Seventh Circuit Rejects The Separate-Accrual Rule In Copyright Ownership Disputes

by Uri Abt

The Seventh Circuit recently answered an important question about when suits under the Copyright Act accrue for purposes of its three-year statute of limitations.  See 17 U.S.C. § 507(b).  In Consumer Health Information Corp. v. Amylin Pharmaceuticals, Inc., No. 14-3231, 2016 WL 1534013 (7th Cir. April 15, 2016), the Court of Appeals held that the separate-accrual rule that applies in the traditional copyright-infringement context, does not apply if the suit concerns copyright ownership, rather than infringement. 

Consumer Health Information Corporation (CHI) developed educational materials to help Amylin Pharmaceuticals, Inc. (Amylin) market a new drug.  CHI assigned all copyrights in those materials to Amylin in 2006.  In 2013, CHI sued Amylin alleging that the assignment was the product of economic duress and fraud, that CHI owned the copyrights in the educational materials, and that Amylin was liable for copyright infringement under the Copyright Act. 

CHI argued that its suit was timely under the separate-accrual rule, which applies to traditional copyright infringement cases.  See Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S.Ct. 1962, 1969 (2014). Under the separate-accrual rule, each infringing use of copyrighted material triggers a new three-year limitations period.  If the separate-accrual rule applied, CHI’s claims concerning allegedly infringing acts that occurred within the three years preceding its suit would be timely.  But the Court of Appeals held that CHI’s suit was not a traditional infringement suit, and that the separate-accrual rule did not apply.

The Court of Appeals reasoned that CHI’s suit was really about who owned the copyright, not, as is usually the case, whether some act infringed a copyright whose ownership was not in dispute.  “Unlike an ordinary infringement case in which each infringing act is a discrete wrong triggering a new limitations period, ownership claims accrue only once.  Consumer Health Information Corp., 2016 WL 1534013, at *4.  The Court drew support for its holding from the Second, Sixth, Ninth, and Tenth Circuits, which have all recognized the same distinction.

After holding that the separate-accrual rule did not apply, the Court set down the rule that did apply: “when the gravamen of a copyright suit is a question of copyright ownership, the claim accrues when the ownership dispute becomes explicit—that is, when the claimant has notice that his claim of ownership is repudiated or contested.”  Id. at *5.  CHI knew that its ownership of the educational material copyrights was contested when it assigned them away in 2006, so its Copyright Act claim was time-barred.