Friday, September 12, 2014

SCIPR: Petrella v. MGM

Petrella v. MGM (Can laches bar a copyright claim within the 3 year statute of limitations?)

Moderator: Scott McBride, Shareholder, McAndrews Held & Malloy Ltd.

Panelists: Paula Petrella, Petitioner and owner of rights to the screenplay (only individual plaintiff in these IP cases). Would never wish anyone the necessity of this trip, but it was surreal and wonderful. 

McBridge: MGM said that it hadn’t made money on Raging Bull, but in late 2000s it (perhaps) became profitable based on sales of DVDs etc. (details of the income stream are still subject to litigation).  MGM argued laches including the most recent 3 years before suit was filed, but SCt held that this equitable defense couldn’t bar the legal remedy of damages.

Professor Stephanos Bibas, Counsel to Petrella, University of Pennsylvania Law School Supreme Court Clinic:

Professor Tyler Ochoa, Santa Clara University School of Law: The statute does refer to the equitable doctrine of tolling.  Legislative history says “we won’t say anything about tolling, dcts do that anyway.” J. Ginsburg is right in that the legislative history doesn’t say anything about laches one way or another. J. Breyer is probably right that Congress didn’t consider laches one way or another. But the Lanham Act does specifically refer to laches; if you assume they gave roughly the same attention to both, maybe that’s meaningful.

Q: Lanham Act doesn’t have a statute of limitations and borrows/uses laches; does that matter?

Ochoa: general principle that if no SOL is specified federal courts will borrow from states, which suggests that limitations are so important that we don’t tolerate their absence. Federal SOL: Check on what otherwise might be nonuniformity/inequities from states. Here, for the first time, SCt says no laches if there’s a SOL, arguably inconsistent w/ previous cases despite J. Ginsburg’s distinctions.

Q: patent has slightly different situation—6 year statute of repose precluding recovery of damages. How will this impact Fed. Cir. in laches in patent?

Mark Perry, Counsel to MGM, Partner, Gibson Dunn LLP: Bad news for defendants.  Decision has greater potential impact for patent than for copyright. Laches has always been a bit of a sport for ©, only for the most egregious cases.  © has statutory damages, and economic nature of © tends to lessen value of cases in overall context of IP litigation—compared to the volume of $ in patent litigation.  In patent, laches has played an important role to cut off those kinds of sneaky claims that are the most problematic—very vague patents that lie there like alligators under the water.

Bibas: not an impact on TM, but in patent there’s a real question.  SCt says they haven’t had occasion to review the Fed. Cir. rule, which is not a ringing endorsement.  Patent Act has a particular phrase about “unenforceability,” a word that’s not present in the © Act.  Drafter of Act wrote a report saying it was supposed to carry forward the defense of laches. 

Ochoa: only applies to equitable relief unless there’s something very specific in the legislative history, and even then some textualists won’t like it.  In patent world, that isn’t the worst thing in the world—6 years is 2x as long as the © SOL, and the patent only lasts for 20 years.  © lasts a really long time, and so there’s a really long period where an action could come up 20, 40, 50 years after an allegedly infringing release. Has a really great impact in reviving what otherwise would be very stale claims.

Q: court brought up “separate accrual” rule. New cause of action created each time there’s a copying or dissemination of © work. So she could recover (if successful) for 2006 on. 

Ochoa: says w/o a separate accrual rule you force initiation of suit for relatively minor infringement immediately even if it’s not really worth doing so.  If people are allowed to wait until there’s something worth fighting over, we might have less litigation.  That’s an empirical question.  Watch out for the impact of this on joint authorship!  If you sue for dj, courts often say you knew about contested authorship 10-15 years ago, so the SOL has passed.  But if you sue for a share of the money through an accounting and say you’re a joint author, that’s something that will perhaps allow you to recover for the last 3 years. Or there will be an inconsistency.

