Copyright Law Blog: Exclusive Rights

Category Archives: Statute of Limitations

Liability in US for overseas infringement stemming from domestic, predicative act outside the SOL

Shourin Sen - 21 October 2010 – 10:04 am

Filed under Extraterritoriality, News, Statute of Limitations

In re Outsidewall Tire Litig., 1:09cv1217 (E.D.V.A. October 18, 2010)

There was an interesting decision on the extraterritorial application of the Copyright Act and the statute of limitations this week. The plaintiffs, an individual and his trio of companies which produced mine vehicle tires, alleged that a group of defendants manufactured and distributed infringing tires. A jury returned a verdict in the plaintiffs’ favor on a series of claims including copyright infringement. Defendants moved for a new trial.

The plaintiffs alleged that the defendants manufactured the infringing tires abroad using designs that were copied in the U.S., outside of the statute of limitations. The Court found that the defendants were domestically liable for damages on the overseas infringement because the infringement was enabled by domestic, predicate acts, even though the domestic acts occurred prior to (what the Court applied as) the statute of limitations period:

Defendants next argue that the verdict should be set aside because no acts of copyright infringement occurred in the United States. As discussed in the July 21 Order, this argument is also unavailing. See July 21 Order, at 14. As an initial matter, the evidence adduced at trial plainly showed (i) that in 2005 and early 2006, Vance copied plaintiffs’ Alpha tire blueprints and modified them to create an infringing derivative work for defendants and (ii) that he did so in part in Virginia. It is true that none of these acts occurred in the United States after October 28, 2006, meaning the acts do not fall within the limitations period for the copyright claims. Indeed, both the manufacturing of the infringing tires based on Vance’s work and the sales of such tires occurred outside the United States during the relevant limitations period. While the Fourth Circuit has [*30] not yet addressed whether extraterritorial exploitation of a copyright falls within the Copyright Act’s jurisdiction when the domestic, predicate acts occurred prior to the limitations period, the Second and Ninth Circuits have sensibly held that such infringement is covered by the Act. See L.A. News Serv. v. Reuters Tel. Int’l, Ltd., 340 F.3d 926, 928 (9th Cir. 2003); Update Art, Inc. v. Modiin Pub., Ltd., 843 F.2d 67, 73 (2d Cir. 1988). ¹⁸ Specifically, the Ninth Circuit has held that while “the Copyright Act does not apply extraterritorially, an exception may apply where an act of infringement is completed entirely within the United States and that such infringing act enabled further exploitation abroad.” L.A. News, 340 F.3d at 928; see also Update Art, 843 F.2d at 73 (in the Second Circuit, holding that although “copyright laws generally do not have extraterritorial application[,] [t]here is an exception . . . when the type of infringement permits further reproduction abroad”). This rule ensures that domestic copyright infringers cannot escape liability for their infringing acts by exploiting the fruits of their infringement in foreign markets. This rule is appropriately applied [*31] in this case. Defendants cannot escape the reach of the Copyright Act where, as here, they initiated and committed their infringing acts in the United States and then attempted to reap the spoils of their infringement by manufacturing and selling their infringing tires abroad. Thus, they are liable for the foreign acts implementing their unlawful infringement scheme.

FOOTNOTES

18 The Sixth Circuit has also recognized that a court has subject matter jurisdiction over a copyright infringement action “as long as some act of infringement occurred in the United States,” even if most of the infringing conduct took occurred abroad. Liberty Toy Co. v. Fred ilber Co., No. 97-3177, 1998 U.S. App. LEXIS 14866, at *11 (6th Cir. June 29, 1998).

