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IP/Entertainment Case Law Updates

Kwan v. Schlein

The Second Circuit affirms the district court’s holding that where a claim of copyright infringement cannot be decided without adjudicating a dispute concerning plaintiff’s ownership of the underlying copyright, and plaintiff’s ownership claim was time-barred by the statute of limitations, the claim of copyright infringement is also time-barred.

Defendant Alan Schlein authored a book called Find it Online, which was published by defendant Business Resources Bureau, Inc. (“BRB”). In 1998, BRB hired plaintiff Shirley Kwan, a contract editor, to perform editing work on the book. Kwan initially agreed to perform one hundred hours of editing work for a fee and later agreed to provide certain additional editorial assistance to Schlein in exchange for a share of the book’s royalties.

Prior to the book’s publication BRB asked both Schlein and Kwan how each wanted to be billed on the cover. Schlein asked that Kwan be billed as an editor, but Kwan insisted that she be billed as co-author. After some debate, BRB decided to credit Kwan as an editor in the book’s first and second editions, both released in 1999. BRB published a third edition of Find it Online in 2002, and a fourth edition followed in 2004. Prior to the third edition’s release, BRB sent a letter to Kwan stating that she would not receive royalties for any edition of Find it Online after the second edition because the book had been completely re-written. Kwan did not respond.

In 2005, approximately one year after the release of the fourth edition, Kwan sued defendants for copyright infringement, arguing that she owned the copyright in the book. Shortly thereafter, Kwan also filed copyright registrations for Find it Online, identifying herself as the author. Defendants counterclaimed, arguing that Kwan’s copyright registrations were invalid and that Kwan had no ownership interest in the book. Defendants also moved for summary judgment on their counterclaims and on Kwan’s infringement claim. Although the trial court denied the motions with respect to defendants’ counterclaims, the trial court granted summary judgment for the defendants on Kwan’s infringement claim, reasoning that plaintiff’s claim was time-barred under the Copyright Act’s three-year statute of limitations because “the core issue [was] ownership,” not infringement, and therefore the statute of limitations began to run “when the plaintiff first knew the defendant disputed ownership or used the material at issue.”

The district court subsequently granted defendants’ motion for an order permitting them to dismiss their counterclaims voluntarily, without prejudice to reinstatement, if Kwan were to prevail on appeal or commence a new action against defendants, finding that it would cause Kwan no legal prejudice.

The Second Circuit affirmed. The Copyright Act provides for a three-year statute of limitations on copyright claims. Although a copyright infringement claim may be brought within three years of any infringing act, an ownership claim must be brought within three years after a reasonably diligent plaintiff would have been put on inquiry as to the existence of a right.

Although Kwan brought her infringement claim only a year after defendants published the fourth edition, the court found that Kwan could not maintain her claims because she could not prove the first element of her infringement action, to wit, that she owned a valid copyright. The court recognized that in many infringement cases the first element of an infringement claim – ownership – is not in dispute. However, in this case the underlying dispute involved who wrote Find it Online in the first place. Accordingly, the court concluded that “[w]here, as here, the ownership claim is time-barred, and ownership is the dispositive issue, any attendant infringement claims must fail.” Kwan could not establish her ownership interest in Find it Online because she did not bring an action to establish ownership within three years after BRB published the first edition billing Kwan as an editor. Because the underlying ownership claim was time-barred, the infringement claim was likewise time-barred.

The Second Circuit also affirmed the district court’s dismissal of defendants’ counterclaims without prejudice, agreeing that such dismissal resulted in no prejudice to plaintiff under the circumstances of this case.

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