WASHINGTON, D.C. — (Mealey’s) The defense of laches cannot serve as a bar to allegations of copyright infringement, an attorney for the holder of renewal rights in the screenplay “The Raging Bull” told the U.S. Supreme Court on Jan. 21 (Paula Petrella v. Metro-Goldwyn-Mayer Inc., No. 12-1315, U.S. Sup.; See 1/21/14, Page 41).
The Ninth Circuit U.S. Court of Appeals erroneously relied on laches in rejecting out of hand petitioner Paula Petrella’s case against respondent Metro-Goldwyn-Mayer Inc. (MGM), according to Stephanos Bibas, who outlined four grounds for reversal.
“First, under the separate accrual rule, these claims are timely. . . . Second, laches is a gap filler, but Congress filled this gap with a bright-line statute of limitations. Third, Congress chose a clear, predictable timeliness rule. And fourth, injunctive relief must remain available to protect petitioner's property right against ongoing violations, less respondents effectively get a compulsory license for free for the next four decades,” Bibas argued.
Rights Passed On
The late Frank Petrella wrote several literary works based on the life of his longtime friend, boxing champion Jake LaMotta: “The Raging Bull,” another related screenplay, and a book, each of which he copyrighted. In 1976, Frank Petrella and LaMotta assigned the copyrights associated with the works to Chartoff-Winkler Productions. Two years later, United Artists Corp., a subsidiary of respondent MGM, acquired the motion picture rights to the works from Chartoff-Winkler. In 1980, United Artists released “Raging Bull,” a critically acclaimed and award-winning movie based on LaMotta’s life. In 1981, during the original 28-year term of the copyrights for the book and the two screenplays, Frank Petrella died and his renewal rights in the works passed to his heirs. In 1991, his daughter, Paula, filed a copyright renewal application for the 1963 screenplay.
In 1998, Paula Petrella’s attorney contacted MGM, asserting that Paula Petrella had obtained the rights to the 1963 screenplay and that the continuing exploitation of any derivative work, including “Raging Bull,” was an infringement of these exclusive rights. Over the next two years, Paula Petrella and MGM exchanged a series of letters in which she accused MGM of infringing her copyrights and MGM insisted that it did not. In 2009, Paula Petrella sued MGM, United Artists, Metro-Goldwyn-Mayer Studios Inc., Metro-Goldwyn-Mayer Home Entertainment LLC, Metro-Goldwyn-Mayer Home Entertainment Distribution Corp. and 20th Century Fox Home Entertainment LLC (collectively, MGM) in the U.S. District Court for the Central District of California for copyright infringement. The complaint sought monetary damages, injunctive relief, attorney fees and costs.
Because the Copyright Act has a three-year statute of limitations, Paula Petrella alleged that MGM was liable for infringement beginning in 2006. The District Court granted summary judgment in favor of MGM, however, after finding that the copyright infringement claim was barred by the doctrine of laches. The court held that Paula Petrella had unreasonably delayed by not filing suit until 2009 and that her delay prejudiced MGM in terms of both its commercial expectations and its access to evidence. The Ninth Circuit U.S. Court of Appeals — relying on Danjaq LLC v. Sony Corp., 263 F. 3d 942 (9th Cir. 2001) [an enhanced version of this opinion is available to lexis.com subscribers] — affirmed, holding that Petrella’s copyright, unjust enrichment and accounting claims are barred by laches and that the District Court did not abuse its discretion by denying a related motion by MGM for sanctions and attorney fees. Pursuant to Danjaq, the appellate panel held, laches can bar all relief, both legal and equitable, when a plaintiff delays initiating litigation, when the delay is unreasonable and when the delay results in prejudice. In a concurrence, however, Judge William A. Fletcher stated that the decision was correct only because the panel was compelled to follow Danjaq; what’s more, Judge Fletcher lamented that “our circuit is the most hostile to copyright owners of all the circuits.”
