In June, the Supreme Court issued a landmark decision affecting copyright claims and defenses. The copyrighted work at issue was the popular motion picture Raging Bull, in which Robert DeNiro plays famous boxing champion Jake LaMotta. In 1980, the defendant, Metro-Goldwyn-Mayer, Inc. (“MGM”) acquired the rights to the screenplay, through a subsidiary, and registered a copyright in the film.
The screenplay was written by author Frank Petrella along with boxer Jake LaMotta, who assigned their rights to a subsidiary of MGM. In 1991, when the copyright renewal term—which passes to an author’s heirs—came up, Paula Petrella, Frank Petrella’s daughter, renewed the copyright as the sole owner. MGM continued using the work without complaint from Petrella from 1991 until January 6, 2009, when she finally sued for copyright infringement.
The Supreme Court said Petrella was entitled to bring her lawsuit, even after so many years had passed.
What you need to know—separate accrual and the statute of limitations. The Copyright Act provides for separate accrual, meaning each act of copyright infringement carries its own statute of limitations. So, every time MGM made a copy of the movie, distributed it, or publicly displayed it, MGM allegedly committed a new, separate act of infringement. The Copyright Act also provides a three-year statute of limitations on any claim for copyright infringement, meaning a plaintiff must sue for infringement within three years of the infringement, or the discovery of the infringement, or else lose those rights forever. See 17 U.S.C. § 507(b). For Petrella, the three-year statute of limitations means her lawsuit is only effective with regard to acts of copyright infringement that occurred January 6, 2006, and later.
What you need to know—laches. Apart from statutes of limitation, the common law also provides another time-related defense called laches. A defendant asserting laches argues that the plaintiff “slept on her rights” and because the plaintiff waited so long to sue, it would be inequitable to allow the plaintiff to bring a lawsuit now. MGM argued laches should apply because Petrella knew of MGM’s use of Raging Bull ever since she acquired her rights in 1991 but failed to bring her lawsuit until 2009—almost twenty years later.
What the Supreme Court said—the Ninth Circuit was wrong. The Supreme Court reversed the Ninth Circuit’s previous ruling in favor of MGM and held that MGM could not assert laches as an affirmative defense for any of the claims that fell within the statute of limitations. Stated another way, the Supreme Court ruled that laches is not a viable defense for any claim of infringement that occurred within three years of a complaint’s filing date. Because laches cannot be applied to claims falling within the statute of limitations and because claims older than three years would be barred by the statute of limitations anyway, the Supreme Court’s decision effectively eradicates laches as an affirmative defense to copyright infringement.
So, is laches gone forever in copyright suits? Not quite. The Supreme Court said that, while laches could not be used as an affirmative defense, it could possibly be asserted by defendants to limit the remedies available to plaintiffs. We may begin to see laches as a way for copyright defendants to avoid some of the remedies that have more teeth—such as the ability to destroy all infringing copies of a work. A district court has the discretion to consider a plaintiff’s delay when deciding whether injunctive relief is appropriate and what level of profits to award. So, in lawsuits where a plaintiff has waited many years to bring a claim, pursuing injunctive relief and other more drastic remedies for copyright infringement might be inappropriate.”
Raging Bull and copyright plaintiffs—suit can wait until the cash rolls in. Why did Ms. Petrella wait until 2009 to file her lawsuit? Money. MGM argued that she should not be allowed to cool her heels and wait to assert her rights. The Supreme Court disagreed and even went on to say that there is nothing wrong with a copyright plaintiff waiting to see if an infringer’s wrongful exploitation turns profitable before deciding whether it is worthwhile to file suit. And that is just what happened. Raging Bull was in debt, but MGM released it to video in 2000 followed by a limited theatrical release in 2005, for a comeback that was earning lots of cash. It was only when the finances made a turnaround that Petrella filed suit, and the Supreme Court’s ruling puts the stamp of approval on that business decision. This Court’s opinion suggests that businesses with a potential copyright infringement claim have the right to weigh the costs and benefits from a business perspective without forfeiting their right to sue when it becomes economically profitable to do so.
Raging Bull and copyright defendants—you’ve got a three-year exposure window. MGM and players from other copyright-intensive industries were floored that after nearly twenty years, they may have to face and defend a copyright infringement claim, which they thought was stale. In light of this increased exposure window, companies making ongoing use of a copyright (with separate accrual for each use), may want to consider setting up a reserve fund that could cover a three-year look back. Companies should also be sure to keep good accounting records, because the Supreme Court reasoned that a defendant may retain profits from its use of a copyrighted work when the defendant could show that a portion of its profits was attributable to the defendant’s own enterprise, as opposed to the value of the copyrighted work being infringed. Companies may need to enlist an accountant to ascertain which part of its income is attributable to its business enterprise and which part is attributable to the intellectual property in the copyright asset.
Licensing is always safest—but beware copyright terminations. When possible, companies should get an outright assignment or a perpetual, irrevocable license agreement with content creators. The Copyright Act’s copyright termination provision, 17 U.S.C. § 203, which just started coming to fruition in 2013, may be analogous to the situation in the Raging Bull case: where a prior license or assignment can be revoked by an author asserting his or her termination rights, leaving the assignor or licensor, who thought it had good title to use a copyrighted work, with exposure to an infringement suit. The Copyright Act does not allow businesses to contract around the termination provision, but once a notice of termination is served, it does provide licensees with a period of time in which they have the exclusive right to negotiate a new license with the author. Businesses should take advantage of this limited monopoly period to draft a new license deal with content creators.
Does this decision affect my trademark rights? Maybe. Copyrights and trademark rights are distinct intellectual property protections that serve different functions in the marketplace. Copyrights are intended to promote the progress of science and the useful arts, while trademarks are intended to protect an owner’s goodwill in a brand and to prevent source confusion. However, the law around copyright law and trademark law frequently bleeds together. For example, in eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), the Ninth Circuit Court of Appeals held that in litigation seeking a preliminary injunction based on copyright infringement, a plaintiff could not benefit from a presumption of irreparable harm. Later on, in Herb Reed Enters., LLC v. Florida Entm’t Mgmt., Inc., 736 F.3d 1239 (9 th Cir. 2013), the Ninth Circuit extended its rationale in eBay to the trademark context at issue in Herb Reed, ruling that trademark infringement plaintiffs seeking injunctive relief also could not benefit from a presumption of irreparable harm.
Because courts frequently “borrow” precedent from the copyright context to import into the trademark context, one should expect that a laches defense may be held inapplicable to any trademark claims that are brought within the analogous statute of limitations period. See, e.g., Johnny’s Fine Foods, Inc. v. Johnny’s Inc., 286 F. Supp. 2d 876, 882 (M.D. Tenn. 2003) (“With respect to what amounts to an unreasonable delay, this Circuit holds faithfully to the principle that a suit will not be barred by laches before the analogous statute of limitations has run but will be barred after the statutory time has run.”)