Raging Bull Majority Decision: Supreme Court Nixes Laches As Defense To Copyright Damages

by Foley Hoag LLP - Trademark, Copyright & Unfair Competition
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deNiroIn Petrella v. MGM, the U.S. Supreme Court was confronted with the question of whether laches is available as a defense to copyright infringement.  We have previously written about the case here and here. Yesterday, May 19, 2014, Justice Ginsberg, delivering the opinion of the majority, held that laches was not available as a defense to copyright damages, but was available as a bar to equitable relief in extraordinary circumstances. The dissent, authored by Justice Breyer, was joined by Chief Justice Roberts and Justice Kennedy.

The Legal Backdrop

The case arises from a quirk of copyright law. Prior to 1957, courts dealt with unreasonably delayed copyright claims either by applying their local tort statute of limitations or by invoking the doctrine of laches.  Then, in 1957, Congress changed all that by including an express three-year statute of limitations, which was later incorporated into the 1976 Copyright Act.

Three years seems pretty short, but not really. Copyright law follows the “separate accrual” rule, in which a new three-year period begins to run each time an infringing copy is made. So if you have been making copies of my work since 1990 and I wait until the end of 2010 to sue, my complaint is still timely, but I will be limited to the last three years of damages (2008-2010). Also, I can bring another suit against you for every subsequent three-year period of damages, up until my copyright expires. Thus, it’s no wonder that many lawyers and judges assumed that the doctrine of laches still applied to bar unreasonably delayed lawsuits where the defendant would be unfairly prejudiced, especially where it appeared that the plaintiff was sitting on her hands for purely strategic reasons.

Raging Bull

The Petrella case concerns the 1980 film Raging Bull. Paula Petrella’s father wrote a book about boxer Jake LaMotta, from which the film was allegedly derived.  Petrella became owner of the copyright in her father’s work in 1991, after he died. However, at that time the film hadn’t made any money, so suing was not worth Petrella’s while. She admittedly to sue waited until 2009, when she knew the film was finally making a profit. Petrella’s complaint demanded a share of the last three years’ worth of profit and an injunction against future infringement.  The District Court dismissed the complaint and the Ninth Circuit affirmed, holding that Petrella’s entire claim was barred by the doctrine of laches.

Laches Cannot Bar Copyright Damages

The Supreme Court reversed. The majority held that, since the Congress had included an express statute of limitations in the Copyright Act, laches could no longer be used as a defense to bar copyright infringement damages.  Among the issues discussed by the Court were:

Unfairness. The dissent argued that the Court’s opinion would leave defendants with no recourse against the unfairness of unreasonably delayed claims. The majority disagreed, holding that guards against unfairness were already built into the Copyright Act because: (1) damages are limited to the three year period before the complaint was filed; (2) the defendant can deduct the expenses incurred in generating the profit during that period; (3) the defendant can offset the amount of damages by showing that its own original contribution was responsible for some of the profits; and (4) equitable estoppel is still available as a defense if the plaintiff made assurances on which the defendant relied.

Legislative History.  The dissent noted that nothing in the legislative history of the copyright statute of limitations indicated an intent to do away with laches.  The majority argued that the purpose of the federal limitations period was to impose uniformity in results, and uneven application of the doctrine of laches by different judges would upset that intent.

Rule 8(c). The dissent pointed out that Rule 8(c) of the Federal Rules of Civil Procedure lists laches among the defenses available to all litigants.  The majority stated that laches is simply an equitable “gap-fill” for areas of the law without a statute of limitations.  Its application to damages therefore does not survive the statutory imposition of a limitations period, and certainly cannot override one.

Equitable Tolling. The defendant had argued that laches was similar to equitable tolling, which is available to plaintiffs (including copyright plaintiffs) to toll a statute of limitations where fairness so requires.  The majority held that laches is distinguishable.  While equitable tolling is a rule of interpretation for the application of statutes of limitation (i.e., by extending it where appropriate), laches was simply a substitute for the lack of a statute of limitations, and cannot therefore be used to interpret its application.

Bad Faith Plaintiffs. The dissent, echoing Judge Learned Hand, argued that doing away with laches would allow copyright plaintiffs to sit on their hands and sue after the work had earned a profit, thus transferring all the risk to the defendant.  The majority appeared to acknowledge this possibility but held that “there is nothing untoward” about such delays.

Evidence. The dissent noted that, without laches, bad faith plaintiffs could intentionally wait to sue until key witnesses died.  The majority responded that (1) any loss of evidence is more likely to harm the plaintiff’s case, since the plaintiff has the burden of proof; and (2) Congress allows for long copyright terms and renewals already, during which witnesses are likely to die, so it must not be concerned with that issue.

Laches May Still Bar Injunctive Relief

The majority acknowledged that its holding only applied to damages, and laches was still available as a defense to bar equitable relief in copyright cases. However, the Court indicated that laches should be limited to “extraordinary” cases. By way of example, the Court cited a Sixth Circuit case in which an architect had waited to sue for copyright infringement and until the infringing housing project was nearly complete.  In that extraordinary case, laches was appropriate to bar the remedy of destruction of the infringing goods. However, the Court hinted that this may not apply to the case at bar because the injunction requested by Petrella would not result in “total destruction of the film,” thus suggesting a very high bar for the showing of prejudice to invoke laches.

Trademark and Patent Limitations Periods

In a footnote, the Court addressed whether its opinion was consistent with trademark and patent law. Under the Lanham Act, laches is available, but the Court argued that this was because there is no express statute of limitations in that act. Therefore, laches is simply playing a “gap-filling” role. Because the Copyright Act does have an express statute of limitations, there is no gap to fill.  In that way, the majority reasoned, the application of copyright and trademark will be consistent under the Court’s ruling.

Patent law, on the other hand, is another matter. Like the Copyright Act, the Patent Act includes an explicit statute of limitations. But unlike the Copyright Act, the Federal Circuit has held that under the Patent Act, laches can bar damages but not equitable relief – the exact opposite of the Court’s ruling in Petrella. The majority admitted this inconsistency and without further commented stated: “We have not had occasion to review the Federal Circuit’s position.”

What Happens Now?

Petrella’s complaint was reinstated and the matter was remanded to the District Court, presumably for discovery and then trial. Although laches cannot bar her suit, if Petrella prevails on the merits, the District Court may take into account the long delay in bringing suit in determining the appropriate injunctive relief.  The Court also held that the delay may also be grounds for the District Court to lower the amount of money damages awarded.

Meanwhile, if you are a patent litigator unhappy with a Federal Circuit ruling on an unreasonably delayed patent infringement claim, it appears that the Supreme Court’s door will be open to a certiorari petition.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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