Furthermore, the fact that the domestic acts of infringement occurred outside of the limitations period is irrelevant to defendants’ liability, because the Copyright Act’s statute of limitations limits the remedy, not the substantive rights, under the Act. See Prather v. Neva Paperbacks, Inc., 446 F.2d 338, 340 (5th Cir. 1971) (holding that the limitations period would affects “the remedy only, not the substantive right” under the Copyright Act); Peter Letterese & Assocs. v. World Inst. of Scientology Enters., 533 F.3d 1287, 1320 (11th Cir. 2008) [*32] (agreeing with the Fifth Circuit’s analysis). Accordingly, defendants are liable for their foreign acts of infringement despite the fact that the domestic acts of infringement occurred before October 28, 2006.

Finally, defendants’ argue that Virginia law was improperly applied to the claims in this action because the wrongful acts did not occur in Virginia. This assertion is plainly meritless, since there is no question that acts of infringement occurred in the Commonwealth of Virginia. The Supreme Court of Virginia has consistently held that it is the place of the wrong that determines which state’s substantive law applies. See Quillen v. International Playlex, Inc., 789 F.2d 1041, 1044 (4th Cir. Va. 1986) (citing McMillan v. McMillan, 219 Va. 1127, 253 S.E.2d 662 (1979)).

Third Circuit holds discovery rules govern claim accrual under the Copyright Act

Shourin Sen - 10 June 2009 – 9:00 am

Filed under Statute of Limitations

William A. Graham Co. v. Haughey, 2009 WL 1564223 (3d. Cir. 2009)

On Friday, the Third Circuit (Scirica, Hardiman, Sloviter writing) issued an order addressing one of the most consistently litigated areas of copyright law. 17 U.S.C. 507(b) provides that “[n]o civil action shall be maintained under the provisions of [the Copyright Act] unless it is commenced within three years after the claim accrued.” The Act, however, doesn’t explicitly state when a claim accrues. As we discussed last week, federal courts have at times adopted two different methods for determining claim accrual under the Copyright Act. If a court applies injury rules, a cause of action accrues at the time of injury; under discovery rules, a claim accrues when the plaintiff discovers, or with due diligence should have discovered, the injury that forms the basis for the claim.

Litigation concerning how to determine when a copyright claim accrues kicked into gear after the Supreme Court’s opinion in TRW Inc. v. Andrews, 534 U.S. 19 (2001). In the case, the Supreme Court addressed a statute of limitations provision from the Fair Credit Reporting Act:

An action to enforce any liability created under this subchapter may be brought . . . not later than the earlier of . . .

(1) 2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or

(2) 6 years after the date on which the violation that is the basis for such liability occurs.

The Ninth Circuit interpreted the “6 years” period as incorporating a general discovery rule because Congress hadn’t “expressly legislated otherwise.” The Supreme Court overturned and found that “to the extent such a presumption exists, a matter this case does not oblige us to decide, the Ninth Circuit conspicuously overstated its scope and force.”

So, if TRW cleared away a hard line presumption for the discovery rule, it still left the circuit courts a great deal of latitude for how to interpret statute of limitations provisions, and whether to incorporate a softer presumption for discovery rules. And following the case, as one would expect, courts have at times reached differing interpretations on this question. While many courts have adopted the discovery rule, there are a series of cases where courts have applied the injury rule. See e.g., Auscape International, 409 F.Supp.2d 235 (S.D.N.Y. 2004); Vasquez v. Torres-Negron, 2007 WL 2244784 (S.D.N.Y. 2007); Roberts v. Keith, 2006 WL 547252 (S.D.N.Y. 2006); Med. Educ. Dev. Servs., Inc. v. Reed Elsevier Group, PLC, 2008 WL 4449412 (S.D.N.Y. 2008). To the best of my knowledge (please let me know in the comments if I’m missing anything), the Ninth Circuit is the only other circuit to directly address the issue of when a copyright claim accrues post TRW. Polar Bear Prod., Inc. v. Timex Corporation, 384 F.3d 700 (9th. Cir. 2004).

The Plaintiff in William A. Graham Co. v. Haughey was an insurance brokerage firm. The Defendant was a former sales employee who struck out on his own. The Defendant entered into an agreement with the Plaintiff to purchase some of its accounts. The Plaintiff provided the Defendant with documentation related to the accounts, including extensive proposals, pursuant to a confidentiality agreement. The Defendant later used the proposals to target new clients. Although the alleged infringement took place between 1992 and 2005, the Plaintiff didn’t find out about the infringement until 2004.

