Laches Bars "Raging Bull" Copyright Infringement Claim: Ninth Circuit

Practical Law Legal Update 0-521-1771 (Approx. 6 pages)

Laches Bars "Raging Bull" Copyright Infringement Claim: Ninth Circuit

by PLC Intellectual Property & Technology

Key Litigated Issues

The key litigated issue before the US Court of Appeals for the Ninth Circuit in Paula Petrella v. Metro-Goldwyn-Mayer was whether the district court erred in finding that a laches defense barred the plaintiff's copyright infringement, unjust enrichment and accounting claims when:

The plaintiff waited 18 or 19 years to file the claim without any reasonable explanation.
During this long period of delay, MGM spent millions of dollars and resources marketing, advertising, distributing and promoting the copyrighted film.

The Ninth Circuit also had to decide whether the defendants were entitled to Rule 11 sanctions and attorney's fees.

Background

The plaintiff, Paula Petrella (Petrella), is the daughter of Frank Peter Petrella (F. Petrella). F. Petrella and Jake LaMotta, a retired boxer, wrote and produced three copyrighted works about LaMotta's life:

A 1963 screenplay, registered in 1963.
A 1973 screenplay, registered in 1973.
A book, registered in 1970.

The screenplays and book became the basis for the 1980 movie, Raging Bull. On November 19, 1976, F. Petrella and LaMotta assigned the copyrights to these three works, including all "periods of copyright and renewals and extensions thereof," to Chartoff-Winkler Productions, Inc.

Around September 1978, a MGM subsidiary, United Artists Corporation, acquired the motion picture rights to Raging Bull. United Artists registered a copyright in the film around September 1980.

F. Petrella died in 1981, which was during the original 28 year term of the copyrights in his screenplays and book. F. Petrella's renewal rights passed to his daughter, Petrella, who claimed to be the sole owner of F. Petrella's interest in these works.

In 1990, the Supreme Court decided Stewart v. Abend. Under the Abend rule, if a copyrighted work that is the basis of a derivative work was created or first published between 1964 and 1977 and the author dies before the work's renewal term begins, the rights revert to the author's statutory successors. This is the case even if the rights were previously assigned by the author to another party. The continued distribution and publication of a derivative work during the renewal term without the successor's authorization to use the underlying work therefore infringes the copyright in the underlying work.

Following Abend, Petrella:

Filed a renewal application for the 1963 screenplay in 1991.
Contacted MGM in 1998, asserting that she obtained the rights to the 1963 screenplay and that MGM was infringing her rights by its ongoing exploitation of the derivative work, Raging Bull.
From 1998-2000, sent letters to MGM threatening to take legal action.
Filed a lawsuit for copyright infringement in 2009.

Outcome

The Ninth Circuit's August 29, 2012 opinion affirmed the district court's grant of summary judgment for MGM, finding that the district court:

Correctly held that Petrella's copyright infringement, unjust enrichment and accounting claims were barred by the doctrine of laches.
Did not abuse its discretion in denying MGM's motions for Rule 11 sanctions and attorney's fees.

Applying its three-factor test for proving laches, the Ninth Circuit ruled that MGM had met its burden of proving the unreasonable delay and expectations-based prejudice required to establish a laches defense.

Laches Defense

In evaluating the defendant's laches defense, the Ninth Circuit applied the standard pronounced in Danjaq LLC v. Sony Corp. Under Danjaq, a defendant must prove that:

The plaintiff delayed in initiating the lawsuit.
The delay was unreasonable.
The delay resulted in prejudice.

In the Ninth Circuit, so long as the defendant is not a willful infringer, laches can bar all legal and equitable relief (whether retrospective or prospective) for a copyright claim. It may be available even where the plaintiff timely brought its claim within the three-year statute of limitations under the Copyright Act.

Delay

For the purpose of laches, the relevant delay is the period from when the plaintiff knew or should have known of the allegedly infringing conduct to the initiation of the lawsuit. It was undisputed that:

Petrella was aware of her potential claims since 1991, when her attorney filed a renewal application.
Petrella did not file her lawsuit until January 2009.

The court agreed with the district court that this 18-year period constituted delay.

Unreasonable Delay

As to the reasonableness of Petrella's delay, the court found two relevant periods:

1990-1998, when Petrella first engaged an attorney and then contacted the defendants.
1998-2009, when Petrella started sending letters to the defendants and ultimately filed the complaint.

