Sunday, October 22, 2006

Defense of Equitable Estoppel in Copyright Litigation (CLH Ch 12)

Last weekend's visit to the Sagamore for the annual meeting of the New York State Bar Association's IP Law Section was well worth it. My publisher West arranged for a book signing. Special thanks to Debra Resnick of FTI Consulting, Joyce Creidy of Thomson Compumark, Marc Lieberstein of Pitney Hardin and Cathy Teeter of NYSBA for the warm welcome and the kind patronage. The Copyright Litigation Handbook t-shirts were a big hit, and several bar associations expressed interest in having me speak to their members.

On September 21, 2006, Judge Cedarbaum in the Southern District of New York made an interesting decision involving Ian Fleming's Chitty Chitty Bang Bang. Legislator 1357 Ltd v. Metro-Goldwyn-Mayer Inc., 2006 WL 2709783. Fleming wrote it just before he died. Before he died, he assigned the publishing and film rights to it to separate trusts, but the story was not published prior to his death. Later, a film was based on this short story. A film based on a copyrighted work is known as a "derivative work".

Judge Cedarbaum's decision decides fascinating issues of whether the short story was "posthumous" and interpretes the Copyright Act's provisions on heirs recapturing copyrights. Professor Patry has discussed those elements of the decision here. I would like to focus on that portion of the opinion discussing the defense of equitable estoppel. My recently-published Copyright Litigation Handbook discusses equitable estoppel in Chapter 12 "Answer and Defenses". Judge Cedarbaum carefully distinguishes between the defenses of laches and estoppel and notes that it is an open question whether or not the defense of laches is available in the Second Circuit.

Overview: Rule 12(b)(6) of the Federal Rules of Civil Procedure (FRCP) requires that certain defenses be asserted in the answer to a complaint, except for certain defenses that may be asserted in a motion, at the option of a pleader. Rule 8(c) of the FRCP provides the checklist of such defenses and specifies estoppel. The motion for partial summary judgment before Judge Cedarbaum was made under FRCP 56 which requires the court to examine all admissible evidence to determine whether "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (citations omitted).

Decision: Plaintiffs moved for partial summary judgment. Defendants resisted, based on a defense of laches. The court found that defendant's laches arguments raised instead a "genuine issue of disputed fact" (and therefore a potentially valid defense of equitable estoppel) due to representations by plaintiffs after Fleming's death and lengthy delay in filing the action, as well as defendants' good-faith belief that plaintiffs viewed them as the owners of the film rights in the Work. The court noted that the defense of equitable estoppel applies when "the party to be estopped had knowledge of defendant's infringing conduct, and either intended that his own conduct be relied upon or acted so that the party asserting the estoppel has a right to believe it was so intended. Additionally, the defendant must be ignorant of the true facts and must rely on plaintiff's conduct to his detriment." Additionally "[u]nlike laches, equitable estoppel can be used to prevent a plaintiff from recovering prospective as well as past damages." (citations omitted).

The court contrasted a line of case law permitting equitable estoppel in copyright cases with a line of cases rejecting laches as the equitable equivalent of a statute of limitations, and noting a three-way split in the various circuits on whether and how the laches defense is available, together with a discussion of the Second Circuit cases showing that the Second Circuit hasn't reached the question.

Practice Tip for Lawyers: Judge Cedarbaum's opinion provides a strong hook for defendants who can present solid evidence that they have published believing in good faith that they were entitled to do so. It also serves as a warning to defendants in copyright litigation that careful pleading of defenses is essential. At least in the Second Circuit, equitable estoppel may provide the most powerful defense.

To purchase the Copyright Litigation Handbook (West 2006), please go here and use OFFER NUMBER 523571.

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