Page:Starz Entertainment v. MGM Domestic Television Distribution.pdf/8

 the ongoing infringements more than three years before he filed suit, and second, that Petrella created a “damages bar” such that damages should be strictly limited to three years from the time the complaint was filed. See id. at 44. The district court rejected each of Scholastic’s arguments, applied the discovery rule, found Sohm was not on inquiry notice three years before he filed suit, and was thus entitled to damages for infringing acts before the three-year period preceding suit. See id.

The Second Circuit affirmed the district court’s grant of summary judgment, concluding “that the discovery rule applies for statute of limitations purposes in determining when a copyright infringement claim accrues under the Copyright Act.” Id. at 50. It explained that “an infringement claim does not ‘accrue’ until the copyright holder discovers, or with due diligence should have discovered, the infringement,” citing its binding precedent in Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120 (2d Cir. 2014). Sohm, 959 F.3d at 50. It recognized that the Supreme Court in Petrella “specifically noted that it was not passing on the question of the discovery rule,” a position that was “reaffirmed” in SCA Hygiene Products. Id. “Consequently,” the Second Circuit found that “in light of the Supreme Court’s direct and repeated representations that it has not opined on the propriety of the discovery or injury rules, it would contravene settled principles of stare decisis for this Court to depart from its prior holding in Psihoyos on the basis of Petrella.” Id.

The Second Circuit next considered whether the district court correctly found that Sohm “did not discover, nor with due diligence should have discovered, Scholastic’s purported copyright infringements more than three years prior to when he filed suit.” Id. It concluded that Scholastic failed to identify any facts or circumstances that would have put Sohm on inquiry notice that Scholastic was infringing its copyrights, reasoning that “Scholastic cannot rely on the passage of time alone to establish that Sohm should have discovered” the infringing acts. Id. at 51. It upheld the district court’s determination that Sohm’s claims accrued within the statute of limitations—that he discovered the earlier acts of infringement within the three-year period before he filed suit. That should have been the end of discussion, but it wasn’t.

Scholastic, like MGM here, went on to argue that even if the discovery rule means the pre-three-year window claims timely accrued, Petrella created a separate damages bar that limits damages to only those arising from acts of infringement within the three-year window. The Second Circuit agreed, holding that the Petrella Court “explicitly delimited damages to the three years prior to the commencement of a copyright infringement action.” Id. It found that “Petrella’s plain language explicitly dissociated the Copyright Act’s statute of limitations from its time limit on damages.” Id. at 52. The Second Circuit reasoned from Psihoyos and certain language in Petrella that “we must apply the discover[y] rule to determine when a copyright infringement claim accrues, but a three-year lookback period from the time a suit is filed to determine the extent of the relief available.” Id. Accordingly, the Sohm court concluded that “a plaintiff’s recovery is limited to damages incurred during the three years prior to filing suit,” even where the copyright holder was unaware of the infringing acts, and the district court’s contrary conclusion was in error. Id.

MGM asks us to adopt the approach taken by the Second Circuit in Sohm, and hold, in light of Petrella, that the damages that Starz may recover on its infringement claims are strictly limited to