Time-Barred Copyright Ownership Claim Prevents Infringement Claim

Before publication, Kwan and Schlein had a disagreement over whether Kwan would receive credit as a “ghostwriter” for the book or as an editor. In December 1998, BRB CEO Michael Sankey stated in an e-mail to Schlein and Kwan that the names would appear on the cover either as “AMS and SKK” or “AMS with SKK.” Schlein immediately objected to this arrangement, stating to Sankey (but not Kwan), “your offering a co-authorship to Shirley has put me in an awkward position. She was brought in as a contract editor, and while I appreciate all her significant efforts, it was her and my agreement to have her listed as an editor.” Kwan responded to Sankey's e-mail, explaining that “I've decided to request the following title credit: by Alan Schlein with Shirley Kwan Kisaichi,” because “essentially, I have ghostwritten this book.”

BRB published the book in 1999, citing authorship as follows: “By Alan M. Schlein Edited by Shirley Kwan Kisaichi.” Schlein registered the work at the U.S. Copyright Office, naming himself and Kwan as authors. Kwan received royalty payments for her contribution to the 1999 edition, as well as a subsequent edition. In May 2002, BRB notified Kwan that BRB was finalizing the third edition of Find It Online, and the BRB would not be paying Kwan royalties for any edition following the second edition, stating that book had “been completely re-written.”

Kwan initiated the lawsuit in January 2005, alleging copyright infringement, and sought registration of her copyright interest as a co-author of Find It Outline. The following month, Kwan filed a copyright registration for Find It Online, identifying herself as a co-author with Schlein. Kwan later amended this registration to name herself as the sole author.

BRB and Schlein filed counterclaims to Kwan's complaint, seeking a declaratory judgment that Kwan's copyright registrations were invalid and that she had no ownership interest in Find It Online, and a permanent injunction preventing Kwan from making any future claims of copyright ownership in the book. In January 2009, Schlein moved for summary judgment, arguing that Kwan's claims for registration and to be named sole author were barred by the statute of limitations. The district court granted Schlein's motion for summary judgment, finding that Kwan first asserted authorship in the work in 1998, when she sent a letter to BRB in which she “clearly claimed co-authorship of Find It Online.” That letter, as the district court noted, referenced Kwan's specific objection to being named as an editor of the publication. The district court also noted that BRB first issued a check to Kwan for royalties from the first edition of Find It Online in May 1999, and Kwan cashed that check in September 1999. Relying on these facts, the district court found that Kwan knew that BRB and Schlein disputed her rights in Find It Online no later than September 1999, and that consequently her claims were barred by the statute of limitations. According to the district court, under 17 U.S.C. ' 507(b), the three-year statute of limitations tolled in September 2002.

Following the district court's decision, BRB and Schlein moved pursuant to Federal Rule of Civil Procedure 41(a) for an order permitting the voluntary dismissal of their counterclaims, without prejudice to reassertion, should Kwan prevail on appeal from the district court's grant of summary judgment, or commence a new lawsuit against Schlein relating to Find It Online, or take some other action in violation of BRB's and Schlein's copyright interest in Find It Online. The district court granted the motion, finding that no legal prejudice to Kwan would result.

The Second Circuit Decision

On appeal, the Second Circuit affirmed the district court's grant of summary judgment to Schlein, holding that a time-barred ownership claim prevents a claim for copyright infringement “where, as here, the infringement claim cannot be decided without adjudication of a genuine dispute as to the plaintiff's ownership of the copyright.” Citing Second Circuit authority, the panel noted that a copyright ownership claim must be brought within three years after the claim has accrued, and that such a claim “accrues only once, 'when a reasonably diligent plaintiff would have been put on inquiry as to the existence of a right.'” (internal citations omitted). The panel agreed with the district court that BRB and Schlein first rejected Kwan's express assertion of authorship as early as December 1998. The subsequent publishing of Find It Online in January 1999 without Kwan listed as a co-author further supported a finding that Kwan was aware of the dispute regarding her rights in the publication.

In her appeal, Kwan acknowledged that any claims relating to the first and second editions of Find It Online were time-barred, but that she held two timely causes of action for copyright infringement, based upon the third and fourth editions of Find It Online. Kwan maintained that these editions were not barred under the statute of limitations because both were published less than three years before Kwan filed her lawsuit. Judge Rosemary S. Pooler, writing for the panel, disagreed, noting that the ownership issue formed the “backbone” of the dispute over Find It Online ' the nature, extent or scope of the alleged copying, more typical areas of dispute in copyright infringement litigation, were not at issue. The dispute involved only whether Kwan's contributions to the work were enough to qualify her as an author and by extension, as an owner of the copyright in Find It Online “in the first place.” Kwan could not obtain relief for her infringement claim unless she was the sole author of the work, and as the Copyright Act provides, one co-author cannot sue another for infringement. The panel noted, citing authority within the Second Circuit, that “the statute of limitations cannot be defeated by portraying an action as one for infringement when copyright ownership rights are the true matter at issue.” (internal citations omitted). Since the issue of authorship related solely to the creation of the work, a new claim of infringement ' not barred by the statute of limitations ' did not arise upon a subsequent publication of Find It Online. The panel relied upon authority from sister circuits to conclude that when claims for both infringement and ownership are alleged, the timeliness of the infringement claim must depend upon whether the ownership claim is timely. (internal citations omitted). Consequently, Kwan's time-barred ownership claim, the dispositive issue in the case, precluded her infringement claim as a matter of law.

