Davis v. Meridian Films, Inc.

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

EVERETT C. DAVIS, 
Plaintiff-Appellant,
and
BARBARA J. MOONEYHAM,
Plaintiff,
v.  No. 00-1359

MERIDIAN FILMS, INCORPORATED;
BENSON, BENSON & HENRIKSEN, (The
Partnership); ANNA L. M. BENSON;
CYNTHIA BENSON; MARK HENRIKSEN,
Defendants-Appellees.

Appeal from the United States District Court
for the District of South Carolina, at Columbia.
Matthew J. Perry, Jr., Senior District Judge.
(CA-98-1885)

Argued: May 7, 2001

Decided: July 5, 2001

Before WIDENER and WILKINS, Circuit Judges, and
Arthur L. ALARCON, Senior Circuit Judge of the
United States Court of Appeals for the Ninth Circuit,
sitting by designation.

Affirmed in part, reversed in part, and remanded by unpublished per
curiam opinion.
2 DAVIS v. MERIDIAN FILMS, INC.
COUNSEL

ARGUED: David Edward Mills, DOW, LOHNES & ALBERTSON,
P.L.L.C., Washington, D.C., for Appellant. Marcus Angelo Manos,
NEXSEN, PRUET, JACOBS & POLLARD, L.L.C., Columbia, South
Carolina, for Appellees. ON BRIEF: Michael Kovaka, Todd M.
Klessman, DOW, LOHNES & ALBERTSON, P.L.L.C., Washington,
D.C., for Appellant.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

OPINION

PER CURIAM:

Everett C. Davis appeals two orders of the district court that, col-
lectively, resulted in the dismissal of his copyright and breach of con-
tract claims against Appellees Meridian Films, Incorporated
("Meridian"), Anna L. M. Benson ("Anna"), Cynthia Benson
("Cynthia"), and Mark Henriksen ("Mark"). For the reasons set forth
below, we affirm in part, reverse in part, and remand for further pro-
ceedings.

I.

In the early 1970s, Anna, Cynthia, and Mark opened "The Firm"
exercise studios in Columbia and Charleston, South Carolina. The
exercise routines at The Firm employed a then-unique combination of
aerobic exercise and weight training. In the late 1970s, the three
decided to create exercise videos based upon the routines. They
formed Meridian and created a brochure to attract investors to the
project. Anna, Cynthia, and Mark intended to create lavish video pro-
ductions that would stand out from ordinary exercise videos, which
were usually filmed against a plain background with a single, station-
ary camera. To this end, they planned to use a decorated set with
 DAVIS v. MERIDIAN FILMS, INC. 3
unique choreography and music composed especially for the video;
multiple cameras would capture the action while providing clear
views of the exercises in order to aid the viewer’s understanding of
the proper form.

In 1985, having obtained sufficient funding, Appellees contacted
Davis to provide videography services for the first video, which was
titled "The FIRM Aerobic Workout With Weights — Volume 1." J.A.
53. Ultimately, Davis provided videography services for 17 "FIRM"
videos.1 In connection with his services, Davis signed nine contracts
and corresponding royalty agreements, all of which were substantially
similar. Each of the contracts provided that Davis would be paid a
specified amount for his services as production manager or director
of photography.2 The relevant language of the royalty agreements was
as follows:

In exchange for the services rendered . . . , Meridian
Films, Inc., (Producer) agrees to pay to Everett Davis (Pro-
duction Manager) the following:

a) A contract payment, the receipt of which is hereby
acknowledged.

b) At such time [as] the completed videotape is marketed
and thirty (30) days after any royalty payments are made to
Meridian, a royalty (percentage of sales) of .015% of the
wholesale sales price of each videocassette sold by the
Owner or its assigns.

