Copyright Damages Limited to Three Years Before Lawsuit Filing
Addressing a myriad of issues relating to copyright law, the US Court of Appeals for the Second Circuit found that the discovery rule applies for statute of limitations purposes in determining when copyright claims accrue, but damages are limited to three years before filing of the lawsuit. Sohm v. Scholastic Inc., Case Nos. 10-2110, -2445 (2d Cir. May 12, 2020) (Sullivan, J.).
Joseph Sohm is professional photographer. Scholastic is a publisher and distributor of children’s books. Sohm entered into agreements with various agencies that in turn issued limited licenses to Scholastic to use Sohm’s photographs. One of the agencies, Corbis, also entered into a preferred vendor agreement with Scholastic that established fees for certain print-run ranges of Sohm’s photographs. Sohm also participated in Corbis’s copyright registration program, under which Sohm temporarily assigned his copyrights to Corbis for registration purposes, with the understanding that Corbis would reassign the copyrights to Sohm after registration. Corbis registered a number of Sohm’s photographs, but none of the registrations identified Sohm as author or claimant.
Sohm sued Scholastic for copyright infringement, alleging that photographs that Sohm had authored and which Scholastic had used in various publications exceeded the number of print runs contemplated by the licenses. Both parties moved for partial summary judgment.
The district court first considered Scholastic’s motion. Scholastic challenged the validity of the copyright registration based on the group’s registration under Corbis’s name, asserting that the registration failed to list the name of the “author” as required by the copyright statute. Examining Ninth Circuit cases (in the absence of binding Second Circuit precedent), the district court concluded that the name of the author of the “work” must be provided, and in Sohm’s case, the author of the collective work (Corbis) was included on the registration.
Scholastic also claimed that there was insufficient evidence of unauthorized copying. The district court found that:
For 12 of the photographs, there was undisputed evidence that Scholastic did not exceed print runs under the license.
For 43 of the uses, Sohm failed to offer any evidence that a use occurred at all.
For 36 of the uses, Sohm did not satisfy his burden of infringement.
The district court next considered Sohm’s motion for summary judgment based on 13 uses that Scholastic did not dispute exceeded the authorized print run. Scholastic opposed summary judgment, arguing that Sohm’s claims were barred by the Copyright Act’s statute of limitations provision, and that Sohm’s damages should be limited to those incurred within three years of the commencement of the suit. Scholastic also argued that under the preferred vendor agreement, the relevant print-run limitations were contractual, not condition precedent, meaning that the claims for exceeding the print-run limitations sounded in breach of contract (which was not pled) rather than copyright infringement. The district court rejected Scholastic’s statute of limitations argument, applying the discovery rule and concluding that there was no affirmative evidence that could have prompted Sohm to inquire about use of his photographs. The district court also refused to limit damages to only three years before filing of the lawsuit, finding that Second Circuit precedent did not establish a time limit on recovery of damages distinct from the statute of limitations. Finally, the district court determined that Sohm’s claims did sound in breach of contract because the payment terms in the preferred vendor agreement did not contain unmistakable language to give rise to a condition precedent and were therefore contractual covenants. Both parties appealed.
Addressing Sohm’s appeal first, the Second Circuit affirmed in part and reversed in part. Sohm argued that the district court erred in its condition/covenant analysis by ignoring clear language of condition in the license. The Court agreed, finding that the license agreements granting Scholastic the right to copy contained unmistakable language of conditions precedent, including provisions replete with conditional language of conditions precedent, such as “unless,” “conditioned upon” and “except where specifically permitted.” The Court thus found that Sohm properly pled claims of copyright infringement, and reversed the grant of partial summary judgment to Scholastic on this issue. The Court also found that the district court properly recited the elements of a copyright infringement claim and placed the burden of proof on Sohm to demonstrate that Scholastic’s use of his images was outside the scope of the license. The Court therefore affirmed the grant of summary judgment to Scholastic on this issue.
Turning to Scholastic’s appeal, the Second Circuit affirmed in part and reversed in part. The Second Circuit found that the district court properly applied the discovery rule in determining when Sohm’s copyright claims accrued, and thus the district court was correct in rejecting Scholastic’s affirmative defense based on the Copyright Act’s statute of limitations. Turning to Scholastic’s argument that the Copyright Act limited Sohm’s damages to the three years prior to the commencement of the lawsuit, the Court agreed with Scholastic and reversed. The Court explained that the 2014 Supreme Court decision in Petrella v. Metro-Goldwyn-Mayer was based on the determination that laches was inapplicable to copyright actions because the Copyright Act itself takes into account any delay by limiting damages to three years prior to filing of the suit.
Finally, the Court determined that Corbis validly registered each of Sohm’s photographs because Corbis was properly listed as the author of the collective work. The Second Circuit thus affirmed the district court on this issue.