The question on appeal was whether the defendant was only liable for the infringement that occurred after 2002 (injury rules) or whether the defendant could be held liable for all of the infringement since 1992, because the plaintiff neither discovered or with due diligence should have discovered the injury (discovery rules). The Third Circuit found that, provided Congress hasn’t codified an “explicit command” or “implication from the structure and text of the statute, a court should apply a general discovery rule.” Regardless, the Third Circuit also found that structure of the Copyright Act favors use of the discovery rule. I’ve quoted here at length because I find the analysis interesting:

USI would have us set aside that analysis, applied by this court less than a year ago, in favor of a single district court decision in another circuit which used the injury rule to determine when claims accrue under the Copyright Act. See Auscape Int’l v. Nat’l Geographic Soc’y, 409 F.Supp.2d 235, 247 (S.D.N.Y.2004). We decline to do so. Even the court in Auscape conceded that “the text and structure of the [Copyright Act] lend no guidance” as to “Congress’ intent with regard to when an infringement claim accrues .” Id. at 244. This concession answers in the negative the first question raised in Disabled in Action: whether “Congress has specified an accrual date by ‘explicit command’ or ‘by implication from the structure and text of the statute.’ “ 539 F.3d at 209 (quoting TRW, 534 U.S. at 27-28).

Further, the text and structure of the Copyright Act actually favor use of the discovery rule. As noted by Graham, criminal actions under the Copyright Act must be “commenced within 5 years after the cause of action arose.” 17 U.S.C. § 507(a) (emphasis added). Just six years prior to the amendment to the Copyright Act that added the civil limitations period now codified at 17 U.S.C. § 507(b), the Supreme Court interpreted language similar to § 507(a)’ s criminal limitations period in the Admiralty Act (“cause of action arises”) to embody the injury rule. McMahon v. United States, 342 U.S. 25-26, 27 (1951); see also TRW, 534 U.S. at 32 (noting that petitioner “offer[ed] a strong argument” that use of the word “arise” in a statute of limitations provision signals congressional intent to adopt the injury rule (citing McMahon, 342 U.S. 25)). Significantly, Congress used different language in the civil limitations provision (“after the claim accrued”), which the Supreme Court had previously interpreted as embodying the discovery rule. See Urie v. Thompson, 337 U.S. 163, 169-170 (1949) (construing “cause of action accrued” in Federal Employers’ Liability Act and holding that statute of limitations was not triggered until injured employee should have known of injury). Given the maxim of statutory construction that “when the legislature uses certain language in one part of the statute and different language in another, the court assumes different meanings were intended,” Sosa v. Alvarez-Machain, 542 U.S. 692, 711 n. 9 (2004) (quotation omitted), Graham persuasively argues that the criminal and civil limitations periods embody different claim accrual rules and that § 507(b) should be interpreted to embody the discovery rule.

USI, once again pointing to Auscape, interprets the legislative history of the Copyright Act’s statute of limitations provision as evidence of congressional intent to adopt the injury rule for civil claims brought pursuant to the Copyright Act. However, Congress provided no “directive” mandating use of the injury rule in that legislative history. Disabled in Action, 539 F.3d at 209.

For example, until the statute of limitations provision now codified at 17 U.S.C. § 507(b) was enacted in 1957, the Copyright Act lacked a statute of limitations period for civil actions and courts borrowed state statutes of limitation for analogous claims. See S.Rep. No. 85-1014 (1957), as reprinted in 1957 U.S.C.C.A.N.1961, 1961-62. USI notes several instances in the legislative history of § 507(b) in which congress persons and witnesses argued that § 507(b) was necessary to provide a “uniform” or “fixed” limitations period. However, these statements reflected dissatisfaction with the use of state statutes of limitations, which ranged from one to eight years and therefore encouraged forum-shopping. See id. at 1962; see also Copyrights-Statute of Limitations: Hearing on H.R. 781 Before H. Comm. on the Judiciary, 84th Cong. 9, 35, 40 (1955) (hereafter “Hearing”). None of these statements addressed the separate issue of when a claim would accrue under the new federal three-year statute of limitations.

