United States Supreme Court Signals Change in Accrual Date for Statute of Limitations in Copyright Infringement Claims

WDC Journal Edition: Spring 2015
By: David Pliner & Shannon Buttchen, Corneille Law Group, LLC

Since the adoption of the United States Copyright Act,1 federal courts have adopted varying interpretations of when a copyright claim accrues, with the majority of federal courts adopting the discovery rule. Until recently, the United States Supreme Court had not commented on the issue. However, on May 19, 2014, the court released a landmark decision in Petrella v. Metro-Goldwyn-Mayer, Inc.,2 supporting the argument that the three-year statute of limitations in copyright actions, 17 U.S.C. § 507(b), begins to accrue on the date the infringement occurs.

The specific issue of when a copyright claim accrues was not before the court in Petrella, and the court noted that it was not deciding that issue. However, a careful review of Petrella strongly suggests that the court would hold that copyright claims typically accrue on the date the infringement occurs, not on the date the infringement is discovered. Petrella may have a significant impact on copyright law in the Seventh Circuit which has, with virtually no analysis, followed a discovery rule of accrual since 1983.

The Law in the Seventh Circuit

The Seventh Circuit first considered when a copyright cause of action accrues in the 1983 case of Taylor v. Meirick.3 Taylor has been interpreted in subsequent decisions as holding that a discovery rule of accrual applies to copyright claims. However, a close reading of Taylor suggests that the court’s brief discussion of the discovery rule was dicta. The Taylor court did not have to decide when copyright claims accrue, and its very brief discussion of the discovery rule reads as more of a side comment than a formal holding.

The plaintiff in Taylor copyrighted maps of three lakes for use by fishermen. The defendant subsequently made and distributed unauthorized copies of the maps over a period of several years. The defendant argued that the plaintiff’s claims for copyright infringement were time-barred because the defendant had stopped selling the maps more than three years before plaintiff filed suit. However, after taking evidence, the magistrate judge determined that the lawsuit was timely because the defendant had engaged in infringing acts within one year of the time suit was filed.4 The Seventh Circuit affirmed.

It was in that context, after noting the evidence of infringements within the three-year limitations period, that the Seventh Circuit discussed whether a discovery rule of accrual might apply to copyright claims. After noting that some federal courts had applied a discovery rule to unrelated types of claims, the Seventh Circuit commented: “Although we cannot find a copyright case on point, a similar principle may apply in such cases.... Probably it should be enough to toll the statute of limitations that a reasonable man would not have discovered the infringement....”5 The Seventh Circuit went on to cite the discovery rule as a possible alternative basis for reaching the conclusion it had already reached, that the lawsuit was timely.6

The Taylor court’s comments about the discovery rule appear to qualify as dicta. Those comments were phrased in the manner of a hypothetical discussion or suggestion, and the outcome of the case did not turn on whether a discovery rule of accrual applied. Further, Taylor did not address any legislative intent behind the Copyright Act by, for example, examining hearing records reflecting discussions about the enactment of the Copyright Act. Finally, the Taylor court made no reference to the general rule that claims under federal law accrue as soon as they are capable of enforcement, in the absence of an express adoption of a discovery rule.7

Subsequent decisions have cited Taylor as adopting a discovery rule of accrual for copyright claims in the Seventh Circuit. However, none of those decisions actually analyzes Taylor or the underlying question of when a copyright claim accrues. They simply cite Taylor for the proposition, without comment.

For example, twenty-one years after Taylor was decided, it was cited briefly by the Seventh Circuit inGaiman v. McFarlane.8 Gaiman involved a claim of infringement of certain comic book characters. Significantly, the parties in Gaiman stipulated that the plaintiff’s claims accrued when he discovered, or reasonably could have discovered, the infringement. The court characterized the stipulation as being “right,” citing Taylor. However, since the parties had stipulated to a discovery rule of accrual, the court understandably offered no analysis or discussion of Taylor or 17 U.S.C. § 507(b). To the extent the court briefly commented that the parties’ agreement was “right” due to Taylor, that comment was itself dicta.

While district courts in the Seventh Circuit have also cited Taylor and Gaiman as authority for applying a discovery rule of accrual to copyright claims, none of those courts has carefully analyzed the issue either.9

Petrella Supports the Standard Occurrence Rule of Accrual for Copyright Claims.