1
The parties vigorously dispute the various roles they played in the
production of the videos. Davis asserts, and we must take as true for pur-
poses of this appeal, that he was primarily responsible for the lighting
design and selection of camera angles; Appellees maintain that Davis
merely consulted with them on such matters and that they made the ulti-
mate decisions as to what each camera would view at a given time. This
dispute is not pertinent to our resolution of the issues on appeal.
2
Davis provided essentially the same services for each video, regard-
less of his title.
4 DAVIS v. MERIDIAN FILMS, INC.
3
Id. at 76.

As noted above, Davis and Appellees collaborated on 17 "FIRM"
videos: six "total body" workouts (The FIRM volumes 1-6); seven
"FIRM Parts" videos (focusing on particular areas of the body such
as abdominal muscles or legs); and four "variety" videos. Davis is
identified in the credits of each video as either production manager or
director of photography. Each video is prominently marked in three
places—the cassette jacket, the face of the cassette, and the film itself
—with a copyright notice that identifies Meridian as the sole copy-
right holder, e.g., "© 1986 MERIDIAN FILMS, INC." Id. at 1267.
Davis has stipulated that he was aware of this copyright notice at the
time of publication of each video. Meridian also obtained copyright
registrations for each video as a work for hire based upon the contri-
butions of Anna, Cynthia, and Mark as employees of Meridian.

In the early- to mid-1990s, Appellees produced four additional
"FIRM Parts" videos ("the Group B videos") without Davis’ assis-
tance. The Group B videos were composed of excerpts from previous
videos that were linked together with new footage. In late 1995, upon
learning that these videos had been produced, Davis submitted a
demand to Meridian for over $145,000 in past-due royalty payments.
Davis asserted that he was entitled to royalty payments for the por-
tions of the original videos used in the Group B videos; he also
claimed that the royalty rate specified in the agreements for Volumes
2 and 3 had been altered to his detriment some time after he signed
the agreements. Although Appellees paid Davis an additional $1,261,
they refused to pay him any royalties for the Group B videos, main-
taining that Davis had no copyrightable interest in the original videos.

Davis thereafter brought this action in federal court. As amended,
Davis’ complaint states three claims.4 First, Davis contends that he is
3
The above-quoted language is from the royalty agreement relating to
the second exercise video produced by Appellees, "The FIRM, Volume
2." Id. Although this language is not precisely the same as the language
used in some of the other royalty agreements, those differences are not
pertinent to our resolution of this appeal.
4
Davis was joined in the suit by Barbara Mooneyhan, who claimed
entitlement to damages for breach of contract. Mooneyhan is not a party
to this appeal.
 DAVIS v. MERIDIAN FILMS, INC. 5
the sole author of the original 17 videos and that Meridian’s prepara-
tion of derivative works (the Group B videos) constituted copyright
infringement. Alternatively, Davis maintains that he is a coauthor,
with Meridian, of the original videos and therefore is entitled to an
accounting of profits. Davis’ third cause of action is a state-law claim
for breach of contract.

The district court granted judgment to Appellees in two orders. In
the first order, the court concluded that Davis’ claims of coauthorship
as to videos 1 through 15 were barred by the statute of limitations
and, based upon this conclusion, dismissed both the coauthorship and
infringement claims as to those videos.5 In the second order, the dis-
trict court held that even assuming Davis was the sole author of vid-
eos 16 and 17, he had transferred his rights when he signed the
royalty agreements; the court therefore dismissed Davis’ infringement
claims as to those videos.6

II.

Davis first contends that the district court erred in dismissing his
coauthorship and infringement claims as to videos 1 through 15 as
time-barred. Although Davis concedes that he was aware of Meridi-
an’s assertion of sole copyright when each video was initially pro-
duced, he maintains that his coauthorship claim did not accrue until
1996, when Appellees specifically asserted that Davis possessed no
copyrightable interest in the videos. We review the grant of a motion
to dismiss de novo. See Mayes v. Rapoport, 198 F.3d 457, 460 (4th
Cir. 1999).

