A Second Circuit Panel Misunderstands the Copyright Act’s Statute of Limitations (Guest Blog Post)
By Guest Blogger Tyler Ochoa
In Sohm v. Scholastic, Inc., 959 F.3d 39 (2d Cir. 2020), a Second Circuit panel held that “the discovery rule applies for statute of limitations purposes in determining when a copyright infringement claim accrues under the Copyright Act.” Id. at 50. It also held that damages for copyright infringement were limited to “a three-year lookback period from the time a suit is filed.” Id. at 52. What the panel failed to notice, however, is that those two rulings are inherently contradictory. In effect, the panel applied a “wrongful act” rule of accrual, while simultaneously claiming that it was applying a “discovery rule” of accrual. A petition for rehearing en banc is currently pending, and one hopes the court will grant the petition and rectify its error.
The Statute of Limitations and How it Works
The Copyright Act’s statute of limitations is unremarkable. Section 507 of the Copyright Act provides simply: “No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.” 17 U.S.C. §507(b). When applying the statute of limitations to specific facts, however, questions immediately arise. When does a claim “accrue” for purposes of the Copyright Act? What happens if the copyright owner reasonably fails to discover the alleged infringement until more than three years have passed? And what happens if a prospective defendant began infringing more than three years ago, but continues to infringe?
The Supreme Court answered some of those questions in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014). Petrella involved a claim that the 1980 movie Raging Bull was based in part on a screenplay co-authored by Frank Petrella in 1963, and that MGM continued to distribute the movie during the renewal term of that screenplay’s copyright without the permission of Petrella’s heirs. (Copyrights obtained before 1978 were entitled to an initial 28-year copyright term and a renewal term that has been extended twice and is now 67 years. Frank Petrella died in 1981, and in 1991, his daughter Paula registered the copyright in the renewal term with the Copyright Office.) Paula Petrella knew about her claim in 1991, but she did not contact MGM until 1998. For two years, the parties exchanged letters without reaching an agreement. After remaining silent for another nine years, Petrella filed suit in 2009.
The Ninth Circuit dismissed the case on the ground of laches (an equitable doctrine that bars relief when there is an unreasonable delay in filing suit that prejudices the opposing party). The Supreme Court reversed, holding that laches could not bar an action for damages that was filed within the three-year statute of limitations. It explained how the period is calculated:
A claim ordinarily accrues when a plaintiff has a complete and present cause of action. In other words, the limitations period generally begins to run at the point when the plaintiff can file suit and obtain relief. A copyright claim thus arises or “accrues” when an infringing act occurs.
It is widely recognized that the separate-accrual rule attends the copyright statute of limitations. Under that rule, when a defendant commits successive violations, the statute of limitations runs separately from each violation. Each time an infringing work is reproduced or distributed, the infringer commits a new wrong. Each wrong gives rise to a discrete “claim” that “accrues” at the time the wrong occurs. In short, each infringing act starts a new limitations period.
Under the Act’s three-year provision, an infringement is actionable within three years, and only three years, of its occurrence. And the infringer is insulated from liability for earlier infringements of the same work. Thus, when a defendant has engaged (or is alleged to have engaged) in a series of discrete infringing acts, the copyright holder’s suit ordinarily will be timely under § 507(b) with respect to more recent acts of infringement (i.e., acts within the three-year window), but untimely with respect to prior acts of the same or similar kind.
Petrella, 134 S. Ct. at 1969-70 (internal citations and quotes omitted). Petrella’s action thus “accrued” for the first time on January 1, 1992, when the renewal term began. (Copyright terms extend to December 31 of the year in which they would otherwise expire. 17 U.S.C. § 305.) “It is hardly incumbent on copyright owners, however, to challenge each and every actionable infringement. And there is nothing untoward about waiting to see whether an infringer’s exploitation undercuts the value of the copyrighted work [or not]…. Even if an infringement is harmful, the harm may be too small to justify the cost of litigation.” Petrella, 134 S. Ct. at 1976. Thus, Petrella could sue at any time and recover damages for any infringement that occurred within three years before the date she filed suit.
The Discovery Rule
Suppose that a defendant infringed your work (such as a poem, essay, or photograph) by publishing it in a book in 2015, but that you did not discover the infringement until 2020. Under the three-year statute of limitations, as interpreted in Petrella, your right to relief would depend on whether the infringement was ongoing. If the defendant continued to infringe by selling the book, you could sue in 2020 and recover damages for any sales occurring within three years of the date you filed suit. But if the infringement occurred only in 2015 and ceased, it would be too late to sue unless there was some doctrine of delayed accrual, or unless the limitations period was “tolled” or ceased running temporarily, until you discovered the infringement.
This is where the “discovery rule” comes in. Under the “discovery rule,” the three-year period does not begin to run “until the copyright holder discovers, or with [reasonable] due diligence should have discovered, the infringement.” Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120, 124 (2d Cir. 2014). (The “discovery rule” is often framed as a rule of delayed “accrual,” but under Petrella, it is probably better to think of it as a rule “tolling” the running of the statute of limitations.) Thus, if you (as copyright owner) can show that you reasonably did not discover the alleged infringement until 2020, you would be allowed to recover damages for infringements occurring in 2015, beyond the three-year lookback period, so long as you filed suit within three years of the date that you reasonably should have discovered the alleged infringement.
The discovery rule makes sense in many contexts. In the hypothetical above, for example, it is quite plausible that an author might not discover an infringement that occurred in 2015 for more than three years. An author can’t be expected to buy and read every book ever published to see if it contains a copy of his or her copyrighted work. Indeed, even if the infringement occurred by posting the work online, there would be no reason for the copyright owner to search the entire web for copies of all of his or her works every three years. On the other hand, from the defendant’s perspective (as Eric Goldman has observed), “[t]his means a long-forgotten web page last modified over a decade ago can still support a lawsuit if a single viewer accessed the page within 3 years before the lawsuit.”
