Wednesday, July 26, 2006

Laches and the Statute of Limitations

What is the relationship between laches and the statute of limitations in 17 USC Section 507? Laches is an equitable doctrine invoked when, through an unreasonable delay, plaintiff fails to act in a timely fashion in asserting its rights. But while laches properly focuses on plaintiff's blame in sitting on its rights, ultimately it is the harm to defendant from plaintiff's inaction that forms the basis for the defense. As an affirmative defense, defendant bears the burden of proof in establishing both unreasonable delay and harm therefrom: mere delay or passage of time is insufficient.

Can laches ever occur when plaintiff acts within the limitations period, in our case three-years from the time the claim accrues?

Statutes of limitation are pure creatures of legislatures; laches is a judicially created doctrine, and as a result some courts (those few who are modest) have expressed concern over separation of powers problems that would arise if laches is utilized to bar a claim brought within the limitations period. Professor Dobbs, the guru of such things, has traced the origins of laches to subject areas where there was no statute of limitations, and thus laches functioned as a form of judicial flexible statute of limitations. But where the legislature has acted, laches should not be available.

Courts do though have a hard time not dipping into the well of their self-created equitable powers, especially the Ninth Circuit which has used laches within the limitations period while ironically noting such applications are "rare." In Jackson v. Axton, 25 F.3d 884, 888 (9th Cir. 1994), that court wrote, without any supporting authority (who needs it when you create your own), "laches may apply whether or not any statutory limitations period runs."A subsequent opinion, Kling v. Hallmark Cards, Inc., 225 F.3d 1010, 1039 (9th Cir, 2000) seems to have misunderstood the issue entirely, writing:

[a] copyright holder would be vulnerable to the laches defense if
he had knowledge of a planned infringement more than three
years prior to filing his action, even if he complied with the statute
of limitations by filing less than three years after the infringement
actually began.

Try explaining that to a client. And then there is the case that led me to this post in the first place, a June 26, 2006 opinion from the Eastern District of Pennsylvania, Gloster v. Relios, Inc., 2006 WL 1737800: "[O]nce the statute of limitations has run, the defendant is entitled to a presumption of laches, which the plaintiff has to rebut." I would have thought that once the limitations is past, plaintiff loses, and that if one is within the limitations period either laches has no role at all, or if it does, defendant bears the burden.

13 comments:

Anonymous said...

Amen.

The Fourth Circuit's opinion in Lyons Partnership, L.P. v. Morris Costumes, Inc., 243 F.3d 789 (4th Cir. 2001) is probably the most cogent analysis of the separation of powers issue.

Fortunately, in my experience most district courts will follow the Lyons rule rather than the oddball decisions you cite in your post.

LKB in Houston

Anonymous said...

It may overstate the case to say that "[b]ut where the legislature has acted [by enacting an SoL, I gather], laches should not be available".

This implicitly assumes that inequities may only arise due to the passage of time, rather than other factors.

Suppose a fact pattern where a party or group of parties repeatedly and unwittingly infringes a set of copyrighted works. The plaintiff could sue, but delays for the purpose of allowing future infringements to occur, increasing the number of potential defendants and the size of statutory damages. [Such a hypo might easily arise with respect to software distribution.]

Inequitable? Yes. Should laches operate? Perhaps - but the equitable inquiry turns on the plaintiff's conduct, not the absolute passage of time. To say that laches should only simulate an SoL would encourage this plaintiff to delay as long as 507(b) allows. And arguably, that's not an incentive that Title 17 should create.

Edward Lee said...

That 9th Circuit decision sounds crazy!

William Patry said...

I like Anononymous' hypo. The theory behind no laches within the limitations period, as I understand it, is that there has been a legislative judgment that any suit within that period can't be inequitable, even if that means delaying to get the largest recovery.

But such a possibility is always risky: how does one know for sure what the ultimate monetary award might be?

As for a single defendant, there is only one award per work so no increase there. As for multiple defendants, multiple awards are possible, but why would any delay necessarily affect the number of defendants? I assume you are thinking of third party-liability, where an early injunction against the service would cut off the number of direct infringers, to be sure, but such cases rarely involve claims againt the direct infringers anyway.

I do see the theoretical point, but I don't know how it might shake out in actual practice.

Anonymous said...

