U.S. Supreme Court Upholds Settlement Of Copyright Infringement Claims Involving Unregistered Works

March 3, 2010

On March 2, 2010, the U.S. Supreme Court issued its decision in Reed Elsevier v. Muchnick, ___ U.S. ___, No. 08-103, interpreting the Copyright Act to allow judicial approval of settlements of copyright infringement claims involving unregistered works.  Reversing the U.S. Court of Appeals for the Second Circuit, the Court held that the Copyright Act’s statutory requirement that plaintiffs register their works before instituting a claim for copyright infringement, 17 U.S.C. § 411(a), does not limit the subject matter jurisdiction of the federal courts.  The decision brings needed clarity both to the Court’s general standard for treating statutory pre-conditions to suit as jurisdictional and, in copyright cases, to litigants seeking to settle or adjudicate claims involving at least some unregistered works.

A.  The Settlement and Its Origin

Reed Elsevier has its origins in the earlier copyright case of New York Times Co. v. Tasini.  In Tasini, decided in 2001, the Supreme Court held that several owners of online databases and print publishers had infringed the copyrights of six freelance authors by reproducing their work electronically without first obtaining their permission.  533 U.S. 483, 493 (2001).  In doing so, the Court explicitly noted that freelance authors, publishers and database operators were free to structure agreements allowing continued electronic reproduction of the freelance authors’ works without infringing their copyrights.  Numerous other freelance authors also had filed similar suits against publishers and databases, which had been stayed pending the Tasini decision.  After Tasini, those lawsuits were consolidated by the Judicial Panel on Multidistrict Litigation into a single putative class action pending in the United States District Court for the Southern District of New York (captioned In re Literary Works in Electronic Databases Copyright Litigation), which ultimately gave rise to the Reed Elsevier v. Muchnick appeal.

In the aftermath of Tasini, the Reed Elsevier parties began negotiations to attempt a comprehensive resolution of the copyright claims of freelance authors regarding electronic republication of their works.  After more than three years of mediation, the parties forged an agreement encompassing an industry-wide settlement of up to $18 million intended to "achieve a global peace in the publishing industry."  As part of that settlement, the freelance authors agreed to release the publishers and database operators from past, present and future copyright infringement claims arising from their works, whether registered or unregistered.  Among other things, the settlement terms–which would become effective only after class certification and court approval–provided that claimants would receive greater settlement compensation for registered works than for unregistered works. 

Ten of the freelance authors out of the thousands in the proposed settlement class objected to the settlement.  The objectors argued, among other things, that the structure of the proposed settlement was inequitable to those whose works were unregistered.  The district court rejected the objectors’ arguments, certified a settlement class, and approved the settlement.  The objectors appealed, pressing their arguments before the Second Circuit.  Just prior to oral argument, the Second Circuit requested briefing from the parties regarding whether the district court had subject matter jurisdiction over claims concerning the infringement of unregistered copyrights.  The Second Circuit then ruled sua sponte that, under Section 411(a) of the Copyright Act, the district court lacked subject matter jurisdiction to approve the settlement covering unregistered works.  Section 411(a) states that "no civil action for infringement of the copyright in any United States work shall be instituted until … registration of the copyright claim has been made."  That language, the appellate court held, limited federal courts’ "subject matter jurisdiction to claims arising from registered copyrights only," leaving the district court without jurisdiction to approve a settlement involving unregistered works.

B.  The Reed Elsevier Decision

In an opinion written by Justice Thomas, the Court in Reed Elsevier reversed the Second Circuit and held that Section 411(a) is not a limitation upon the subject matter jurisdiction of the federal courts.  Rather, the Court explained, Section 411(a) is a "claim-processing rule" that creates a non-jurisdictional pre-condition to suits based on unregistered works.  Reaffirming the basic framework it had laid out in Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), the Court noted that a statutory requirement should be considered jurisdictional only if Congress "clearly states" that it count as such.  The Court found no such indication in the text, structure, or history of Section 411(a).  In doing so, the Court distinguished that section’s single use of the word "jurisdiction" as speaking only to a federal court’s power to determine the issue of registrability and noted that Section 411(a)’s registration requirement appeared in a provision that was separate from the jurisdictional provisions of the Copyright Act.  The Court also saw no jurisdictional difference between a statutory requirement setting forth an element of a claim–such as that at issue in Arbaugh–and one setting forth a pre-condition to initiating suit.  Having disposed of the jurisdictional issue, the Court expressly declined to address whether Section 411(a)’s requirement is a "mandatory" pre-condition to suit that district courts can or should enforce sua sponte. 

The Court’s decision is significant for several reasons.  As a general matter, the decision makes clear that federal courts should be reluctant blithely to treat statutory pre-conditions to suit as "jurisdictional," a label which can have significant consequences for litigants.  Following Bowles v. Russell, 551 U.S. 205 (2007), a case in which a habeas petitioner was barred from filing a late notice of appeal on the ground that the filing deadline was jurisdictional, some Court observers saw the Court developing a trend of increasingly treating certain statutory requirements as jurisdictional, and confusion began to spread in the circuits on that issue.  The Court’s decision in Reed Elsevier unquestionably reins in that trend and makes clear that the term "jurisdictional" should not be used lightly.

In copyright cases, the decision also clarifies the rules of the road for defendants for both negotiating settlements of and defending against infringement suits.  After Reed Elsevier, it will be far easier for defendants to negotiate and structure comprehensive settlements with authors of both registered and unregistered works.  At the same time, because the decision worked no changes to the substantive law of copyright, defendants retain the ability to "enforce" Section 411(a)’s registration requirement through motions to dismiss and other vehicles at the early stages of litigation.  Because it remains unclear after Reed Elsevier whether a district court can dismiss an infringement claim sua sponte for failure to register, however, defense counsel should be sure to do so before the time for raising waivable defenses has passed. 

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James Hallowell, Jonathan Li, and Aaron Simowitz represented Petitioner Dow Jones & Company, Inc. in this matter and assisted in preparing Petitioners’ briefs before the Supreme Court.

© 2010 Gibson, Dunn & Crutcher LLP

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