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July 29, 2022

Lit Alerts July 2022

A Publication of the Litigation Practice Group

Copyright: Ninth Circuit Rejects a Three-Year “Damages Bar” in Copyright Infringement Cases

In July 2022, the US Court of Appeals for the Ninth Circuit held that the Copyright Act’s three-year statute of limitations for copyright infringement claims, 17 U.S.C. § 507(b), is subject to the common “discovery rule” and does not impose a separate “damages bar” that limits a plaintiff’s recovery to the preceding three years, regardless of when the plaintiff discovered the alleged infringement. See Starz Entertainment, LLC v. MGM Domestic Television, LLC, Case No. 21-55389 (9th Cir. July 14, 2022). The Starz court disagreed with and criticized the US Court of Appeals for the Second Circuit’s opinion in Sohm v. Scholastic, Inc., 959 F.3d 39 (2020), which recognized such a “damages bar,” creating a significant split between two of the country’s busiest circuits for copyright infringement cases.

Starz arose from licensing agreements between Starz and MGM in which MGM granted Starz the exclusive right to exhibit certain MGM-owned movies and television series episodes on Starz’s suite of services within the United States for specified time periods. Several years later, Starz discovered that one of the licensed films, Bill & Ted’s Excellent Adventure, was available on another company’s streaming service in violation of Starz’s exclusive rights. Over the next few months, Starz investigated further and discovered additional exclusivity violations, leading it to sue MGM for hundreds of claims of copyright infringement in US District Court for the Central District of California. MGM moved to dismiss a number of the claims, arguing that they accrued more than three years before filing of the suit and were thus time-barred.

Affirming the district court’s denial of MGM’s motion to dismiss, the Ninth Circuit foreclosed a frequently asserted argument that the US Supreme Court’s 2014 decision in Petrella v. Metro-Goldwyn-Mayer eliminated the discovery rule as applied to copyright infringement claims. The discovery rule provides that a claim accrues not when the infringement occurs, but when the copyright holder knows or reasonably should know that the infringement occurred. Declaring the discovery rule “alive and well,” the Ninth Circuit found that Starz adequately invoked the rule in its complaint by pleading that it had no reason to know of MGM’s alleged violations until just months before it filed suit. Moreover, the court rejected an argument, accepted by the Second Circuit in Sohm, that Petrella established an independent damages bar that cuts of any damages incurred more than three years before the filing of the complaint, even if the plaintiff did not know or have reason to know of the infringement at the time. The Ninth Circuit found such a rule “inherently self-contradictory” and without support in the text of § 507(b).

Criminal Procedure: Unexplained Pre-Trial Delays Violated Defendant’s Sixth Amendment Protections

The Speedy Trial Act was promulgated to secure a defendant’s right under the Sixth Amendment to a speedy trial. It requires a criminal case to be brought to trial within 70 days of charges being made or unsealed, subject to certain exclusions. The Act also requires a judge to consider whether the ends of justice are served by a continuance. If complexity is a reason for a continuance, the trial court shall set forth the reasons why continuation due to complexity is necessary.

Following the June 20, 2016 indictment of Aleksandr Pikus for alleged Medicare fraud and money laundering conspiracy, his case was excluded under the Speedy Trial Act at least nine times for a total of three years and four months. Pikus first sought dismissal for violation of the Speedy Trial Act on November 14, 2017, and the trial court denied the motion on the basis that the case was “complex.” After several other delays and developments related to discovery and disclosures, Pikus again orally moved to dismiss the indictment on October 26, 2019, and the court again denied the request stating that the case was designated as complex.

Pikus was ultimately tried and convicted in November 2019. On appeal, the US Court of Appeals for the Second Circuit reviewed the case history and reversed Pikus’s conviction, determining that the long delays were non-excludable time under the Speedy Trial Act. Specifically, the trial court failed to make sufficient findings on the record for an “ends-of-justice continuance.” Simply stating that the case was complex without more on-the-record findings was insufficient.

The court remanded the case with instructions to “determine whether the pending charges should be dismissed with or without prejudice.”

Standing: Hypothetical Future Injury Held Insufficient in Light of Factual Challenge to Standing

In July 2022, the Seventh Circuit affirmed a decision of an Illinois district court that a threat of hypothetical future harm does not grant a party standing to sue. In Brian Flynn v. FCA US LLC, certified classes of drivers from Illinois, Michigan and Missouri alleged that certain vehicle models were vulnerable to hacking due to defectively installed infotainment systems that could be remote-controlled. The drivers claimed they had overpaid for their vehicles as a result of the alleged vulnerability.

The district court granted the defendants’ motion to dismiss, finding the drivers lacked standing because they did not allege their infotainment systems did not work due to the alleged vulnerability, or that they were unwilling to operate their vehicles due to the alleged vulnerability, or that they were forced to sell their vehicles at a loss. Instead, the drivers argued that two security researchers who had conducted a controlled hack of two vehicles on behalf of a publication demonstrated the vehicles’ susceptibility to cyber-attacks. This was found insufficient to support their claimed overpayment injury.

The Seventh Circuit agreed, finding the drivers had failed to present evidence of a legally cognizable injury in fact. Although the drivers attempted to use their expert reports as evidence of an overpayment injury, the drivers presented those reports for the first time on appeal. The court reiterated that it only considers evidence and factual arguments that were first presented to the district court.

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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