Starz Argues It Isn't Obligated to Scan Every Platform for Infringements in MGM Suit

Bill and Ted's Excellent Adventure (1989) - Alex Winter - Keanu Reeves - Photofest -H 2020

Last summer, a Starz employee saw Bill & Ted's Excellent Adventure was available on Amazon Prime. That's what the company says put it on notice that MGM had been violating the terms of their exclusive library agreements and prompted it to sue for copyright infringement and breach of contract.

MGM is arguing that U.S. District Judge Dolly M. Gee should toss the bulk of the suit because the statute of limitations for copyright infringement is three years and licenses for 127 of the 340 titles at issue expired by March 2017 and Starz didn't sue until May 2020. It also characterized the complaint as "massively overstated and commercially insignificant." 

At the center of the dispute is a provision of U.S. copyright law known as the discovery rule. Under it, the statute of limitations clock starts to run when the rights holder learns of the infringement or reasonably should have discovered it — not necessarily at the time of the alleged infringement.

MGM is incredulous that Starz could possibly have gone several years without noticing the content at issue had been errantly licensed to other platforms because of a defect in its rights tracking system. It argues that, if the network was able to quickly identify so many infringed titles after the Bill & Ted discovery, "reasonable diligence" would have allowed it to find the titles being exhibited elsewhere much sooner and therefore the discovery rule shouldn't apply. MGM also argues that the U.S. Supreme Court's decision in a dispute over Raging Bull means that, even if Starz can proceed with those claims, it can only recover damages for the three-year period prior to the filing of the suit. MGM argues Starz can't claim damages for 127 of the titles at issue because the alleged infringement didn't happen in that window.

Starz argues that it's perfectly reasonable it didn't discover the infringement until August 2019 and it would be an "unreasonably heavy burden" to expect the network to aggressively scour competitors' platforms for content it's exclusively licensing.

"The Library Agreements granted Starz the exclusive right to exhibit the 761 Pictures only for specific windows of exclusivity that varied in length for each Picture, some of which were as short as one month," states Starz's opposition. "Pictures could — and likely did — appear on third party platforms during the term of the Library Agreements without constituting copyright infringement, so long as the exhibition did not overlap with a Starz window of exclusivity."

Starz argues it met its burden of diligence by securing a contractual commitment from MGM that it wouldn't impair Starz's rights and quickly alerting MGM when it suspected an infringement.

"With thousands of movies in Starz’s 'large, rotating' library, to discover an infringement upon the act of exhibition — as MGM suggests Starz should have done — Starz would have needed to monitor the offerings of every third-party platform that exhibits movies or television episodes, every day, against every exclusivity window, to ensure that every title in Starz’s rotating library at that time was not being infringed, all despite Starz having obtained from MGM a binding commitment that it would not take any act that would allow a third party to infringe Starz’s rights," the network argues. "The law does not impose such an onerous burden on copyright holders, even sophisticated ones."

Starz also disputes MGM's argument about case law precluding damages outside of a three-year lookback period and argues that 9th Circuit precedent holds it can recover damages outside of that window as long as the discovery rule applies.

"MGM’s proposed rule would eviscerate the well-established discovery rule," argues Starz. "Under MGM’s proposal, so long as an infringement goes undetected for three years, the copyright holder would be unable to recover damages for the infringement, even if the copyright holder reasonably did not discover the infringement until just before filing suit."

A hearing is currently set for September 11.