Second Circuit Adopts Plaintiff-Friendly "Discovery Rule" for Copyright Infringement Claims

by White & Case LLP
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The Second Circuit has ruled in Psihoyos v. Wiley & Sons that the "discovery rule" determines when the statute of limitations begins to run in copyright infringement claims.[1] In doing so, the court adopted a rule that may encourage more copyright infringement lawsuits and increase the amount of damages recoverable for infringement.

"Discovery Rule" vs. "Injury Rule"

Civil actions for copyright infringement must be "commenced within three years after the claim accrued."[2] Federal courts have adopted two competing interpretations of when accrual occurs. Most courts apply the "discovery rule," where an infringement claim does not accrue until the copyright holder discovers, or with due diligence should have discovered, the infringement.[3] Some courts apply the "injury rule," where a claim accrues when the infringement commenced. Under the injury rule, a copyright owner must file an infringement suit within three years after infringement began, regardless of when he or she learned of the infringement.[4]

The Second Circuit's Decision

In 2010, the publisher John Wiley & Sons sought a retroactive license from Louis Psihoyos, a professional photographer, after discovering that Wiley had published his photographs in textbooks without a license. Upon further inquiry from Psihoyos, Wiley disclosed that there were more unlicensed uses of Psihoyos's photographs. In March 2011, Psihoyos filed suit, alleging infringement of several images dating back to 2005. Wiley moved for summary judgment, alleging that the Copyright Act's three-year statute of limitations barred Psihoyos's infringement claims, and that Psihoyos failed to register several of the photos with the Copyright Office.

The District Court held that Psihoyos's claims accrued when he learned of Wiley's use of his images in 2010 and, therefore, were not time-barred.[5] After trial, a jury found no infringement of one photo, non-willful infringement of a second image, and willful infringement of the remaining two photos. Wiley appealed the District Court's ruling that the claims were not barred by the statute of limitations.

The Second Circuit rejected Wiley's reliance on TRW Inc. v. Andrews, a Supreme Court case that held that Congress intended to exclude the discovery rule when calculating the statute of limitations under the Fair Credit Reporting Act.[6] The court found that the Copyright Act was not analogous to the Fair Credit Reporting Act, and that Congress's intent and policy considerations dictate that claims do not accrue until the plaintiff's actual or constructive knowledge of the relevant infringement.[7] Thus, Psihoyos's claims accrued when he discovered the infringement and were not barred by the statute of limitations.

Implications

The Psihoyos decision brings the Second Circuit in line with most federal Circuits.[8] It sets a plaintiff-friendly precedent that has the potential to allow claims that otherwise would be time-barred and to increase the damages period—as well as the amount of damages—claimed in copyright cases.

The discovery rule also increases uncertainty for accused infringers who seek to assert a statute of limitations defense. The question of when the plaintiff actually knew or should have known of the infringement is a fact-driven inquiry that will play an increasingly important role in copyright cases.


1 - Psihoyos v. Wiley & Sons, Inc., No. 12-4874, 2014 WL 1327937 (2d Cir. Apr. 4, 2014).
2 - 17 U.S.C. § 507(b).
3 - Psihoyos, 2014 WL 1327937, at *8. 
4 - Id. at 9.
5 - The court also found that several photographs did not satisfy the Copyright Act’s registration requirement under § 411(a). A civil action for infringement of copyright cannot commence until registration has been made with the U.S. Copyright Office. See 17 U.S.C. § 411(a).
6 - See 534 U.S. 19 (2001).
7 - Psihoyos, 2014 WL 1327937, at *10.
8 - Nine Courts of Appeals have adopted the discovery rule.

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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