Distribution Infringement Claims Sink With the Time-Barred Ownership Claims Ship

In a case of first impression in this circuit, the Ninth Circuit Court of Appeals differentiated between the two kinds of copyright infringement claims:  ordinary copyright infringement (copying, preparing derivative works, distributing, publicly performing or publicly displaying without the owner’s permission) and copyright infringement in which the dispute is about ownership.  Copyright infringement claims involve establishing 1) that the plaintiff is the owner of a valid copyright and 2) that the defendant copied the original elements of the plaintiff’s work.  Seven Arts Filmed Entertainment sought to establish itself as the copyright owner of the films Rules of Engagement, An American Rhapsody, and Who is Cletis Tout? and sued Paramount Pictures for allegedly distributing the films without a license.  Paramount argued that Seven Arts’ infringement claims were barred by the statute of limitations.  The Ninth Circuit viewed this case as an ownership dispute.

Section 507(b) of the Copyright Act of 1976 requires civil copyright actions to be “commenced within three years after the claim accrued.”  Most copyright infringement lawsuits focus on whether the defendant copied the plaintiff’s work.  When copying is the issue, infringement claims for copying that occurs more than three years before the lawsuit was filed are barred, i.e., prohibited, by the statute of limitations.  But the defendant can still be held liable for copying that occurs between the three year statute of limitations date and the present.  Each new infringing act creates a new claim for infringement.  (However, damages are determined per work infringed, not by the number of infringing acts.)  The issue for the Ninth Circuit to decide was “whether a claim for copyright infringement in which ownership is the disputed issue is time-barred if a freestanding ownership claim would be barred.”  (Opinion pdf page 9).  Could Paramount be held liable for continuing infringing acts if the statute of limitations prevented Seven Arts from establishing copyright ownership ?

The Ninth Circuit ruled that Seven Arts’ ownership claim was barred by the statute of limitations and so were its ordinary infringement claims.

Allowing infringement claims to establish ownership where a freestanding ownership claim would be time-barred would permit plaintiffs to skirt the statute of limitations for ownership claims and lead to results that are potentially bizarre.

(Opinion pdf page 10).

The statute of limitations for ownership copyright infringement claims starts to run when other parties claiming to own the copyright expressly repudiate the plaintiff’s ownership claims.  The Ninth Circuit ruled that Paramount expressly repudiated Seven Arts’ copyright ownership claims more than three years before Seven Arts filed the lawsuit against Paramount.  Paramount continued to pay distribution royalties to third parties, CanWest Entertainment Inc. and Content Media Corp., after Seven Arts demanded that Paramount pay the distribution royalties to Seven Arts.

By choosing to continue paying royalties to CanWest and Content, rather than to Seven Arts’s predecessors, as demanded, Paramount plainly and expressly repudiated Seven Arts’s copyright ownership by 2005 at the latest. This action was filed over three years later, on May 27, 2011.

(Opinion pdf pages 14-15).

Seven Arts also argued that the statute of limitations should be tolled, i.e., stopped from running, due to previous pending cases involving its rights in these films.  According to the Ninth Circuit, “Such assertion borders on the frivolous.”  (Opinion pdf page 15).  There are no cases tolling the Copyright Act’s statute of limitations due to the existence of a pending lawsuit. 

Seven Arts points to no case holding that a plaintiff may rely on the filing of a separate action against a separate defendant to toll a subsequent copyright action against a new defendant. We decline to hold so here, especially where Seven Arts offers no compelling reason for its failure to sue Paramount in any earlier action, or to bring suit within the statute of limitations.

(Opinion pdf pages 15-16).

This case is Seven Arts Filmed Entertainment Limited v. Content Media Corporation, PLC, No. 11-56759, Ninth Circuit Court of Appeals.

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