The panel also reviewed the district court's granting of BRB's and Schlein's Federal Rule of Civil Procedure 41(a) motion for voluntary dismissal of its counterclaims against Schlein and confirmed the district court's granting of the motion. As the panel noted, the district court's ruling did not place defendants in a position of “control” over whether Kwan's claims were ever reasserted. Instead, BRB's and Schlein's motion made it clear to the district court that they had no intention of pursuing any counterclaims unless the Second Circuit reversed the district court's decision, Kwan commenced another lawsuit or violated the copyright held by BRB and Schlein in Find It Online. The panel rejected Kwan's argument that dismissal of the counterclaims caused her legal prejudice and foreclosed a determination of her right of ownership in Find It Online, finding that Kwan's complaint had already been dismissed with prejudice, and thus it had already been determined that no such right of ownership existed. The panel further noted that it found “no merit” in Kwan's arguments that defendants' efforts in pursuing the counterclaims were dilatory.

Conclusion

The Second Circuit's decision in Kwan reaffirms that a copyright infringement claim dependent upon a copyright ownership claim can be barred under the Copyright Act's three-year statute of limitations, found in 17 U.S.C. ' 507(b), if the ownership claim is itself barred by the statute of limitations.

Whitney D. Brown is an associate in Washington, DC, office of McDermott Will & Emery LLP. She focuses her practice on copyright, patent and trademark litigation, as well as trademark prosecution.

The U.S. Court of Appeals for the Second Circuit has ruled that a time-bar for copyright ownership under the statute of limitations also bars a related copyright infringement claim. Kwan v. Schlein, Case No. 09-5202 (2nd Cir., Jan. 25, 2011) (Pooler, J.). According to the Second Circuit, a claim for copyright infringement based on an underlying claim of copyright ownership will be prohibited if that underlying claim is time-barred.

Background

In 1998, Business Resources Publications (“BRB”) hired plaintiff Shirley Y. Kwan to serve as an editor for Find It Online, a book to be authored by Alan M. Schlein. BRB engaged Kwan as an editor for 100 hours of work, and had promised to give her credit as an editor on the title page. After Kwan had worked on the project for more than 100 hours, Schlein asked BRB to continue her employment, and offered her a percentage of the royalties from Find It Online as compensation. The rate amounted to 2.5% of the book's royalties for the first 5,000 copies sold, and 3% thereafter. Under Schlein's and Kwan's editing agreement, Schlein would prepare a first draft of a chapter of Find It Online; Kwan would provide comment on that draft and return it to Schlein. Kwan then performed a second round of editing on Schlein's revised versions of the chapters.

Before publication, Kwan and Schlein had a disagreement over whether Kwan would receive credit as a “ghostwriter” for the book or as an editor. In December 1998, BRB CEO Michael Sankey stated in an e-mail to Schlein and Kwan that the names would appear on the cover either as “AMS and SKK” or “AMS with SKK.” Schlein immediately objected to this arrangement, stating to Sankey (but not Kwan), “your offering a co-authorship to Shirley has put me in an awkward position. She was brought in as a contract editor, and while I appreciate all her significant efforts, it was her and my agreement to have her listed as an editor.” Kwan responded to Sankey's e-mail, explaining that “I've decided to request the following title credit: by Alan Schlein with Shirley Kwan Kisaichi,” because “essentially, I have ghostwritten this book.”

BRB published the book in 1999, citing authorship as follows: “By Alan M. Schlein Edited by Shirley Kwan Kisaichi.” Schlein registered the work at the U.S. Copyright Office, naming himself and Kwan as authors. Kwan received royalty payments for her contribution to the 1999 edition, as well as a subsequent edition. In May 2002, BRB notified Kwan that BRB was finalizing the third edition of Find It Online, and the BRB would not be paying Kwan royalties for any edition following the second edition, stating that book had “been completely re-written.”

Kwan initiated the lawsuit in January 2005, alleging copyright infringement, and sought registration of her copyright interest as a co-author of Find It Outline. The following month, Kwan filed a copyright registration for Find It Online, identifying herself as a co-author with Schlein. Kwan later amended this registration to name herself as the sole author.

