Opinion
ORDER DENYING DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT BASED ON THE STATUTE OF LIMITATIONS AND LACHES
MARGARET MORROW, District Judge.
This action concerns plaintiff Sofia Stewart's claim that defendants willfully infringed her copyrighted literary works. Stewart alleges, inter alia, that defendants have willfully infringed two copyrighted works, both titled "The Third Eye, " "and used [them] as their own property in the making of the motion pictures The Matrix I, II, and III, and The Terminator I, II, and III." Defendants James Cameron, Gale Ann Hurd, and Twentieth Century Fox Film Corporation ("Twentieth Century") move to dismiss plaintiff's declaratory relief, copyright infringement and contributory copyright infringement claims on the basis that they are barred by the statute of limitations and the doctrine of laches.
First Amended Complaint, ¶ 44.
I. FACTUAL BACKGROUND
Plaintiff Sophia Stewart is a screenwriter, composer and editor who works under the pseudonym, Zenia Kavala. On or about May 1, 1981, Stewart created a six-page screen treatment titled "The Third Eye, " which was a "scientific account of futuristic life." On or about November 1, 1983, she created a 45-page manuscript titled "The Third Eye." Stewart registered a copyright in the six-page treatment on February 2, 1983. She registered a copyright in the 45-page manuscript on February 6, 1984.
Id., ¶ 2.
Id., ¶ 15.
Id., ¶ 16.
Id., ¶ 2, Exs. 1, 3.
Stewart alleges that, in May 1981, she delivered the six-page treatment to Susan Merzback, Vice-President of Creative Affairs for Twentieth Century Fox Film Corporation. In November 1983, she allegedly mailed a copy of the manuscript to the office of Twentieth Century's David Madden. For the next year and a half, Stewart and her agent, Ester Duffie, purportedly communicated with employees of Twentieth Century, and made several attempts to submit the manuscript for the studio's consideration. Stewart asserts that Twentieth Century advised her by mail that it could not accept the manuscript unless it was submitted by an agent registered with the Writer's Guild of America.
Id., ¶ 18.
Id., ¶ 20.
Id., ¶¶ 20-22.
In the summer of 1986, Stewart sent her six-page treatment and 45-page manuscript to Andy and Larry Wachowski in response to an advertisement in a national magazine seeking science fiction works. The Wachowskis did not respond to Stewart's submission, and did not return the copyrighted works.
Id., ¶¶ 23-24.
Id., ¶ 25.
Stewart alleges that, in March and April 1999, she discovered that the Wachowskis had produced a comic book series and a film titled "The Matrix." She concluded that the comic book series and "The Matrix, " which had been produced and distributed by Warner Brothers, infringed her copyright in both the treatment and the manuscript. As a result, she communicated with Warner Brothers, asserting that it had infringed her copyrighted works, and demanding that it cease its infringing activities. Stewart continued to correspond with Warner Brothers about her claim through February 2001.
Id., ¶¶ 25, 26.
Id., ¶ 38.
Id., ¶ 26.
Id., ¶¶ 28, 39-42.
Id., ¶¶ 40-42, 47.
Stewart also alleges that the films "Terminator I, " "Terminator II, " and "Terminator III, " infringe her copyrighted works. She contends that James Cameron, Gale Ann Hurd, Joel Silver and the Wachowskis misappropriated or acquired her works and used them to create "Terminator II." She further contends that Warner Brothers and Sony Pictures Entertainment Corporation funded the production and/or distribution of "Terminator III."
Id., ¶¶ 44, 54.
Stewart alleges that Hemdale Film Corporation (a purported RICO enterprise) is a corporation that was used by Cameron and Hurd "to effect transfers of monies and/or properties received from the commercial exploitation of intellectual property rights." ( Id., ¶ 52.) Hemdale filed a bankruptcy petition in 1992, which Stewart alleges was "motivated in bad faith for purposes of discharing any and/or all claims of creditors." ( Id., ¶ 53.)
Id., ¶ 54.
Id., ¶ 56.
On June 10, 1999, Stewart filed a written complaint with the Federal Bureau of Investigation, charging that the Wachowskis, Twentieth Century, Silver, Warner Brothers, Cameron and Hurd had infringed her copyrights. On June 28, 1999, Stewart notified the Wachowskis of her copyright infringement claim and threatened legal action.
Id., ¶ 43.
Id., ¶ 36.
On April 24, 2003, Stewart, filed a pro se complaint for damages. On July 14, 2004, Stewart filed a substitution of attorneys, a first amended complaint, and a 294-page RICO case statement.
II. DISCUSSION
A. Applicable Legal Standards
1. Legal Standard Governing Motions To Dismiss Under Rule 12(b)(6)
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. Rule 12(b)(6) must be read in conjunction with Rule 8(a) which requires "a short and plain statement of the claim showing that the pleader is entitled to relief." 5A Charles A. Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE, § 1356 (1990).