What makes the Ninth Circuit's opinions in Jackson and Kling even more bizarre is that in an earlier case, Miller v. Maxwell's International, 991 F.2d 583 (9th Cir. 1993), the Ninth Circuit had this to say:

"The district court barred the remainder of Miller's ADEA claims under the equitable defense of laches. ***This was error because the doctrine of laches is inapplicable when Congress has provided a statute of limitations to govern the action.*** See, e.g., International Tel. & Tel. Corp. v. General Tel. & Elec. Corp., 518 F.2d 913, 926 (9th Cir.1975). Because Congress provided a statute of limitations to govern ADEA actions, see 29 U.S.C. § 255 (1988), Miller's ADEA claims cannot be barred by laches.

991 F.2d at 586 (emphasis added). Why this holding was not dispositive -- or even mentioned -- in Jackson and Kling is beyond me. (Of course, the Ninth Circuit is the same bunch that has produced such copyright gems as Rano v. Sipa Press, so maybe it's just something in the water out there. ;-) )

Re: anonymous' hypo, the answer under the Lyons' rule (which is followed by the Second, Tenth, and as noted above by at least some judges on the Ninth Circuit) is clear: Congress has decreed that a copyright owner has three years to file suit, and to allow a judicially-created (i.e., common law) defense to shorten this period would be an unconstitutional usurpation of Congressional power and/or a negation of a Congressionally-created right. Period. Ergo, if a three year statute of limitation leads to "unfair" results, write your Congressman and get the law changed -- don't try and end-run the statute via common law defenses.

From my experience, the far more common situation that anonymous' hypo is where an infringer is absolutely nailed for piracy, and is scrambling to find a fact issue that will preclude a partial summary judgment on liability (as well as perhaps give him a vehicle at trial for jury nullification [think: RIAA or ASCAP cases]). Laches is one of the most common ones I see in this context; i.e., even though the copyright owner filed suit well within limitations, a summary judgment on liability is argued to be inappropriate because the copyright owner "should have sued me sooner," based on an alleged fact question of whether the copyright owner knew / should have known of the infringement earlier. Application of the Lyons rule vaporizes this tactic.

Can application of the Lyons rule and a strict application of the statute of limitations lead to "unfair" results? No question, but that's life under a strict liability statute. Again, if application of strict liability in copyright law is "unfair," then change the law through legitimate (legislative) means -- not by judicial fiat.

LKB in Houston

Max said...

I believe anonymous's hypothetical stems from statements made in the SCO vs. IBM case. While the case is largely about Linux, SCO also terminated IBM's license to make and distribute a UNIX derivative (AIX). SCO then claimed the fact that IBM continued to make and ship AIX justified $1 billion damages (I don't know why they didn't say "an amount to be proven at trial"). In an interview, he explained that $1 billion could go higher: "We're sort of fine to let the AIX thing tick, because the longer it goes, when we actually end up in courtroom, we can go back to June 13, 2003, and add damages."

Since SCO also sued for $1 billion damages for IBM's Linux development, I had remembered the quote referring to Linux. However, I got the wrong $1 billion, and I think anonymous did too.

Max said...

Oops. "He" refers to SCO's chairman, Darl McBride.

anon said...

Wouldn't laches be a factor in a determination of whether the plaintiff would actually obtain injunctive releif as opposed to damages? For example, a music company has reason to know that its works are being incorporated into a film. It fails to act and instead waits for its release. It then seeks a manadatory injunction ordering the removal of the music from all copies of the film. Leaving to one side a balancing of hardships argument, certainly the delay on the part of the music company is analysed using the rubric of laches. The outcome could be a one-time award of damages or the imposition of a royalty with no injunction.

Anonymous said...

Re: anon's laches / injunction hypo . . .

I have had a district court suggest in dicta (unreported case) that laches was *only* applicable to requests for equitable relief, because the statute of limitations governed liability / monetary damages under the Lyons rule.

Having said this, while I acknowledge the gut-level appeal of the argument, I still think it doesn't address the fundamental legal basis of Lyons and cases that have adopted it.

The copyright statute of limitations doesn't limit itself to claims for damages. (Cf. the patent statute of limitations (15 USC 286), which is so limited.) To allow laches to be used to "shorten" the period of time that Congress has decreed a copyright holder has to bring suit (which includes suits to obtain injunctive relief) is to allow a judge-made doctrine to trump the statute. Separation of powers principles do not permit this result. Any "unfairness" or "inequity" that may emerge doesn't change this Constitutional reality.

Further, where would laches be considered in the "four factor" test that Los Supremos have now dictated shall apply to requests for injunctive relief in copyright cases? Factors 1 and 2? No way. Factor 3? Maybe, but it would be quite a stretch. Factor 4? Even longer stretch, given the pretty clear authority that halting copyright infringement is per se in the public interest, and that the statute of limitations pretty clearly demarks what the public interest is regarding the timeliness of a copyright suit.