BRB and Schlein filed counterclaims to Kwan's complaint, seeking a declaratory judgment that Kwan's copyright registrations were invalid and that she had no ownership interest in Find It Online, and a permanent injunction preventing Kwan from making any future claims of copyright ownership in the book. In January 2009, Schlein moved for summary judgment, arguing that Kwan's claims for registration and to be named sole author were barred by the statute of limitations. The district court granted Schlein's motion for summary judgment, finding that Kwan first asserted authorship in the work in 1998, when she sent a letter to BRB in which she “clearly claimed co-authorship of Find It Online.” That letter, as the district court noted, referenced Kwan's specific objection to being named as an editor of the publication. The district court also noted that BRB first issued a check to Kwan for royalties from the first edition of Find It Online in May 1999, and Kwan cashed that check in September 1999. Relying on these facts, the district court found that Kwan knew that BRB and Schlein disputed her rights in Find It Online no later than September 1999, and that consequently her claims were barred by the statute of limitations. According to the district court, under 17 U.S.C. ' 507(b), the three-year statute of limitations tolled in September 2002.

Following the district court's decision, BRB and Schlein moved pursuant to Federal Rule of Civil Procedure 41(a) for an order permitting the voluntary dismissal of their counterclaims, without prejudice to reassertion, should Kwan prevail on appeal from the district court's grant of summary judgment, or commence a new lawsuit against Schlein relating to Find It Online, or take some other action in violation of BRB's and Schlein's copyright interest in Find It Online. The district court granted the motion, finding that no legal prejudice to Kwan would result.

The Second Circuit Decision

On appeal, the Second Circuit affirmed the district court's grant of summary judgment to Schlein, holding that a time-barred ownership claim prevents a claim for copyright infringement “where, as here, the infringement claim cannot be decided without adjudication of a genuine dispute as to the plaintiff's ownership of the copyright.” Citing Second Circuit authority, the panel noted that a copyright ownership claim must be brought within three years after the claim has accrued, and that such a claim “accrues only once, 'when a reasonably diligent plaintiff would have been put on inquiry as to the existence of a right.'” (internal citations omitted). The panel agreed with the district court that BRB and Schlein first rejected Kwan's express assertion of authorship as early as December 1998. The subsequent publishing of Find It Online in January 1999 without Kwan listed as a co-author further supported a finding that Kwan was aware of the dispute regarding her rights in the publication.

In her appeal, Kwan acknowledged that any claims relating to the first and second editions of Find It Online were time-barred, but that she held two timely causes of action for copyright infringement, based upon the third and fourth editions of Find It Online. Kwan maintained that these editions were not barred under the statute of limitations because both were published less than three years before Kwan filed her lawsuit. Judge Rosemary S. Pooler, writing for the panel, disagreed, noting that the ownership issue formed the “backbone” of the dispute over Find It Online ' the nature, extent or scope of the alleged copying, more typical areas of dispute in copyright infringement litigation, were not at issue. The dispute involved only whether Kwan's contributions to the work were enough to qualify her as an author and by extension, as an owner of the copyright in Find It Online “in the first place.” Kwan could not obtain relief for her infringement claim unless she was the sole author of the work, and as the Copyright Act provides, one co-author cannot sue another for infringement. The panel noted, citing authority within the Second Circuit, that “the statute of limitations cannot be defeated by portraying an action as one for infringement when copyright ownership rights are the true matter at issue.” (internal citations omitted). Since the issue of authorship related solely to the creation of the work, a new claim of infringement ' not barred by the statute of limitations ' did not arise upon a subsequent publication of Find It Online. The panel relied upon authority from sister circuits to conclude that when claims for both infringement and ownership are alleged, the timeliness of the infringement claim must depend upon whether the ownership claim is timely. (internal citations omitted). Consequently, Kwan's time-barred ownership claim, the dispositive issue in the case, precluded her infringement claim as a matter of law.

The panel also reviewed the district court's granting of BRB's and Schlein's Federal Rule of Civil Procedure 41(a) motion for voluntary dismissal of its counterclaims against Schlein and confirmed the district court's granting of the motion. As the panel noted, the district court's ruling did not place defendants in a position of “control” over whether Kwan's claims were ever reasserted. Instead, BRB's and Schlein's motion made it clear to the district court that they had no intention of pursuing any counterclaims unless the Second Circuit reversed the district court's decision, Kwan commenced another lawsuit or violated the copyright held by BRB and Schlein in Find It Online. The panel rejected Kwan's argument that dismissal of the counterclaims caused her legal prejudice and foreclosed a determination of her right of ownership in Find It Online, finding that Kwan's complaint had already been dismissed with prejudice, and thus it had already been determined that no such right of ownership existed. The panel further noted that it found “no merit” in Kwan's arguments that defendants' efforts in pursuing the counterclaims were dilatory.

Conclusion

The Second Circuit's decision in Kwan reaffirms that a copyright infringement claim dependent upon a copyright ownership claim can be barred under the Copyright Act's three-year statute of limitations, found in 17 U.S.C. ' 507(b), if the ownership claim is itself barred by the statute of limitations.

Whitney D. Brown is an associate in Washington, DC, office of McDermott Will & Emery LLP. She focuses her practice on copyright, patent and trademark litigation, as well as trademark prosecution.