IP Law Daily, COPYRIGHT—2d Cir.: Where copyright infringement claim turns on the existence of a license, does it accrue only once?, (Aug 12, 2026)

By Matthew Hersh, J.D.

An unpublished decision distinguishes claims over the scope of a license from claims over the existence of a license.

A software company’s copyright infringement claim against industry giant IBM accrued when IBM first contended that it had a nonexclusive license to the software and did not accrue anew even though IBM continued to use the software at issue for many years thereafter, the U.S. Court of Appeals for the Second Circuit has held. The perhaps surprising result, which came in an unpublished opinion that affirmed an unwritten bench opinion from the district court below, was reached on the basis of the court’s “intuitive conclusion” that a dispute over the existence of a license “focuses on competing assertions of rights in the work at issue” and thus accrues only once (Xinuos, Inc. v. International Business Machines Corp., No. 25-1073 (2d Cir. Aug. 10, 2026)).

The dispute has a procedural history going back several decades. In 1998 IBM and a now-defunct software company then known as the Santa Cruz Operation entered into a joint development agreement, known as Project Monterey, to develop and market a family of computers based on the UNIX operating system. Under the agreement between the two companies, the parties granted each other certain rights to use code supplied during the project. After the project ran into what the court would later describe as “serious challenges,” IBM terminated the agreement in 2001.

Extensive litigation then followed. In 2003, the Utah-based purchaser of the Santa Cruz Operation’s UNIX business, which eventually changed its name to SCO Group, filed a lawsuit against IBM in the Utah federal court. That lawsuit claimed, among other things, that IBM had misappropriated source code from the joint project and incorporated it into IBM’s own operating systems. But while that litigation was underway, SCO Group filed for bankruptcy and in 2011 sold almost the entirety of its software business to a small U.S. Virgin Islands-based software company named Xinuos. Critically, however, while Xinuos acquired the rights to the software itself, SCO Group retained the rights to all of the causes of action against IBM that had accrued at that point.

Litigation at that point proceeded on two fronts against IBM. SCO Group continued to litigate its misappropriation claim against IBM in Utah, eventually reaching a settlement in 2021. That same year, however, Xinuos also sued IBM, this time for copyright infringement. Because SCO Group had retained all claims against IBM that had accrued by the time of the purchase agreement, Xinuos could not pursue any claims against IBM that had accrued before the 2011 purchase agreement. But Xinuos claimed that IBM continued to use that code in its own products after the time of the purchase agreement, thus giving rise, it claimed, to new infringement claims that it could pursue independently.

The district court granted IBM’s motion for summary judgment in a bench ruling, finding that the claim was brought too late. Xinuos appealed, leading to this opinion.

Accrual of claim. The court of appeals sided with the district court. Under traditional Second Circuit doctrine, a copyright claim that is about infringement may be commenced within three years of any infringing act, regardless of any prior acts of infringement. But a claim of ownership accrues only once, when “a reasonably diligent plaintiff would have been put on inquiry as to the existence of a right.” And when both types of claims are raised, the court noted, “a time-barred ownership claim will bar a claim for copyright infringement where the infringement claim cannot be decided without adjudication of ownership.” So which bucket did this lawsuit fall into? None of the three exactly, the court of appeals concluded—but the claim was untimely nonetheless.

The court first concluded that Xinuos’s lawsuit was not, traditionally speaking, based on an ownership claim—the basis for the district court’s judgment. In its order from the bench, the district court concluded that Xinuos’s claim was “tantamount” to an ownership claim that accrued when SCO Group, from which Xinuos later acquired the software business, became aware of IBM’s alleged misuse of the source code. But the court of appeals disagreed with that characterization. “IBM does not dispute that Xinuos owns the copyrighted code or that IBM took the code from Project Monterey and incorporated it into its products, which it continues to iterate and release for sale,” the court of appeals noted. “But IBM has maintained through decades of litigation that it had a right to do so.” In other words, the court of appeals concluded, “the parties have framed the dispute in this case as concerning IBM’s right to use the Project Monterey code, which reflects a dispute over a license rather than a dispute over the ownership of the code.”

But even though the lawsuit was not about ownership per se, the court of appeals found, the district court was correct to conclude that the claim accrued only once. Although the dispute was framed as an infringement claim, the court noted, IBM had openly claimed for roughly two decades that it had a nonexclusive license to use the code. And critically, the court emphasized, although IBM continues to use the code in its products today, “the contested action—IBM’s taking of the code in 2001—was a one-time event.” As such, the court reasoned, a claim challenging IBM’s misappropriation of the Project Monterey code “accrued when IBM first began openly using the code in its products allegedly in violation of the JDA.” The district court therefore correctly reached the “intuitive conclusion,” the court of appeals reasoned, that a dispute over the existence of a license “focuses on competing assertions of rights in the work at issue” and thus accrued only once.

The Case is No. 25-1073.

Judge: Per curiam.

Attorneys: Joachim Beno Steinberg (Crowell & Moring LLP) for Xinuos, Inc. Blake E. Stafford (Latham & Watkins LLP) for International Business Machines Corp.

Companies: Xinuos, Inc.; International Business Machines Corp.

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