A court may not dismiss a complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Johnson v. Knowles, 113 F.3d 1114, 1117 (9th Cir. 1997); Moore v. City of Costa Mesa, 886 F.2d 260, 262 (9th Cir. 1989) (quoting Conley ), cert. denied, 496 U.S. 906 (1990). See Haddock v. Board of Dental Examiners, 777 F.2d 462, 464 (9th Cir. 1985) (complaint should not be dismissed if it states a claim under any legal theory, even if the plaintiff erroneously relies on a different legal theory). In other words, a Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988).
In deciding a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), the court's review is limited to the contents of the complaint. Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996); Allarcom Pay Television, Ltd. v. General Instrument Corp., 69 F.3d 381, 385 (9th Cir. 1995). The court must accept all factual allegations pleaded in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir. 1995), citing Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987); NL Indus. Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). It need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981), cert. denied, 454 U.S. 1031 (1981).
2. Statute Of Limitations On Copyright Infringement Claims
The statute of limitations for claims brought under the Copyright Act is found in 17 U.S.C. § 507(b), which provides that "[n]o 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). "A cause of action for copyright infringement accrues when one has knowledge of a violation or is chargeable with such knowledge." Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994). In Roley, the Ninth Circuit held that "in a case of continuing copyright infringements, an action may be brought for all acts that accrued within the three years preceding the filing of suit." The statute bars "bars recovery on any claim for damages that accrued more than three years before commencement of suit." Id. ; see also Hoey v. Dexel Systems Corp., 716 F.Supp. 222, 223 (E.D. Va. 1989) (stating that § 507(b) "does not provide for a waiver of infringing acts within the limitation period if earlier infringements were discovered and not sued upon, nor does it provide for any reach back if an act of infringement occurs within the statutory period").
The three year statute of limitations governing copyright infringement actions also governs claims for declaratory relief regarding copyright ownership or infringement. See, e.g., Meat Loaf Enterprises Inc. v. Sony Music Entertainment, Inc., No. 96 Civ. 0991 (MGC), 1997 WL 598410, *5 (S.D.N.Y. Sept. 25, 1997) (noting that courts have "not limited the application of the three-year statute of limitations to infringement claims [but have] applied it to claims seeking declarations of copyright ownership").
Recently, in Polar Bear Productions, Inc. v. Timex Corp., ___ F.3d ___, 2004 WL 1949285 (9th Cir. Sept. 3, 2004), the Ninth Circuit harmonized Roley 's holding with the rule that a copyright infringement claim accrues when the copyright holder has knowledge of a violation or is chargeable with such knowledge. It stated that "under Roley, the statute of limitations does not prohibit recovery of damages incurred more than three years prior to the filing of suit if the copyright plaintiff was unaware of the infringement, and that lack of knowledge was reasonable under the circumstances." Id. at * 4. Rather, it is only when a plaintiff knows or should know of the infringement that the claim accrues and the statute begins to run. Thus, the date on which a plaintiff discovered or should have discovered alleged infringement is a critical fact in determining whether a claim is barred by the statute of limitations.
3. Applicability Of The Doctrine Of Laches To Copyright Infringement Claims
In addition to asserting that Stewart's claims are barred by the statute of limitations, defendants contend they are barred by the doctrine of laches as well. "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" from proceeding with his suit. Danjaq LLC v. Sony Corp., 263 F.3d 942, 951 (9th Cir. 2001) (internal quotations and citations omitted). Both statute of limitations and laches defenses are available in copyright infringement actions because they address different types of delay. As the Ninth Circuit explained in Kling v. Hallmark Cards, Inc., 225 F.3d 1030 (9th Cir. 2000), the statute of limitations is triggered only by violations - i.e., by actual infringements. Laches, by contrast, "may be triggered when a plaintiff knows or has reason to know about an impending infringement" and fails to act. Kling, supra, 225 F.3d at 1038; see also Haas v. Leo Feist, Inc., 234 F. 105, 108 (S.D.N.Y. 1916) (Learned Hand, J.) ("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 exploration, 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"). Thus, a laches defense will lie against a copyright holder if she knew of a planned infringement more than three years prior to filing suit, even if she complied with the statute of limitations by filing less than three years after the infringement actually began. Kling, supra, 225 F.3d at 1039.
"To demonstrate laches, the defendant must prove both an unreasonable delay by the plaintiff and prejudice to itself.'" Id. (quoting Couveau v. Am. Airlines, Inc., 218 F.3d 1078, 1083 (9th Cir. 2000)). "Generally speaking, the relevant delay is the period from when the plaintiff knew (or should have known) of the allegedly infringing conduct, until the initiation of the lawsuit in which the defendant seeks to counterpose the laches defense." Danjaq, supra, 263 F.3d at 952 (citing Kling, supra, 225 F.3d at 1036). "The question of laches does not depend, as does the statute of limitation, upon the fact that a certain definite time has elapsed since the cause of action accrued, but whether, under all the circumstances of the particular case, plaintiff is chargeable with a want of due diligence in failing to institute proceedings before he did." Townsend v. Vanderwerker, 160 U.S. 171, 186 (1895).
