Zuill v. Shanahan

• Decision Date: 14 June 1996
• Docket Number: No. 93-56217,93-56217
• Citation: 80 F.3d 1366
• Parties: , 1995 Copr.L.Dec. P 27,506, 38 U.S.P.Q.2d 1430, 96 Cal. Daily Op. Serv. 2462, 96 Daily Journal D.A.R. 4110 Paul ZUILL; Lou Rossi, Plaintiffs-Appellants, v. John SHANAHAN, an Individual; John Herlihy, an Individual; Gateway Educational Products, Ltd., a California Corporation, et al.; HMS Publishing Co., Ltd., a Business Entity of Unknown Form; Shanahan Publishing Company, a Business Entity of Unknown Form; Hooked On Phonics, a California Corporation; Hooked On Math, a California Corporation; The Reading Revolution, a California Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1366

80 F.3d 1366

64 USLW 2648, 1995 Copr.L.Dec. P 27,506,

38 U.S.P.Q.2d 1430,

96 Cal. Daily Op. Serv. 2462,

96 Daily Journal D.A.R. 4110

Paul ZUILL; Lou Rossi, Plaintiffs-Appellants, v. John SHANAHAN, an Individual; John Herlihy, an Individual;

Gateway Educational Products, Ltd., a California

Corporation, et al.; HMS Publishing Co., Ltd., a Business

Entity of Unknown Form; Shanahan Publishing Company, a

Business Entity of Unknown Form; Hooked On Phonics, a

California Corporation; Hooked On Math, a California

Corporation; The Reading Revolution, a California

Corporation, Defendants-Appellees.

No. 93-56217.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 7, 1995.

Decided April 10, 1996.

As Amended June 14, 1996.

Michael Q. Eagan, Law Offices of Michael Q. Eagan, San Francisco, California, for defendant-appellee Shanahan.

Scott R. Miller, Riordan & McKinzie, Gina M. Calvelli, Los Angeles, California, for defendants-appellees Herlihy et al.

Cameron M. Jolly and G. David Tenenbaum (on the briefs), David A. Weinfeld (argued), Weinfeld & Mixon, Costa Mesa, California, for plaintiffs-appellants.

Appeal from the United States District Court for the Central District of California, Gary L. Taylor, District Judge, Presiding. No. CV-91-00561-GLT.

Before SCHROEDER and KLEINFELD, Circuit Judges, and KING, District Judge. ^*

KLEINFELD, Circuit Judge:

This case turns on construction of the copyright statute of limitations, 17 U.S.C. § 507(b), as applied to claims of co-ownership. There is also an issue of costs.

FACTS

Mr. Shanahan came up with the idea which eventually became "Hooked on Phonics." This is a program, which includes audio tapes and flash cards, to assist children in learning how to read. Mr. Shanahan created what became Hooked on Phonics by setting vowel and consonant sounds to Three Blind Mice on audiotapes, to help his son learn how to read. Later, Mr. Shanahan brought in an arranger and piano teacher, Mr. Zuill, and a There was some ambiguity about who was to be paid how much. Eventually, in January of 1987, Mr. Shanahan presented Mr. Zuill and Mr. Rossi with a written agreement saying that each of them would get two and one half percent of "profits from the sale of Hooked on Phonics." The agreement also recited that Mr. Shanahan's company, HMS Publishing Company, Ltd., was the "sole owner and copyright holder of 'Hooked on Phonics.' " Mr. Zuill and Mr. Rossi thought that the two and a half percent should be applied to gross sales, not profits, and they refused to sign the agreement. Mr. Shanahan responded, according to Mr. Rossi, by saying "that's all I can give you. Take it or leave it." None of the parties recalled arguing about Shanahan's claim to be the sole owner of the copyright, when the compensation arrangement was proposed in 1987.

                percussionist, Mr. Rossi, to improve the music.   Music was used to make the drill and practice more enjoyable for the children who would use the tapes
                

Though Mr. Shanahan disputes some of the facts as set out below, for purposes of summary judgment, we present the evidence in the light most favorable to the opponents of the motion, Mr. Zuill and Mr. Rossi. United States ex rel. Anderson v. Northern Telecom, Inc., 52 F.3d 810, 815 (9th Cir.1995). We assume for purposes of this decision that the music had sufficient originality to be copyrighted, and that the same music was used on the tapes from 1987 to 1991. We further assume, for purposes of this decision, that Mr. Zuill and Mr. Rossi provided sufficient creative input so that there would be a genuine issue of fact as to whether their work could have been copyrighted. These factual questions need not be decided in order to resolve the case. What is critical to this case and is not disputed, is that any claims to ownership by Mr. Zuill and Mr. Rossi were expressly repudiated by Mr. Shanahan and his company in 1987. Mr. Shanahan had also claimed to be the "sole owner" in an earlier proposed financial agreement.

