Seven Arts Filmed Entm't Ltd. v. Content Media Corp.

• Decision Date: 06 November 2013
• Docket Number: No. 11–56759.,11–56759.
• Citation: 733 F.3d 1251
• Parties: SEVEN ARTS FILMED ENTERTAINMENT LIMITED, an English corporation, Plaintiff–Appellant, v. CONTENT MEDIA CORPORATION PLC, an English corporation, Defendant, and Paramount Pictures Corp., a Delaware corporation, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

733 F.3d 1251

SEVEN ARTS FILMED ENTERTAINMENT LIMITED, an English corporation, Plaintiff–Appellant,

v. CONTENT MEDIA CORPORATION PLC, an English corporation, Defendant,andParamount Pictures Corp., a Delaware corporation, Defendant–Appellee.

No. 11–56759.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 29, 2013.

Filed Nov. 6, 2013.

Neil Netanel, Los Angeles, CA, argued the cause and Peter Hoffman, West Hollywood, CA, filed the briefs for the plaintiff-appellant.

Joan Mack, Los Angeles, CA, argued the cause and filed the brief for the defendant-appellee. With her on the brief were Jeanne A. Fugate, Los Angeles, CA, and Matthew O'Brien, Los Angeles, CA.

Appeal from the United States District Court for the Central District of California, Audrey B. Collins, District Judge, Presiding. D.C. No. 2:11–cv–04603–ABC–FMO.

Before: DIARMUID F. O'SCANNLAIN, CARLOS T. BEA, and MORGAN CHRISTEN, Circuit Judges.

OPINION

O' SCANNLAIN, Circuit Judge:

We are invited to decide the ownership of copyrights in several motion pictures. The question is whether the three-year statute of limitations in the Copyright Act applies.

I

This appeal is the latest chapter in a decade-long quest by Seven Arts Filmed Entertainment Limited (“Seven Arts”) ¹ to establish ownership of copyrights in several motion pictures—as relevant here: Rules of Engagement, An American Rhapsody, and Who is Cletis Tout?.

On May 27, 2011, Seven Arts sued Paramount Pictures Corp. (“Paramount”) and Content Media Corp. PLC (“Content”) for copyright infringement, a declaration of ownership rights, and an accounting, seeking a declaration that neither Content, nor its predecessors-in-interest (collectively “CanWest”),² “is the owner or grantee” of rights in the films. Rather, Seven Arts claims that it is “the registered owner or assignee of the registered owner” of United States copyrights to the films. Seven Arts also alleges that Paramount is the licensee of certain distribution rights in and to the pictures, and that it has paid receipts from their distribution to Content, not Seven Arts, despite Seven Arts's demands.

Seven Arts voluntarily dismissed Content, deciding to pursue it in the High Court of England and Wales. Nonetheless, Seven Arts claimed a viable cause of action for copyright infringement against Paramount because of a summary judgment order it obtained in 2011 from the Superior Court of Justice in Ontario, Canada.

That Canadian action was first brought in 2003 against CanWest. In it, Seven Arts claimed co-ownership rights to the pictures stemming from a document referred to as the “Heads of Agreement” or “Master Structure Agreement.” The case found its way to Canada because CanWest defended Seven Arts's first lawsuit—a 2002 action in the Central District of California—on the ground that the Heads of Agreement had a Canadian forum-selection clause. CanWest defended in Canada by denying that the Heads of Agreement was an enforceable contract.

While the Canadian action was pending, Seven Arts returned to the United States in 2005 and filed a second action in the Central District of California. Just as the instant 2011 action, the 2005 lawsuit alleged causes of action for copyright infringement, declaratory relief, and an accounting against CanWest. Unlike the 2002 action, which had alleged Seven Arts was a co-owner, the 2005 lawsuit claimed that Seven Arts was the sole owner of the disputed film rights. The new theory of ownership was that when CanWest denied the Heads of Agreement in Canada, Seven Arts obtained and exercised a right to “rescind any contracts which may have existed among the parties.” Such contracts included: the Heads of Agreement in which Seven Arts's predecessor-in-interest had assigned all its rights to Rules of Engagement to Paramount's predecessor-in-interest; a 1999 agreement in which Seven Arts had assigned away its rights to An American Rhapsody; and a 2000 agreement concerning Who Is Cletis Tout?.

In August 2005, the district court granted CanWest's motion to stay the proceedings pending prosecution of the Canadian action. Seven Arts belatedly appealed that stay to this court, and we affirmed. See Seven Arts Pictures PLC v. Fireworks Entm't, Inc., 244 Fed.Appx. 836 (9th Cir.2007). In 2008, the district court dismissed the 2005 action with prejudice for failure to prosecute after issuing two prior warnings. Seven Arts appealed to this court, and we affirmed. See Seven Arts Pictures PLC v. Fireworks Entm't, Inc., 329 Fed.Appx. 726 (9th Cir.2009).

