Seven Arts Filmed Entertainmen v. Content Media Corporation Plc , 733 F.3d 1251 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SEVEN ARTS FILMED No. 11-56759
ENTERTAINMENT LIMITED, an
English corporation, D.C. No.
Plaintiff-Appellant, 2:11-cv-04603-
ABC-FMO
v.
CONTENT MEDIA CORPORATION OPINION
PLC, an English corporation,
Defendant,
and
PARAMOUNT PICTURES CORP., a
Delaware corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Audrey B. Collins, District Judge, Presiding
Argued and Submitted
August 29, 2013—Pasadena, California
Filed November 6, 2013
2 SEVEN ARTS V. CONTENT MEDIA
Before: Diarmuid F. O’Scannlain, Carlos T. Bea,
and Morgan Christen, Circuit Judges.
Opinion by Judge O’Scannlain
SUMMARY*
Copyright
The panel affirmed the dismissal of a copyright
infringement claim as barred by the Copyright Act’s three-
year statute of limitations in a case in which the plaintiff
sought to establish ownership of copyrights in several motion
pictures.
Agreeing with the Second and Sixth Circuits, the 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. The panel held that because it was apparent
from the complaint that the defendant clearly and expressly
repudiated the plaintiff’s ownership of the copyrights more
than three years before the plaintiff brought suit, the district
court properly dismissed the complaint.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
SEVEN ARTS V. CONTENT MEDIA 3
COUNSEL
Neil Netanel, Los Angeles, California, argued the cause and
Peter Hoffman, West Hollywood, California, filed the briefs
for the plaintiff-appellant.
Joan Mack, Los Angeles, California, argued the cause and
filed the brief for the defendant-appellee. With her on the
brief were Jeanne A. Fugate, Los Angeles, California, and
Matthew O’Brien, Los Angeles, California.
OPINION
O’SCANNLAIN, Circuit Judge:
We are invited to decide the ownership of copyrights in
several motion pictures. The question is whether the three-
year statute of limitations in the Copyright Act applies.
I
This appeal is the latest chapter in a decade-long quest by
Seven Arts Filmed Entertainment Limited (“Seven Arts”)1 to
establish ownership of copyrights in several motion
pictures—as relevant here: Rules of Engagement, An
American Rhapsody, and Who is Cletis Tout?.
1
Except as necessary for clarity, this Opinion uses “Seven Arts” to
describe the Plaintiff as well as its predecessors-in-interest: CineVisions,
Stander Productions Ltd., Seven Arts Pictures PLC, and Seven Arts
Pictures, Inc.
4 SEVEN ARTS V. CONTENT MEDIA
On May 27, 2011, Seven Arts sued Paramount Pictures
Corp. (“Paramount”) and Content Media Corp. PLC
(“Content”) for copyright infringement, a declaration of
ownership rights, and an accounting, seeking a declaration
that neither Content, nor its predecessors-in-interest
(collectively “CanWest”),2 “is the owner or grantee” of rights
in the films. Rather, Seven Arts claims that it is “the
registered owner or assignee of the registered owner” of
United States copyrights to the films. Seven Arts also alleges
that Paramount is the licensee of certain distribution rights in
and to the pictures, and that it has paid receipts from their
distribution to Content, not Seven Arts, despite Seven Arts’s
demands.
Seven Arts voluntarily dismissed Content, deciding to
pursue it in the High Court of England and Wales.
Nonetheless, Seven Arts claimed a viable cause of action for
copyright infringement against Paramount because of a
summary judgment order it obtained in 2011 from the
Superior Court of Justice in Ontario, Canada.
That Canadian action was first brought in 2003 against
CanWest. In it, 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 case found its way to Canada because CanWest defended
Seven Arts’s first lawsuit—a 2002 action in the Central
2
According to the complaint, “Content is the assignee and/or licensee
of all interests that Fireworks Entertainment, Inc., an Ontario, Canada
corporation, Fireworks Pictures Releasing (U.S.) Inc., a California
corporation, CanWest Entertainment Inc., an Ontario, Canada corporation,
and CanWest Entertainment International Distribution, an Irish joint
venture . . . purport to own in the Pictures.”
