Statute of Limitations In Copyright Ownership Disputes: Questions from the Everly Brothers Case

In the Raging Bull case, the Supreme Court held that laches cannot be used to cut off the right to pursue new acts of infringement within the three-year window, even if the infringement had been ongoing for years with the plaintiff's knowledge. Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014). The Court further clarified that, "when a defendant has engaged (or is alleged to have engaged) in a series of discrete infringing acts, the copyright holder's suit ordinarily will be timely under §507(b) with respect to more recent acts of infringement (i.e., acts within the three-year window), but untimely with respect to prior acts of the same or similar kind." Id. at 672.

In the context of infringement actions post-Petrella, courts generally continue to follow a discovery rule and hold that the statute of limitations does not begin to run until the plaintiff learned, or by reasonable diligence could have learned, that it had a cause of action.

In the context of an ownership dispute, courts have generally followed a similar discovery type rule. To determine the accrual date of a claim for copyright ownership, the statutory period for any action to establish ownership begins to run whenever there is a "plain and express repudiation" of ownership by one party as against the other. Aalmuhammed v. Lee, 202 F.3d 1227, 1231 (9th Cir. 2000); see also, Wilson v. Dynatone Publ'g Co., 892 F.3d 112, 118 (2d Cir. 2018); Gaiman v. McFarlane, 360 F.3d 644, 653 (7th Cir. 2004).

The repudiation that starts the three-year clock can take many forms. For instance, the Second Circuit has recognized three types of repudiation — direct repudiation, publication of the work without credit and non-receipt of royalties — and refers to them as private repudiation, public repudiation and implicit repudiation. Wilson, 892 F.3d at 118.

And unlike an infringement action, where a new statute of limitations begins with each discrete act of infringement, a claim for ownership "accrues only once, and if an action is not brought within three years of accrual, it is forever barred." Zuill v. Shanahan, 80 F.3d 1366, 1369 (9th Cir. 1996).

An Alternative View of When the Statute of Limitations Runs in Copyright Ownership Disputes

Judge Murphy questions how the statute of limitations rule generally applied in copyright ownership disputes squares with the language of the Copyright Act.

As his first basis of criticism, Judge Murphy questions the generally applied test because it triggers the limitations period when a plaintiff has knowledge of a repudiation, not when a cause of action has "accrued."

Judge Murphy recognizes that courts usually choose between two rules to determine when a statute of limitations begins to run. The "occurrence rule" or "injury rule" begins the limitations period on the date that a violation of the plaintiff's legal right has occurred. The "discovery rule" begins on the date that the plaintiff discovered or should have discovered the cause of action.

Judge Murphy notes that the Supreme Court has recently expressed skepticism of a discovery rule absent express statutory language that the limitations period begins upon discovery of the claim, criticizing the "expansive approach to the discovery rule [as] a 'bad wine of recent vintage.'" Rotkiske v. Klemm, 140 S. Ct. 355, 360 (2019) (quoting TRW, Inc. v. Andrews, 534 U.S. 19, 27 (2001) (Scalia, J. concur)). In Rotkiske, the Supreme Court applied a textual analysis and rejected the application of a discovery rule under a federal statute where Congress did not say that the limitations period begins to run upon discovery of the violation. Id. at 361.

Judge Murphy rightly recognizes that the Supreme Court in Petrella did not reject the use of a discovery rule in copyright infringement actions. He notes that the Court has twice cautioned that it has "not passed on the question" of whether the Copyright Act statute of limitations should apply a discovery rule. Petrella, 572 U.S. at 670 n.4; SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 137 S. Ct. 954, 962 (2017).

Judge Murphy expresses his view that, based on its plain language, the Copyright Act statute of limitations should be interpreted as an occurrence rule rather than a discovery rule. He notes that the plain-and-express repudiation test in ownership cases does not apply an occurrence rule asking whether the defendant has violated a legal right triggering the plaintiff's ability to seek relief in court. Rather, he suggests it wrongly applies a discovery rule asking whether the plaintiff knew of the defendant's rejection of the plaintiff's ownership status.

Other courts addressing the question have held that they are bound to follow precedent until such time as the Supreme Court decides that the discovery rule no longer applies. See, e.g., Sohm v. Scholastic Inc., 959 F.3d 39, 2020 U.S. App. LEXIS 15103, at 25-26 (2d Cir. May 12, 2020) ("Consequently, while some language in Petrella is perhaps consistent with the injury rule, in light of the Supreme Court's direct and repeated representations that it has not opined on the propriety of the discovery or injury rules, it would contravene settled principles of stare decisis for this Court to depart from its prior holding … on the basis of Petrella."). Nonetheless, based on its recent pronouncements, Judge Murphy perhaps correctly predicts that the Supreme Court may one day hold that the plain text of the Copyright Act's statute of limitations mandates an occurrence rule, rather than a discovery rule.