The plaintiff in Petrella claimed that the defendants violated her rights in a film by using and distributing the film over a period of eighteen years. However, she only sued for damages caused by the infringements occurring within three years before she filed suit. Although the plaintiff’s claim for those damages was timely by any measure, the defendants argued that the claim should be barred by the equitable doctrine of laches because the plaintiff had waited so long to assert her rights. The specific issue in Petrella was whether laches can serve as a complete defense to a timely copyright claim.

The court ultimately held that equitable laches does not bar copyright claims filed within the three-year “look back” period established by 17 U.S.C. § 507(b). While the court did not explicitly address the question of whether a discovery rule of accrual applies to copyright claims, the court’s ultimate ruling on the issue before it rested in part on the fact that “the copyright statute of limitations ... itself takes account of delay.... [A] successful plaintiff can gain retrospective relief only three years back from the time of suit. No recovery may be had for infringements in earlier years. Profits made in those years remain the defendant’s to keep.”10 This fact was an important consideration in the court’s finding that timely-filed copyright claims are not barred by laches.11 The court offered a detailed discussion of the copyright statute of limitations to support its ruling.

Four aspects of copyright law bear explanation at the outset....

...

Fourth, and most significant here, the statute of limitations. Until 1957, federal copyright law did not include a statute of limitations for civil suits.... In 1957, Congress addressed the matter and filled the hole; it prescribed a three-year lookback limitations period for all civil claims arising under the Copyright Act....

The federal limitations prescription governing copyright suits serves two purposes: (1) to render uniform and certain the time within which copyright claims could be pursued; and (2) to prevent the forum shopping invited by disparate state limitations periods.... To comprehend how the Copyright Act’s limitations period works, one must understand when a copyright claim accrues.

A claim ordinarily accrues “when [a] plaintiff has a complete and present cause of action.”[citation omitted]. In other words, the limitations period generally begins to run at the point when “the plaintiff can file suit and obtain relief.” ... A copyright claim thus arises or “accrue[s]” when an infringing act occurs.12

It is widely recognized that the separate-accrual rule attends the copyright statute of limitations. Under that rule, when a defendant commits successive violations, the statute of limitations runs separately from each violation. Each time an infringing work is reproduced or distributed, the infringer commits a new wrong. Each wrong gives rise to a discrete “claim” that “accrue[s]” at the time the wrong occurs. In short, each infringing act starts a new limitations period....

Under the Act’s three-year provision, an infringement is actionable within three years, and only three years, of its occurrence. And the infringer is insulated from liability for earlier infringements of the same work. [citation omitted]. Thus, when a defendant has 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.

In sum, Congress provided two controlling time prescriptions: the copyright term, which endures for decades ...; and § 507(b)’s limitations period, which allows plaintiffs during that lengthy term to gain retrospective relief running only three years back from the date the complaint was filed.13

While the court in Petrella may not have explicitly resolved the discovery versus occurrence rule of accrual question for copyright claims, its lengthy discussion is fully consistent with an occurrence rule of accrual, and seemingly inconsistent with a discovery rule of accrual.

The Effect of Petrella in the Seventh Circuit

At a minimum, Petrella is an invitation for lower federal courts to take a fresh look at the accrual question. A recent Seventh Circuit decision may be indicative of what is to come. On October 23, 2014, the Seventh Circuit decided Chicago Bldg. Design, P.C. v. Mongolian House, Inc.14 The plaintiff, Chicago Building Design (“CBD”), designed the interior of a restaurant for defendant Mongolian House, Inc., and then filed its blueprints with the City of Chicago. Sometime in 2008, a CBD employee chanced to discover a set of blueprints that appeared to be copies of CBD’s design for the restaurant, but which bore another architect’s name.15

CBD sued for copyright infringement in February 2012. The defendant moved to dismiss, based on the three-year statute of limitations. The parties did not question whether the discovery rule applied, instead relying on Gaiman and Taylor. However, they disagreed about when discovery occurred. The defendant argued CBD discovered the alleged infringement when its employee saw the infringing plans in 2008, more than three years before CBD sued.16 The district court agreed with the defendant and granted the motion to dismiss. CBD appealed, and the Supreme Court decided Petrella while the appeal was pending.

