IP Law Daily, COPYRIGHT—SDNY: Ruling on Whether Photographer’s Copyright Infringement Claims Were Time-Barred Deferred Pending Discovery on Tolling, (Aug 9, 2012)

By Cheryl Beise, J.D.

The federal district court in New York City has deferred ruling on whether the Copyright Act’s statute of limitations barred a commercial photographer’s copyright infringement claim against beauty products company Avon for allegedly exceeding the scope of license use agreements (Bill Diodato Photography LLC v. Avon Products, Inc., August 7, 2012, Sweet, R.). There was insufficient evidence at the motion to dismiss stage for the court to rule on the applicability of the statute of limitations and whether it should be tolled in this case.

Beginning in 2001, Avon hired fine-arts photographer Bill Diodato to perform catalog photography services under an arrangement memorialized in invoices, which provided Avon with limited use licenses for one year. Diodato alleged that Avon used his images in various catalogs and online outside the scope of the licenses granted. In February, 2012, Diodato sued Avon, asserting copyright infringement under federal law and breach of contract, conversion, and two counts of account stated under New York law.

Copyright Infringement—Statute of Limitations

Avon argued that Diodato’s copyright infringement claim was barred by the statute of limitations. Section 507(b) of the Copyright Act requires infringement actions to be “commenced within three years after the claim accrued.” The Act, however, is silent as to when a plaintiff’s copyright infringement action accrues.

Neither the U.S. Supreme Court nor the Second Circuit has addressed the issue of when a copyright infringement cause of action arises and there was a split among district court decisions with the Second Circuit, the court noted. A minority of courts have held that that a copyright infringement claim accrues only upon discovery by the plaintiff (the discovery rule), but the majority of courts in recent years have held that a copyright infringement action accrues at the moment of infringement (the injury rule). The court chose to apply the injury rule.

“Tolling Agreement”

Diodato alleged that during settlement discussions in 2010, the parties entered into a tolling agreement, as a condition to Diodato’s refraining from commencing a lawsuit, setting March 4, 2010 as the “Effective Date” of Diodato’s claims for statute of limitations purposes. According to Diodato, assuming application of the injury rule, Avon was liable for infringing acts on or after March 4, 2007.

However, because Diodato’s complaint did not allege the existence of the 2010 tolling agreement or incorporate it by reference, the court was unable to consider it in ruling on Avon’s motion to dismiss.

Avon argued New York General Obligations Law § 17-103 in any case precluded Diodato from relying on the tolling agreement. Section 17-103 provides that an agreement to extend the statute of limitations for an indefinite time period “applicable to an action arising out of a contract” is unenforceable. Because the relationship between the parties in the present action had its genesis in the parties’ contractual relationship, according to Avon, any tolling agreement was rendered unenforceable by §17-103.

Diodato countered that §17-103 only applied to claims sounding in contract, not to claims arising under federal copyright law. The court acknowledged that the “enforceability of the alleged tolling agreement represents a novel issue of state law,” but the issue was not properly before the court at this stage. Diodato, however, was not precluded from alleging the existence of the tolling agreement in an amended complaint, the court stated.

Equitable Tolling

Diodato also asserted that the doctrine of equitable tolling of the statute of limitations should apply in this case because Avon fraudulently concealed material facts relating to its wrongdoing by failing to produce copies of all domestic and international catalogs, thereby preventing Diodato from discovering the full extent of Avon’s alleged infringement.

In view of Diodato’s allegations, the court agreed to allow limited discovery on the equitable tolling issue. Specifically, Diodato was granted permission to submit to Avon a document request for the allegedly withheld negatives and domestic and international catalogs.

Copyright Infringement—Sufficiency of Allegations

Assuming Diodato’s copyright infringement claim was not time-barred, Diodato alleged sufficient facts support a claim of copyright infringement. Contrary to Avon’s assertion, Diodato did not need to produce copyright registration certificates or registration numbers in order to proceed with an infringement claim.

Although registration is precondition to filing a copyright infringement claim under the Copyright Act, Diodato’s assertion that he had “a registered copyright in the creative works identified herein” sufficed at the pleading stage. Diodato sufficiently identified the works that were the subject of his copyright cause of action, asserted that he owned the copyrights in those works and that the works were registered, and described Avon’s allegedly infringing acts as to those work.

State Law Claims

Diodato also could go forward with breach of contract and account stated claims under New York law. In the Second Circuit, a breach of contract claim alleging breach of agreements to pay for the use of copyrighted works is not preempted by the Copyright Act, the court said.

However, Diodato’s conversion claim alleging that Avon wrongfully retained possession of negatives of Diodato’s photographs was dismissed as barred by the applicable three-year statute of limitations. Diodato’s cause of action for conversion accrued when Avon did not return the negatives upon termination of the one-year licenses.

Case No. 12 Civ. 847 (RSW).

Marc Andrew Lebowitz (Lebowitz Law Offices LLC) for Bill Diodato Photography LLC. Alexander Lloyd Greenberg (Fross Zelnick Lehrman & Zissu, P.C.) for Avon Products, Inc.

Cases: Copyright NewYorkNews