In Petrella v. Metro-Goldwyn-Mayer, Inc., No. 12-1315 (May 19, 2014), the Supreme Court of the United States found the equitable defense of laches does not apply to a copyright infringement claim. In a 6-3 decision, the Supreme Court reversed and remanded a ruling by the Ninth Circuit Court of Appeals, thereby reinstating a lawsuit filed by the copyright holder to the screenplay that was made into the movie “Raging Bull,” which was released by Metro-Goldwyn-Mayer, Inc. (MGM) in 1980.
By way of background, Frank Petrella wrote a book and two screenplays in collaboration with his friend and former middleweight boxing champion, Jake LaMotta (LaMotta). The book was written in 1970 and the screenplays were written in 1963 and 1973, respectively. All three works were based upon LaMotta’s life and career as a professional boxer and were registered with the U.S. Copyright Office. In 1976, Frank Petrella and LaMotta assigned the rights to the book and screenplays to a production company that subsequently transferred the rights to United Artists Corporation (United Artists), a subsidiary of MGM, in 1978. In 1980, United Artists released, and registered a copyright in, the film. “Raging Bull” earned Oscar nominations for best picture and best director (Martin Scorsese) and a best actor award for its star, Robert De Niro.
In 1981, during the initial terms of the copyrights to the works, Frank Petrella passed away. The renewal rights to Frank Petrella’s works reverted to his heirs, as confirmed by the Supreme Court’s decision in Stewart v. Abend, 495 U.S. 207, 221 (1990) (“[T]he renewal provisions were intended to give the author a second chance to obtain fair remuneration for his creative efforts and to provide the author's family a ‘new estate’ if the author died before the renewal period arrived, and his renewal rights reverted to his heirs.”).
Paula Petrella (Petrella), Frank’s daughter, retained an attorney to analyze her renewal rights to the works upon hearing of the decision in Stewart. In 1991, upon discovering that she was the sole owner of her father’s interest in the book and screenplays, Petrella had her counsel file a renewal application for the 1963 screenplay. Due to the late filing of renewal applications for the book and 1973 screenplay, Petrella had lost all of her rights to those works.
In 1998, Petrella’s counsel gave notice to MGM that his client had obtained the copyright to the 1963 screenplay, and that the exploitation of derivative works like “Raging Bull” amounted to infringement to Petrella’s rights. For the next two years, Petrella’s counsel threatened legal action while MGM maintained that it did not recognize Petrella as the rightful owner to the 1963 screenplay. Then, in 2009, Petrella finally filed suit against MGM in the U.S. District Court for the Central District of California, alleging, among other things, a claim for copyright infringement. In her complaint, Petrella alleged that MGM had repeatedly violated her copyright by continuing to market and distribute “Raging Bull,” a derivative work of her 1963 screenplay. The lawsuit asserted claims for copyright infringement, unjust enrichment and an accounting, and sought monetary and injunctive relief. While Petrella acknowledged the three-year statute of limitations for copyright claims, she only sought damages going back to 2006, which was three years prior to her filing of the lawsuit.
In response, MGM moved for summary judgment, in pertinent part, on the equitable doctrine of laches, which holds that a person may be barred from asserting a claim when there has been an undue delay in seeking relief. The district court agreed and found MGM had been prejudiced by Petrella’s unreasonable delay of 18 years from the time of her renewal of the copyright in 1991, until the time she filed litigation in 2009. The district court also held that MGM had sustained “expectations-based prejudice,” in that MGM had invested substantial amounts of money in the film under the belief that it had complete ownership and control of “Raging Bull.” Furthermore, the court observed that MGM would have substantial difficulty in producing any evidence to refute Petrella’s ownership claim because the authors of the work were unavailable – Frank Petrella passed away in 1981 and Jake LaMotta was suffering from memory loss from years of boxing (e.g., he no longer recognized Petrella, even though he had known her for more than 40 years).
