Circuit Splits

Circuit Split Roundup

For the latest coverage of noteworthy issues dividing the federal courts, check out the following links:

• Alison Frankel, Is a claim the same as a case? 6th Circuit says yes in FCA suit, Thomson Reuters News & Insights (Nov. 5, 2012).

• Robert B. Milligan, Employer Petitions U.S. Supreme Court to Resolve Computer Fraud and Abuse Act Circuit Split, Trading Secrets (Nov. 2, 2012).

• Robyn Hagan Cain, Are Graphic Warning Labels Heading for En Banc Review?, FindLaw D.C. Circuit Blog (Nov. 1, 2012 3:02 PM).

• Andy Liu & Jonathan Crone, Widening a Split, Sixth Circuit Says FCA Amendments Apply to Pending Cases, Not Claims, Crowell Moring (Nov. 6, 2012).

• Benjamin M. Riskin, Twenty-Six Years Later, a Lubrizol Split by the Seventh Circuit, jdsupra.com (Nov. 2, 2012).

• Brian Clark, Circuit Splits and Copyright Courts, Music Manumit Law-cast (Nov. 3, 2012).

• Scott M. Flaherty, Internet Prior Art; Related Circuit Split, intellectualIP.com (Nov. 6, 2012).

• H. Jacob Lager, IRS slooooowwwlllly acknowledging electronic docs; Supreme Court takes on windfall tax circuit split, Tax Sans Frontieres (Nov. 2, 2012 9:05 AM).

Can the Doctrine of Laches Serve as a Defense to Injunctive Relief?

Can the doctrine of laches serve as a defense to injunctive relief? Last week the First Circuit noted in Oriental Fin. Group, Inc. v. Cooperativa De Ahorro Crédito Oriental that seven of the eight federal circuits that have answered this question have done so in the affirmative:

"The argument that laches is never a defense to an injunction, no matter what the equities, has been asserted and rejected in several cases." 6 McCarthy, supra, § 31:6 n.2.

The general rule of the circuits, as quoted with approvalby Professor McCarthy, has been that "'mere delay' will not, by itself, bar a plaintiff's suit, but there must be some element of estoppel, such as reliance by the defendant. . . . All this means, however, is that a balancing of the equities is required, which would be the case with any principle of equity." 6 Id. § 31:6 (quoting Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1040 (2d Cir. 1980)). This view is corroborated by a majority of the circuits. See, e.g., Ray Commc'ns, Inc. v. Clear Channel Broad., Inc., 673 F.3d 294, 307 (4th Cir. 2012) (noting that "laches may act as a bar to both monetary and injunctive relief under certain circumstances," such as where aggravating factors cause the balance of the equities to strongly favor the defendant (emphasis in original)); Univ. of Pitt. v. Champion Prods., Inc., 686 F.2d 1040, 1045 (3d Cir. 1982) (noting that cases can "give rise to affirmative rights in the defendant as a result of detrimental reliance" under a laches theory, but that cases involving "meredelay" will not bar prospective injunctive relief); Prudential Ins. Co. v. Gibraltar Fin. Corp., 694 F.2d 1150, 1152 n.1 (9th Cir.1982) (noting that that "[t]here is a wealth of authority in other circuits that laches can bar injunctive relief" and citing several cases where the balancing of the equities favored the defendant); Armco, Inc. v. Armco Burglar Alarm Co., Inc., 693 F.2d 1155, 1161 n.14, 1161-62 (5th Cir. 1982) (noting that "[t]here is no doubt that laches may defeat claims for injunctive relief" and considering the equitable factors involved in the laches defense); Saratoga Vichy Spring Co., 625 F.2d at 1040 (noting that a balancing of the equities beyond "mere delay" is needed to bar the plaintiff's prayer for injunctive relief under a laches theory); Seven-Up Co. v. O-So-Grape Co., 283 F.2d 103, 106 (7th Cir. 1960) ("Laches does not necessarily constitute a conclusive and automatic bar to injunctive relief in trademark actions. However, in many instances, the delay may be so prolonged and inexcusable that it would be inequitable to permit the plaintiff to seek injunctive relief as to future activities.").