[I also strongly disagree with the apparent last conclusion anon makes -- that a future royalty could be forced on the copyright owner in lieu of a permanent injunction. See Sony, which rejected such a suggestion. But, as they say, that is another story . . .]

LKB in Houston

Anonymous said...

Maybe I'm missing something, but if laches cannot be asserted if the claim is brought within the statute of limitations, then why even recognize the doctrine of laches? After all, if the claim is brought outside the statute of limitations, the defendant can just assert the statute straight up -- no need for laches with all its equitable fuzziness.

By the way, there's further discussion of this issue in Danjaq LLC v. Sony Corp., 263 F.3d 942, 954 (9th Cir. 2001):

For similar reasons, we reject McClory's argument that laches may never bar a claim for infringement brought within the statute of limitations. We have already determined that laches may sometimes bar a statutorily timely claim. Kling, 225 F.3d at 1039; Jackson, 25 F.3d at 888. And, although such an application of laches may be unusual, see Telink, 24 F.3d at 45 n. 3, it is appropriate here. Even leaving aside the special circumstance of re-releases, we conclude in any event that McClory's extraordinary delay and the extraordinary prejudice to Danjaq render laches appropriate despite the statute of limitations. Id. at 46 n. 5 (“If the defendant can show harm from the delay, the court may, in extraordinary circumstances, defeat the claim based on laches, though the claim is within the analogous limitations period.”).

Anonymous said...

Short answer to anonymous: you're not missing it -- under Lyons and similar cases that follow the same rule, laches is just not recognized as a valid defense: compliance with the statute of limitations ends the inquiry.

Re: Danjak, note that CTA9 doesn't mention its own prior, contrary Miller opinion. [In CTA5 and most other circuits, because one panel cannot overrule another, absent an intervening en banc or Supreme Court decision such an opinion would be treated as nugatory. See King Empire, SD Tex 2001 for an example of a court reconciling opposite CTA5 panel opinions on copyright limitations by disregarding the later one. For some reason, I don't think CTA9 follows this standard practice, which may explain the sometimes chaotic state of CTA9 law.)

Nor does Danjak attempt to address the constitutional issue (separation of powers) that forms the basis of the Lyons rule. I tend to view Danjak in the same way I (and most other commentators) view Rano v. Sipa Press -- a bizarre decision out of the 9th Circuit.

LKB in Houston

anon said...

LKB in Houston overlooks, I think, the differences within the Copyright Act between sections 502 and 504. 502 says that a Court "may" grant injunctions "on such terms as it may deem reasonable to prevent or restrain infringement of a copyright" with, I believe, the expectation that the court will sit in equity when considering the appropriateness or efficacy of an injunctive remedy.

Although a finding of laches results in an order that no action will lie, the rubric of laches is all about inequitable delay. So, in the music in the movie hypo I proposed, the plaintiff's delay would need to be broken down a bit for the purposes of evaluating injunctive relief. While this can be done by balancing hardships, that balance speaks to the hardship imposed by the grant of the injunction. It doesn’t speak to the aspect with which the plaintiff is approaching the court to obtain an equitable remedy. Let us say that the court obtains facts that the delay by the plaintiff was designed to improve the plaintiff's economic leverage at the point that the case was filed in anticipation that a threat of injunctive remedy would make the defendant more generous in its settlement offer. There is nothing "unclean" about a plaintiff choosing a tactical approach that benefits itself. But in equity "waiting too long" isn't just about the time line or the absolute boundary of a statute of limitations. It's also, potentially, about what the wait did to the opposing party and its expectations and actions as a result of the wait. The plaintiff demands the court to order the defendant to take the music out of the film or take the film out of distribution. The court can rely on the timing of the plaintiff's actions, and the delay in those actions past a date at which the defendant could have acted differently, to deny the injunctive relief. You can call that process whatever you want but it’s the learning from the doctrine of laches that's at work here.

JM said...

Question:
I have a law suit I am working on against a big corporation pro se in Federal Court. Civil, copyright infringement case.
The infringement occured in 2001,2002, and 2003. Discovery on my part was made partially in January of 2002. New discovery arose when the company infringed again in 2003. These infringements are involving photographs and therefore should be considered one wrongful infringing act, therefore the statutes of limitation should not start to run until the infringement ceased which would have been mid 2003 to my knowledge. However, the images could still be running internationally and will not know until Defendant bears burden of proof. Am I correct?
In regards to "Laches" this is a new term for me. But is it something I could use in regards to this Case.
Additionally, any helpful information you have as far as specific cases regarding statutes of limitations/laches would be greatly appreciated.

JLM