Evergreen Safety Council v. RSA Network Inc.

• Decision Date: 17 October 2012
• Docket Number: No. 11–35680.,11–35680.
• Citation: 697 F.3d 1221
• Parties: EVERGREEN SAFETY COUNCIL, a Washington nonprofit corporation, Plaintiff–Appellee, v. RSA NETWORK INC., DBA Starfish Network, Inc., a Utah corporation, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

697 F.3d 1221

104 U.S.P.Q.2d 1380

12 Cal. Daily Op. Serv. 11,698

2012 Daily Journal D.A.R. 14,357

EVERGREEN SAFETY COUNCIL, a Washington nonprofit corporation, Plaintiff–Appellee,

v.RSA NETWORK INC., DBA Starfish Network, Inc., a Utah corporation, Defendant–Appellant.

No. 11–35680.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted July 12, 2012.

Filed Oct. 17, 2012.

Blake Ostler (argued), Salt Lake City, UT, John Whitaker, Seattle, WA, for the defendant-appellant.

David C. Spellman, Tiffany Scott Connors (argued), Seattle, WA, for the plaintiff-appellee.

Appeal from the United States District Court for the Western District of Washington, Ricardo S. Martinez, District Judge, Presiding. D.C. No. 2:09–cv–01643–RSM.

Before: MARY M. SCHROEDER, STEPHEN REINHARDT, and MILAN D. SMITH, JR., Circuit Judges.

OPINION

M. SMITH, Circuit Judge:

RSA Networks (RSA) appeals the district court's grant of summary judgment dismissal of RSA's claim for copyright infringement against Evergreen Safety Council (Evergreen) on the ground of laches. RSA contends that the district court erred in applying laches because Evergreen willfully infringed upon its copyright. We reject this argument because Evergreen acted under color of title and in good faith, and therefore did not willfully infringe upon RSA's copyright. Danjaq LLC v. Sony Corp., 263 F.3d 942, 959 (9th Cir.2001). RSA also contends the district court erred in dismissing the case because RSA still retained claims for injunctive relief. We likewise reject that argument because the alleged future infringements named as the basis for the injunctive relief are identical to the original infringements, and thus are barred by laches as well. Danjaq, 263 F.3d at 960. Accordingly, we affirm the district court's summary judgment dismissal.

FACTUAL AND PROCEDURAL BACKGROUND

Evergreen is a Seattle-based non-profit that disseminates safety and health information, and provides training on pilot escort vehicles. Pilot escort vehicles generally position themselves directly in front of, or behind, an escorted oversized vehicle. RSA is a Utah-based company that has been involved in the pilot escort business for over 25 years. Randy Sorenson (Sorenson) is the president of RSA. Both Evergreen and RSA provide pilot escort vehicle operator training, and both parties have published training manuals for use in conjunction with mandatory state certification programs.

In 1991, Sorenson began working with a Utah state steering committee to develop a certification program for pilot escort vehicle training. By that time, Sorenson had commenced drafting a manual, which was subsequently revised and adopted in 1992 as the course syllabus in the Utah state certification program. In 1993, Sorenson registered his manual with the U.S. Copyright Office. In 1996, Sorenson began working with representatives of the State of Florida to modify his Utah certified program for use in Florida. From 1996, Sorenson worked as a consultant to various states, agencies and organizations “to educate and promote standardization within the pilot/escort industry.” Based upon his work as a consultant, he indicated in the 1996 foreword to his revised manual that he was then “working with Washington, Oregon, Arizona, Idaho, North Carolina, and Kansas” to develop their pilot escort vehicle training programs.

In 1998, the Washington State Department of Transportation decided to develop a pilot vehicle training program. During the summer of 1998, the chair of the Washington steering committee proposed to “develop an outline based on Utah's [trainingmanual].” The committee chair also inquired whether Utah's material was copyrighted.

In late 1998 and early 1999, Sorenson met with the Washington steering committee twice, including one meeting at Evergreen's office regarding the development of Washington's training program. The State of Washington designated Evergreen as the administrator of its pilot escort training program. On May 12, 1999, Evergreen's president sent Sorenson a letter (Letter) enclosing Evergreen's draft manual. The Letter included a reference to a prior meeting with Sorenson and a telephone call, in which Evergreen's draft manual and Washington's training program were discussed. Among other things, the Letter stated: “We will probably have a final version [ready] to go after we meet this Friday with our task group.” The Letter concluded: “Once you have had an opportunity to scan the material, we would appreciate any and all observations, suggestions or comments. We look forward to hearing from you.” Sorenson claimed that the Letter was not opened by anyone when it was received by RSA in 1999, and that RSA did not open the Letter, or become aware of its contents, until 2010.