Nos. 11-1473 & 11-1476, at n.9 (1st Cir. Oct. 18, 2012).

Which circuit is the lone dissenter? If you guessed “Sixth Circuit,” you are correct:

Currently only the Sixth Circuit has suggested that laches cannot be a defense to injunctive relief. Kellogg Co. v. Exxon Corp., 209 F.3d 562, 568 (6th Cir. 2000) ("Although laches precludes a plaintiff from recovering damages, it does not barin junctive relief."). McCarthy suggests that "a careful reading of [this case] reveals either that such language was dictum, that [the case was] lacking the traditional elements of an estoppel by laches or that [it] was merely referring to 'delay' per se." 6 McCarthy, supra, § 31:6. Indeed, Kellogg acknowledges that 'there is that narrow class of cases where the plaintiff's delay has been so outrageous, unreasonable and inexcusable as to constitute a virtual abandonment of its right.'" 209 F.3d at 569 (quoting Univ. Of Pitt., 686 F.2d at 1044).

Id.

Judge Urges 9th Circuit to Reconsider its Position in “Severe” Split Over Laches Defense in Copyright Cases

Yesterday the Ninth Circuit issued its opinion in Petrella v. Metro-Goldwyn-Mayer, Inc., a case in which plaintiff Paula Petrella sued MGM Studios and a variety of other major players in the film industry for “infring[ing] her purported interest in a book and two screenplays that together allegedly formed the basis for the 1980 motion picture Raging Bull.” On appeal, the Ninth Circuit held that Ms. Petrella’s action for copyright infringement was barred by the equitable defense of laches.

Judge William Fletcher wrote a concurring opinion to call the court's attention to “a severe circuit split on the availability of a laches defense in copyright cases.”

“Our circuit has taken a wrong turn in its formulation and application of laches in copyright cases,” wrote Judge Fletcher, who urged his colleagues to “revisit our case law to provide appropriate protection to innocent copyright owners who have brought infringement suits within the statute of limitations.”

Judge Fletcher summarized the “severe circuit split” as follows:

In the Fourth Circuit, there is no laches at all. If a copyright suit is brought within the statute of limitations, it may go forward. Lyons P’ship. L.P. v. Morris Costumes, Inc., 243 F.3d 789, 797-98 (4th Cir. 2001). In the Eleventh Circuit, “there is a strong presumption that a plaintiff’s suit is timely if it is filed before the statute of limitations has run. Only in the most extraordinary circumstances will laches be recognized as a defense.” Peter Letterese & Assocs., Inc. v. World Inst. of Scientology Enters., Int’l, 533 F.3d 1287, 1320 (11th Cir. 2008). Even if laches is found, “laches serves as a bar only to the recovery of retrospective damages, not to prospective relief.” Id. at 1321. In the Second Circuit, laches is available as a bar to injunctive relief but not to money damages. See New Era Publ’ns Int’l v. Henry Holt & Co., 873 F.2d 576, 584-85 (2d Cir. 1989). In the Sixth Circuit, laches is available in only “the most compelling of cases.” Chirco v. Crosswinds Cmtys., Inc., 474 F.3d 227, 233 (6th Cir. 2007).

Our circuit is the most hostile to copyright owners of all the circuits. In the Ninth Circuit, laches can bar all relief, both legal and equitable, when “(1) the plaintiff delayed in initiating the lawsuit; (2) the delay was unreasonable; and (3) the delay resulted in prejudice.” Maj. Op., at 10176 (citing Danjaq, 263 F.3d at 951).

Circuit Split Roundup

For the latest coverage of noteworthy issues dividing the federal courts, check out the following links:

• Joe Celentino, Bankruptcy Circuit Split May Go to the Supreme Court, Courthouse News Service (July 11, 2012 11:54 AM PT) (HTML).

• Mark A. Platt & Ryan E. Manns, Seventh Circuit Opinion Creates Circuit Split Over the Effect of Rejection of a Contract Granting a Trademark License, lexology.com (July 11, 2012) (HTML).

