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Media Alerts - Seven Arts Filmed Ent. Ltd. v. Content Media Corp. PLC - 9th Circuit
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December 9, 2013
  Seven Arts Filmed Ent. Ltd. v. Content Media Corp. PLC - 9th Circuit
Headline: Ninth Circuit affirms dismissal of copyright infringement claim due to gravamen of dispute being ownership between parties in a close relationship

Area of Law: Civil Procedure and Entertainment Law

Issue Presented: Whether a claim for copyright infringement under 17 U.S.C. § 507(b), in which ownership is the disputed issue, is time-barred if a unattached ownership claim would be barred.

Brief Summary: In 2011 appellant, Seven Arts Filmed Entertainment, filed a claim for copyright infringement against Paramount Pictures and Content Media Corporation based on Paramount's refusal to pay distribution proceeds in 2005. The district court dismissed Seven Arts' claim on the grounds that it was time barred by the Copyright Act's three-year statute of limitations.

The Ninth Circuit affirmed the dismissal, holding that Paramount's failure and refusal to comply with demands for payment in 2005 was a clear and express repudiation of Seven Arts' copyright ownership. Since this occurred in 2005 and Seven Arts' claim was filed in 2011, the Court held that Paramount's repudiation occurred in excess of three years prior to Seven Arts' suit and was time barred.

Extended Summary: In 1998 Seven Arts' predecessor-in-interest, CineVision, entered into a " 'first-look' " production arrangement with Paramount that gave CineVision exclusive international distribution rights to the motion picture Rules of Engagement. CineVision also obtained rights to the distribution of American Rhapsody and Who is Cletis Tout?. Later that year, CineVision entered into an agreement with Fireworks, one of Content's predecessors-in-interest, to finance, produce and distribute movies covered under CineVision's "first look" agreement with Paramount. Paramount then began paying receipts from the movie distributions to Content's predecessors-in-interest instead of Seven Arts.

In 2005, Seven Arts' predecessor-in-interest sent three letters to Paramount regarding these payments. The letters stated that Content's predecessors no longer had rights to distribute the movies, that Paramount pay all sums due to Seven Arts instead, and that Paramount demand proof of chain of title from Content's predecessors prior to making any further payments to them. Paramount obtained the proof of chain of title, gave it to Seven Arts' predecessor in interest, and continued to pay Content's predecessors instead of Seven Arts.

In 2003, Seven Arts filed a suit in Canada against one of Content's predecessors in interest, CanWest, claiming co-ownership rights stemming from a " 'Master Structure Agreement.' " CanWest denied that the agreement was an enforceable contract. Seven Arts then claimed that this denial allowed Seven Arts to rescind existing contracts among the parties and, claiming sole ownership, filed a second suit in 2005 against CanWest for copyright infringement. Since the Canadian action was still pending, this suit was stayed pending prosecution of the Canadian action and was dismissed in 2008 for failure to prosecute.
Seven Arts then prosecuted its Canadian action and obtained summary judgment in 2011. The Canadian order granted Seven Arts a declaration that at all relevant times it was the owner of copyrights for An American Rhapsody and Who is Cletis Tout? and that Seven Arts had exclusive rights for international distribution of Rules of Engagement. However, by this time the named defendants had declared bankruptcy.

Seven Arts, claiming the summary judgment order established its ownership rights, then sued Content and, for the first time, Paramount on May 27, 2011. Seven Arts voluntarily dismissed against Content so it could pursue the claim in England and Wales. Paramount moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) and the district court dismissed on the ground that Seven Arts' claim was barred by the Copyright Act's three-year statute of limitations under 17 U.S.C. § 507(b).

17 U.S.C. § 507(b) states that all civil actions must be brought " 'within three years after the claim accrued.' " However, when the claim accrued here was dependent on whether the claim was for ordinary copyright infringement or if it was a claim to establish ownership of the copyright. Claims for ordinary copyright infringement can be brought for any acts that accrued within three years prior to filing the suit. By contrast, claims of ownership, which occur at the time of repudiation of ownership, accrue "only once."

Pursuing a claim for copyright infringement requires two basic elements: (1) the plaintiff owns a valid copyright and (2) original elements of the work were copied. In most infringement cases, the dispute centers on the second prong. Here, however, the dispute centered on who owned the copyrights to the films. As such, the Court had to examine whether copyright infringement claims, where ownership is the disputed issue, are time-barred if an unattached ownership claim would be barred.

While this was an issue of first impression in the Ninth Circuit, other circuits have held that infringement claims are barred if ownership is the gravamen of the suit and freestanding ownership claims would be time-barred. In adopting this rule, the Court reasoned that holding otherwise would create a loophole to the statute of limitations that would allow owners who are time-barred to "restyle their claims as 'infringement' and proceed without restriction." Furthermore, adopting a rule contrary to the other circuits would create a split in authority, creating different tiers of protection based on geographic location. Such a split between the circuits would also be contrary to " '[c]ongressional intent to have national uniformity in copyright laws.' " For these reasons, the Ninth Circuit panel held that "an untimely ownership claim will bar a claim for copyright infringement where the gravamen of the dispute is ownership, at least where, as here, the parties are in a close relationship."

Here, Paramount's rescission occurred in 2005, and Seven Arts' suit was filed more than 3 years later, making an ownership claim time-barred. Since an infringement claim requires the corresponding ownership claim be timely, the Ninth Circuit held that the district court properly dismissed Seven Arts' claim.

Panel: Judges O'Scannlain, Bea, Christen

Date of Issued Opinion: November 6, 2013

Docket Number: 2:11-cv-04603-ABC-FMO

Decided: Affirmed

Case Alert Author: Seth DuMouchel

Author of Opinion: Judge O'Scannlain

Case Alert Circuit Supervisor: Professor Glenn Koppel

    Posted By: Glenn Koppel @ 12/09/2013 06:01 PM     9th Circuit  

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