Zalewski v. T.P. Builders, Inc., No. 1:10-cv-876 (GLS/RFT) (N.D.N.Y. Aug. 02, 2011) may signal a change of course for courts in the Second Circuit on applying the "discovery" rule to the statute of limitations under the Copyright Act. In Zalewski, defendants moved to dismiss a copyright infringement action, claiming it was time-barred by the three-year limitations period in 17 U.S.C. 507(b) because any cause of action accrued at the time of alleged infringement, more than three years before the suit was filed. Defendants relied on the Supreme Court decision in TRW Inc. v. Andrews, 534 U.S. 19 (2001), and a line of New York district court decisions holding that the statute of limitations for copyright infringement began running when the infringement occurred. Plaintiffs, relying on contrary rulings in other circuits, argued that the "discovery" rule governed, and the statute of limitations did not start running until the plaintiff knew or had reason to know of the infringement.
In his opinion, Magistrate Judge Sharpe noted that historically, courts applied the discovery rule in the copyright context and wherever a statute was silent on when a cause of action accrued. However, the Supreme Court ruled in TRW Inc. that the discovery rule did not apply to the statute of limitations in the Fair Credit Reporting Act, casting doubt on the continued viability of this discovery rule presumption. In response to TRW, courts in the Southern and Eastern District of New York held that the statute of limitations period in copyright cases commenced upon infringement. The majority of the courts in other circuits, however, continued to apply the discovery rule. Despite the New York case law, Judge Sharpe decided that the majority rule in other circuits was more persuasive and that the statute of limitations period should commence when the plaintiff knew or had reason to know of infringement. He reasoned: "as to civil copyright claims, the discovery rule best comports with the text and structure of the Copyright Act."
Practice Pointers: For copyright holder plaintiffs with statute of limitations concerns, the Northern District may be the best New York venue. For accused infringers, remember that a limitations period argument may be successful in the Southern or Eastern District of New York even where the discovery rule would preclude such a defense in other circuits.