USI also relies on a statement in the Senate Report that “due to the nature of publication of works of art … generally the person injured receives reasonably prompt notice or can easily ascertain any infringement of his rights. The committee agrees that 3 years is an appropriate period for a uniform statute of limitations for civil copyright actions and that it would provide an adequate opportunity for the injured party to commence his action.” S.Rep. No. 85-1014 (1957), as reprinted in 1957 U.S.C.C.A.N.1961, 1962. Again, this statement does not speak directly to the accrual of actions, but rather seeks to support the three-year limitations period adopted by Congress. Moreover, the fact that Congress believed that infringement was “generally” a public act does not necessarily imply that, in cases in which infringement was not public, Congress intended to reject application of the discovery rule. Indeed, the quoted passage speaks of whether the injured party has “reasonably prompt notice” of infringement-an inquiry consistent with the discovery rule.

USI next points to what we view as an unenlightening exchange between Representative Shepard J. Crumpacker and a lobbyist for the motion picture industry during a House committee hearing. Representative Crumpacker was concerned that a movie company could make a movie that infringed on a writer’s script, secretly show that movie in a small town, sit on the movie until the statute of limitations passed, and then release the movie generally while claiming that the writer was barred from enforcing his or her rights. Hearing at 47. The lobbyist responded that each performance of the film would constitute a separate act of infringement. Id. at 48. This exchange is not illustrative of Congressional intent regarding when copyright claims accrue, but is cited by USI because the lobbyist also stated that “if [an act of infringement] occurred three years ago … [, then it] would be barred in three years.” Id. That single statement by a witness at a congressional hearing, which no congress person commented on or agreed with, signifies nothing and is hardly a basis to conclude that Congress intended to apply the injury rule.

USI also notes that Congress considered including certain express provisions to permit tolling of the statute of limitations, including where the infringer was guilty of fraudulent concealment, and it argues that the consideration of these exceptions would have been unnecessary had Congress intended to apply the discovery rule to claims under the Copyright Act. Of course, had Congress included those limited exceptions within § 507(b), the holding in TRW might well have inclined us to reject the discovery rule here. But the important fact is that Congress rejected inclusion of any statutory exceptions to the statute of limitations period, and did so because “the Federal district courts, generally, would recognize these equitable defenses anyway.” H. Rep. No. 84-2419, at 2 (1956).

Moreover, the legislative history makes clear that Congress intended the Copyright Act’s statute of limitations to apply “to the remedy of the person affected thereby, and not to his substantive rights,” id., by which Congress meant that “[e]quitable considerations are available to prolong the time for bringing suit,” id. at 3. Further, Congress feared that inclusion of specific statutory exceptions to the three-year limitations period “might result in unfairness to some persons.” S.Rep. No. 85-1014 (1957), as reprinted in 1957 U.S.C.C.A.N.1961, 1963. Thus, this case actually presents the opposite situation as TRW: Congress considered, but rejected, inclusion of specific statutory exceptions to the Copyright Act’s statute of limitations in order to ensure that the courts could consider any equitable circumstances sufficient to excuse a plaintiff’s failure to sue within the three-year limitations period.