SEVEN ARTS V. CONTENT MEDIA 5
District of California—on the ground that the Heads of
Agreement had a Canadian forum-selection clause. CanWest
defended in Canada by denying that the Heads of Agreement
was an enforceable contract.
While the Canadian action was pending, Seven Arts
returned to the United States in 2005 and filed a second
action in the Central District of California. Just as the instant
2011 action, the 2005 lawsuit alleged causes of action for
copyright infringement, declaratory relief, and an accounting
against CanWest. Unlike the 2002 action, which had alleged
Seven Arts was a co-owner, the 2005 lawsuit claimed that
Seven Arts was the sole owner of the disputed film rights.
The new theory of ownership was that when CanWest denied
the Heads of Agreement in Canada, Seven Arts obtained and
exercised a right to “rescind any contracts which may have
existed among the parties.” Such contracts included: the
Heads of Agreement in which Seven Arts’s predecessor-in-
interest had assigned all its rights to Rules of Engagement to
Paramount’s predecessor-in-interest; a 1999 agreement in
which Seven Arts had assigned away its rights to An
American Rhapsody; and a 2000 agreement concerning Who
Is Cletis Tout?.
In August 2005, the district court granted CanWest’s
motion to stay the proceedings pending prosecution of the
Canadian action. Seven Arts belatedly appealed that stay to
this court, and we affirmed. See Seven Arts Pictures PLC v.
Fireworks Entm’t, Inc., 244 F. App’x 836 (9th Cir. 2007). In
2008, the district court dismissed the 2005 action with
prejudice for failure to prosecute after issuing two prior
warnings. Seven Arts appealed to this court, and we
affirmed. See Seven Arts Pictures PLC v. Fireworks Entm’t,
Inc., 329 F. App’x 726 (9th Cir. 2009).
6 SEVEN ARTS V. CONTENT MEDIA
Seven Arts finally prosecuted its Canadian action and
ultimately secured the February 2011 summary judgment
order already mentioned. The Canadian proceeding was not
adversarial, because the initially named defendants had
entered bankruptcy and had not opposed the motion; so the
Canadian court reviewed only the evidence presented by
Seven Arts. Nonetheless, the Canadian order granted Seven
Arts a declaration that it is and at all relevant times had been
the owner of “copyrights registered and enforceable pursuant
to the United States Copyright Act of 1976” for An American
Rhapsody and Who is Cletis Tout?, and also that it had
“exclusive rights” for international distribution of Rules of
Engagement. The Canadian order further determined that
Seven Arts had “granted no rights or interest in the
Copyrights or the Copyrighted Works to any Defendant” and
that therefore “the Defendants have infringed and continue to
infringe the Plaintiffs’ rights.”
Seven Arts—with the summary judgment order in
hand—returned to federal district court and filed this case, a
near-duplicate of the 2005 lawsuit, except that Seven Arts
sued Paramount for the first time and alleged that the
Canadian summary judgment order established its ownership
rights. Paramount moved to dismiss the complaint under
Federal Rule of Civil Procedure 12(b)(6).3 On October 3,
2011, the district court dismissed the complaint with
prejudice on the ground that Seven Arts’s claim for copyright
infringement against Paramount was barred by the Copyright
Act’s three-year statute of limitations, 17 U.S.C. § 507(b).
3
Content also moved to dismiss under Rule 12(b)(6) but, as previously
mentioned, Seven Arts voluntarily dismissed Content before the district
court ruled on Content’s motion.
SEVEN ARTS V. CONTENT MEDIA 7
II
We review the district court’s dismissal of the complaint
for failure to state a claim and the legal issues it presents de
novo. See UMG Recordings, Inc. v. Shelter Capital Partners
LLC, 718 F.3d 1006, 1014 (9th Cir. 2013). A statute-of-
limitations defense, if “apparent from the face of the
complaint,” may properly be raised in a motion to dismiss.
