Author’s Heir Delivers Own Knockdown Punch in “Raging Bull” Copyright Suit

In a recent decision that could lead to a surge in lawsuits on behalf of copyright owners, especially those with limited resources to immediately pursue claims, a 6–3 Supreme Court held that laches cannot be invoked as a bar to a copyright owner’s pursuit of a claim for damages brought within §507(b)’s three-year window.¹  Even though the copyright owner in this case waited eighteen (18) years to file her lawsuit, the Court determined that the copyright statute takes into account this type of delay by restricting a successful plaintiff to retrospective relief only three years back from the time of suit. The Court’s decision resolved a split among the circuit courts.

Copyrights to a book and screenplay retelling the story of boxing champion Jake LaMotta, which served as the genesis for the 1980 Raging Bull film starring Robert De Niro, were transferred by the author Frank Petrella to Metro-Goldwyn-Mayer, Inc. (“MGM”). However, renewal rights for these copyrights reverted back to his heirs when he died in 1981 during the initial term of the copyright.² Frank Petrella’s daughter, Paula Petrella, therefore became sole owner of the copyrights and she timely renewed the copyright in the screenplay in 1991. She then informed MGM of her ownership and that exploitation of any derivative works would result in legal action. Despite this, MGM continued marketing and selling DVD and Blu-ray versions of the film, and Petrella filed suit on January 6, 2009 for copyright infringement.

The district court dismissed Petrella’s copyright infringement suit for laches due to her 18-year delay in bringing suit, from 1991, when she renewed the copyright and, hence, acquired ownership of the copyright, until 2009, when she commenced suit. The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal and noted that MGM had established expectations-based prejudice. That is, the company had made a large investment in the Raging Bull film believing it had complete ownership and control of the film and was, therefore, prejudiced by Petrella’s delay in filing suit. A concurring circuit judge did however note that laches in copyright cases is “notably in tension with Congress’ [provision of a three-year limitations period],” foreshadowing the Supreme Court’s decision. In Petrella v. Metro-Goldwyn-Mayer, Inc., case number 12-1315, the Supreme Court reversed, holding that laches cannot be invoked as a bar to Petrella’s pursuit of a claim for damages brought within §507(b)’s three-year window and finding MGM’s principal arguments supporting its laches defense unavailing. The case will now return to the district court to determine the merits of the infringement claim.

The Court declined MGM’s invitation to find that its laches defense bars all forms of relief. Such an “expansive role for laches careens away from understandings, past and present, of the essentially gap-filling, not legislation-overriding, offices of laches,” the Court said. The Court expressly distinguished laches from equitable tolling, which lengthens the time for commencing a civil action in appropriate circumstances. Equitable tolling “applies when there is a statute of limitations; it is, in effect, a rule of interpretation tied to that limit. Laches, in contrast, originally served as a guide when no statute of limitations controlled the claim.”

The majority of the Court also appeared unconcerned about copyright owners deferring suit until it can be “estimate[d] whether litigation is worth the candle.” MGM insisted that a laches defense must be available to prevent a copyright owner from sitting still, doing nothing, waiting to see the outcome of an alleged infringer’s investment. In fact, Petrella had conceded that she waited to file because “the film was deeply in debt and in the red and would probably never recoup.” Because the copyright statute allows a successful plaintiff to gain retrospective relief only three years back from the time of suit, the Court observed that due to her delay “[s]he will miss out on damages for periods prior to the three-year look-back.”. “But her right to prospective injunctive relief should remain unaltered.”

The Court was not sympathetic to MGM’s concern that evidence needed or useful to defend against liability will be lost due to a copyright owner’s delay or inaction, presuming Congress had already considered this scenario when drafting legislation:

Congress provided for reversionary renewal rights exercisable by an author’s heirs, rights that can be exercised, at the earliest for pre-1978 copyrights, 28 years after a work was written and copyrighted. At that time, the author, and perhaps other witnesses to the creation of the work, will be dead. Congress must have been aware that the passage of time and the author’s death could cause a loss or dilution of evidence. Congress chose, nonetheless, to give the author’s family ”a second chance to obtain fair remuneration.”