Finally, USI argues that use of the discovery rule would be inappropriate as a matter of policy. USI notes that in TRW the Supreme Court stated that it has “recognized a prevailing discovery rule … in two contexts, latent disease and medical malpractice, ‘where the cry for such a rule is loudest.’ “ TRW, 534 U.S. at 27 (quoting Rotella v. Wood, 528 U.S. 549, 555 (2000)). USI would distinguish copyright infringement, arguing that “there is nothing intrinsically ‘hidden’ or ‘latent’ about copyright infringement because it is by its nature a public act that is only very rarely hidden from the copyright owner.” USI’s Reply Br. at 16. That may be true in some instances but not in all. Technological advances such as personal computing and the internet have “ma[de] it more difficult for rights holders to stridently police and protect their copyrights.” John Ramirez, Note, Discovering Injury? The Confused State of the Statute of Limitations for Federal Copyright Infringement, 17 Fordham Intell. Prop. Media & Ent. L.J. 1125, 1158 (2007) (concluding that discovery rule is appropriate for copyright actions).

Equitable tolling of the SOL for filing a timely action that is dismissed for lack of personal jurisdiction

Shourin Sen - 4 June 2009 – 9:00 am

Filed under Statute of Limitations

L.A. Printex Industries, Inc. v. At Last Sportswear, Inc., 2009 WL 1285923 (S.D.N.Y. 2009)

This decision is almost a month old but I’ve been meaning to write about it for a while. As many of you know, the Copyright Act states that a copyright owner must commence a suit “within three years after the claim accrued.” The Copyright Act, however, doesn’t explicitly state when a claim accrues. Federal courts have at times used two different rules for determining when a claim for copyright infringement accrues: under the injury rule, a claim accrues at the time of infringement; under the discovery rule, accrual often occurs later, at the time a “plaintiff knows of the infringement or is chargeable with such knowledge.” See Bridgeport Music Inc. v. Diamond Time, Ltd., 371 F.3d 883 (6th Cir. 2004).

Nowhere is there as many divergent decision by district courts in regards to the statue of limitations than in the Second Circuit. On May 4, Judge Jed S. Rakoff issued an order finding that the Court didn’t need to decide what rule to apply because the statute of limitations was equitably tolled because the plaintiff had filed a complaint in the Central District of California, which was dismissed for lack of personal jurisdiction. I may be reading too much into the decision, such is the state of armchair quarterbacking, but it almost seems like the Court was relieved not to have to decide the issue:

Defendant urges this Court to join several other courts in this district in finding that the 2001 Supreme Court decision TRW Inc. v. Andrews, 534 U.S. 19 (2001), necessitates reconsideration of the Second Circuit’s previous adoption of a discovery rule. See Auscape International, 409 F.Supp.2d 235 (S.D.N.Y.2004); Vasquez v. Torres-Negron, No. 06 Civ. 819, 2007 WL 2244784, at *5 (S.D.N.Y. Jul. 11, 2007); Roberts v. Keith, No. 04 Civ. 10079, 2006 WL 547252, at *2-3 (S.D.N.Y. Mar. 7, 2006); Med. Educ. Dev. Servs., Inc. v. Reed Elsevier Group, PLC, No. 05 Civ. 8665, 2008 WL 4449412, at *10 (S.D.N.Y. Sept. 30, 2008). Plaintiff argues, in response, that the Second Circuit’s pre- TRW rule remains the law in this Circuit and, unless changed by the Court of Appeals itself, must be followed. Cf. Home Design Servs., Inc. v. B & B Custom Homes, LLC, 509 F.Supp.2d 968 (D.Colo.2007) (rejecting the argument that TRW mandates the reassessment of the discovery rule in the copyright context).

The Court need not resolve this issue, however, because the Court finds that the statute of limitations was equitably tolled for a period sufficient to defeat defendant’s claim that the statute of limitations has run.

* * * * *

Here, plaintiff filed a timely action against At Last on May 15, 2008 in the Central District of California. It litigated defendant’s motion to dismiss for lack of personal jurisdiction, and then, when the California Action was dismissed, it filed the instant action within three weeks, a span of time that suggests reasonable diligence, see Abbas v. Dixon, 480 F.3d 636, 642 (2d Cir.2007) (noting that “[d]ue diligence on the part of the plaintiff in bringing an action … is an essential element of equitable relief”) (quotation marks and alterations deleted).

