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Supreme Court Sours on Discovery Rule but Ninth Circuit Doesn't Flinch
By Nigel Avilez and Bruce E.H. Johnson
[Winter 2007]
Copyright infringement claims are governed by a three-year statute of limitations. Because the Copyright Act does not define the point at which a claim begins to accrue, courts have held, alternatively, that a claim may accrue when the work is infringed (the “injury rule”), or when the plaintiff knows or has reason to know of the injury upon which the claim is based (the “discovery rule”). Federal courts historically have automatically applied the discovery rule except in those instances where Congress has explicitly adopted a different rule.
In 2001, however, in a decision described as “altering the landscape” and “shift[ing] the tectonic plates” of claim accrual determination, the United States Supreme Court explicitly rejected that view, and directed lower courts to look to the text and structure of a statute to determine what accrual rule should apply. See TRW v. Andrews, 534 U.S. 19, 151 L.Ed.2d 339, 122 S.Ct. 441; see also Auscape v. Nat’l Geographic Soc’y, 409 F. Supp. 2d 235, 244 (S.D.N.Y. 2004) (TRW is landscape-altering); Roberts v. Keith, 2006 U.S. Dist. LEXIS 8659, 9 (S.D.N.Y. 2006) (TRW shifted tectonic plates of claim accrual). But as much as TRW altered and shook, the Ninth Circuit has carried on unaffected by the decision, content to rely on its prior copyright statute of limitations cases and their summary adoption of the discovery rule. E.g., Kourtis v. Cameron, 419 F.3d 989, 999 (9th Cir. 2005) (citing Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994)). Given the import of the Supreme Court decision, the Ninth Circuit should be asked to either distinguish TRW, or to change course and adopt the injury rule, which legislative history shows was intended by the Copyright Act.
The decision triggering review
Supreme Court review of the federal statute of limitations calculus was triggered by a Ninth Circuit decision, Andrews v. TRW Inc., 225 F.3d 1063 (9th Cir. 2000), reversing a lower court ruling barring consumer claims under the Fair Credit Reporting Act (FCRA). In TRW, Plaintiff Adelaide Andrews, whose credit information had been stolen and subsequently used by an imposter, sued credit reporting agency TRW under the FCRA for disclosing her credit information without reasonable grounds for believing that a legitimate consumer was involved in the request. Id. at 1065. Under the injury rule applied by the district court, two of plaintiff’s claims were barred by the FCRA’s two-year statute of limitations. Id. at 1066. The Ninth Circuit, however, reversed the district court, holding that a general discovery rule controlled the case. The Court rested its decision on what it considered to be a presumption that all federal statutes of limitations, regardless of context, incorporate a general discovery rule, “unless Congress expressly legislated otherwise.” Id. at 1067.
Supreme Court rejects general federal discovery rule
The Supreme Court in TRW refused to endorse the Ninth Circuit’s position, holding instead that federal courts should determine claim accrual by looking to congressional intent in enacting a statute—such intent as is derived from the statute’s text, structure and legislative history. 534 U.S. at 27-28. The Court went on to conclude that neither the text, nor structure, nor other evidence of congressional intent supported a finding that consumer claims under the FCRA are governed by a general discovery rule.
While the TRW analysis of course focused on the FCRA, by its terms, its guidance is general. It is as applicable to the Copyright Act—and other federal statutes—as it is to the FCRA. Applying this guidance to the Copyright Act, it becomes “strikingly clear,” as one federal court concluded, that Congress intended the Act to be governed by an injury rule. Auscape, 409 F. Supp. 2d at 20.
Copyright Act intended an injury rule
Unlike the FCRA, the text and structure of Section 507(b) provide no hint of Congress’ intent. Section 507(b) states only that a civil copyright infringement claim must be brought “within three years after the claim accrued.” Thus, in determining the claim accrual date as intended by Congress, a court must necessarily look beyond the text of the Copyright Act to its legislative history. E.g., Blum v. Stevenson, 465 U.S. 886, 896, 79 L.Ed.2d. 891, 104 S.Ct. 1541 (1984).