Conerly v. Westinghouse Elec. Corp., 623 F.2d 117, 119 (9th
Cir. 1980). “We accept as true all well-pleaded allegations of
material fact” but are not “required to accept as true
allegations that contradict exhibits attached to the Complaint
or matters properly subject to judicial notice, or allegations
that are merely conclusory, unwarranted deductions of fact,
or unreasonable inferences.” Daniels-Hall v. Nat’l Educ.
Ass’n, 629 F.3d 992, 998 (9th Cir. 2010).
III
The Copyright Act of 1976 provides that all civil actions
must be brought “within three years after the claim accrued.”
17 U.S.C. § 507(b). When a claim accrues depends on the
nature of the copyright claim.
For ordinary claims of copyright infringement, each new
infringing act causes a new claim to accrue; thus, we have
held that “an action may be brought for all acts that accrued
within the three years preceding the filing of the suit.” Roley
v. New World Pictures, Ltd., 19 F.3d 479, 481–82 (9th Cir.
1994).4 By contrast, we have held “that claims of
4
See also 3 Melville B. Nimmer & David Nimmer, Nimmer on
Copyright, § 12.05[B][1][b] (2011) (explaining that Roley “adopted a
‘rolling’ concept of looking back three years from the date of filing,” an
8 SEVEN ARTS V. CONTENT MEDIA
co-ownership, as distinct from claims of infringement,”
accrue only once, “when plain and express repudiation of
co-ownership is communicated to the claimant, and are
barred three years from the time of repudiation.” Zuill v.
Shanahan, 80 F.3d 1366, 1369 (9th Cir. 1996); see also
Aalmuhammed v. Lee, 202 F.3d 1227, 1230–31 (9th Cir.
2000) (Where “creation rather than infringement is the
gravamen of an authorship claim, the claim accrues on
account of creation, not subsequent infringement, and is
barred three years from ‘plain and express repudiation’ of
authorship.”).
Copyright infringement claims have two basic elements:
“(1) ownership of a valid copyright, and (2) copying of
constituent elements of the work that are original.” Feist
Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361
(1991). In the ordinary infringement case, ownership is not
in dispute, Kwan v. Schlein, 634 F.3d 224, 229 (2d Cir. 2011);
rather, the dispute centers on the second prong—whether, for
example, the copying was a “fair use,”5 or whether the
materials taken were “original,” see, e.g., Roley, 19 F.3d at
480.
But this dispute is about ownership—Paramount concedes
it is exploiting the pictures, but denies that Seven Arts owns
the copyrights. That such is the nature of this dispute is
approach which “rejects the continuing wrong theory, whereby” damages
would be available all the way back to the day the infringement started).
5
E.g., SOFA Entm’t, Inc. v. Dodger Prod., Inc., 709 F.3d 1273, 1276
(9th Cir. 2013) (involving “a copyright infringement suit over a
seven-second clip of Ed Sullivan’s introduction of the Four Seasons on
The Ed Sullivan Show”).
SEVEN ARTS V. CONTENT MEDIA 9
apparent from the face of Seven Arts’s complaint, which
alleges that Seven Arts, not CanWest or Content, owned the
copyrights, and that Paramount improperly paid royalties to
CanWest or Content rather than Seven Arts.6 We must
decide, then, whether a claim for copyright infringement in
which ownership is the disputed issue is time-barred if a
freestanding ownership claim would be barred.
A
Although this is an issue of first impression in our circuit,
we are guided by the Second and Sixth Circuits. Our sister
circuits have held that, where the gravamen of a copyright
infringement suit is ownership, and a freestanding ownership
claim would be time-barred, any infringement claims are also
barred. See Kwan, 634 F.3d at 229–30; Ritchie v. Williams,
395 F.3d 283, 288 n.5 (6th Cir. 2005); see also Roger Miller
Music, Inc. v. Sony/ATV Publ’g, LLC, 477 F.3d 383, 389–90
(6th Cir. 2007).7 “When claims for both infringement and
ownership are alleged,” according to the Sixth Circuit, “the
6
We need not consider Seven Arts’s assertion that Paramount is
precluded from disputing Seven Arts’s ownership of the copyrights
because it stood in privity with CanWest in the Canadian action. Both
parties concede that the issue of “estoppel by privity” was not adjudicated
by the district court and is not properly before us. Even if Seven Arts
were ultimately to prevail on the merits of that theory, it would not prove
that the gravamen of this dispute is something other than ownership.
