Untimely Ownership Claim Time-Bars Copyright Infringement Claim Where Basis of Dispute Is Ownership – Seven Arts Filmed Entertainment Ltd. v. Paramount Pictures Corp.

The U.S. Court of Appeals for the Ninth Circuit held that a district court properly dismissed a copyright infringement suit as untimely where the plaintiff sought to establish its ownership in several motion pictures more than three years after the defendant repudiated plaintiff’s control of the works. Seven Arts Filmed Entertainment Ltd. v. Paramount Pictures Corp., Case No. 11-56759 (9th Cir., Nov. 6, 2013) (O’Scannlain, J.).

Over the course of ten years and multiple lawsuits, plaintiff Seven Arts Filmed Entertainment Limited (Seven Arts) sought to establish ownership in three motion pictures, Rules of Engagement, An American Rhapsody and Who Is Cletis Tout? In 2011, Seven Arts secured an order from a Canadian court granting Seven Arts a declaration that it “is and at all relevant times had been” the owner of the copyrights to the films and had exclusive international distribution rights. Following that ruling, Seven Arts filed the instant action in California federal court against Paramount Pictures Corporation (Paramount) asserting infringement for unauthorized distribution of the films and requesting from the court a declaration of Seven Arts’s ownership rights in the films. The district court granted Paramount’s motion to dismiss on the grounds that Seven Arts’s claim for copyright infringement was barred by the Copyright Act’s three-year statute of limitations. Seven Arts appealed.

Under the Copyright Act, claims for ordinary copyright infringement must be brought within three years after the claim accrues. Thus, a new three-year statute of limitations is created upon each act of infringement. However, courts have held that claims pertaining to copyright authorship accrue only once and must be brought within three years from when “plain and express repudiation” of authorship is communicated to the claimant. In this case, the 9th Circuit followed guidance from the U.S. Court of Appeals for the Second and Sixth Circuits to affirm the district court ruling that an infringement claim where the central issue is copyright ownership is only timely if such ownership claim, standing alone, would also be timely. The court reasoned that this approach prevents plaintiffs from navigating around the statute of limitations for copyright ownership claims by simply disguising the grievance as an infringement claim. The 9th Circuit noted that creating a circuit split in the area of copyright, as Seven Arts requested, would be “particularly troublesome” and would lead to inconsistent levels of copyright protection among jurisdictions.

The court reasoned that in 2005, Paramount “plainly and expressly” repudiated Seven Arts’s ownership in and to the films when it failed to comply with Seven Arts’s demands to cease distribution of the films and pay Seven Arts distribution royalties. As Seven Arts filed the present action more than three years later, the 9th Circuit affirmed the district court’s ruling that the plaintiff’s infringement claim was time-barred.

Practice Note: A variation of this issue is scheduled to be addressed by the Supreme Court in oral argument set for early 2014 in the case Petrella v. MGM, where the issue of whether the equitable defense of laches is available to bar a copyright infringement claim timely filed within the three-year statute of limitations prescribed by the Copyright Act.