Paula Petrella responded with a petition for writ of certiorari with the Supreme Court, presenting the following question: “Whether the nonstatutory defense of laches is available without restriction to bar all remedies for civil copyright claims filed within the three-year statute of limitations prescribed by Congress, 17 U.S.C. § 507(b).” The Supreme Court granted the petition in October 2013.
Value Goes Down
In oral arguments today, Bibas urged reversal, noting that “whether our client brings suit now or 20 years from now, she gets three and only three years’ [worth of] damages.”
“The evidence in this case is that creative works are worth the most right after they’re released. And so the value of the claim goes down. Respondents get to keep the first years of profits if she waits. So she has every incentive, as the amicus briefs indicate, to file suit early. And, indeed, courts can use adverse inferences against plaintiffs who delay, draw inferences and missing witness instructions from their delay. But let me point out that there are plenty of situations in which there is a delay in suit,” Bibas added.
Justice Antonin Scalia expressed concern, however, about the prospect of MGM being unfairly penalized by Paula Petrella’s delay. “[MGM] invested substantial amounts of money [in the film], and when that money starts to pay off, you file suit and . . . you get three years’ worth of their profits,” Justice Scalia noted. Bibas was less sympathetic, pointing out that under the Copyright Act, MGM is “entitled to deduct all the expenses that are attributable to earning the profits from infringement.” Paula Petrella “doesn’t get a dime until respondents recoup those expenses,” according to Bibas.
“Moreover, one who has notice of a registered copyright in the face of protest has no legitimate good faith expectation to continue to infringe. Either file a declaratory judgment action, engage in settlement negotiations or infringe at your peril,” Bibas added.
By contrast, respondent’s attorney Mark A. Perry criticized Bibas’ “bizarre argument” that all the equitable doctrines — including acquiescence, estoppel, waiver and tolling — are available in a copyright action, but laches is not. “Bizarre seems to me [to be] a little strong,” Justice Elena Kagan responded, noting that “Mr. Bibas is making a statutory argument. . . . He’s saying what Congress was thinking at the time.”
“Congress was faced with all of these precedents, essentially saying laches was not available. There are no cases out there really where laches does cut into a defined statute of limitations period,” Justice Kagan added.
Undeterred, Perry then voiced skepticism surrounding the timing of Paula Petrella’s complaint.
“She sued in January of 2009 to pick up the profits back to January of 2006. The biggest investment was in 2005 for the 25th anniversary edition. We think she’s going to go into court and say, ‘I don’t have to offset that because it’s more than three years old.’ So that she wants only — she wants to skim the cream,” Perry said, prompting Justice Sonia Sotomayor to ask “What’s so bad about that?”
Nicole Saharsky, representing the U.S. solicitor general, said that although the government “agrees entirely” with Paula Petrella that “the suit should not have been barred at the outset,” it is the government’s view that “laches is available in extraordinary cases to bar copyright infringement claims brought within the statute of limitations for two reasons.”
“First of all, laches, like equitable tolling and other equitable principles, was a background principle that Congress acted against when it enacted the statute of limitations and it said nothing to bar it. We’ve already had the discussion here at Court today about the text and how it doesn't bar it. But second . . . the copyright situation is unique in that there is this separate accrual rule which allows a person to sue many years after the infringing conduct started so that it makes sense to at least be able to consider laches,” Saharsky said.
Petrella is represented by Bibas, James A. Feldman and Nancy Bregstein Gordon of University of Pennsylvania Law School Supreme Court Clinic in Philadelphia and Glen L. Kulik of Kulik Gottesman & Siegel in Sherman Oaks, Calif. Perry, Theodore B. Olson, G. Brinton Lucas and Lindsay S. See of Gibson, Dunn & Crutcher in Washington; Blaine H. Evanson of Gibson Dunn in Los Angeles; Jonathan Zavin and Wook Hwang of Loeb & Loeb in New York; and David Grossman and Robert J. Catalano of Loeb & Loeb in Los Angeles represent the respondents.
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