A laches defense is not available in cases of willful infringement, where the infringing conduct "occurs with knowledge that the defendant's conduct constitutes copyright infringement.'" Danjaq, supra, 263 F.3d at 957.
B. Whether Plaintiff's Complaint Must Be Dismissed On Statute Of Limitations Or Laches Grounds
Defendants Cameron, Hurd and Twentieth Century (collectively, the "Terminator defendants") assert that any copyright infringement claims based on the creation, production and distribution of the first two Terminator films are barred by the statute of limitations and laches, and that any claims arising from the final Terminator film are barred by the doctrine of laches.
Defendants James Cameron, Gale Ann Hurd And Fox's Motion To Dismiss Plaintiff's First Amended Complaint Pursuant To Federal Rule Of Civil Procedure 12(b)(6) Based On The Statute Of Limitations And Laches ("Def.'s Mot.") at 2-5.
1. Terminator I and II
Defendants assert that, as respects "Terminator I" and "Terminator II, " any acts of infringement by Cameron and Hurd took place ten to twenty years ago, and thus fall outside the three year statute of limitations governing copyright infringement claims. They assert that Cameron and Hurd have not participated in the distribution or exhibition of the films and thus have committed no potentially infringing acts that fall within the three-year limitations period. In support, they cite the holding in Roley, supra, 19 F.3d at 481, that where there is continuing copyright infringement, an action may be brought for all acts that accrued within the three years preceding the filing of suit, but not for actions about which the plaintiff knew or should have known more than three years before the commencement of suit. Id.
The Terminator defendants argue that
"there are facts which suggest that either [Stewart] knew or she should have known of this purported copyright infringement nearly 20 years ago and that she has sat on her rights.
As early as 1984, Stewart knew, or should have known, that "Terminator 1" was released to the public. As is commonly known, this was not a small independent house film. This was a major film release, widely-released and widely-distributed. Terminator 1' instantly became a part of American culture. It is undisputed that Stewart corresponded with movie studios as early as 1981 concerning her purported treatment The Third Eye[, ]'... and that she again had correspondence with some movie studios in 1983.... Therefore, Stewart was attempting to become actively involved in the movie business as early as 1981. As one attempting to get involved in movies by virtue of purportedly drafting a science fiction manuscript, Stewart knew, or should have known, as early as 1984, that Terminator 1' had been released and purportedly infringed upon The Third Eye.'"
Defendant's Reply Brief In Support Of Motion To Dismiss Based On the Statute of Limitations And Laches ("Def.'s Reply") at 7.
The problem with defendants' analysis is that it does not confine itself to the facts alleged in the complaint. Nowhere in the complaint does Stewart allege when the Terminator films were created, produced or distributed, or when she learned of their creation, production, distribution or release. The complaint also contains no allegation as to the date the films were first released, or the date on which Stewart saw any of the films.
The pleading, in short, alleges no facts from which the court can conclude that Stewart either saw or should have seen defendants' films more than three years prior to the date she filed this lawsuit. It also contains no facts from which the court can conclude that Stewart should have known of Cameron's writing activities or Hurd's production activities more than three years prior to the commencement of the action.
Among the only allegations that bear on the timeliness of Stewart's claims is Paragraph 43, which states:
"On 10 June 1999, plaintiff filed an in person written complaint with the Federal Bureau of Investigation ["FBI"] with the Salt Lake City, Case No.: 295-0-15/195-SU-0, White Collar Crime Branch re: Copyright Infringement (295C) about the alleged federal copyright infringement committed by Wachowski, Twentieth Century, Joel Silver, Warner Brothers in concert with others, including but not restricted to James Cameron and Gale Ann Hurd, of plaintiff's protected literary works. Attached hereto and incorporated herein as Exhibit No.: 21 is a copy of the FBI complaint filed by plaintiff."
First Amended Complaint, ¶ 43.
This allegation suggests that Stewart believed the Terminator defendants were engaged in infringing activities as early as June 1999. It is unclear, however, whether those activities related to the Terminator films or to the alleged infringement of Stewart's works by the Matrix films. Exhibit 21 provides no information concerning the extent to which Stewart was on notice of infringing activities involving the Terminator films in 1999, since the partially redacted FBI document does not mention the films, and does not identify Cameron, Hurd or Twentieth Century in any of its unredacted portions.
Id., Ex. 21.
