Tenth Circuit Applies Discovery Rule and Rejects Continuing Wrong Exception in Copyright Action | Practical Law

Tenth Circuit Applies Discovery Rule and Rejects Continuing Wrong Exception in Copyright Action | Practical Law

In Diversey v. Schmidly, the US Court of Appeals for the Tenth Circuit aligned itself with a majority of courts by holding that a copyright infringement claim accrues when the plaintiff knows or is chargeable of knowing of a copyright violation and rejecting a continuing wrong exception to the three-year limitation period.

Tenth Circuit Applies Discovery Rule and Rejects Continuing Wrong Exception in Copyright Action

by Practical Law Intellectual Property & Technology
Published on 31 Dec 2013 • USA (National/Federal)
In Diversey v. Schmidly, the US Court of Appeals for the Tenth Circuit aligned itself with a majority of courts by holding that a copyright infringement claim accrues when the plaintiff knows or is chargeable of knowing of a copyright violation and rejecting a continuing wrong exception to the three-year limitation period.
On December 23, 2013, in Diversey v. Schmidly, the US Court of Appeals for the Tenth Circuit affirmed in part and reversed in part the US District Court for the District of New Mexico's dismissal of Diversey's copyright infringement claims as untimely under Rule 12(b)(6) of the Federal Rules of Civil Procedure (FRCP) (No. 13-2058, (9th Cir. Dec. 26, 2013)). Notably, the court:
  • Held that for purposes of calculating the three-year statute of limitations period for copyright infringement claims, a claim accrues when a plaintiff becomes aware of an infringing act or becomes chargeable with knowledge of it.
  • Rejected the application of a continuing wrong exception that would permit a plaintiff to recover for acts of infringement occurring more than three years before the filing of a complaint where a related act of infringement occurs within the limitation period.
The court's decision aligned the Tenth Circuit with the majority of circuits in adopting the discovery rule for claim accrual and rejecting a continuing wrong exception to the three-year limitation period.
Diversey was a doctoral student at the University of New Mexico (UNM). On February 7, 2008, Diversey learned that his dissertation had been deposited in a UNM Library, despite his numerous complaints regarding the dissertation review process. On June 16, 2009, Diversey discovered two more copies of his dissertation in libraries that made the dissertation available to the general public. Diversey filed a copyright infringement claim against the defendants, UNM administrators and members of the Board of Regents of UNM, on June 15, 2012. The district court dismissed the case holding that:
  • Diversey's action was barred because the copyright infringement claims accrued on February 7, 2008 when Diversey learned of the dissertation's deposit in the library. Section 507(b) of the Copyright Act has a three-year statute of limitations and the period ended by February 2011.
  • UNM's ongoing distribution of Diversey's work in its libraries was not a continuing infringement (for which the cause of action would not have accrued until the infringement ceased).
On appeal, the Tenth Circuit affirmed the district court's judgment regarding Diversey's right to copy and reversed and remanded Diversey's right to distribute claim to the district court.
Addressing the application of the Copyright Act's three-year statute of limitations, the court held that a copyright infringement claim accrues when one has knowledge of a violation or is chargeable with knowing of a violation, noting that this rule had been previously applied by district courts in the Tenth Circuit. The court then rejected the application of a continuing wrong exception to the three-year limitation period. The court noted that the continuing wrong exception, applied by a minority of courts, allows a plaintiff to recover for infringement acts that occur more than three years before the filing of a complaint when some related act of infringement, the continuing wrong, occurs within the limitation period. The court rejected the continuing wrong exception finding that:
  • There is no statutory support for a special limitation rule for continuing wrongs.
  • The majority accrual rule and tolling principles already adequately protect copyright owners' rights.
The court then applied the limitations period to each of the alleged infringements in the case, noting that the district court erred by failing to recognize separate accrual dates for each distinct infringement. Diversey's amended complaint alleged two distinct infringements:
  • The reproduction of the draft dissertation for deposit in UNM's library violated his exclusive right to make copies.
  • UNM listing his work in its library catalog for public lending violated his exclusive right to distribute.
Considering the two rights separately, the court held:
  • For the right to copy, the court agreed with the district court's analysis and held that this claim accrued when Diversey learned of the deposit on February 7, 2008, barring Diversey's June 15, 2012 complaint as untimely because it fell outside the three-year limitations period.
  • For the right to distribute, the claim accrued on June 16, 2009, the date that Diversey discovered the dissertation was publicly available to the borrowing or browsing public. Therefore Diversey's June 15, 2012 complaint was timely for this claim and the district court erred by failing to recognize the separate accrual date for the right to distribute claims.
The Tenth Circuit also rejected the defendants' fair use defense because the factors tilted heavily against the defendants and remanded the issue of each of the defendant's involvement for liability purposes.