THE BREYER ASCENDANCY DEFERRED

In some earlier posts (titled The Breyer Ascendancy and the The Breyer Ascendancy, Part IIBull1_L) I have suggested that we may have  reached an inflection point where Justice Breyer is no longer just the Supreme Court’s leading skeptic on intellectual property protection, but where he is primed to lead his colleagues in a major retrenchment of IP protections.  Though I think we will see more evidence of that in some of the decisions still to come down before the end of the current term, yesterday’s 6-3 ruling in Petrella v. MGM, a copyright case brought in 2009 involving Martin Scorsese’s film Raging Bull, which was first released in 1980, shows that there is still a strong constituency on the Court, led by Justice Ginsberg, that is far less hostile to strong copyright protections than is Justice Breyer. Why did a majority allow a copyright infringement case–brought 29 years after the allegedly infringing film was released–to go forward, when the statute of limitations on such cases is three years?

The short answer is that copyright infringement is considered a continuing offense, with each new act of infringement restarting the three-year clock. Thus, each time MGM brought out a new edition or format of Raging Bull, indeed each time it sold another copy, a new cause of action arose with a new three-year limitations period for bringing suit. As a result of the limitations period, Ms. Petrella’s 2009 claim for damages can only reach back to infringements occurring since 2006, but there is no limit on her prospective claims until the copyright she sued on expires. (Her claim was based on her inheritance of a copyright in a screenplay written by her father in 1963. The author died in 1981, meaning the copyright term–life plus 70 years–will not expire until 2051.)

But the lower courts had dismissed Ms. Petrella’s suit based on the equitable doctrine of laches, which applies in situations where, notwithstanding the statute of limitations, a plaintiff has unreasonably delayed in filing suit, to the prejudice of the defendant in the form of lost evidence, fading memories, or extensive, longstanding, and irreversible investment in the course of conduct at issue.  As Learned Hand wrote long ago, it may be:

inequitable for the owner of a copyright, with full notice of an intended infringement, to stand inactive while the proposed infringer spends large sums ofmoney in its exploitation, and to intervene only when his speculation has proved a success. 

Traditionally, though, this defense is only a bar to claims for injunctive relief (e.g., an order to stop selling Raging Bull and destroy all remaining copies), not a defense to a claim for damages, which is the way the lower courts applied it against Ms. Petrella. The majority rejected this expansive use of the doctrine of laches, emphasizing a number of points, in addition to the traditional limitation of the doctrine to equitable remedies: i.e., that the three-year limitation period enacted by Congress in itself is a significant protection against delay; that laches is a discretionary doctrine that undermines a Congressional goal of uniformity; and that under the damages provisions of the Copyright Act a defendant may deduct its expenses from any award and that there is also an adjustment for factors contributing to profits other than the infringement.

Justice Breyer, not surprisingly, wrote the dissent. His response to the final point above, the extent to which an award of damages can be adjusted to account for the defendant’s expenses and investment in the property, is most interesting and characteristic of his economically-oriented approach to IP issues:

  the majority takes assurance from the fact that the Act enables the defendant to recoup his outlays in developing or selling the allegedly infringing work. Again, sometimes that fact will prevent inequitable results. But sometimes it will not. A plaintiff ’s delay may mean that the defendant has already recovered the majority of his expenses, and what is left isprimarily profit. It may mean that the defendant has dedicated decades of his life to producing the work, such that the loss of a future profit stream (even if he can recover past expenses) is tantamount to the loss of any income in later years. And in circumstances such as those described, it could prove inequitable to give the profit to a plaintiff who has unnecessarily delayed in filing an action. Simply put, the “deductible expenses” provision does not protect the defendant from the potential inequity highlighted by Judge Hand nearly 100 years ago in his influential copyright opinion. That is, it does not stop a copyright-holder (or his heirs) from “stand[ing] inactive while the proposed infringer spends large sums of money” in a risky venture; appearing on the scene only when the venture has proved a success; and thereby collecting substantially more money than he could have obtained at the outset, had he bargained with the investor over a licenseand royalty fee.

I am wagering that Justice Breyer will, despite this setback, be voting with and perhaps writing for the majorities in the two most important IP cases coming down over the next six weeks, American Broadcasting v. Aereo and  Alice Corp. v. CLS Bank.

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  1. SUPREME COURT SHUTS DOWN AEREO | Express Written Dissent

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