Another allegation asserts that, on May 19, 1999, Jeremy N. Williams of Warner Brothers wrote to explain the studio's disagreement with Stewart's contention that "The Matrix" infringed Stewart's "The Third Eye." In this letter, Williams acknowledged that "The Matrix" and "The Third Eye" had "similar themes, " but asserted that "those thematic elements [were] unprotectible ideas residing in the public domain, " which were "common to numerous works, ranging widely from Biblical chapters to such sci-fi motion pictures as Star Wars' and The Terminator.'" Defendants do not contend that this letter sufficed to put Stewart on notice of the purportedly infringing content of the Terminator films, and the court cannot say at this point, viewing the evidence in the light most favorable to Stewart, that it contained sufficient information to trigger the statute of limitations on Stewart's Terminator claims.
Id., Ex. 20.
Because the facts on which defendants rely in asserting the statute of limitations bar are outside the complaint, and because plaintiff's allegations do not establish either when defendants engaged in the allegedly infringing conduct or when plaintiff knew or should have known of the purported infringement, the court cannot determine when Stewart's claim accrued. Accordingly, it must deny defendants' motion to dismiss Stewart's "Terminator I and II" claims on statute of limitations grounds. The court must also deny defendants' motion to dismiss the "Terminator I and II" claims on the basis of laches. None of the allegations in the complaint demonstrates that Stewart knew or should have known of defendants' allegedly infringing conduct for an unreasonably long period of time prior to initiating this action. See Danjaq, supra, 263 F.3d at 952.
In Danjaq, the court dismissed a claim that eight James Bond films, released over a period of thirty-six years, infringed plaintiff's copyright. Danjaq, supra, 263 F.3d at 950-51. Because the plaintiff did "not argue... that he was unaware of the[] movies" ( id. at 953, n. 10), the court looked to the release dates of the movies to determine the period of delay ( id. at 952). Given the plaintiff's concession, the holding in Danjaq cannot be read to impute knowledge of infringement broadly to any plaintiff whose work was allegedly infringed by a widely distributed film. In the present case, there is no information on the face of the pleadings as to when plaintiff first learned of defendants' allegedly infringing activities in creating, producing and distributing "Terminator I and II." As a result, the analysis conducted in Danjaq cannot presently be performed in this case.
Additionally, plaintiff alleges willful copyright infringement. As noted earlier, the defense of laches is unavailable to a willful infringer. See Danjaq, supra, 263 F.3d at 957. Because the court cannot resolve on the face of the pleadings whether such allegations are true, or whether defendants created, produced and distributed the Terminator films "with knowledge that the[ir]... conduct constitute[d] copyright infringement" ( id. ), it cannot grant defendants' motion to dismiss Stewart's "Terminator I and II" claims on the basis of laches for this further reason as well.
2. Terminator III
Defendants also seek to dismiss Stewart's claims based on "Terminator III" on the grounds of laches. Citing Danjaq, they argue that because "Terminator III" was based on the same allegedly infringing material as "Terminator I and II, " Stewart's claims respecting it are barred even though they were brought within the three year limitations period prescribed by § 507(b). In Danjaq, the court held that plaintiff's claim that a recently released DVD of the Bond films infringed his copyright was barred by laches, even though filed within three years of the release of the DVD. It stated:
"... [W]e conclude that claims of infringement stemming from re-releases of Bond movies on DVD have been delayed' for purposes of laches. On the one hand, we recognize the seemingly paradoxical nature of this conclusion. After all, how can it fairly be said that a lawsuit filed in 1998, relating to a DVD released in 1997 (to take the example of Dr. No) was delayed'? The answer is simple: Where, as here, the allegedly infringing aspect of the DVD is identical to the alleged infringements contained in the underlying movie, then the two should be treated identically for purposes of laches. It would be incongruous indeed to hold the opposite - to say, that is, that McClory's claim for infringement on a re-release survives, despite the dismissal for laches of the same claim regarding the original work. This exception would effectively swallow the rule of laches, and render it a spineless defense." Id. at 953.
The court rejected plaintiff's "argument that laches may never bar a claim for infringement brought within the statute of limitations, " noting that it had already held in Kling, supra, 225 F.3d at 1039, and other cases that "laches may sometimes bar a statutorily timely claim." Danjaq, supra, 263 F.3d at 954. The court acknowledged that "such an application of laches [might] be unusual, " but concluded that it was appropriate in the case before it. Id.
Here, as noted, the court cannot determine if Stewart's claims concerning "Terminator I and II" are barred by laches. It also cannot determine if Stewart's willful infringement can be proven. It thus cannot utilize the rationale of Danjaq to hold that Stewart's "Terminator III" claims are similarly barred.
III. CONCLUSION
For the foregoing reasons, defendants' motion to dismiss plaintiff's first amended complaint on statute of limitations and laches grounds is denied.