On appeal, the Ninth Circuit affirmed the trial court’s ruling holding that expectations-based prejudice was proven by the nearly $8.5 million expended by MGM, in the United States alone, to promote the film “Raging Bull.” Furthermore, the court found that prejudice had been demonstrated by the numerous licensing agreements MGM entered into, and commitments made, during the relevant time period for purposes of distributing the film. In finding that Petrella’s infringement claim was barred by laches, the Ninth Circuit cited to Judge Learned Hand’s decision in Haas v. Leo Feist, Inc., 234 F. 105, 108 (S.D.N.Y. 1916), where it was stated that “[d]elay . . . under such circumstances allows the owner to speculate without risk with the other’s money; he cannot possibly lose, and he may win.”
Given the Ninth Circuit’s ruling, Petrella filed another appeal, to the Supreme Court of the United States, contending the doctrine of laches could not trump her right to a remedy under the Copyright Act. The high court agreed, holding the Copyright Act’s three-year look back provision allowed for plaintiffs to defer filing suit until such time that litigation appears to be a potentially beneficial venture.
MGM argued again that, with the passage of time, the possibility of finding useful evidence to defend against the litigation would be diminished. However, the high court posited that Congress must have already been aware of such a scenario when it passed the Copyright Act of 1978, which provided renewal rights to a copyright holder’s heirs some 28 years after a work was created and registered. Nonetheless, Congress decided to give the author’s heirs “a second chance to obtain fair remuneration.” Stewart, supra, 495 U.S. at 220. Furthermore, the Supreme Court pointed to the fact that the plaintiff still had the high burden of proving infringement, and that any unavailability of evidence due to the passage of time would equally, if not more so, be a disadvantage to the plaintiff’s case.
Ultimately, the high court found that it was improper of the lower courts to rely upon the doctrine of laches to dispose of Petrella’s case, thereby preventing an adjudication of her rights on the merits. The court reasoned that, by allowing Petrella’s case to continue, only a fraction of MGM’s profits from “Raging Bull” would be put at issue. MGM had profited from the movie since 1980 and Petrella was only seeking relief for the three years prior to filing suit, as allowed pursuant to 17 U.S.C. §507(b). The Court also noted that should Petrella prevail on the merits of her case, the district court could take into account her delay in filing suit, and MGM’s monetary investment in reliance on that delay, when determining the scope of any injunctive relief or any profits to be awarded. Accordingly, the Supreme Court reversed the Ninth Circuit’s decision and remanded the matter back to the Central District Court of California.
This case has obviously garnered the attention of many individuals and entities reliant upon the entertainment industry. Proponents of this decision contend that this ruling will have the effect of leveling the playing field that has previously been heavily slanted in favor of entertainment studio defendants. Indeed, as highlighted in an amicus brief filed by The California Society of Entertainment Lawyers, studios and networks have won every copyright infringement case in the Ninth Circuit since 1990, usually by way of a motion for summary judgment.
On the other side of the aisle, you have entertainment industry groups and companies that believe this ruling will have a chilling effect on innovation that will be very deleterious to the entertainment industry as a whole. For example, the amicus brief filed jointly by Dish Network, LLC, Tivo, Inc., EchoStar Corp., and DIRECTV, among others, argued that a finding in favor of Petrella would chill innovation, especially in the dual-use technology industry. Dual-use technology products are those that can be used by a consumer lawfully, while also in a manner that gives rise to an infringement claim, such as DVD players, DVRs and iPods. The creators of these products are often sued for infringement under a theory of secondary liability. By abolishing the doctrine of laches as it applies to copyrights, these companies allege, they would be exposed to endless liability. In that way, they contend, uncertainty with regard to the scope of secondary liability would be created, which will diminish the incentive for creators of such products to invest hundreds of millions of dollars in such technology.
Ultimately, Petrella will still have to prove her case at trial. Unless she is successful in proving infringement, and until an award of damages is entered in her favor, the true ramifications of the Supreme Court’s ruling will not be fully known. Even then, the question of whether an award in Petrella’s favor would change the way studios and innovators of entertainment-related products conduct their business, remains unanswered.