• Noah Lipschultz, U.S. Supreme Court Agrees to Resolve Circuit Split Over ERISA Plan Reimbursement Rights, Employee Benefits Counsel (July 11, 2012) (HTML).

• Division Among Courts Intensifies Regarding False Claims Act's First-to-File Requirement, Ropes & Gray Alert: Government Enforcement (July 11, 2012) (PDF).

• Janet Marvel, Seventh Circuit Issues Important Decision Regarding Trademarks in Bankruptcy, Pattishall IP Blog (July 12, 2012) (HTML).

Circuit Split Roundup

For the latest news and commentary on areas of law dividing the courts or recently resolved, check out the following links:

• Lee Beck, DOJ’s “Departure Bar” Regulation to Reopening Immigration Cases: Another Circuit, Another Loss, Federal Regulations Advisor (May 24, 2012) (HTML).

• Rudolph J. Di Massa, Jr. & Aaron J. Margolis, Supreme Court Addresses Circuit Split Over Cramdown Plans Precluding Credit Bidding, The Legal Intelligencer (May 22, 2012) (HTML).

• Christopher M. Loveland & Jonathan S. Aronie, United States: Another U.S. District Court Follows The Lead Of The D.C. Circuit In Addressing The "First-To-File Bar" Circuit Split And Pushes Back Against An Opportunistic Relator, mondaq.com (May 21, 2012) (HTML).

• Jonathan H. Adler, Court to Consider Standing to Challenge FISA Surveillance, The Volokh Conspiracy (May 21, 2012) (HTML).

• Laura Fishwick, Application Of the First Sale Doctrine To Exclusive Importation Rights After Quality King, Harv. J. L. & Tech. Jolt Digest (May 20, 2012) (HTML).

Courts Split Over Copyright Law's "First Sale Doctrine"

The “first sale doctrine” had its genesis in a 1908 Supreme Court case in which the Court held that owners of copyrighted work have no control over the resale price of their work after it has entered the stream of commerce. See Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350 (1908). This holding is now reflected in 17 U.S.C. § 109(a), which provides that “the owner of a particular copy . . . lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy . . . .” (emphasis added).

Another copyright law, however, makes it unlawful to import foreign-made copies of copyrighted work into the U.S. without the copyright owner's approval. See 17 U.S.C. § 602(a). In 2011’s John Wiley & Sons, Inc. v. Kirtsaeng, Judge Garvan Murtha penned a dissent that highlights the following circuit split over whether § 109(a) applies to foreign-manufactured goods imported into the U.S.:

§ 109(a) requires (1) the person claiming protection be the owner of the copy, and (2) the copy was "lawfully made under this title." 17 U.S.C. § 109(a). Courts have split over the meaning of "lawfully made under this title," with some holding it means "legally manufactured... within the United States," CBS v. Scorpio Music Distrib., 569 F. Supp. 47, 49 (E.D. Pa. 1983), aff'd without opinion, 738 F.2d 424 (3d Cir. 1984); see also Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982, 987 (9th Cir. 2008), aff'd by an equally divided court 131 S. Ct. 565 (2010), and others "confess[ing] some uneasiness with this construction" and suggesting "lawfully made under this title" refers not to the place a copy is manufactured but to the lawfulness of its manufacture as a function of U.S. copyright law. Sebastian Int'l, Inc. v. Consumer Contacts (PTY) Ltd., 847 F.2d 1093, 1098 n.1 (3rd Cir. 1988).

No. 09-4896-cv (2d Cir. Aug. 15, 2011). The dissent continues, "Here, the district court held — and the majority affirms — the doctrine does not apply to imported copies that were made abroad because § 109(a) applies only to copies that are 'lawfully made under this title,' and that means physically manufactured in the United States." See John Wiley & Sons, Inc. v. Kirtsaeng, No. 08 Civ 7834, 2009 WL 3364037, at *9 (S.D.N.Y. Oct. 19, 2009).

I think the takeaway here is, until the Supreme Court resolves this issue, you would be wise to think twice before purchasing that bootleg copy of Rush Hour 3 on eBay. Actually, you would be wise to think twice before purchasing a copy of Rush Hour 3, period.