The Copyright Act of 1976 provides that copyright vests initially
in the author or coauthors of a work. See 17 U.S.C.A. § 201(a) (West
1996). Because one coauthor cannot infringe against another,
5
Prior to oral argument, we asked the parties to be prepared to address
the question of whether Davis timely appealed the first order of the dis-
trict court. Based upon the parties’ representations at argument, we are
satisfied that the appeal is timely.
6
Having dismissed the federal claims, the district court declined to
exercise jurisdiction over Davis’ state law breach of contract claim. That
order is not before us on appeal.
6 DAVIS v. MERIDIAN FILMS, INC.
infringement and coauthorship claims are mutually exclusive. See
Zuill v. Shanahan, 80 F.3d 1366, 1369 (9th Cir. 1996). A coauthor
who successfully sues a fellow author is entitled to an accounting of
profits. See id. In contrast, a copyright owner whose exclusive rights
have been infringed upon may obtain actual or statutory damages and
injunctive relief. See 17 U.S.C.A. §§ 502, 504 (West 1996 & Supp.
2000); see also 17 U.S.C.A. § 503 (West 1996) (providing that a court
may order infringing items impounded and destroyed).

Both coauthorship and infringement claims are subject to a three-
year statute of limitations. See 17 U.S.C.A. § 507(b) (West 1996).
However, this limitations period operates differently as to the differ-
ent claims. A coauthorship claim accrues only once, and if an action
is not brought within three years of accrual, it is forever barred. See
Zuill, 80 F.3d at 1369. In contrast, a new infringement claim accrues
with each separate infringing act; thus, while claims for infringements
that occurred more than three years before an action was filed are
barred, claims for infringements that occur within three years of filing
suit are timely. See Hotaling v. Church of Jesus Christ of Latter-Day
Saints, 118 F.3d 199, 202 (4th Cir. 1997).

With these principles in mind, we turn to an examination of the dis-
missal of Davis’ coauthorship and infringement claims regarding vid-
eos 1 through 15. A coauthorship claim, like any civil claim, accrues
when a reasonably diligent plaintiff "knows or has reason to know of
the injury upon which the claim is premised." Merchant v. Levy, 92
F.3d 51, 56 (2d Cir. 1996). Here, the district court correctly deter-
mined that Davis was on notice of competing claims of copyright
ownership when Meridian published the videos bearing copyright
notices in its name. See id. (holding that claim of coauthorship
accrued when putative coauthors reached majority, which occurred
after defendant obtained copyright that did not identify putative coau-
thors); Netzer v. Continuity Graphic Assocs., Inc., 963 F. Supp. 1308,
1315-16 (S.D.N.Y. 1997) (holding that coauthorship claim accrued
when plaintiff received copy of comic book bearing copyright notice
that did not include plaintiff’s name). As noted previously, Davis has
conceded for purposes of this appeal that he was aware of Meridian’s
copyright claim when videos 1 through 15 were initially published
between February 1, 1986 and September 28, 1994. Because each of
these videos was published more than three years before Davis filed
 DAVIS v. MERIDIAN FILMS, INC. 7
this action on June 29, 1998, the district court properly dismissed
Davis’ coauthorship claims as to videos 1 through 15.

Davis maintains, however, that a claim of coauthorship accrues
only upon a "plain and express repudiation of co-ownership." Zuill,
80 F.3d at 1369. He further contends that no express repudiation
occurred until Meridian’s 1996 letter claiming sole ownership of
copyright in videos 1 through 17. Since the 1996 letter was within
three years of the date Davis filed suit, he maintains that his coauthor-
ship claims are timely as to all of the videos. We disagree. Even
assuming that Davis is correct in his assertion that the "express repu-
diation" standard is somehow higher than the ordinary standard for
the accrual of a civil copyright claim, Meridian’s placement of a
copyright notice on the videos constituted an express rejection of
competing claims of authorship. See Netzer, 963 F. Supp. at 1315-16
(concluding that placement of copyright notice that did not include
plaintiff’s name constituted "[a]n express assertion of sole authorship
or ownership" sufficient to start the limitations period on a coauthor-
ship claim).

The district court erred, however, in concluding that the time-bar
of Davis’ coauthorship claims was also fatal to his infringement
claims regarding videos 1 through 15. It is true, of course, that copy-
right ownership—which here would be established by Davis demon-
strating that he was the sole contributor of original, copyrightable
expression—is a necessary element of an infringement claim. See
Keeler Brass Co. v. Continental Brass Co., 862 F.2d 1063, 1065 (4th
Cir. 1988). However, to conclude, as the district court did, that an
infringement claim is time-barred when the underlying authorship
claim is time-barred would be to fail to recognize that a new infringe-
ment claim accrues every time an infringement occurs.7 Accordingly,
we reverse the portion of the order of the district court that dismissed
Davis’ infringement claims as to videos 1 through 15.

7
There is no dispute that Davis alleged infringing acts by Meridian
within the three-year limitations period.
8 DAVIS v. MERIDIAN FILMS, INC.
III.

Next, we turn to the question of whether the district court erred in
dismissing Davis’ infringement claims as to videos 16 and 17 on the
basis that Davis transferred any and all rights he might have had.8 In
ruling on these claims, the district court assumed without deciding
that Davis was the sole author—and thus was the original copyright
owner—of videos 16 and 17. Nevertheless, the court concluded that
the royalty agreements unambiguously transferred all of Davis’ rights
to Meridian. We reverse.

A copyright grants its owner the exclusive right to reproduce and
distribute copies of the work; to prepare derivative works; and to per-
form or display the work publicly. See 17 U.S.C.A. § 106 (West 1996
& Supp. 2000). Ownership of a copyright may be transferred in whole
or in part, and any of the exclusive rights of a copyright owner may
be owned separately. See 17 U.S.C.A. § 201(d) (West 1996). Owner-
ship may be transferred by sale or by the granting of an exclusive
license, see 17 U.S.C.A. § 101 (West Supp. 2000); in either case, the
transfer must be accomplished by means of a written instrument
signed by the copyright owner, see 17 U.S.C.A. § 204(a) (West
1996). A copyright owner may also grant a nonexclusive license in
one or more of the exclusive rights; such a license may be granted
orally or by the conduct of the parties. See Jacob Maxwell, Inc. v.
Veeck, 110 F.3d 749, 752 (11th Cir. 1997). The difference between
a transfer of ownership and a grant of a nonexclusive license is criti-
cal, for a nonexclusive license may be withdrawn by the copyright
owner. See id. at 753.

Here, the royalty agreement is inherently ambiguous regarding
what rights, if any, Davis transferred to Meridian. As written, the
agreement might have been intended to accomplish any of three
8
There is some question as to whether the second order was a dismissal
for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6)
or a grant of summary judgment pursuant to Rule 56. Davis contends that
he is entitled to reversal of the order on the basis that the district court
improperly converted Appellees’ motion to dismiss into a motion for
summary judgment. In view of our reversal of the second order on other
grounds, we do not address this argument.
 DAVIS v. MERIDIAN FILMS, INC. 9
things: (1) it could, as the district court ruled, transfer all rights from
Davis to Meridian; (2) it could transfer the exclusive rights to copy
and to distribute, but not the right to prepare derivative works; or (3)
it could grant a nonexclusive license to copy and distribute the work.
Moreover, there appear to be substantial disputes of fact regarding the
parties’ intent in signing the royalty agreement. Under these circum-
stances, the district court erred in granting judgment to Appellees.9

IV.

For the reasons set forth above, we conclude that the district court
correctly dismissed, as time-barred, Davis’ claims of coauthorship of
videos 1 through 15. However, the court erred in dismissing Davis’
infringement claims regarding these videos on limitations grounds.
We further conclude that the district court erred in holding, as a mat-
ter of law, that Davis transferred all of his rights to Meridian. Accord-
ingly, we affirm in part, reverse in part, and remand for further
proceedings.

AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED
9
We note also that the district court never ruled on Davis’ claims of
coauthorship regarding videos 16 and 17. These claims, along with
Davis’ infringement claims, must be addressed by the district court on
remand.