Defendant attempts to characterize plaintiff as a chronic litigator, but there is nothing to suggest that the instant action is frivolous and a copyright holder is understandably assiduous in defense of its copyright. Defendant also argues that plaintiff should have either abandoned the California Action when defendant filed its motion to dismiss in the California Action-at which point the statute of limitations had not run under any rule-or moved for transfer of venue when personal jurisdiction was found not to exist. The Court does not believe, however, that plaintiff was obligated to abandon the California Action mid-stream just because defendant asserted it was not subject to personal jurisdiction. And while plaintiff, as it now acknowledges, could have avoided the statute of limitations problem altogether by seeking transfer, nonetheless, given the fact that plaintiff promptly brought suit in the Southern District of New York after the California Action was dismissed, the Court does not see this
oversight as reason to deny plaintiff equitable tolling.

As the Supreme Court has noted, “[w]hen a lawsuit is filed, that filing shows a desire on the part of the plaintiff to begin his case and thereby toll whatever statutes of limitation would otherwise apply.” Goldlawr, Inc. v. Heiman, 369 U.S. 463, 467 (1962). Defendant has been on notice since at least May 15, 2008 that it will be called upon to defend against plaintiff’s lawsuit and cannot claim that it suffers any prejudice as a result of plaintiff’s actions.

Accordingly, the Court finds that the statute of limitations was equitably tolled during the four and one-half months that the California Action was pending. The instant action was therefore timely brought regardless of whether an injury rule or a discovery rule is applied. Defendant’s motion to dismiss is therefore denied.

M.D. Tenn.: Defendants ordered to produce discovery that is more than three years old

Shourin Sen - 12 January 2009 – 10:09 pm

Filed under Statute of Limitations

Frank Betz Associates, Inc. v. J.O. Clark Construction LLC, 08 cv 00159, 2009 WL 47143 (M.D. Tenn. Jan 7, 2009) (discovery order).

In this suit, Frank Betz Associates, Inc., an architecture firm, alleged that J.O. Clark Construction and Clark & Howell Building Group, home construction corporations, infringed their architectural designs. During discovery, Betz sought documents and information related to houses that the defendants had built and sold in the previous nine years.

The defendants only provided information relating to the 179 houses that they had sold within three years prior to the filing of the suit. The defendants further moved for a protective order that would limit the scope of the plaintiff’s written discovery to three years prior to the filing of the suit.

17 U.S.C. § 507 provides that a civil action under the Act must be “commenced within three years after the claim accrued.” The defendants argued that the E.D. of Tenn. should follow the rule, adopted by the S.D.N.Y., that a claim begins to accrue at the actual time of the injury, not when the plaintiffs discovered the injury. See Auscape Int’l v. National Geographic Soc’y, 409 F.Supp.2d 235 (S.D.N.Y.2004).

The Court concluded that the ruling in Auscape was a “minority view,” finding that the “vast majority” of courts that have addressed this issue mark the plaintiffs’ discovery of harm, not the moment of actual harm, as the time when the statute of limitations begin to accrue. The Court further cited Bridgeport Music, Inc. v. Diamond Time, Ltd., 371 F.3d 883, 889 (6th Cir.2004) for the finding that “[a] cause of action accrues when a plaintiff knows of the infringement or is chargeable with such knowledge,” an enunciation of the “discovery rule.”

However, despite the strong language, the Court refrained from explicitly endorsing the “discovery rule,” and instead, based their order on the fact that the Magistrate Judge should refrain on ruling on dispositive issues during discovery:

In ruling on an issue involving the scope of discovery, it is more appropriate to permit a wider scope, if it is defensible and has legitimate underpinnings, leaving the dispositive issue to be resolved by the District Judge. The applicability of the “discovery rule” in the Sixth Circuit is at least defensible and has the authority of the Sixth Circuit pronouncements. This discovery ruling is not, however, intended to foreshadow or have any impact on any corollary dispositive issue.

Documents: