IP Law Daily, COPYRIGHT—2d Cir.: Appeals court revives copyright lawsuit against shoe designer, rejecting ‘sophisticated plaintiff’ exception, (Aug 19, 2024)

By George Basharis, J.D.

A federal appeals court has given new life to a photographer’s copyright infringement claims against a shoe designer, ruling that even experienced copyright enforcers get the full benefit of the law’s discovery rule for when claims can be filed.

The U.S. Court of Appeals for the Second Circuit vacated a lower court’s dismissal of a copyright lawsuit brought by Michael Grecco Productions (MGP) against shoe designer Ruthie Davis and her companies. The appeals court rejected the notion that there is a “sophisticated plaintiff” exception to the discovery rule that determines when the three-year statute of limitations begins to run on copyright claims (Michael Grecco Productions, Inc. v. RADesign, Inc., No. 23-1078 (2d Cir. Aug. 16, 2024)).

MGP, owned by commercial photographer Michael Grecco, had sued Davis for allegedly using Grecco’s copyrighted photos of model Amber Rose without permission on Davis’s website and social media. The photos, taken in January 2017, showed Rose wearing Davis’s shoe designs.

District court dismissed case as untimely. MGP filed its lawsuit in October 2021, alleging it discovered the infringement in February 2021. However, the U.S. District Court for the Southern District of New York dismissed the case, ruling it was filed too late under the Copyright Act’s three-year statute of limitations.

The district court reasoned that because MGP touted its sophistication in detecting and litigating copyright infringements, it should have discovered Davis’s alleged infringement within three years of when it began in August 2017. The lower court viewed MGP as a “sophisticated plaintiff” that could not benefit from the discovery rule, which delays the start of the limitations period until the copyright holder discovers or should have discovered the infringement.

Appeals court: No “sophisticated plaintiff” exception. The Second Circuit forcefully rejected this reasoning, finding “no mooring” for it in precedent. The appeals court emphasized that the discovery rule applies to all copyright plaintiffs, not just some, writing: “We have never understood the Copyright Act to employ different rules of accrual for different plaintiffs.”

The court explained that in copyright cases, claims accrue when the plaintiff discovers or should have discovered the infringement—regardless of the plaintiff’s level of sophistication. It criticized the lower court for effectively applying an “injury rule” of accrual to MGP while purporting to use the discovery rule.

“The discovery rule is the rule of accrual, not an equitable tolling or estoppel doctrine,” the appeals court emphasized. “The discovery rule is not an exception to the injury rule that only applies to some infringement claims; it is not a benefit for which only some plaintiffs qualify.”

Factual issues remain on timeliness. At the same time, the court left open the question of whether a plaintiff’s sophistication level could be considered when determining what qualifies as “due diligence” in discovering infringements. This may leave room for defendants to argue that more sophisticated plaintiffs should be held to a higher standard of diligence.

The Second Circuit found it was not clear from the face of MGP’s complaint that its claims were time-barred. The court said MGP’s general allegations about its diligence in policing copyrights did not resolve factual questions about whether it should have discovered Davis’s specific alleged infringement earlier.

“MGP’s complaint needed to plausibly allege a claim of copyright infringement, but the complaint did not need to allege, plausibly or otherwise, that the claim was timely,” the appeals court explained. It noted that timeliness is an affirmative defense that defendants must plead and prove. Consequently, the court vacated the dismissal and remanded the case for further proceedings, where Davis may still try to prove her statute of limitations defense.

The Case is No. 23-1078.

Judge: Wesley, R.

Attorneys: Bruce W. Bellingham (Spector Gadon & Rosen, PC) for Michael Grecco Productions, Inc. Emily Bab Kirsch (Kirsch & Niehaus PLLC) for RADesign, Inc.

Companies: Michael Grecco Productions, Inc.; RADesign, Inc.

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