7
Both circuits were, in turn, guided by Zuill. See Kwan, 634 F.3d at 230(“Creation, rather than infringement, was the gravamen of plaintiffs’ co-
ownership claim, so the claim did not accrue upon subsequent
publication.” (quoting Zuill, 80 F.3d at 1371)); Ritchie, 395 F.3d at 288
n.5 (extending Zuill’s accrual upon “plain and express repudiation” rule
“from co-authors to others in close relationships, such as those who
transfer copyright ownership via contract”).
10 SEVEN ARTS V. CONTENT MEDIA
infringement claim is timely only if the corresponding
ownership claim is also timely.” Roger Miller Music, Inc.,
477 F.3d at 389–90. Or, as the Second Circuit puts it,
“[w]here . . . the ownership claim is time-barred, and
ownership is the dispositive issue, any attendant infringement
claims must fail.” Kwan, 634 F.3d at 230.
1
Our sister circuits’ approach makes good sense—allowing
infringement claims to establish ownership where a
freestanding ownership claim would be time-barred would
permit plaintiffs to skirt the statute of limitations for
ownership claims and lead to results that are “potentially
bizarre,” 3 Nimmer & Nimmer, Nimmer on Copyright,
§ 12.05[C][3]. An alternative approach would allow
plaintiffs who claim to be owners, but who are time-barred
from pursuing their ownership claims forthrightly, simply to
restyle their claims as “infringement” and proceed without
restriction. Such would negate our reasoning in Zuill—
It is inequitable to allow the putative
co-owner to lie in the weeds for years after his
claim has been repudiated, while large
amounts of money are spent developing a
market for the copyrighted material, and then
pounce on the prize after it has been brought
in by another’s effort.
80 F.3d at 1370–71.
Still, Seven Arts urges us to create a circuit split by
refusing to extend Zuill’s accrual-upon-express-repudiation
rule from ownership claims among co-authors to
SEVEN ARTS V. CONTENT MEDIA 11
infringement claims where the dispositive issue is ownership.
To be sure, Seven Arts is correct that Zuill was a dispute
between co-authors, who cannot sue one another for
copyright infringement, whereas our sister circuits have
extended Zuill to claims of sole authorship. Yet, as the
leading copyright treatise explains, that is a distinction
without a difference. See 3 Nimmer & Nimmer, Nimmer on
Copyright, § 12.05[C][2] (“If A cannot be heard to claim
belatedly that he co-authored a work with B twenty years ago,
which would result in A owning 50% of the copyright, then
all the moreso C must be barred from belatedly claiming that
she solely authored a work on which D has been claiming
authorship credit for twenty years, which would result in C
owning 100% of the copyright.”).
Relying on legislative history, Seven Arts maintains that
the statute of limitations for declaratory-judgment actions
should not be applied to claims for copyright infringement
because Congress’s intent in enacting the statute of
limitations was to bar particular remedies, not extinguish any
substantive rights. See, e.g., S. Rep. 85-1014 (1957),
reprinted in 1957 U.S.C.C.A.N. 1961, 1963 (“The committee
wishes to emphasize that it is the committee’s intention that
the statute of limitations, contained in this bill, is to extend to
the remedy of the person affected thereby, and not to his
substantive rights.”). The plaintiff in Zuill cited the same
passage of legislative history. 80 F.3d at 1369 & n.1. As in
Zuill, the “legislative history does not speak to the issue” in
this case. Id. at 1369.
