9th Circuit Rules that Time is Of the Essence When a “Close Relationship” Exists Between the Parties to a Copyright Infringement Suit


On November 6, 2013, the 9th Circuit, following previous decisions by the 2nd and 6th Circuits, ruled that a copyright infringement claim filed by Seven Arts was barred based on the three year statute of limitations imposed by the Copyright Act. The decision cited that this decision was proper for the circumstances at hand because “the gravamen of the dispute is ownership” and “the parties are in a close relationship.”

This case arose out of a series of cases (spanning over ten years) that Seven Arts filed concerning its alleged ownership of the copyrights for three motion pictures: Rules of Engagement, An American Rhapsody and Who is Cletis Tout?

Seven Arts filed a lawsuit in Canada in 2003 against CanWest based on its alleged ownership of the copyright rights to the films. In the complaint, “Seven Arts claimed co-ownership rights to the pictures stemming from a document referred to as the ‘Heads of Agreement’ or ‘Master Structure Agreement.’” (The agreement contained a forum selection clause that designated Canada as the proper venue.) While the Canadian case was still pending, Seven Arts filed the same action against the same defendant in the Central District of California in 2005. This time, it claimed to be the sole owner of the rights. (This case is dismissed in 2008 for failure to prosecute.)

In 2011, the Canadian court ruled that Seven Arts is the sole owner of the copyrights. Seven Arts relied on this judgment as proof of ownership and it immediately filed suit against Paramount and Content Media Corporation for copyright infringement of the three works. (This action was almost identical to the suit filed in this court in 2005 that was later dismissed.) The complaint also asserted that Paramount had been improperly paying royalties to CanWest or Content Media despite several attempts to alert them to Seven Art’s ownership claim.

Seven Arts chose to voluntarily dismiss Content Media from the suit and instead intended to pursue the company in the High Court of England and Wales. Paramount admitted to “exploiting the pictures” but was unwilling to recognize that Seven Arts maintained ownership of the associated copyrights.

While the court recognized that “each new infringing act causes a new claim to accrue,” it explained that a “plain and express repudiation” of ownership by the defendant begins the tolling of the three year statute of limitations. If the claim of ownership is time barred, all claims related to the ownership must also be barred.

Seven Arts attempted to argue that the rulings in the other circuits were not applicable because Paramount did not maintain a close relationship with Seven Arts, but was instead only a “downstream, third party licensee.” In reference to this contention, the court considered the relationship of the various predecessors-in-interest to both parties. It determined that there was a “close relationship” between these groups. (The current CEO of Seven Arts had even been personally involved in creating the licensing agreement with Paramount on behalf of CineVisions, a predecessor-in-interest to Seven Arts. Thus, Seven Arts was aware of Paramount’s interest in the distribution rights of the films during the statutory period.)

The court also looked at evidence that Seven Arts had sent three letters to Paramount throughout 2005 claiming that it was the rightful owner of the copyrights and royalties should rightfully be paid to Seven Arts and not other parties. Paramount ignored these requests, which the court determined constituted a “plainly and expressly repudiat[ion]” of Seven Arts’ copyright ownership claim and it occurred outside the three year window.

The 9th Circuit stated obvious concern for causing a split between the rulings of other circuit courts, but whether or not that feeling will be echoed by other circuit courts is uncertain.

For more information:

  • Case 2:11-cv-04603-ABC-FMO
  • Copyright Act, 17 USC §507(b)




Add a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Website Apps