The Seventh Circuit began by noting that “[a]s this case originally came to us, the parties’ dispute centered on the proper application of the discovery rule to the facts alleged in CBD’s complaint. But the Supreme Court’s recent decision in Petrella casts the limitations question in quite a different light.”17 The Seventh Circuit recognized that Petrella’s analysis of when a copyright claim accrues affected the case before it, and it discussed at length Petrella’s findings that “[f]or copyright cases in particular, ... an infringement claim accrues ‘when an infringing act occurs,’” and that “the Copyright Act’s statute of limitations establishes a ‘separate accrual rule’ for each violation.”18 “Put more succinctly, § 507(b) prescribes ‘a three-year look back limitations period for all civil claims arising under the Copyright Act.’”19

In light of Petrella’s conclusion that “an infringement is actionable within three years, and only three years, of its occurrence,” the Seventh Circuit concluded, “we now know that the right question to ask in copyright cases is whether the complaint contains allegations of infringing acts that occurred within the three-year look-back period from the date on which the suit was filed.”20 CBD had pled infringing acts occurring within three years of when it filed suit, and so the Seventh Circuit reversed the order for dismissal.21 Significantly, the Seventh Circuit offered this final word regarding the statute of limitations: “If on remand CBD continues to claim a right to recover for infringing acts that occurred in 2008 [i.e., beyond the three-year look back period], the parties will need to address whether Petrella abrogates the discovery rule in copyright cases....”22

As matters now stand, the question of whether Petrella establishes an occurrence rule of accrual for copyright claims is an open question. Given the volume of copyright litigation, courts in the Seventh Circuit should have ample opportunity in the near future to address this question, and perhaps to analyze for the first time whether the Seventh Circuit ever really adopted a discovery rule of accrual in the first place.

David Pliner is a partner with the Corneille Law Group, LLC, in the Madison office. David specializes in motion and appellate practice. He was selected a “Superlawyer” by Superlawyer’s Magazine in 2011-2014, and was selected to the 2013-2015 editions of “Best Lawyers in America.” David was named a “Leader in the Law” by the Wisconsin Law Journal in 2013. He can be reached at 609-661-1151 or by e-mail at dpliner@corneillelaw.com

Shannon A. Buttchen, Wisconsin 2012, cum laude, is an associate attorney with the Madison office of Corneille Law Group, S.C. She specializes in the defense of personal injury and medical negligence cases.

References

1 Title 17 of the United States Code.
2 572 U.S. ___, 134 S. Ct. 1962 (2014).
3 712 F.2d 1112 (7th Cir. 1983).
4 Id. at 1117.

5 Id. at 1117-18 (emphasis added).

6 Id. at 1119.

7 Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corp. of Cal., 522 U.S. 192, 201 (1997).
8 360 F.3d 644, 653 (7th Cir. 2004).
9 See, e.g., Levanthal v. Schenberg, 917 F. Supp. 2d 837, 845 (N.D. Ill. 2013) (citing Johnson v. Cypress Hill, 619 F. Supp. 2d 537, 543 (N.D. Ill. 2008), which in turn cited another earlier Illinois district court decision that had “endorsed” Taylor with little analysis); see also Beasley v. John Wiley & Sons., Inc.,2014 U.S. Dist. LEXIS 98711, at **19-20 (N.D. Ill. 2014) (unpublished decision); Frerck v. Pearson Educ., Inc., 2014 U.S. Dist. LEXIS 111562, at *8 (N.D. Ill. 2014) (unpublished decision); and Panoramic Stock Images, Ltd. v. John Wiley & Sons, Inc., 2014 U.S. Dist. LEXIS 121663, at **23-24 (N.D. Ill. 2014) (unpublished decision).
10 Petrella, 134 S. Ct. at 1973 (emphasis added).
11 Id.
12 At this point, the court noted in a footnote that nine circuits had adopted a discovery rule for copyright claims, citing William A. Graham Co. v. Haughey, 568 F.3d 425, 433 (3rd Cir. 2009). Haughey, in turn, string-cited cases from other circuits, including Gaiman v. McFarlane, 360 F.3d 644 (7th Cir. 2004).
13 Petrella, 134 S. Ct. at 1968-1970 (emphasis added).
14 770 F.3d 610 (2014).
15 Id. at 612-13.
16 Id. at 613.
17 Id. at 614.
18 Id.
19 Id. (quoting Petrella, 134 S. Ct. at 1968).
20 Id. at 616.
21 Id. at 617.
22 Id. at 618.