Petrella gave various explanations for why she did not file a claim during these periods, including her brother's disability and her mother's illnesses. Petrella also claimed that she could not afford a lawsuit at any time during either of these time periods.

The court found that Petrella's explanations were not only unsupported by evidence, but also insufficient to prove that delay was reasonable. The court reasoned that, if the plaintiff's purpose in delaying a claim is to capitalize on the success of the alleged infringer's intervening labor, the delay is unreasonable. Therefore, the Ninth Circuit agreed with the district court that Petrella's combined 19-year delay was unreasonable.

Delay Resulted in Expectations-based Prejudice

The court specified that two primary forms of prejudice are relevant to determine whether a defendant was prejudiced by the plaintiff's unreasonable delay:

Expectations-based prejudice, which results when a defendant took actions or consequences that it would not have if the plaintiff had brought the suit promptly.
Evidentiary prejudice, which occurs when there is lost, stale or degraded evidence or witnesses with faded memories or who have died.

The court only considered expectations-based prejudice. This is proven by showing that, during the delay, the defendant:

Invested money to expand its business.
Entered into business transactions based on its presumed rights.

MGM provided evidence of both forms of prejudice by:

Having expended substantial financial and other resources in marketing, advertising, distributing and otherwise promoting the film in various media in both the US and abroad over the extensive delay period.
Spending $3 million to create, promote and distribute a 25th anniversary edition of the film that was released in 2005.
Incurring costs to convert the film to the Blu-Ray format in 2008 and 2009.
Entering into numerous agreements to license the film.

The Ninth Circuit noted that MGM's significant investment of finances and other resources resulting from some 18 or more years of Petrella's unexcused delay was the essence of expectations-based prejudice. The court therefore affirmed the district court's grant of summary judgment dismissing Petrella's claims as untimely, reasoning that Petrella could not be permitted to seek an unjust recovery of MGM's profits under its copyright infringement, unjust enrichment and accounting claims.

Sanctions and Attorney's Fees

The court ruled that the district court did not abuse its discretion in denying MGM's motions for Rule 11 sanctions and attorney's fees. This is because the record reflected that Petrella had a reasonable belief that she could overcome the laches defense and there was no evidence of improper motive to warrant attorney's fees.

Concurring Opinion

Judge W. Fletcher's concurring opinion discussed a split among the circuits on the availability of a laches defense in copyright cases. In contrast to the Ninth Circuit, the following circuits treat laches as follows:

Second Circuit: Laches is available as a bar only to recovering retrospective damages, not to prospective relief (see New Era Publ’ns Int’l v. Henry Holt & Co.).
Fourth Circuit: No laches defense is available and any claim brought within the statute of limitations is upheld (see Lyons P’ship. L.P. v. Morris Costumes, Inc.).
Sixth Circuit: Laches is only available in the most compelling cases (see Chirco v. Crosswinds Cmtys., Inc.).
Eleventh Circuit: There is a strong presumption that the plaintiff's suit is timely if it is filed before the statute of limitations has run. Laches will only be recognized in the most extraordinary circumstances (see Peter Letterese & Assocs., Inc. v. World Inst. of Scientology Enters., Int’l).

Judge Fletcher noted that the Ninth Circuit is the most lenient in permitting the defense because:

Laches may bar both retrospective and prospective relief.
The defendant does not need to show:
- actual harm, only expectation-based prejudice; or
- plaintiff's actual knowledge of the infringement, only that the plaintiff should have known.

In his concurring opinion, Judge Fletcher urged the Ninth Circuit to reevaluate the availability of the laches defense in copyright cases because:

The Copyright Act of 1976's adoption of a three-year statute of limitations for copyright claims puts the judicially created equitable defense of laches in tension with Congress' intent.
The equitable rationale used for laches is typically one that is associated with equitable estoppel. However, a defendant must meet a higher standard for equitable estoppel, by showing the plaintiff acted in a manner that it knew, and intended, to be relied on by the defendant, and which is in fact relied on by the defendant to its detriment.

Practical Implications

Paula Petrella v. Metro-Goldwyn-Mayer, Inc. is noteworthy because it shows that the Ninth Circuit continues to make the laches defense available in copyright cases and applies a permissive standard in doing so.

The concurring opinion highlights that defendants must consider the circuit-specific approach to the availability and limitations of a laches defense.

Laches Bars "Raging Bull" Copyright Infringement Claim: Ninth Circuit | Practical Law