Which statute of limitations applies to lawsuits involving both copyright ownership and infringement claims?  This was an open question in the Ninth Circuit until Seven Arts Filmed Entertainment, Ltd. v. Content Media Corporation, No. 11-56759, ____ F.3d ____, 2013 WL 592356 (9th Cir. Nov. 6, 2013).  In ordinary copyright infringement cases, each infringing act creates a new claim, so the claimant can sue about any act within the three years preceding the lawsuit.  In a dispute where parties are fighting over co-ownership the statute accrues only once: at the time when plain and express repudiation of co-ownership is communicated to the claimant.  In Seven Arts, the Ninth Circuit held that in a case with both co-ownership and infringement claims, the more restrictive co-ownership accrual rule applies.

The saga began in 2002, when plaintiff Seven Arts first brought an infringement lawsuit against CanWest (Content Media’s predecessor in interest).  Seven Arts claimed its co-owner had not shared royalties on three movies (Rules of Engagement, American Rhapsody, and Who Is Cletus Titus?) under the terms of a “Heads of Agreement” or “Master Structure Agreement.”  CanWest successfully moved to dismiss because the agreement had a Canadian venue provision.  When Seven Arts sued CanWest in Canada in 2003, CanWest argued that the agreement was unenforceable.  The Canadian lawsuit was not concluded when in 2005 Seven Arts again sued in California, again alleging infringement against CanWest.  CanWest convinced the California district court to stay the matter pending Seven Arts’ prosecution of the Canadian lawsuit.  In 2008 the California court dismissed the lawsuit for failure to prosecute.

At some point CanWest went into bankruptcy.  After that, Seven Arts filed an unopposed motion for summary judgment in 2011 in the Canadian proceeding and prevailed, obtaining an order that it was the owner of the copyright for the three movies, that CanWest had no interest in the copyright, and that CanWest had been infringing and continued to infringe on Seven Arts’ rights.

Then Seven Arts came back to California and filed infringement claims against Content Media (CanWest’s successor-in-interest) and Paramount Pictures Corporation, which had been distributing the films.  Paramount moved to dismiss the case based on the three-year statute of limitations in 17 U.S.C. §507(b).

After describing the convoluted history of the case, the Ninth Circuit noted that there are two elements a plaintiff must prove in an infringement case: ownership and infringement.  The court then reviewed the statute of limitation approaches the Ninth Circuit has applied in copyright cases.  The court first explained the accrual method for infringement cases:

For ordinary claims of copyright infringement, each new infringing act causes a new claim to accrue; thus, we have held that “an action may be brought for all acts that accrued within the three years preceding the filing of the suit.”

Next, the court explained the accrual method for co-ownership cases:

By contrast, we have held “that claims of co-ownership, as distinct from claims of infringement,” accrue only once, “when plain and express repudiation of co-ownership is communicated to the claimant, and are barred three years from the time of repudiation.”

Then, the court turned to the new issue in this case: what is the statute when both claims (co-ownership and infringement) are involved?  The Court turned to two other circuits for guidance:

Although this is an issue of first impression in our circuit, we are guided by the Second and Sixth Circuits. Our sister circuits have held that, where the gravamen of a copyright infringement suit is ownership, and a freestanding ownership claim would be time-barred, any infringement claims are also barred.  “When claims for both infringement and ownership are alleged,” according to the Sixth Circuit, “the infringement claim is timely only if the corresponding ownership claim is also timely.”  (citations omitted)

The Seven Arts court agreed with these circuits, explaining that allowing a claimant to bring an ownership claim in a mixed-issue case years after the statute ran on a freestanding ownership claim would lead to “potentially bizarre” results, citing to 3 Nimmer & Nimmer, Nimmer on Copyright, § 12.05[C][3].

So the Ninth Circuit has now provided an answer to the question of the statute of limitations applicable to a mixed-issue case: the more restrictive accrual method for ownership disputes applies.  The Court emphasized that the holding in this case was limited to disputants who have a close relationship as co-authors or co-owners.  The Court left open the question of what accrual method applies in a mixed-issue case where the defendant is not in a close relationship with the claimant.

Aside from the obvious lesson that one should always name all defendants in the first lawsuit filed and should not delay filing after learning of claims, this case provides guidance for owners and their counsel (as well as putative co-owners) on the statute of limitations that will apply in cases involving both ownership and infringement claims.  Copyright owners should always seek advice promptly upon learning of a claim or improper publication of their work.

If you have any questions, please contact George Wailes at gwailes@carr-mcclellan.com or at (650) 342-9600.