Sep 13, 2024
Today, on behalf of our client, RADesign, Inc., Kirsch & Niehaus PLLC along with co-counsel Weil, Gotshal and Manges LLP, filed a Petition for Rehearing En Banc in Michael Grecco Productions, Inc. v. RADesign, Inc., Case No. 23-1078, seeking review of the decision of the Second Circuit panel to reverse the District Court’s dismissal of the underlying complaint.
In October 2021, Michael Grecco Productions (“MGP”) sued our client RADesign, Inc. for copyright infringement for the August 2017 posting of two images of Amber Rose wearing a pair of RADesign’s shoes by Ruthie Davis on the cover of Inked Magazine. RADesign, Inc. successfully moved to dismiss the suit as time-barred, arguing that the complaint was deficient on its face based on the Copyright Act’s three-year limitations period. The District Court dismissed the case, holding that MGP’s relative sophistication as an experienced litigator in identifying and bringing causes of action for unauthorized uses of Grecco’s copyrighted works leads to the conclusion that it should have discovered, with the exercise of due diligence, the alleged infringement within the statute’s three-year limitations period. Michael Grecco Prods., Inc. v. RADesign, Inc., et al. 678 F.Supp. 3d 405 (S.D.N.Y 2023).
MGP appealed and, reviewing the District Court’s ruling de novo, the Second Circuit found that the District Court erred as a matter of law in concluding that MGP’s complaint was barred by the three-year limitations period. Michael Grecco Prods., Inc. v. RADesign, Inc., et al., 112 F.4th 144 (2d Cir. 2024). The Second Circuit reasoned that the running of the Copyright Act’s statute of limitations (Section 507(b)) is governed by a discovery rule. Under the discovery rule, a claim for copyright infringement accrues when a diligent plaintiff discovers or should have discovered the infringement. This accrual standard is in contrast to “the injury rule,” under which the claim would accrue when the infringement in fact occurred. Because the plaintiff pled he did not discover the infringement until February 2021, and then filed the lawsuit within three years of discovering the infringement, the Second Circuit vacated the District Court’s dismissal.
Although applying a discovery rule to the Copyright Act’s statute of limitations is currently law in eleven Circuits that have considered the issue, the propriety of reading in this broad and lenient rule is subject to serious challenges in many courts. The discovery rule is inconsistent with Supreme Court precedent interpreting claim accrual for statutes of limitations in other contexts. The discovery rule, adopted in the Second Circuit only as recently as 2014, is also inconsistent with the legislative history and purpose of the Copyright Act’s statute of limitations passed in 1957. The Supreme Court famously declined to pass on whether a discovery rule should apply in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014), though it in fact applied the injury rule. The Supreme Court again expressly declined to decide the issue of whether a discovery rule should apply to the Copyright Act this past term in Warner Chappell Music v. Nealy, 601 U.S. 366 (2024) because it was not properly presented to the Court. But even there three justices clearly previewed that the Copyright Act “almost certainly does not tolerate a discovery rule,” and the discovery rule here “very likely does not exist.” Id. at 374, 376 (Gorsuch, J. dissenting).
We are hopeful that the Second Circuit will take a second look en banc at this extremely important issue and course correct. An appropriately disciplined statutory construction is badly needed to stem the tsunami of copyright litigation seeking compensation for long ago activities. This cottage industry has arisen precisely because a discovery rule deprives defendants of ever reaching the point of repose that Congress intended with Section 507(b) and subjects publishers to the unreasonable burden of maintaining records for every internet post or be forced to pay to settle claims brought for decades-old activities.