Implications of “Raging Bull” Lawsuit for Copyright Owners

Dust off those old songs, manuscripts and articles because on May 19, 2014, the U.S. Supreme Court issued an opinion in Petrella v. Metro-Goldwyn-Mayer, Inc. (the “Raging Bull” lawsuit) that ensures a copyright holder has the right to enforce a copyrighted work, even if it has been dormant for many years, and receive damages, and, in most instances, injunctive relief, to redress past infringement so long as the action is filed within three years of the offense.

Background

The allegedly infringing work in this case is the motion picture Raging Bull, which is based on the life of boxing champion Jake LaMotta. In 1963, Mr. LaMotta and Frank Petrella created a screenplay based on Mr. LaMotta’s life, and registered a copyright in the work in the same year. In 1976, the pair assigned their copyright and renewal rights in the screenplay to a third party. United Artists Corporation, a subsidiary of MGM, eventually acquired those rights. In 1980, MGM registered a copyright in the film Raging Bull and released it to worldwide acclaim. It continues to market the film today.

Mr. Petrella died during the initial copyright term, and thus by law his renewal rights reverted to his heirs regardless of any prior assignments. Paula Petrella, his daughter, renewed the 1963 copyright in 1991. In doing so, she became its sole owner. Seven years later, she advised MGM that its commercial exploitation of Raging Bull violated her copyright, and threatened suit. Nine years later, on January 6, 2009, Ms. Petrella filed such suit seeking monetary damages and injunctive relief for MGM’s acts of infringement taking place on or after January 6, 2006. Invoking the equitable doctrine of laches, MGM moved for summary judgment, arguing that Ms. Petrella’s 18-year delay in filing suit was unreasonable and prejudicial to MGM. The trial court granted the motion, and the Ninth Circuit affirmed.

The U.S. Supreme Court reversed, effectively eliminating the laches defense to a claim of damages filed within three years of the offending events, regardless of when the infringement actually began.

Supreme Court’s Reasoning

Justice Ginsburg, who wrote the majority opinion for the Supremes, determined laches cannot be invoked to bar Petrella’s claim for damages brought within the Copyright Act’s three-year statute of limitations. She reasoned that by permitting a successful plaintiff to gain retrospective relief only three years back from the time of suit, the Act’s statute of limitations takes account of any delay. When the limitations period is brought to bear in this case, it directs that Petrella cannot reach MGM’s returns on its investment in Raging Bull in the years before 2006. Moreover, if the plaintiff can show infringement within the three-year window, the defendant may offset against profits made in that period the expenses incurred in generating those profits. A defendant can also retain the return on investment shown to be attributable to its own enterprise, as distinct from the value created by the infringed work.

Justice Ginsburg rejected all of MGM’s arguments that laches should apply to bar any recovery by Ms. Petrella.

First, she rejected MGM’s argument that laches should be available in every civil action to bar all forms of relief regardless of the applicable statute of limitations. Justice Ginsburg found the court has never applied laches to bar in their entirety claims for discrete wrongs that occur within a federally prescribed limitations period.

Second, Justice Ginsburg rejected MGM’s argument that laches should be read into every federal statute of limitations because while the defense originally served as a guide when no limitation period controlled the time in which to bring a claim, Congress’ decision to set a three-year limitations period [largely] eliminated the need for the defense.

Third, Justice Ginsburg rejected MGM’s defense that laches prevents a copyright owner from sitting on her rights until the outcome of the infringer’s investment is known. She determined a copyright owner has no obligation to challenge every act of infringement. There is nothing wrong with waiting to see if the infringer’s exploitation of the work increases or decreases its value, and thus whether suing for damages is worth the cost.

Fourth, the court rejected MGM’s argument that evidence would be lost during the copyright owner’s delay in bringing an action that would prejudice the defendant. She determined that Congress knew the passage of time and the author’s death could cause evidentiary issues when it provided for reversionary renewal rights that an author’s heirs could exercise long after a work was copyrighted. The absence of evidence would hinder both parties, particularly given the plaintiff bears the burden of proving infringement.

Fifth, while laches cannot be invoked to preclude adjudication of a claim for damages brought during the limitations period, in extraordinary circumstances it may curtail equitable relief. For example, an order requiring destruction of housing constructed and occupied because the copyrighted architectural plans were infringed upon or requiring the destruction of books printed, packed and shipped would not be tolerable.

Implications for Copyright Owners

The Petrella decision may ignite a firestorm of dormant copyright disputes. It will galvanize savvy copyright owners to dust off older works and reconsider asserting their rights against current users.

Businesses that rely on copyrighted material should reevaluate their risk of exposure. Petrella diminishes the advantage of operating under the radar by allowing authors to wait until a business realizes profits to make a demand. In some circumstances, it may now make sense to inoculate against the risk by forcing the issue. For instance, contact the author and ask her to state clearly if she believes she retains any interest in the work and intends to sue. A negative response provides facts supporting an estoppel defense. A positive response avoids the surprise of receiving a demand letter three years after making a profit. Raising the issue places the business on the author’s radar.

Businesses may also wish to keep all financial records showing deductible expenses for the duration of a product’s life plus three years. For products that may be on the market for decades, such a retention schedule will exceed the duration imposed by financial reporting requirements.