39 F.4th 1236
9th Cir.2022Background
- Starz licensed exclusive exhibition rights from MGM for hundreds of films and TV episodes in library agreements (2013 & 2015).
- In August 2019 a Starz employee discovered Bill & Ted’s Excellent Adventure streaming on Amazon during Starz’s exclusivity period; MGM admitted the improper license and later disclosed many additional violating licenses.
- Starz continued investigating, found hundreds of additional infringements, and sued MGM in May 2020 asserting direct, contributory, and vicarious copyright infringement (340 counts each) plus contract claims.
- MGM moved to dismiss under Rule 12(b)(6), arguing Petrella v. MGM created a strict three‑year damages bar measured from the complaint date, eliminating the discovery rule.
- The district court applied the Ninth Circuit discovery rule (accrual upon discovery or when reasonably should have discovered) and denied dismissal; MGM sought interlocutory appeal, which the Ninth Circuit accepted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the discovery rule remains a viable accrual rule post‑Petrella | Discovery rule governs accrual; statute begins to run when plaintiff discovers or should have discovered infringement | Petrella’s language endorses the incident‑of‑injury rule and undermines the discovery rule | Discovery rule remains viable; Ninth Circuit continues to apply it |
| Whether Petrella created a separate three‑year damages bar measured from filing date (regardless of accrual) | No separate damages bar; §507(b) limits actions to three years after accrual, so damages may reach acts predating the three‑year lookback if accrual occurred later by discovery | Petrella’s “look‑back” language limits recoverable damages to three years before complaint, even in discovery‑rule cases ( Second Circuit in Sohm) | Petrella did not create a separate damages bar; damages governed by accrual under discovery rule |
| Statutory interpretation: does §507(b) or §504 support a filing‑date damages limit | §507(b) ties limitations to accrual; §504 governs damages but contains no separate three‑year cap tied to filing date | MGM argues Petrella shows Congress’ policy to limit retrospective relief to three years before filing | Court holds statute’s plain text supports accrual‑based limitations; §504 does not create a separate temporal damages bar |
| Application to Starz’s claims (timeliness) | Starz filed within three years of discovering infringements (Aug 2019 discovery; May 2020 suit within tolling adjustment) and may recover damages for infringements that accrued upon discovery | MGM contends many asserted infringements are nonrecoverable because they predate the three‑year filing lookback | The complaint survives Rule 12(b)(6): Starz timely filed under the discovery rule and may seek damages for infringements that accrued upon discovery |
Key Cases Cited
- Petrella v. Metro‑Goldwyn‑Mayer, Inc., 572 U.S. 663 (2014) (held laches cannot bar damages for infringements accruing within §507(b)’s three‑year window; noted but did not decide discovery rule)
- Roley v. New World Pictures, Ltd., 19 F.3d 479 (9th Cir. 1994) (adopted discovery rule; accrual when plaintiff knows or is chargeable with knowledge)
- Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700 (9th Cir. 2004) (applied discovery rule; three‑year clock begins upon discovery)
- Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020) (applied discovery rule but held Petrella imposed a separate three‑year damages lookback from filing date)
- Oracle Am., Inc. v. Hewlett Packard Enter. Co., 971 F.3d 1042 (9th Cir. 2020) (affirmed that accrual occurs when plaintiff discovers or should have discovered infringement)
- Bay Area Laundry & Dry Cleaning Pension Tr. Fund v. Ferbar Corp. of Cal., 522 U.S. 192 (1997) (accrual principle: claim accrues when plaintiff has a complete and present cause of action)