As his second basis of criticism, Judge Murphy questions the generally applied test because it treats copyright ownership as a complete "claim," not as a legal element of a separate claim.

Judge Murphy notes that, while ownership may be an element of various claims, it is not a standalone cause of action. When not styled as a declaratory judgment action, a copyright ownership (or authorship) case could take many forms: accounting, infringement, or perhaps in connection with asserting statutory termination rights. Although the plaintiff could seek a declaration of its rights earlier, the plaintiff would not necessarily have a complete and present cause of action at the time that the defendant made a plain-and-express repudiation of ownership (or authorship).

For instance, Judge Murphy questions how to square the generally applied test in an infringement action where ownership is in dispute. In such actions, two elements must be proven: 1) ownership of a valid copyright; and 2) copying of constituent elements of the work that are original. If under Petrella each new act of infringement starts a new statute of limitations period, why is the plaintiff forever foreclosed from establishing ownership if not commenced within three years of repudiation? Judge Murphy asks, what if a party who wants to infringe sends a notice repudiating ownership, but waits three years to infringe? If the real owner does not immediately file a declaratory judgment action, is the true owner foreclosed from establishing ownership in an infringement action?

As recently recognized by Judge Lewis Kaplan in Waite v. UMG Recordings, 19-cv-1091 (LAK), 2020 U.S. Dist. LEXIS 56198 (S.D.N.Y. March 31, 2020), cutting off all rights after three years would be unfair in many actions where ownership is the key issue. In that case, the artist plaintiffs brought infringement actions against UMG when it continued to exploit musical works after the effective date of the artists' claimed termination of the grants to UMG under Section 230 of the Copyright Act. UMG argued that the artists were not the authors because the works were works-made-for-hire. Thus, the artists had no right to terminate the grant under Section 230. UMG argued that the artists were put on notice of an authorship and ownership dispute — thereby triggering the three-year statute of limitations period — in the 1970s and 1980s when they signed agreements containing "works made for hire" provisions, as this language was an "express assertion of sole authorship or ownership" and reflected a "repudiation" of any authorship or ownership claim by the artists.

Judge Kaplan held that the gravamen of the artists' claim is UMG's refusal to recognize their termination rights and that termination rights are, by their very nature, about the "nature, extent, or scope of copying" a particular work. On that basis, Judge Kaplan ruled that it is impossible for there to be a legally cognizable infringement claim until a termination right vests, a valid and timely termination notice is sent and ignored, and the copyright's grantee continues to distribute the work.

In reaching this conclusion, Judge Kaplan had to distinguish Aday v. Sony Music Entertainment, No. 96-cv-0991 (MGC), 1997 U.S. Dist. LEXIS 14545 (S.D.N.Y. Sept. 25, 1997), in which the artist Meat Loaf sought a declaration 30 years after entering into a work for hire agreement that he had always been the sole owner of his copyright. The district court held that the three-year statute of limitations began to run in 1977 when Meat Loaf was put on notice "about any of the problems with the 'work for hire provision'" and his ownership claim was time barred.

Judge Kaplan may have reached the correct result, but it can be difficult to reconcile many of the statute of limitations decisions in copyright ownership or authorship cases. The law in this area is a thicket.

While Judge Murphy concedes it could still lead to difficult questions in many cases, his suggestion that a limitations period should not begin to run until a complete and present cause of action has accrued could provide greater clarity and more consistent outcomes in this area.

Where This May Lead

Should the Supreme Court someday reject the discovery rule for the Copyright Act statute of limitations, the results could be harsh. It would certainly impact a copyright owner's ability to pursue acts of infringement of which the owner was unaware or by reasonable diligence could not have learned, especially where there is no basis for equitable tolling like fraudulent concealment. The change may also require courts to reassess the plain-and-express-repudiation test in ownership and authorship cases, which follows a discovery-rule model.

But even putting aside such a ruling from the Supreme Court, application of the plain-and-express-repudiation test to ownership or authorship disputes can lead to results that are difficult to reconcile. While dispensing with a discovery rule may lead to more late-filed, opportunistic attacks by purported authors or owners, which might otherwise have been dismissed as time barred, Judge Murphy's suggested focus on whether a complete and present cause of action could be asserted deserves some consideration. In some cases applying this rule, the date when the statute of limitations begins to run may not change. But, even if it resulted in fewer cases being time barred, unmeritorious ownership or authorship claims will presumably remain difficult to win (albeit expensive to defend).

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Alexander Lawrence is a partner in the Tokyo office of Morrison & Foerster LLP. He can be reached at [email protected].