Supreme Court Update: Petrella v. Metro-Goldwyn-Mayer (12-1315) and Order List

May 27, 2014 Supreme Court Update

Greetings, Court fans!

Our apologies for the delay in summarizing Petrella v. Metro-Goldwyn-Mayer (12-1315) for you, but at least we didn't wait eighteen years! That's how long it took Paula Petrella, owner of the copyright for the screenplay behind the Martin Scorcese film, Raging Bull, to sue MGM Pictures for infringement after she became sole owner of the copyright. The Ninth Circuit held that the 18-year delay was unreasonable and barred the suit under the doctrine of laches; but the Supreme Court reversed, in an interesting 6-3 split.

Justice Ginsburg penned the majority opinion, writing for Scalia, Thomas, Alito, Sotomayor, and Kagan. As she explained, Paula Petrella's father, Frank Petrella, collaborated with boxing great Jake LaMotta on two screenplays and a book, all telling the story of LaMotta's career. This case concerns the first screenplay, which was registered in 1963 to Petrella alone. In 1976, Petrella and LaMotta assigned their rights in all three works, and in 1978 the rights were acquired by MGM, which used them to produce Raging Bull, released under an MGM copyright in 1980. Petrella died the next year, and MGM continued to market and distribute the film. In a 1990 decision, Stewart v. Abend, the Supreme Court held that if an author who has assigned his rights dies before the copyright renewal period, then the assignee may not continue to use the copyright unless the deceased author's successor transfers the renewal rights to the assignee. Coincidentally, the original 1963 copyright was up for renewal in 1991. When Paula Petrella learned of the Abend decision, she contacted a lawyer who renewed the copyright to the 1963 screenplay in her name. Petrella waited seven years before notifying MGM that the screenplay's trademark had been renewed in her name and another eleven years after that before actually filing suit. She conceded she'd waited until the film started making money again. When she finally did sue, MGM argued that the suit was barred by the equitable doctrine of laches.

The equitable nature of the doctrine was front and center in Justice Ginsburg's majority opinion. Laches, the majority emphasized, is a judicial creation to account for unreasonable delays in the filing of lawsuits; but the Copyright Act itself takes account of such delays, through its three-year statute of limitations for damages, which permits an infringement suit to be brought only within three years of the latest act of infringement. (Under the "separate-accrual rule," each new unauthorized reproduction or distribution of a copyrighted work triggers a new three-year limitations period.) The majority stressed that the doctrine of laches is "essentially gap-filling, not legislation-overriding." If a cause of action contains a statutory limitations period, then laches cannot bar an action for damages brought within that period. In so holding, the majority rejected MGM's "sue soon, or forever hold your peace" argument, noting that there is nothing untoward about a copyright owner waiting to see "whether litigation is worth the candle," before filing a federal lawsuit. The majority allowed that, "[i]n extraordinary circumstances, . . . the consequences of a delay in commencing suit may be of sufficient magnitude to warrant, at the very outset of the litigation, curtailment of the relief equitably awardable." But those circumstances—for example, where a copyright holder knows of the potential infringement before it happens, but allows an infringing work to be created before suing to seek its destruction—were not present here. MGM knew of Petrella's potential claim before it put money into remarketing Raging Bull and the relief Petrella sought (disgorgement of profits and a prospective injunction) would not result in the destruction of the movie.

Justice Breyer, joined by the Chief and Justice Kennedy, dissented. He criticized the majority for relying on an overly formalistic distinction between legal and equitable rules and remedies, without appreciating "the rules and practice of modern litigation," under which the traditional distinction between actions in law and actions in equity has been eroded in favor of one "civil action." In modern times, a federal civil action is subject to both equitable and legal defenses and there is no reason why the traditional equitable defense of laches should not apply in appropriate circumstances against legal claims, including damages. Nor is there any reason to believe Congress intended to do away with the laches defense when it created the three-year statute of limitations for copyright claims. Perhaps channeling his (and Kennedy's) California roots, Justice Breyer lamented that the Court's decision would allow plaintiffs (who may not even be the creators of the original work) to sit back and allow others to develop and market a work and then file suit only when the work becomes profitable—as, indeed, appears to have happened here.

So, in the end, MGM and Paula Petrella—two parties that had nothing to do with the original creation of the copyrighted work—will have to work out an arrangement for how to continue to exploit the life story of Jake LaMotta, who is still kicking (if not punching) and no longer able to profit personally from the works he created with Frank Petrella fifty years ago.

Also last week, the Court granted cert in Department of Homeland Security v. MacLean (13-894), concerning TSA regulations prohibiting the disclosure of "Sensitive Security Information," information obtained or developed in carrying out certain transportation-security functions where the agency has decided that "disclosing the information would … be detrimental" to transportation security." The question presented is whether certain whistleblower protections codified at 5 U.S.C. 2302(b)(8)(A) – which are inapplicable when an employee makes a disclosure "specifically prohibited by law" – can bar an agency from taking an enforcement action against an employee who intentionally discloses Sensitive Security Information.

The Court also asked for the SG's views on the cert petition in Obb Personenverkehr AG v. Sachs (13-1067), concerning the application of the Foreign Sovereign Immunities Act's commercial activity exception – which provides that U.S. courts have subject matter jurisdiction over claims "based upon a commercial activity carried on in the United States by the foreign state" – to injuries sustained in a train platform accident in Austria by a passenger who purchased a Eurail pass from a U.S.-based internet ticket seller. If granted, the case would address (1) "Whether, for purposes of determining when an entity is an ‘agent' of a ‘foreign state' … the express definition of ‘agency' in the FSIA, the factors set forth in First National City Bank v. Banco para el Comercio Exterior de Cuba (Bancec), 462 U.S. 611 (1983), or common law principles of agency, control;" and (2) "Whether … a tort claim for personal injuries suffered in connection with travel outside of the United States is ‘based upon' the allegedly tortious conduct occurring outside of the United States or the preceding sale of the ticket in the United States for the travel entirely outside the United States."

The Court handed down a handful of decisions (including one per curiam) and three orders today—we'll be back soon to get those summarized for you.

Kim, Jenny & Tadhg