In 1976, Frank Petrella assigned his rights (including renewal rights) in the 1963 work to a production company, and subsequently, United Artists Corporation, a subsidiary of defendant Metro-Goldwyn-Mayer Inc. (collectively, MGM), acquired the motion picture rights to Frank Petrella’s book and screenplays.
Under the Copyright Act, works published before 1978 are granted protection for an initial period of 28 years, renewable for a period of up to 67 years. Congress provided that the author’s heirs inherit the renewal rights in a work, and in Stewart v. Abend (1990) the Supreme Court held that if an author who has assigned his rights away “dies before the renewal period, then the assignee may continue to use the original work [to produce a derivate work] only if the author’s successor transfers the renewal rights to the assignee.”
Because Frank Petrella died in 1981, i.e., during the initial term of the copyright in the screenplay, the renewal rights in the work reverted to his heirs. Accordingly, in 1991, Frank Petrella’s daughter, Paula Petrella (Petrella), timely renewed the copyright in the 1963 screenplay, and became the sole owner of the copyright in the work. In 1998, Petrella informed MGM of her ownership of the copyright and for nearly two years, Petrella threatened to take legal action against MGM for any further exploitation of the Raging Bull motion picture, a derivative work of the 1963 screenplay. Despite Petrella’s notice, however, MGM released a new edition of Raging Bull on DVD and Blu-ray formats.
In January 2009, Petrella filed suit for copyright infringement. Because § 507(b) of the Copyright Act provides that “[n]o civil action shall be maintained under the [Act] unless it is commenced within three years after the claim accrued,” Petrella only sought relief for MGM’s infringement of Raging Bull that occurred on or after January 6, 2006.
Citing the 18-year delay between the 1991 renewal of the copyright and Petrella’s commencement of the suit in 2009, MGM moved for summary judgment based on the equitable doctrine of laches. The district court granted MGM’s motion, and the Ninth Circuit affirmed the laches-based dismissal, finding that MGM was prejudiced by the delay and noting that Petrella had delayed her claims because the film hadn’t made money in the years prior to the suit.
The Supreme Court Decision
The Supreme Court granted certiorari to resolve a conflict among the circuits on the application of the equitable defense of laches in copyright infringement suits brought within the three-year look-back period prescribed in the Copyright Act.
MGM insisted that the defense of laches must be available to prevent a copyright owner from “sitting still, doing nothing” and waiting to see how an infringer may profit from an investment in a copyright. The Supreme Court, however, stated that it is not problematic for a copyright owner to wait and see whether an infringer’s exploitation of a work undercuts the value of that work so as to determine if the cost of litigation is justified. Thus, the court found that § 507(b)’s “three-year limitation period … allows a copyright owner to defer suit until she can estimate whether litigation is worth the candle.”
As Justice Ginsberg observed, § 507(b)’s three-year limitation period “coupled to the separate accrual rule” means that a copyright owner might miss out on damages prior to the three-year look-back period, “but her right to prospective injunctive relief should … remain unaltered.”
MGM also argued that a copyright owner’s delay in bringing suit will result in the loss of necessary or useful evidence. Rejecting the argument, the Supreme Court found that Congress must have been aware of that issue when it granted reversionary renewal rights to an author’s heirs to be exercised at a later date. Furthermore, the court found that plaintiffs are equally affected by the potential loss of evidence, as the burden of proving infringement falls on the plaintiff. Finally, the court explained that the doctrine of equitable estoppel remains available to protect the alleged infringer if the infringer is harmed by a copyright owner’s intentionally misleading representations in delaying suit.
In the end, the Supreme Court held that the lower courts erred in treating laches as a complete bar to Petrella’s copyright infringement suit. Finding that Petrella’s suit was commenced within the bounds of § 507(b), the court found that Petrella properly notified MGM of her claims before it invested millions of dollars in creating a new edition of Raging Bull, and that allowing Petrella’s suit to go forward would put at risk only a fraction of the income that MGM had earned during that period. Moreover, any remedies in this case would not require the destruction of the film nor any hardship on innocent third parties, such as consumers who had purchased copies of the film.
In reversing and remanding the judgment of the Ninth Circuit, however, the Supreme Court held that if Petrella were to prevail on the merits, the district court could take account of Petrella’s delay in commencing suit to determine the appropriate injunctive relief and to assess profits. But, the court also stated that any delay must be considered in connection with MGM’s early knowledge of Petrella’s claims, the protection that MGM may have achieved through a declaratory judgment action, any protection that MGM received under the separate-accrual rule and the court’s authority to order reasonable injunctive relief.
In his dissent, Justice Breyer argued that the majority’s holding disables the federal courts from addressing laches as an equitable doctrine, regardless of a plaintiff’s delay in bringing a copyright suit. In particular, the dissent focused on the challenges that were created for MGM due to Petrella’s delay in bringing suit, such as the deaths of certain key witnesses, and the amount of marketing dollars that MGM spent developing and marketing a new edition of the film.
The dissent also disagreed with the majority’s opinion stating that the doctrine of equitable estoppel is not a suitable substitute for laches, noting that there is “no reason to erase the [laches] doctrine from copyright’s lexicon, not even in respect to limitations periods applicable to damages actions.” As Justice Breyer observed “[l]ong delays do not automatically prove inequity, but, depending on the circumstances, they raise that possibility.”