Seven Arts finally prosecuted its Canadian action and ultimately secured the February 2011 summary judgment order already mentioned. The Canadian proceeding was not adversarial, because the initially named defendants had entered bankruptcy and had not opposed the motion; so the Canadian court reviewed only the evidence presented by Seven Arts. Nonetheless, the Canadian order granted Seven Arts a declaration that it is and at all relevant times had been the owner of “copyrights registered and enforceable pursuant to the United States Copyright Act of 1976” for An American Rhapsody and Who is Cletis Tout?, and also that it had “exclusive rights” for international distribution of Rules of Engagement. The Canadian order further determined that Seven Arts had “granted no rights or interest in the Copyrights or the Copyrighted Works to any Defendant” and that therefore “the Defendants have infringed and continue to infringe the Plaintiffs' rights.”

Seven Arts—with the summary judgment order in hand—returned to federal district court and filed this case, a near-duplicate of the 2005 lawsuit, except that Seven Arts sued Paramount for the first time and alleged that the Canadian summary judgment order established its ownership rights. Paramount moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6).³ On October 3, 2011, the district court dismissed the complaint with prejudice on the ground that Seven Arts's claim for copyright infringement against Paramount was barred by the Copyright Act's three-year statute of limitations, 17 U.S.C. § 507(b).

II

We review the district court's dismissal of the complaint for failure to state a claim and the legal issues it presents de novo. See UMG Recordings, Inc. v. Shelter Capital Partners LLC, 718 F.3d 1006, 1014 (9th Cir.2013). A statute-of-limitations defense, if “apparent from the face of the complaint,” may properly be raised in a motion to dismiss. Conerly v. Westinghouse Elec. Corp., 623 F.2d 117, 119 (9th Cir.1980). “We accept as true all well-pleaded allegations of material fact” but are not “required to accept as true allegations that contradict exhibits attached to the Complaint or matters properly subject to judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Daniels–Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir.2010).

III

The Copyright Act of 1976 provides that all civil actions must be brought “within three years after the claim accrued.” 17 U.S.C. § 507(b). When a claim accrues depends on the nature of the copyright claim.

For ordinary claims of copyright infringement, each new infringing act causes a new claim to accrue; thus, we have held that “an action may be brought for all acts that accrued within the three years preceding the filing of the suit.” Roley v. New World Pictures, Ltd., 19 F.3d 479, 481–82 (9th Cir.1994).⁴ By contrast, we have held “that claims of co-ownership, as distinct from claims of infringement,” accrue only once, “when plain and express repudiation of co-ownership is communicated to the claimant, and are barred three years from the time of repudiation.” Zuill v. Shanahan, 80 F.3d 1366, 1369 (9th Cir.1996); see also Aalmuhammed v. Lee, 202 F.3d 1227, 1230–31 (9th Cir.2000) (Where “creation rather than infringement is the gravamen of an authorship claim, the claim accrues on account of creation, not subsequent infringement, and is barred three years from ‘plain and express repudiation’ of authorship.”).

Copyright infringement claims have two basic elements: “(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.” Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991). In the ordinary infringement case, ownership is not in dispute, Kwan v. Schlein, 634 F.3d 224, 229 (2d Cir.2011); rather, the dispute centers on the second prong—whether, for example, the copying was a “fair use,” ⁵ or whether the materials taken were “original,” see, e.g., Roley, 19 F.3d at 480.

But this dispute is about ownership—Paramount concedes it is exploiting the pictures, but denies that Seven Arts owns the copyrights. That such is the nature of this dispute is apparent from the face of Seven Arts's complaint, which alleges that Seven Arts, not CanWest or Content, owned the copyrights, and that Paramount improperly paid royalties to CanWest or Content rather than Seven Arts.⁶ We must decide, then, whether a claim for copyright infringement in which ownership is the disputed issue is time-barred if a freestanding ownership claim would be barred.

A

Although this is an issue of first impression in our circuit, we are guided by the Second and Sixth Circuits. Our sister circuits have held that, where the gravamen of a copyright infringement suit is ownership, and a freestanding ownership claim would be time-barred, any infringement claims are also barred. See Kwan, 634 F.3d at 229–30;Ritchie v. Williams, 395 F.3d 283, 288 n. 5 (6th Cir.2005); see also Roger Miller Music, Inc. v. Sony/ATV Publ'g, LLC, 477 F.3d 383, 389–90 (6th Cir.2007).⁷ “When claims for both infringement and ownership are alleged,” according to the Sixth Circuit, “the infringement claim is timely only if the corresponding ownership claim is also timely.” Roger Miller Music, Inc., 477 F.3d at 389–90. Or, as the Second Circuit puts it, “[w]here ... the...