Of course, if the author had reason to suspect an infringement, he or she might be placed on “inquiry notice” that would impose a duty to inquire or investigate whether an alleged infringement had occurred (hence the “due diligence” or “reasonable diligence” qualification to the discovery rule). For example, the author’s work might be famous enough that one would expect a friend or acquaintance to see and recognize the work and notify the author. Or if the infringement occurred in a very public manner, such as a hit movie with a plot similar to the author’s work, it would be difficult for the author to claim that he or she reasonably could not have discovered the alleged infringement within the three-year period. (Petrella, for example, could not reasonably have claimed that she was not aware that the movie Raging Bull was based on her father’s screenplay.) But certainly it may be expected that many infringements would go undetected for some time in the ordinary course of events. So it is perhaps not surprising that every Court of Appeals to have addressed the issue has held that the discovery rule applies to the Copyright Act’s three-year statute of limitations. See Psihoyos, 748 F.3d at 124 n.3 (collecting cases).
In Petrella, however, the Supreme Court was surprisingly coy about the discovery rule, addressing it only a footnote that says:
Although we have not passed on the question, nine Courts of Appeals have adopted, as an alternative to the incident of injury rule, a “discovery rule,” which starts the limitations period when “the plaintiff discovers, or with due diligence should have discovered, the injury that forms the basis for the claim.” William A. Graham Co. v. Haughey, 568 F.3d 425, 433 (3d Cir. 2009) (internal quotation marks omitted). See also 6 W. Patry, Copyright § 20:19, p. 20-28 (2013) (hereinafter Patry) (“The overwhelming majority of courts use discovery accrual in copyright cases.”).
Petrella, 134 S. Ct. at 1969 n.4.
The Conflict in Sohm v. Scholastic
In Sohm v. Scholastic, Inc., 959 F.3d 39 (2d Cir. 2020), a photographer claimed that Scholastic routinely printed more copies of books containing his photographs than it had obtained licenses for. In particular, Sohm alleged 117 infringing uses of 89 of his photographs. Scholastic claimed that some of the uses were barred by the three-year statute of limitations. Since the Second Circuit had reaffirmed the discovery rule in Psihoyos, after the Supreme Court’s decision in Petrella, the district court applied the discovery rule and held that Scholastic failed to introduce any evidence that would have placed the plaintiff on inquiry notice, or that would have prompted a reasonably diligent plaintiff to begin investigating. Thus, because Sohm did not discover the alleged infringements until less than three years before suit was filed, the district court held he could recover damages for all of the unlicensed uses, including those that had occurred more than three-years before suit was filed.
On appeal, the Second Circuit reaffirmed that “the discovery rule applies for statute of limitations purposes in determining when a copyright infringement claim accrues under the Copyright Act.” 959 F.3d at 50. Nonetheless, it held that in Petrella, “the Supreme Court explicitly delimited damages to the three years prior to the commencement of a copyright infringement action.” Id. at 51. Combining these two holdings, it reiterated: “we must apply the discovery rule to determine when a copyright infringement claim accrues, but a three-year lookback period from the time a suit is filed to determine the extent of the relief available.” Id. at 52.
With due respect to the court, this dual conclusion is inherently contradictory and makes no sense. Any damages resulting from infringements that occurred within three years of filing can already be recovered under the three-year statute of limitations without any need to resort to the discovery rule. The discovery rule is only needed or useful to recover damages for infringements that occurred more than three years before filing. By limiting damages to three years from the date the suit was filed, the court in effect was adopting an injury rule of accrual, even though it claimed it was using the discovery rule of accrual.
Attempting to justify its bizarre decision, the court stated “that Petrella’s plain language explicitly dissociated the Copyright Act’s statute of limitations from its time limit on damages.” That is simply incorrect. Petrella’s three-year “time limit on damages” was expressly based on “the Copyright Act’s statute of limitations.” Petrella simply had no occasion to pass on the applicability of the discovery rule, because Paula Petrella could not reasonably have claimed that she was not aware of the alleged infringements at the time they occurred, beginning in 1992. (After all, she had registered the renewal term in her father’s screenplay in 1991, and the movie had been released 11 years earlier.) The Supreme Court neither approved nor disapproved of the discovery rule in Petrella; it simply did not pass on it one way or the other. But under Petrella’s separate accrual rule, where each infringement triggers a new three-year period, the only reason anyone would ever need to use the discovery rule would be to allow a copyright owner to recover damages that had occurred more than three years before suit was filed. The Second Circuit panel seemed to think that damages within the three-year period could have been barred if the defendant could have discovered other acts of infringement outside the three-year period; but that notion flies directly in the face of Petrella’s holding that each act of infringement accrues separately for purposes of the statute of limitations. (If the court had so held, it would constitute the equivalent of the “laches” argument that the Supreme Court rejected in Petrella, by allowing an unreasonable delay at an earlier point in time to bar an action for damages filed within the three-year “lookback” period under the Copyright Act’s statute of limitations.)
The Second Circuit panel’s holding in Sohm v. Scholastic that “we must apply the discovery rule to determine when a copyright infringement claim accrues, but a three-year lookback period from the time a suit is filed to determine the extent of the relief available,” is inherently contradictory and makes no sense. In effect, the panel applied a “wrongful act” rule of accrual, while simultaneously claiming that it was applying a “discovery rule” of accrual (or tolling). I am informed that the plaintiff has filed a petition for rehearing en banc on this issue. One hopes that the Second Circuit will grant the petition for rehearing and that this self-contradictory opinion will be modified or overruled at the earliest opportunity.