Until 1957, the Copyright Act prescribed a statute of limitations only for criminal actions; consequently, federal courts looked to state statutes of limitations to determine timeliness of civil claims. 3 Nimmer on Copyright § 12.05(A) at 12-131 (2005). This practice, however, was confusing and fraught with uncertainty, since different periods of limitations and different rules of accrual applied depending on where a claim was brought. S. Rep No. 85-1014, at 2 (1957), reprinted in 1957 U.S.C.C.A.N. 1961, 1962. Faced with these concerns, Congress began examining the problem in 1955, with the House Judiciary Committee holding hearings on a bill to enact a civil statute of limitations. Id. at 1962. The hearings made clear that there was general dissatisfaction with the uncertainty caused by reliance on state statutes of limitations where, for example, an infringer could face a statute of limitations as long as eight years, or as short as one year, depending on where the infringement occurred. In addition, lawyers testified that they found the situation “quite confusing,” stating that users of intellectual property would be “interested in a fixed statute of limitations to know when they [would] be liable.” See Auscape, 409 F. Supp. 2d at 245 (citing Copyrights—Statute of Limitations: Hearing on H.R. 781 Before the House Comm. on the Judiciary, Subcomm. 3, 84th Cong. 40 (1955) (statement of Fulton Brylawski, Association of American Motion Pictures)).
In its Senate Report, the Senate Judiciary Committee noted that it was “highly desirable” to provide a uniform statutory period throughout the United States, and it settled on a three-year statute of limitations that commenced at the time of injury. S. Rep. No. 85-1014, at 2 (1957), reprinted in 1957 U.S.C.C.A.N. 1961, 1962. The Report states:
All of [the] witnesses ... agreed to a 3-year period, feeling that this represents the best balance attainable to this type of action. It was pointed out that due to the nature of publication of works of art that generally the person injured receives reasonably prompt notice, or can easily ascertain any infringement of his rights. The committee agrees that 3 years is an appropriate period for a uniform statute of limitations for civil copyright claims and that it would provide an adequate opportunity for the injured party to commence his action.
In Auscape, Judge Lewis Kaplan thoroughly examined the Senate Report and the Act’s relevant legislative history to determine whether TRW dictated a Copyright Act accrual date based on injury, rather than discovery. The court noted two major conclusions arising from the legislative history. 409 F. Supp. 2d at 245. First, the court stated that where the goal of the uniform three-year statute of limitations was to remove uncertainty as to the timeliness of copyright infringement claims, it is unlikely that Congress would intend an accrual rule—such as the discovery rule—that depends on something as uncertain and indefinite as when the copyright owner happened to learn of the infringement. Id. This is an entirely accurate observation. Indeed, because in most instances the only proof of plaintiff’s knowledge will be plaintiff’s own subjective, self-serving testimony, the discovery rule re-introduces into the copyright scheme precisely the kind of floating, amorphous limitations period that Congress intended to eliminate in Section 507(b).
Second, the Auscape court observed that the Senate Report also makes clear that the Senate Committee considered a three-year period as “adequate opportunity” for the copyright owner to commence his or her cause of action. Id. Quoting the Committee’s statement that “due to the nature of the publication of works of art … the person injured [generally] receives reasonably prompt notice or can easily ascertain any infringement of his rights,” Judge Kaplan determined that Congress was not concerned that some copyright owners would not know or even have reason to know of an infringement action within three years after its occurrence. Id. at 246. Where Congress clearly recognized but disclaimed concern about the risks that not every copyright holder might discover potential infringements, a discovery accrual rule could not have been its intention.
Judge Kaplan offered additional legislative history analysis supporting these conclusions. First, he pointed to an exchange between a Congressman and a motion picture representative which indicates that Congress was aware that situations would arise in which a copyright owner would not discover the infringement within three years, but nonetheless considered the owner’s awareness (or lack thereof)—the very crux of the discovery rule—to be irrelevant. Id. at 245-246. In the exchange, the Congressman asked what would occur if a movie were shown to a small audience in a small town and then not shown again for three years. The representative noted that “every performance of every moving picture is a separate infringement … . That [each claim based on a performance/infringement] would be barred in three years.” Id. at 246 (emphasis added). The exchange, the court noted, indicates that the statute of limitations was intended to expire three years after the movie was disseminated, regardless of when the actual copyright owner learned of the exhibition; thus, the owner’s awareness of the exhibition was irrelevant. Id.
Next, Judge Kaplan found the commencement of the pre-existing state statutes of limitations to be instructive because Congress was aware that the states themselves generally used an injury rule, yet made no attempt in the hearing to suggest that a different rule was intended. Id. Finally, Judge Kaplan found it significant that Congress spent considerable time focusing on whether to enact a special fraudulent concealment exception or other equitable doctrine ameliorating the (possibly harsh) effects of the statute of limitations. Id. at 246-247. The conclusion the court arrived at was simple: those involved in the enactment of the Copyright Act statute of limitations could not have intended a general discovery rule since the specific statutory exceptions they were contemplating would have been entirely superfluous.