Mr. Shanahan and the corporations he used to market Hooked on Phonics and its predecessors expressly and repeatedly claimed sole ownership of the copyright in 1986 and 1987. They did so by saying so expressly in writing, and by furnishing copies of the Symphonics product in August 1986 with a printed copyright notice. The compensation agreement tendered in January of 1987 claimed sole ownership of the copyright. In the Spring of 1987, Mr. Zuill received a copy of Hooked on Phonics, stating in writing that HMS Publishing Company owned the copyright, and he learned at that time that Mr. Shanahan's company was marketing the product.

Mr. Shanahan was unsuccessful, for quite some time, in his marketing. He first called it Symphonics, then McPhonics when he was trying to sell it through McDonald's, finally Hooked on Phonics. The product was gradually improved and expanded, and eventually caught on. During the first few years, no profits were made, and Mr. Shanahan advised Mr. Zuill and Mr. Rossi of that.

Then in the 1990s, Mr. Shanahan, through the corporation he used to sell Hooked on Phonics, started making money from it. Mr. Zuill and Mr. Rossi sued him in October of 1991, claiming to be co-owners of one-third interests in Hooked on Phonics. They sought a declaratory judgment of co-ownership, an injunction, an accounting for their claimed share, and other relief.

The district court granted summary judgment against Mr. Zuill and Mr. Rossi on the copyright claims, holding that they were barred by the statute of limitations. The court declined to exercise supplemental jurisdiction over the state claims, breach of contract and others, and dismissed them without prejudice so that they could be adjudicated in state court.

ANALYSIS

The district court found the action barred by the copyright statute of limitations, 17 U.S.C. § 507(b), and granted summary judgment to the defendants. We review the district court's grant of summary judgment de novo. Jesinger v. Nevada Federal Credit Union, 24 F.3d 1127, 1130 (9th Cir.1994).

1. Statute of Limitations.

Mr. Zuill and Mr. Rossi claim to be "authors of a joint work," so that copyright This copyright action pursuant to Title 17 of the United States Code was governed by a three year statute of limitations:

                vested in them as well as Mr. Shanahan as "co-owners."  17 U.S.C. § 201(a).   It is possible, under the evidence developed at the time of summary judgment, that the work of Mr. Zuill and Mr. Rossi could have been "for hire," so that Mr. Shanahan was the author for purposes of copyright, 17 U.S.C. § 201(b).   Mr. Zuill and Mr. Rossi did not claim that Mr. Shanahan was not an owner, just that they were co-owners.   Mr. Shanahan's successful defense in district court was that the co-ownership claim was barred by the statute of limitations
                

(b) Civil Actions. No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.

17 U.S.C. § 507(b). Mr. Shanahan's theory, which prevailed below, is that if Mr. Zuill and Mr. Rossi had a claim to be co-owners, it accrued no later than early 1987, so the 1991 law suit was barred. Mr. Zuill's and Mr. Rossi's theory is that so long as their music was used in Hooked on Phonics, a new claim arose every time the product was sold, and their 1991 law suit was not barred for sales during the three years from 1988 to 1991. We conclude that claims of co-ownership, as distinct from claims of infringement, accrue when plain and express repudiation of co-ownership is communicated to the claimant, and are barred three years from the time of repudiation.

The putative co-owners, Mr. Zuill and Mr. Rossi, argue that the statute of limitations cuts off the remedy, but not the right. By that, they mean their right to co-ownership lasts as long as the copyright can--lives of the creators plus fifty years, 17 U.S.C. § 302(b)--and only their remedy for stale infringements would be barred. This argument fails because they have not sued for infringement and could not. They claim to be co-owners with defendants. "A co-owner of a copyright cannot be liable to another co-owner for infringement of the copyright." Oddo v. Ries, 743 F.2d 630, 632-33 (9th Cir.1984). Because a co-owner is an owner, he has a right to use or license the use of the copyright, and cannot be an infringer: his duty to account to other co-owners for profits arises from equitable doctrines relating unjust enrichment and general principles of co-ownership, and does not amount to an infringement claim. Id. at 633. An infringement claim can be brought only against one who violates "the exclusive rights of the copyright owner," see 17 U.S.C. § 501(a), (b), and an owner does not have rights exclusive of a co-owner's, so an infringement claim cannot lie against a co-owner.

Because they have no infringement claim, we cannot identify an asserted right of plaintiffs which can withstand the statute of limitations. The remedy they seek is a declaration that they are co-owners, and none of the subsidiary remedies, for an accounting and so forth, are independent of that remedy.

Plaintiffs cite legislative history, which says that the intention of Congress was that the statute of limitations would extend to remedies and not substantive rights. ¹ The legislative history does not speak to the issue in the case. Plaintiffs were not attempting to enforce their right collaterally in the manner described in the legislative history, or to assert any sort of equitable tolling, or otherwise to claim a remedy not barred. A claim for declaratory relief is subject to a statute of limitations There is a surprising lack of precedent on the question of when a cause of action claiming co-ownership of a copyright accrues. Plaintiffs rely on a Second Circuit case, which held that the statute of limitations did not bar a claim of ownership. See Stone v. Williams, 970 F.2d 1043 (2d Cir.1992). It may be...