On November 6, 2013, the US Court of Appeals for the Ninth Circuit issued an opinion affirming the US District Court for the Central District of California's dismissal of plaintiff Seven Arts's copyright infringement claim in Seven Arts Filmed Ent't Ltd. v. Content Media Corp. PLC. In a case of first impression, the Ninth Circuit joined the Second and Sixth Circuits in holding that where the gravamen of a copyright infringement claim is ownership and a free-standing ownership claim would be barred by the statute of limitations, any infringement claims are also barred.

This dispute concerns plaintiff Seven Arts's attempt to establish copyright ownership of three films:

The defendants are Content Media Corp. (Content), Paramount Pictures Corp. (Paramount) and one of Content's predecessors-in-interest, CanWest.

In 2002, Seven Arts claimed co-ownership rights in the films with CanWest under a "Heads of Agreement" or "Master Structure Agreement". While this claim was initially brought in the Central District of California, it was moved to Canada because that agreement included a Canadian forum selection clause. In 2005, with the Canadian claim pending, Seven Arts filed a second action in the US District Court of the Northern District of California alleging copyright infringement, declaratory relief and an accounting against CanWest, now claiming that Seven Arts was the sole owner. These district court proceedings were stayed pending the resolution of the Canadian action and ultimately dismissed for failure to prosecute.

In February 2011, Seven Arts secured a non-adversarial summary judgment order in Canada granting Seven Arts a declaration that it:

On May 27, 2011, Seven Arts again sued Content in the US District Court of the Northern District of California and added Paramount, a licensee for certain distribution rights to the films, as a party. Seven Arts alleged that the Canadian summary judgment order established its ownership rights and sought the same relief as in its 2005 claim.

Seven Arts voluntarily dismissed the claims against Content and pursued those claims in the High Court of England and Wales. Paramount moved to dismiss the complaint.

On October 3, 2011, the district court dismissed Seven Arts's claim for copyright infringement as barred by the Copyright Act's three-year statute of limitations. The district court found that the May 27, 2011 suit was filed more than three years after Content plainly and expressly repudiated Seven Arts's copyright ownership. In 2005 Seven Arts's predecessors-in-interest sent Paramount three letters that royalties for the films were due to Seven Arts's predecessors. Despite these letters, Paramount continued paying royalties to CanWest and Content, not Seven Arts' predecessors.

On appeal, the question before the Ninth Circuit was whether the district court properly applied the three-year statute of limitations.

On appeal, the Ninth Circuit affirmed the district court's dismissal of Seven Arts's complaint.

The Ninth Circuit noted that Section 507(b) of the Copyright Act specifies that all civil actions must be brought "within three years after the claim is accrued." The Ninth Circuit has therefore held that ordinarily a suit may be brought for all actions in the three years preceding the date on which a copyright claim accrues.

However, the Ninth Circuit previously distinguished co-ownership claims from claims of infringement. It ruled in Zuill v. Shnahan that any claims preceding three years from a repudiation of co-ownership are barred. In this case, the Ninth Circuit faced an issue of first impression as to whether the same rule should apply in the context of a pure ownership claim.

Adopting the approach taken by the US Court of Appeals for the Second Circuit and the US Court of Appeals for the Sixth Circuits, the Ninth Circuit held that if a freestanding ownership claim would be time barred, a copyright infringement claim where ownership is the disputed issue is also time-barred, at least when the parties are in a close relationship.

It reasoned that if a plaintiff could pursue an infringement claim to establish ownership, even where a freestanding ownership claim would be time-barred, this would allow plaintiffs to avoid the statute of limitations for ownership claims. In the case of co-ownership, the Ninth Circuit had held that it would be unfair to allow a purported co-owner to pursue an infringement claim even after its ownership is repudiated and the defendant profited from the use of the work. It found the same logic would apply in the context of exclusive ownership.

Because Paramount clearly and expressly repudiated Seven Arts's ownership of the copyrights more than three years before Seven Arts brought its 2011 suit, the Ninth Circuit found that the district court properly dismissed the complaint.

The Ninth Circuit decision aligns it with the Second and Sixth Circuits, avoiding a circuit split on the issue of whether an untimely ownership claim will bar a claim for copyright infringement where there is a nexus with an ownership claim.

It is noteworthy that the Ninth Circuit declined to decide whether the same rule would apply in a suit where the defendant is an unknown third party, such as a downstream licensee. In this case, and the cases before the Second and Sixth Circuits, the parties had a close relationship and the repudiation of ownership was well established. However, the court noted that if the same rule applied broadly to all defendants, a copyright owner may be required to consider claims more broadly against any party that could possibly repudiate its ownership interest.