Besides legislative history, there are other considerations favoring application of an injury rule.
1. Injury rule is consistent with the standard rule.
An injury rule is consistent with the standard rule for commencement of the statute of limitations, and unless Congress says otherwise, the standard rule should apply. The standard or traditional accrual rule is that all statutes of limitations begin to run when the right of action is complete, i.e., when the plaintiff has the right to apply to a court for relief and commence proceedings to enforce his rights. See Bay Areas Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp., 522 U.S. 192, 201, 139 L.Ed.2d 553, 118 S.Ct. 542 (1997). Under the standard rule, a plaintiff’s inability to discover his injury or other facts supporting his action is irrelevant to the commencement date. Adam Bain and Ugo Collela, Interpreting Federal Statutes of Limitations, 37 Creighton L. Rev. 493, 511-512 (2004). In the copyright infringement context, where the right to sue ripens at the time of the infringement, and where Congress has not enacted or recognized an exception, the standard rule should apply.
2. Supreme Court decisions have not supported a generally applied discovery rule.
In TRW, the Supreme Court noted that it had never adopted the lower courts’ practice of using a generally applied discovery rule. 534 U.S. at 28. Justice Antonin Scalia, in his concurrence, went further, calling the discovery rule applied by the Ninth Circuit a “bad wine of recent vintage,” and pointing out that the Supreme Court had rarely deviated from the traditional injury rule. TRW, 534 U.S. at 37. While the Supreme Court has not evaluated the discovery rule in the context of copyright infringement, the fact that it continues—by design—to restrict the discovery rule to latent injury and medical malpractice cases indicates that it is highly unlikely that the Court would apply the rule to copyright infringement cases.
3. Few types of cases “cry out” for a discovery rule.
As indicated above, even when the Supreme Court has adopted a discovery rule, it has done so in only two contexts—latent disease and medical malpractice—"where the cry for [such a] rule is loudest." TRW, 534 U.S. at 27. As the Court has observed, latent injury cases are logical candidates for a discovery rule given that the very nature of the latent medical injury is that it does not manifest itself immediately. United States v. Kubrick, 444 U.S. 111, 122, 62 L.Ed.2d 259, 100 S.Ct. 352 (1979). Copyright infringement injury, however, by its very nature is not a secretive matter and does not often lead to extreme situations that would “cry out” for a discovery rule.
Conclusion
It is clear that the Ninth Circuit historically has adhered to the federal court practice of applying a general discovery rule unless Congress explicitly states otherwise. It is however unclear why, in light of TRW, the Ninth Circuit has not reconsidered its statute of limitations calculus, despite having the opportunity to do so. The answer may simply be that no one has as yet urged the court to do so. Whatever the reason, the Ninth Circuit continues to labor under a discovery rule that is irreconcilable with Supreme Court guidance and the Copyright Act’s legislative history. The Ninth Circuit needs, at a minimum, to consider its statute of limitations calculus in light of TRW, and accordingly, to adopt the rule clearly intended by the Copyright Act.
About the Authors:
Nigel Avilez is a media and intellectual property associate in DWT’s Seattle Office. He practices in the areas of defamation, access and newsgathering, as well as in copyright, trademark and right of publicity law. He can be reached at (206) 903-3979 or nigelavilez@dwt.com.
Bruce E.H. Johnson, a partner in DWT’s Seattle office, is a member of both the California and Washington State Bars, and has represented media clients in both jurisdictions. He can be reached at (206) 628-7683 or brucejohnson@dwt.com.
Other articles in the Winter 2007 FALL Newsletter:
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This First Amendment Law Letter is a publication of the law firm of Davis Wright Tremaine LLP and is prepared by the Media Group in its Communications, Media and Information Technologies Department, Kelli L. Sager, Chair, Bruce E.H. Johnson and Robert D. Balin, Vice Chairs, Rochelle Wilcox, editor and Amber Husbands, associate editor.
Our purpose in publishing this law letter is to inform our clients and friends of recent First Amendment and communications law developments. It is not intended, nor should it be used, as a substitute for specific legal advice since legal counsel may be given only in response to inquiries regarding particular factual situations.
Copyright © 2007, Davis Wright Tremaine LLP.
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