Is it legal to intentionally wait before filing a copyright lawsuit to maximize profits?

Question

Let's say someone uses my intellectual property without my consent and uses it for commercial purposes. Can I wait until they've made many millions of dollars off of my work, so that I can sue and take a large portion of or all of that money? This takes place in the United States

Answer 1

Equitable remedies such as disgorgement (recovery of profits) are typically subject to equitable bars to recovery such as laches. Laches reflects the maxim that "equity aids the vigilant and not the idolent" (Snell's Equity, § 5). The doctrine of laches gives a court discretion to bar a claim when the plaintiff unreasonably delays bringing a claim.

It is certainly "legal" for a plaintiff to sit on a potential claim for any amount of time before actually filing suit, but I take it you are asking whether such behaviour would limit the amount recoverable by disgorgement of profits under the Copyright Act.

The Supreme Court answered this in Petrella v. Metro-Goldwyn-Mayer Inc., 572 U.S. 663 (2014).

The Court said that given the statutory three-year limitations period in the Copyright Act, laches typically play no role. The concerns about delays normally handled by laches were considered by Congress and reflected in the three-year limitations period (p. 685):

That regime leaves "little place" for a doctrine that would further limit the timeliness of a copyright owner's suit.

However, in extraordinary circumstances, laches may still play a role. The Court gave two examples:

• Chirco v. Crosswinds Communities, Inc., 474 F. 3d 227 (CA6 2007): defendants were alleged to be using architectural designs without permission, in violation of the plaintiffs' copyright; the plaintiffs were aware of the building projects but took "no steps to halt the housing development until more than 168 units were built"; the Court of Appeals found that the order sought by the plaintiffs that the houses be destroyed was barred by laches, even though the lawsuit was brought within the three-year limitation period.
• New Era Publications Int'l v. Henry Holt & Co., 873 F. 2d 576, 584–585 (CA2 1989): plaintiffs were aware for two years of a book being published in violation of their copyright; the Court of Appeals held that laches barred the injunctive relief of destruction, but allowed a damages remedy.

The Court distinguished the remedy sought by Petrella from that sought in Chirco and New Era. In Chirco and New Era, the plaintiffs were seeking destruction of the works. The plaintiff Petrella was seeking only disgorgement.

The Court said (p. 687):

the circumstances here may or may not (we need not decide) warrant limiting relief at the remedial stage, but they are not sufficiently extraordinary to justify threshold dismissal.

Should Petrella ultimately prevail on the merits, the District Court, in determining the appropriate injunctive relief and assessing profits, may take account of her delay in commencing suit. In doing so, however, that court should closely examine MGM's alleged reliance on Petrella's delay. This examination should take account of MGM's early knowledge of Petrella's claims, the protection MGM might have achieved through pursuit of a declaratory judgment action, the extent to which MGM's investment was protected by the separate-accrual rule, the court's authority to order injunctive relief “on such terms as it may deem reasonable,” § 502(a), and any other considerations that would justify adjusting injunctive relief or profits.

That paragraph emphasizes that in equity, remedies and defences are discretionary and flexible.

My reading is that:

1. it would have to be quite extraordinary for a disgorgement remedy under the Copyright Act to be completely barred due to laches; and
2. if the court came to believe that the delay was intentional and with the purpose of trying to run up the disgorgement amount, it may exercise its discretion to reduce the amount that is recoverable.