We agree with our sister circuits’ reasoning, and are
unpersuaded by Seven Arts’s criticism of it. Moreover, “the
creation of a circuit split would be particularly troublesome
in the realm of copyright.” Silvers v. Sony Pictures Entm’t,
12 SEVEN ARTS V. CONTENT MEDIA
Inc., 402 F.3d 881, 890 (9th Cir. 2005) (en banc). Creating
“[i]nconsistent rules among the circuits would lead to
different levels of protection in different areas of the country,
even if the same alleged infringement is occurring
nationwide.” Id. Such would contravene Congress’s intent
in revising the Copyright Act. See Cmty. for Creative
Non-Violence v. Reid, 490 U.S. 730, 749 (1989) (“Congress’
paramount goal in revising the 1976 Act [was] enhancing
predictability and certainty of copyright ownership.”); Syntek
Semiconductor Co. v. Microchip Tech. Inc., 307 F.3d 775,
781 (9th Cir. 2002) (“Congressional intent to have national
uniformity in copyright laws is clear.”). We decline Seven
Arts’s invitation to create a circuit split.
2
Seven Arts contends that, even if we follow the Second
and Sixth Circuits, our sister circuits’ caselaw is inapposite
because Paramount is a “putative downstream, third party
licensee”8 rather than a co-author or otherwise “in [a] close
relationship[], such as those who transfer copyright
ownership via contract,” Ritchie, 395 F.3d at 288 n.5; see also
Kwan, 634 F.3d at 226–27 (holding that suit by editor of a
book against book’s publisher, who hired her, and author was
barred by statute of limitations). Extending Zuill’s accrual
rule to encompass claims against those who are not in a close
relationship could introduce uncertainty into the enforcement
8
Paramount disputes this characterization, claiming that it has validly
registered copyrights to An American Rhapsody and Who is Cletis Tout?
and that its German partner, MFP Munich Films, holds the copyright for
Rules of Engagement. Furthermore, Paramount claims that it assigned the
international distribution right for Rules of Engagement to Seven Arts’s
predecessor and was therefore “upstream” from Seven Arts.
SEVEN ARTS V. CONTENT MEDIA 13
of copyrights and require copyright holders to file suit against
any third party that might be deemed to have repudiated the
copyright owner’s title.
We need not decide which rule applies to suits against
unknown third parties. Paramount and Seven Arts’s
predecessors-in-interest were in the sort of “close
relationship” envisioned by Ritchie and reflected in Kwan.
Peter Hoffman, then-president of Seven Arts’s predecessor-
in-interest CineVisions, described the relationship in his
affidavit filed in support of summary judgment in the
Canadian action. CineVisions and Hoffman entered into a
“first look” deal with Paramount in January 1998. Later that
year, CineVisions and Fireworks, one of Content’s
predecessors-in-interest, “agreed to enter into an agreement
for the financing, production, acquisition and distribution of
theatrical motion pictures (the ‘Venture’) under and pursuant
to [CineVisions’s] ‘first look’ production arrangement with
Paramount.”
“Pursuant to the Venture . . . [CineVisions] obtained from
Paramount the exclusive grant of all international distribution
rights, i.e. theatrical, non-theatrical, video and television
rights outside the United States and Canada . . . to the motion
picture entitled Rules of Engagement,” which “was the first
of the major Paramount motion pictures acquired by
[CineVisions] under the ‘first look’ arrangement with
Paramount.” Similarly, Hoffman “obtain[ed] an agreement
with Paramount for the distribution of American Rhapsody in
most territories.” And, CineVisions “arranged several
pre-sales for [Who is Cletis Trout?] and arranged for
distribution of the picture in the United States through
Paramount.”
14 SEVEN ARTS V. CONTENT MEDIA
Of particular note, Hoffman, now Seven Arts’s CEO and
counsel in this appeal, personally signed and negotiated those
contracts and agreements with Paramount. Seven Arts cannot
claim ignorance about Paramount’s interest in, and
distribution of, the pictures during the statutory period.