The registration mechanism, a prerequisite to filing a copyright infringement lawsuit, also reduces the need for extrinsic evidence. The Court noted that:

[k]ey evidence in the litigation, then will be the certificate, the original work, and the allegedly infringing work, and the adjudication will often turn on the factfinder’s direct comparison of the original and infringing works.

Finally, the Court distinguished between laches, for which timeliness is the essential element, and equitable estoppel, the “gravamen” of which is “misleading and consequent loss.” The doctrine of equitable estoppel may bar the copyright owner’s claims completely, eliminating all potential remedies.

The Court noted that while laches cannot be invoked to preclude adjudication of a claim for damages brought within the Act’s three-year window, in extraordinary circumstances laches may, at the very outset of the litigation, curtail the relief equitably awarded, such as “total destruction” of a construction project substantially constructed and occupied, or a book already printed, packed, and shipped.

This decision will likely increase the number of copyright cases being brought, particularly on behalf of copyright owners who have limited means or have waited for the commercial version of their copyrighted work to become a success. Any party that has acquired copyrights from another will likely wish to reevaluate their ownership agreements. As here, copyright owners by transfer should be aware of the termination provisions of the Copyright Act and their effects on copyright ownership. To the extent any ongoing infringement is discovered, a party should immediately cease the infringing activities, at least cutting off exposure by stopping any new limitations periods under the separate accrual rules. If possible, transferees should seek to reacquire copyright ownership post-termination. If reacquiring ownership rights is not an option, former transferees wishing to reacquire rights to the copyright may consider licensing the copyright for an initial lump sum or lower non-escalating royalty on future profits. Similarly, authors negotiating to license their rights may be best served by a royalty tied directly to the licensee’s revenues. In this manner any later commercial success may be captured regardless of whether the licensee has recovered its investment in exploiting the work.

The decision may have broader implications outside the copyright realm given the rationale of the Court with respect to look-back windows. For example, the patent statute provides a similar look-back window allowing recovery of damages for infringement taking place within the six years prior to the filing of the complaint.³ However, the Federal Circuit has previously held that if laches is established, then the patentee's claim for damages prior to suit may be entirely barred in certain circumstances.⁴ Patentees may now argue that an entire bar does not square with the instant decision and as support point to a footnote in the opinion stating, “[w]e have not had occasion to review the Federal Circuit’s position.” On the other hand, those relying on the equitable defense of laches to patent infringement will point to the fact that despite being aware of the over twenty-two (22) years of patent laches precedent, Congress did not alter 35 U.S.C. §286 in the recent America Invents Act. Consequently, the effect of this decision, if any, on patent law remains to be seen.

1. The Act’s statute of limitations provides: “No civil action shall be maintained under the [Act] unless it is commenced within three years after the claim accrued.” §507(b). A claim ordinarily accrues when an infringing act occurs. Under the separate-accrual rule that attends the copyright statute of limitations, when a defendant has committed successive violations, each infringing act starts a new limitations period. However, under §507(b), each infringement is actionable only within three years of its occurrence.

2. Although transferred rights to the registered copyrights were stated to be “exclusive[e] and forever, including all periods of copyright and renewals and extensions thereof,” a later Supreme Court decision in Stewart v. Abend meant that renewal rights the elder Petrella had transferred to the studio reverted back to his family when passed, unburdened by any assignment previously made by the author. Such post-transfer termination provisions of the Copyright Act are intended to provide an author and his or her family a second chance to reap the benefits of the author’s creative accomplishments by furnishing the opportunity to terminate transfers made during the term of the copyright.

3. 35 U.S.C. §286.

4. A.C. Auckerman Company v. R.L. Chaides Construction Co., 960 F. 2d 1020 (Fed. Cir. 1992, en banc).