Bibas: noteworthy that MGM didn’t dispute the separate accrual rule in general.  MPAA testified in legislative history that each showing of a movie would be a separate violation with its own 3-year period. The only Q was whether laches ought to truncate that.  US’s argument: laches implicitly moves the triggering event from the violation being sued on now (separate accrual) to the initial violation, which is in tension w/the principle that each violation is discrete.

Perry: sauce for the goose has to be sauce for the gander: the studios bring more copyright claims than we get sued for. Separate accrual makes sense for pirated video on YT.  If it goes viral after ten years, you may not be barred. But what laches did was to check the abusive cases.  He accepts the SCt’s ruling but just wants to make the point that you can have both laches and separate accrual.

Ochoa: SCt did help because circuits were all over the map in what they were doing. 9th Circuit was far more generous than any other circuit, and others were irrevocably split on what constituted laches.  Certain rule outweighs bad effects on a few damages cases; apportionment of profits is equitable for these purposes, so actual damages will be the rule for these cases.

Perry: Why can’t estoppel bar a damages claim now? It’s an equitable doctrine too.  But the SCt said that was different.

Bibas: Estoppel, tolling and discovery were established background principles in 1957 but it was clear then that laches couldn’t bar damages.  Those considerations can come into tailoring the scope of injunctive relief and its duration.  Court leaves open a few exceptional cases in which laches could bar equitable relief—retrospective rather than prospective equitable relief, e.g. when an architect asked for a condo constructed from infringing plans to be torn down. That’s not classic equitable relief anyway, but the Court says you can prevent the destruction of the infringing article.  Clear rule is a good idea.

Q: dissent talks about strategic waiting to file claims. This is an allegation in patent claims as well.  Is J. Breyer right?

Perry: yes.

Ochoa: classic situation: P is aware of cause of action, but D is not.  Here, as soon as Stewart v. Abend was decided, MGM was aware of the issue and knew she’d asserted rights in 1992.  MGM could’ve brought a declaratory judgment to resolve this issue. Not sympathetic here.  Surprised that none of the justices went for laches as a backstop even if inappropriate here.  Discovery doesn’t play a role here.  Extraordinary delays are often because of lack of discovery, and so those claims can pop up a long time after infringement began regardless. It’s extraordinary length of © + renewal provisions that create the most harm.

Perry: Philosophical core of this case—entities strive to get power and don’t relinquish it voluntarily. SCt considers centuries-old equitable doctrine that was a power of judges unfettered by legislators.  Majority decided to give up power the judges had, which is a fascinating aspect of the decision.

Bibas: separation of powers analysis has something to say. If Congress has registration provisions to deal with evidentiary concerns, limitations on damages reachback, then Congress has addressed this issue.  Not a flood of stale claims because most people bring them early, when the value of the work tends to be highest. Congress chose the long term and the Stewart v. Abend result.

Perry: footnote 13—The SCt creates the idea of a “cost-free royalty” as the consequence of a successful defense.  (“Assuming Petrella had a winning case on the merits, the Court of Appeals' ruling on laches would effectively give MGM a cost-free license to exploit Raging Bull throughout the long term of the copyright. The value to MGM of such a free, compulsory license could exceed by far MGM's expenditures on the film.”)  This framing is a bonus for plaintiffs.

Bibas: my client has a property right. The practical effect of denying her right to exclude MGM would be disastrous. MGM conceded it couldn’t make a remake; just wanted to continue its existing use. 

Ochoa: if as a factual matter LaMotta was a coauthor, MGM can continue to use it—he survived to the vesting period so Steward v. Abend didn’t divest MGM of any rights it had through LaMotta.  Also, if apportionment of profits is an equitable remedy, that has effects on jury award.

Petrella: big copyright owners have armies of lawyers watching expiration.  You should know you own something.

Ochoa: injunction, impoundment, apportionment of profits: delay can be taken into account.  Only damages are affected.

Perry: laches is still available at the remedial stage of the case.

Bibas: that does make a difference. If it’s part of the balance of injunctive equitable factors, it allows you to balance the equities between D and P, which you can’t do for a threshold defense.  (That’s not my understanding of laches, FWIW, but then I mostly see Lanham Act cases.)

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