Last month, the Second Circuit went against the tide of recent S.D.N.Y.
decisions and instead joined the majority of circuit courts around the country to
hold that the statute of limitations for copyright infringement claims runs
from when the infringement is or should have been discovered, and not the date
of infringement. See Psihoyos v. John Wiley & Sons, Civ. No. 12-4874, 2014 WL
1327937, at *1 (2d Cir. Apr. 4, 2014).
In Psihoyos, a
plaintiff photographer sued the defendant for publishing his photos in
textbooks and ancillary publications without his permission. The Second Circuit affirmed the district
court’s holding that the Copyright Act’s three-year statute of limitations did
not bar the plaintiff’s claims because the plaintiff did not discover the
infringements until 2010, less than three years before he filed the suit.
Under 17 U.S.C. §
507(b), civil actions for copyright infringement must be commenced
within three years “after the claim accrue[s].”
Prior to Psihoyos, district
courts within the Second Circuit were divided with regard to whether the
“injury rule” or “discovery rule” applied.
Under the “injury rule,” a claim accrues at the time the infringement
occurs while under the “discovery rule,” a claim accrues when the aggrieved
party knows or has reason to know of the infringement. At the time of the court’s decision in Psihoyos, the overwhelming majority of
appellate courts subscribed to the “discovery rule.” However, within the Second Circuit many
courts continued to follow Judge Kaplan’s seminal decision in Auscape Int’l v. Nat’l Geographic Society, 409 F. Supp. 2d 235 (S.D.N.Y. 2004),
along with Judge Buchwald’s decision in Urbont
v. Sony Music Enter. et. al., 863 F. Supp. 2d 279, 282 (S.D.N.Y. 2012), applying
the “injury rule.”
The Second Circuit stated that it agreed with its “sister
Circuits that the text and structure of the Copyright Act . . . evince[d]
Congress’s intent to employ the discovery rule,” and that policy reasons
counseled in favor of adopting it. See Psihoyos, 2014 WL 1327937, at *3. In so doing, the court distinguished the
Supreme Court’s decision in TRW Inc. v.
Andrews, 534 U.S. 19 (2001) (refusing to inject a general “discovery rule” into
statute of limitations provision of the Fair Credit Reporting Act). The court relied
on the reasoning articulated by other circuits grappling with the issue since TRW had been decided. Psihoyos,
2014 WL 1327937, at *3 & n.3.
Psihoyos raises several
issues that will need to be decided in the Second Circuit. For example, what will be the legal standard
for inquiry notice of infringement in the copyright context? Traditionally, while trademark owners have a
duty to police their marks, copyright owners do not. Thus some courts applying the “discovery
rule” have held that a plaintiff is on inquiry notice only “once it possesses
information regarding culpable conduct – ‘storm warnings’ - suggesting some
reason to investigate.” Design Basics, LLC v. Chelsea Lumber Co., Civ.
No. 11-10854, 2013 WL 5539609, at
*7-*8 (E.D. Mich. Oct. 8, 2013) (relying on opinions by the First and Third
Circuits).
Since the Psihoyos
court relied on its sister circuits in embracing the “discovery rule,” it may
also adopt their requirement for “storm warnings.” If so, will a potential plaintiff be on
inquiry notice if an accused infringer floods the Internet or Tweets, for
example, an infringing photograph or recording?
While courts have held that public availability of potential
infringements “does not, without some additional ‘triggering event,‘ put a
plaintiff on inquiry notice,” see id.,
what constitutes a triggering event will likely be a ripe area for litigation
in the Second Circuit now that the “discovery rule” is in place.
On a practical level, the rule may also require copyright
plaintiffs and defendants to allocate discovery resources to litigating statute
of limitations issues. For example, if “storm
warnings” are required, litigants will fight over what they were, who received
them, and whether a plaintiff acted with reasonable diligence, rather than the
often much cleaner line based on the date of the act of infringement. Thus, Psihoyos
may require litigators to pay more attention to statute of limitations issues in
copyright cases.
by Wendy Stein and Jason Sanders
© 2014 Jason Sanders Law PLLC
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