See Starz: No damages bar in copyright discovery rule case | McDermott Will & Emery

The United States Court of Appeals for the Ninth Circuit upheld a district court’s denial of a motion to dismiss claims of copyright infringement as prohibited by the statute of limitations, affirming the right of the copyright owner to sue even if more than three years had passed since the alleged infringement. . Starz Entertainment, LLC v MGM Domestic Television Distribution, LLCCase No. 21-55379 (9th Cir. July 14, 2022) (wardlawIkuta, Baden, JJ.)

Starz entered into licensing agreements for movies and TV series episodes with MGM in 2013 and 2015. Under these agreements, MGM granted Starz the exclusive right to show the movies and TV series episodes during specified periods of time. . MGM has agreed not to exhibit or license the Content to third parties during these specified times. From 2019 to 2020, Starz discovered that some MGM-licensed content was available on other streaming platforms.

Starz sued MGM in May 2020, asserting 340 claims of direct, contributory, and indirect copyright infringement, among other claims. MGM filed for dismissal, arguing that Starz’s copyright infringement claims were dismissed by the 2014 Supreme Court ruling in Petrella vs. MGM. MGM claimed that petrella imposes a strict bar on collecting damages for copyright infringement that occurs more than three years before the lawsuit is filed. The district court determined that petrella does not affect the discovery rule (that’s to say, that under the Copyright Act there is a three-year limitation period) except where the plaintiff was not reasonably aware of the infringements at the time they occurred. MGM filed an interlocutory appeal.

The copyright law states: “No civil action shall be sustained under the provisions of this title unless brought within three years after the claim arises.” The issue on appeal here was when a copyright infringement claim accrues. The Ninth Circuit noted that it, and all other circuits, have an exception to the infringement rule, known as the “discovery rule,” which starts the clock when a copyright owner knows or should reasonably know that a violation has occurred. The Court disagreed with MGM that petrella removed the discovery rule. Instead, the discovery rule for accrued copyright claims is alive and well, and so the court upheld the district court’s finding that Starz was not banned by petrella to file a lawsuit.

The Ninth Circuit then addressed the question of whether petrella imposed a bar of damages separate from the statute of limitations. MGM argued that petrella created a separate damages bar that limits damages to damages arising from acts of infringement within the three-year window. The Court concluded that a three-year look-back period would eviscerate the discovery rule and explained that MGM’s approach is a classic example of the absurdity of such a rule. The agreements between Starz and MGM covered hundreds of titles over separate time periods, and under MGM’s approach, damages could only be recovered for a 2013 infringement if the suit was filed by 2016. In this case, Starz did not discover any infringement until 2019 and filed suit less than a year later. While Starz’s copyright infringement claim piled up when Starz discovered the alleged infringement in 2019 and was timely, according to MGM’s theory, the act of infringement would have been unrecoverable since 2016. petrella imposes a three-year damages bar in a discovery rule case.

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