There is no record evidence that Evergreen ever heard from Sorenson after it sent the Letter, and three months after Sorenson received the Letter and draft manual, Evergreen printed the final first edition of its manual. A second edition was printed in December 1999. In 2003, Evergreen received a copyright registration for a further revision entitled, “Evergreen Safety Council's certified pilot/escort vehicle operator (P/EVO) course.”

Sorenson claims that in 2009, despite having advertised his consultative role with multiple different states for over a decade, he became aware that Oklahoma, North Carolina, and Washington were infringing RSA's copyrights. At that time, RSA sent demand letters jointly to Evergreen and the Washington State Department of Transportation.

In 2009, Evergreen met with Sorenson and his attorney. Sorenson told Evergreen that RSA had licensing agreements with Florida, Oklahoma, and North Carolina. Evergreen later determined that Sorenson's Florida, Oklahoma, and North Carolina licensing claims were false. Shortly after the meeting with Sorenson and his attorney, Evergreen filed suit on November 18, 2009, seeking declaratory judgment of noninfringement regarding some of the artwork in its manual, and asserting a fair use defense. Eleven months later, RSA sent a letter identifying specific allegedly infringing items (primarily diagrams) and demanding that Evergreen cease infringing. In an attempt to ameliorate Sorenson's concerns, Evergreen stated that it would “deplete the remaining inventory of 4,000 manuals within eighteen months.”

A year after filing the suit, on November 18, 2010, RSA asserted a counterclaim for copyright infringement. The counterclaim included a willful infringement claim for enhanced damages. In response to the counterclaim, Evergreen asserted laches, license, acquiescence, fair use, equitable estoppel and other affirmative defenses.

RSA moved for partial summary judgment asserting that Evergreen had willfully infringed, and requesting an immediate injunction. The district court granted summary judgment dismissal to Evergreen on the basis of laches. RSA subsequently moved for reconsideration on the grounds that the evidence did not satisfy the required elements of laches on summary judgment, that the willful infringement exception prevented the application of laches, and that laches could not bar RSA's claim for prospective injunctive relief.

The district court ordered Evergreen to respond regarding the claim for prospective relief. Evergreen responded and declared that it was planning to publish a fifth edition of its manual using scale model photographs instead of the disputed diagrams, and further, that Evergreen was placing a sticker over an allegedly infringing part of the remaining inventory of its existing manual, thus eliminating any remaining similarity between Evergreen's manual and the works protected by RSA's copyright. The district court ultimately denied RSA's motion for reconsideration.

STANDARD OF REVIEW AND JURISDICTION

Summary judgment dismissal on the grounds of laches triggers a hybrid abuse of discretion/clear error standard of review.¹Danjaq, 263 F.3d at 951. Whether a court inappropriately resolved any material issues of disputed fact on summary judgment is reviewed de novo. In re Beaty, 306 F.3d 914, 921 (9th Cir.2002). Summary judgment may be affirmed on any ground supported by the record. Video Software Dealers Ass'n v. Schwarzenegger, 556 F.3d 950, 956 (9th Cir.2009).

The district court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1291.

DISCUSSION

I. Laches

Laches is an equitable defense that prevents a plaintiff, who “with full knowledge of the facts, acquiesces in a transaction and sleeps upon his rights.” Danjaq, 263 F.3d at 950–51 (internal citations and quotation marks omitted). In the context of copyright:

It must be obvious to every one familiar with equitable principles that it is inequitable for the owner of a copyright, with full notice of an intended infringement, to stand inactive while the proposed infringer spends large sums of money in its exploitation, and to intervene only when his speculation has proved a success. Delay under such circumstances allows the owner to speculate without risk with the other's money; he cannot possibly lose, and he may win.

Danjaq, 263 F.3d at 951 (quoting Haas v. Leo Feist, Inc., 234 F. 105, 108 (S.D.N.Y.1916)). To prove laches, the “defendant must prove both an unreasonable delay by the plaintiff and prejudice to itself.” Couveau v. Am. Airlines, Inc., 218 F.3d 1078, 1083 (9th Cir.2000).

A. Unreasonable Delay and Undue Prejudice

When evaluating the reasonableness of a delay, the evaluation period begins when the plaintiff knew (or should have known) of the allegedly infringing conduct, and ends with the initiation of the lawsuit in which the defendant seeks to invoke the laches defense. Kling v. Hallmark Cards, Inc., 225 F.3d 1030, 1036 (9th Cir.2000) (“any delay is to be measured from the time that the plaintiff knew or should have known about the potential claim at issue”). In determining the reasonableness of the delay, courts look to the cause of the delay. Delay has been...