B
Paramount plainly and expressly repudiated Seven Arts’s
copyright ownership more than three years before Seven Arts
brought this suit. According to the complaint, Seven Arts’s
predecessors-in-interest “gave notice to Paramount in three
letters dated January 20, 2005, March 18, 2005, and May 5,
2005 . . . that all sums due to the CanWest Parties with
respect to the Pictures was [sic] and would become due to
[Seven Arts’s] Predecessors.”
The January letter informed Paramount that “Seven Arts
claims ownership of the Pictures,” that “[CanWest] has no
further right to distribute the Pictures or collect any sums due
as respect to the Pictures,” and therefore that “Seven Arts
demands that Paramount pay all sums due with respect to
such Pictures to Seven Arts and not to pay such sums to
[CanWest] until resolution of the litigation currently pending
in Canada.” In March, Hoffman requested “Paramount to
demand of CanWest production of [the appropriate] chain of
title as a prerequisite to payment of any future sums.” By
May, Hoffman had “read the documents” Paramount sent to
him and found it “truly outrageous that CanWest would use
these documents as chain of title.”
Despite the letters, “Paramount failed and refused to
comply with [Seven Arts’s] Predecessors’ demand.” By
choosing to continue paying royalties to CanWest and
SEVEN ARTS V. CONTENT MEDIA 15
Content, rather than to Seven Arts’s predecessors, as
demanded, Paramount plainly and expressly repudiated Seven
Arts’s copyright ownership by 2005 at the latest. This action
was filed over three years later, on May 27, 2011.
C
Seven Arts asserts that, even if its claim accrued in 2005
and is barred by the statute of limitations, it is entitled to
equitable tolling because of some combination of the 2002
suit, the long-dormant 2003 Canadian action, or the 2005 stay
order tolled its claim against Paramount. Such assertion
borders on the frivolous.
Seven Arts admits, as it must, that it is not entitled to
tolling on the basis of concealment or lack of knowledge. It
has known about Paramount’s distribution of the pictures
from the first and has never, before this case, added
Paramount as a defendant in any of its multifarious actions.
Furthermore, Seven Arts concedes that it cannot cite any
case tolling the Copyright Act’s statute of limitations by
reason of a prior pending claim.9 And Seven Arts points to
no case holding that a plaintiff may rely on the filing of a
separate action against a separate defendant to toll a
9
Seven Arts relies, as it did below, on two cases that “applied equitable
tolling in the situation where . . . a bankruptcy petition erected an
automatic stay under 11 U.S.C. § 362 which prevented the claimant from
taking steps to protect her claim,” O’Donnell v. Vencor, Inc., 465 F.3d
1063, 1068 (9th Cir. 2006) (citing Young v. United States, 535 U.S. 43,
50–51 (2002)). In each of those cases, though, “the defendants” had
“created the situation which impeded” the plaintiffs from pursuing their
claims. Id.; see also Young, 535 U.S. at 50. Paramount did nothing to
prevent Seven Arts from bringing suit in a timely fashion.
16 SEVEN ARTS V. CONTENT MEDIA
subsequent copyright action against a new defendant.10 We
decline to hold so here, especially where Seven Arts offers no
compelling reason for its failure to sue Paramount in any
earlier action, or to bring suit within the statute of limitations.
IV
We join our sister circuits in holding 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.
Because it is apparent from the complaint that Paramount
clearly and expressly repudiated Seven Arts’s ownership of
the copyrights more than three years before Seven Arts
brought suit, the district court properly dismissed.
AFFIRMED
10
Tellingly, Seven Arts’s reply brief states “[i]ndeed, 4’s [sic] central
point is that equitable tolling may be available even if the now affected
party was not sued in the prior action . . . .” From context, Seven Arts
appears to be relying on Daviton v. Columbia/HCA Healthcare Corp.,
which interpreted California’s equitable tolling law and concerned the
tolling effect of an administrative complaint for “the same wrong . . .
against the same defendant,” 241 F.3d 1131, 1133 (9th Cir. 2001) (en
banc) (emphasis added); see also id. at 1138 (“Typically,” under
California law, “both claims name the same defendant.”).