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IP/Entertainment Case Law Updates

Seven Arts Filmed Entertainment Ltd. v. Content Media Corp

Adopting Second and Sixth Circuit precedent, Ninth Circuit affirms dismissal of copyright infringement action as barred by Copyright Act’s statute of limitations, where central dispute was copyright ownership and defendant repudiated plaintiff’s ownership more than three years before plaintiff brought suit.

Plaintiff Seven Arts Filmed Entertainment Limited purports to be the owner or assignee of several motion pictures, including Rules of Engagement, An American Rhapsody, and Who Is Cletis Tout? Seven Arts sued Paramount Pictures Corp. and Content Media Corp. PLC for copyright infringement, alleging that Paramount is the licensee of certain distribution rights in and to the motion pictures and that Paramount improperly paid royalties to Content, not Seven Arts. Seven Arts sought a declaration that neither Content nor any of its predecessors-in-interests was the copyright owner of the motion pictures. The district court dismissed Seven Arts’ action as time-barred and Seven Arts appealed.

At the outset, the court distinguished between the accrual of copyright infringement claims and the accrual of claims of ownership. In contrast to copyright infringement claims, which, under the “rolling” concept of looking back three years from filing, accrue at the time of each infringing act, a claim to establish ownership or co-ownership accrues only once, when plain and express repudiation of ownership is communicated to the claimant. Although Seven Arts asserted a claim for copyright infringement, the court found that the dispute was essentially a dispute over ownership. Paramount conceded that it is exploiting the pictures, noted the court, but denies that Seven Arts owns the copyrights.

Guided by the Second and Sixth Circuits, the Ninth Circuit held that, where the gravamen of a copyright infringement suit is ownership, and a freestanding ownership claim would be time-barred, any infringement claims are also barred. The court reasoned that 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 potentially bizarre results. The court saw no reason not to extend the accrual-upon-express-repudiation rule for claims of co-ownership to claims seeking to establish sole ownership. The court also found inapposite Seven Arts’ contention that Congress’s intent in enacting the statute of limitations was to bar particular remedies, not to extinguish substantive rights.

The court rejected Seven Arts’ effort to distinguish Second and Sixth Circuit precedent on the basis that Paramount was a “putative downstream, third party licensee” rather than a co-author or otherwise “in a close relationship, such as those who transfer copyright ownership via contract.” While the panel acknowledged that extending the accrual-upon-express-repudiation rule to those who are not in a close relationship potentially could introduce uncertainty in copyright enforcement, here the requisite close relationship existed. Where Seven Arts’ CEO and counsel in the appeal personally signed and negotiated contracts with Paramount, Seven Arts was fully aware of Paramount’s interest in, and distribution of, the pictures during the statutory period.

Because it was apparent from the complaint that Paramount clearly and expressly repudiated Seven Arts’ ownership of the copyrights more than three years before Seven Arts brought suit, the Ninth Circuit affirmed dismissal of Seven Arts’ claims as time-barred.

For more information, please contact Jonathan Zavin, W. Allan Edmiston, David Grossman, Tal Dickstein or Meg Charendoff.

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