Statute of Limitations: Part One, Infringement

A risk to lawyers specializing exclusively in one area of law over a long period of time is tunnel-vision: one may miss trends in general law that impact significantly on your area. A new wind is blowing from the Supreme Court in statute of limitations questions that conflicts with very well-established case law in copyright.

Section 507(b) requires that a civil action under title 17 be commenced within three years from the date the claim accrued. Until 1957, there was no federal limitations period for civil actions, with state law supplying the relevant period. The legislative history states that Congress intended application of the limitations defense to be a bar on the remedy, not the right. This distinction is critical not only in infringement actions, where it affects recovery of damages, but also for declaratory judgment actions on ownership. Ownership claims and the statute of limitations will be the subject of Thursday's posting.

Like almost all limitations periods, Section 507(b) does not define accrual or (commencement). It is common in copyright opinions for courts to refer to the limitations period as running from the last act of infringement, but that's a sloppy way of talking about the problem. It is not always true that if defendant begins infringing in 2000 and stops in 2005, plaintiff may sue in 2008 and collect damages going back to 2000. Plaintiff may sue in 2008 sure enough, but damages may well be limited to 2005, depending upon a number of factors, including plaintiff's knowledge of the infringement and which theory of accrual is used. It is also not true that there is a split in the circuits on this issue. It is folklore in copyright that Judge Posner's 1983 opinion in Taylor v. Meirick, 712 F.2d 1112 (7th Cir.) authorized going back to 2000 in our hypo, while all the other circuits would cut off damages at 2005.

Here's how limitations works in copyright cases. A complaint is filed in 2005. Under what circumstances may plaintiff collect damages for acts of infringement that began in 2000 and continued into 2005? (If the infringement began in 2000 but stopped in 2001, a suit brought in 2005 is untimely and no recovery is possible). All circuits permit recovery reaching back to 2002. The only differences in approach would be whether to permit recovery going back to 2000, a date outside the three year period. Taylor is mistakenly construed as permitting recovery back to 2000, while the other circuits are considered to cut off recovery before 2002.

Taylor did permit recovery going back to 2000, but for an entirely different reason: defendant was found to have fraudulently concealed the infringement so the clock hadn't begun to run. Had there been no fraudulent concealment and had plaintiff known of the infringement in 2000, the Seventh Circuit, like all courts, would have cut off the recovery at 2002. And, if there is fraudulent concealment, all the other circuits would permit recovery back to 2000. Hence, there is no circuit split.

Aside from tolling doctrines, when does a claim for infringement "accrue"? There are two basic approaches, violation accrual and discovery accrual. Violation accrual runs the limitations period from when infringement first occurred, regardless of whether plaintiff knew of the infringement or could have known of it. Violation accrual's value is certainty. Discovery accrual runs from when a reasonable person in plaintiff's position knew or should have known of facts which would support a claim of infringement. Discovery accrual's value is fairness to plaintiffs.

Courts have historically used discovery accrual in copyright infringement actions. That may be a thing of the past. The Supreme Court has been extremely critical of discovery accrual as of late. In TRW, Inc. v. Andrews, 534 U.S. 19 (2001), Justice Ginsburg noted the Court had only approved of it in two situations, latent disease and medical malpractice. Justices Scalia and Thomas went further, calling discovery accrual "bad wine of a recent vintage." If so, the drek continues. In 2004, the Ninth Circuit reaffirmed its commitment to discovery accrual in copyright cases, Polar Bear Productions, Inc. v. Timex Corp., 2004 U.S. App. LEXIS 22131 (9th Cir. Oct. 25, 2004). Polar Bear didn't cite TRW, though, relying on an earlier circuit copyright case. Polar Bear makes my point about relying on copyright decisions to the exclusion of trends in general law.

A notable exception is Auscape International v. National Geographic Society, 71 USPQ2d 1874 (S.D.N.Y. Aug. 12, 2004). Judge Lewis Kaplan, in an exhaustive opinion citing TRW and the 1957 legislative history, held that it is "strikingly clear that Congress intended to adopt a three-year limitations period running from the date of infringement, as a discovery rule would have defeated its overriding goal of certainty." Auscape is a very good indication that reliance on past precedent in the area may be a big mistake.