### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 14

- 3231
C ONSUMER H EALTH I NFORMATION C ORPORATION , Plaintiff

- Appellant ,

v.
A MYLIN P HARMACEUTICALS , I NC

. , et al

. , Defendant s

- Appellees

.

____________________ Appeal from the United States District Court for the Southern District of Indiana , Indianapolis Division. No. 1:13

- cv

- 01061

- TWP

- DML

— Tanya Walton Pratt , Judge

.

____________________
A RGUED M AY 28, 2015

— D ECIDED A PRIL 1 5 , 2016

____________________

Before F LAUM , K ANNE , and S YKES , Circuit Judges

. S YKES , Circuit Judge

. Consumer Health Information Co rporation sued Amylin Pharmaceuticals , Inc., alleging cop yright infringement

. 17 U.S.C. § § 101 et seq. The d ispute centers on copyright ownership : Who owns the copyright in certain patient

- education materials Consumer Health deve loped for Amylin ’s use in marketing its diabetes drug Byetta? The parties’ c ontract , executed in March 2006, unambiguou s-2 No. 14

- 3231

ly assigns the copyright to Amylin

. T his suit is an attempt to reclaim ownership of the copyright and recover damages for infringement. To that end, Consumer Health all eg es that the
contract was induced by fraud or economic distress and seeks rescission

. The distric t court dismissed the suit as untimely.
We affirm. Consumer Health assigned the copyright to Amylin in 2006 but did not file this suit until July 2013, several years too late under either of two applicable statutes of limitations. A four

- year limitations period applies to claims for contract rescission under California law, which governs the parties’ c ontract

. C AL

. C IV

. P ROC

. C OD E § 337. C laims under the Copyright Act are subject to a three

- year statute of limitations

. 17 U.S.C. § 507(b). Consumer Health’s cause of action accrued in March 2006 , when the contract

was executed; a t that point Consumer Health knew that Amylin owned the copyright , and the limitations clock on a suit to reclaim ownership started ticking

. Under either statute of limitations, the s uit is untimely.
I. B ackground
Consumer Health is headquartered in Virginia and pr omotes itself as having “expertise in patient engagement and patient adherence strategies, health literacy, and patient education program development for prescription drugs,

over

- the

- counter products, and medical devices.” Amylin , a large pharmaceutical company, is based in California

. Jointly with Eli Lilly & Co., a pharmaceutical giant based in Indiana, Amylin developed and owns the rights to Byetta, an inject able diabe tes drug

.No. 14

- 3231 3

When Byetta launch ed in 2005 , its initial sales were di sappointing

. Amylin attributed the slow s tart to patients not understanding how to properly use the drug and thus declining to refill their prescriptions. An additional problem was that doctors were not adequately trained to demonstrate the use of Byetta to their patients and so were reluctant to prescribe it as often as Amylin had projected

. So Amylin approached Consumer Health to develop materials that would increase patient education and compliance.
Consumer Health commenced work on the project in D ecember 2005 on the verbal assurance that it would be paid for its services . I n March 2006 the parties formalized their arrangement by executing a Master Ser vices Agreement. The
contract explicitly assigned to Amylin the copyright in any materials Consumer Health creat ed : [Consumer Health] hereby assigns to AMYLIN all right, title, and interest in and to said cop yrights in the United States and elsewhere, i ncluding registration and publication rights, rights to create derivative works and all other rights which are incident to copyright own e rship

. Amylin stopped paying for work after September 30, 2006 , but continue d to use the materials Consumer Health had de veloped , or at least certain “constituent elements” of them

. Almost seven years later, i n July 2013 , Consumer Health sued Amylin and Eli Lilly alleging copyright infringement. 1

1 For the rest of this opinion, we’ll refer to the defendants collectively as “Amylin.”4 No. 14

- 3231

The complaint , filed in the Southern District of Indiana , seeks actual damages and disgorgement of profits attribut able to the infringement

. The premise of the suit is that Co nsumer Health owns the copyright in t he educational mater ials because the contract was induced by fraud or economic duress, either of which is a basis for rescission . More specif ically, the complaint alleges that Amylin never intended to fulfill its end of the bargain and that Consumer Health sign ed the contract under economic duress . The factual premise of the latter contention is that Consumer Health had not yet been paid for its work from December 2005 to March 2006, when it signed the contract , and therefore agreed to the contract only und er economic duress

. 2 Amylin moved to dismiss the suit as untimely

. The di strict court granted the motion, concluding that the complaint was f iled several years too late under either of two applic able statutes of limitations. U nder the contract’s choice

- of

- law provision, the rescission claim is governed by California law, and the California limitations period for rescission claims based on fraud or econom ic duress is four years. C AL

. C IV

. P ROC

. C OD E § 337. The judge held that Consumer Health’s rescission claim accrued in March 2006, when the contract was signed, or at the very latest in October 2006, when Amylin stopped paying for its services. On this accrual analysis, the four

- year limitations period expired in either

2 This suit was preceded by an earlier one making essentially the same claims. In December 2008 Consumer Health sued Amylin and Eli Lilly in the United States District Court for the District of Columbia alleging (among other things) copyright infringement, fraud, and breach of
contract. For reasons not revealed in the record, Consumer Health voluntarily dismissed that case.No. 14

- 3231 5

March or October 2010, roughly three years before the suit was filed. To avoid the time bar, Consumer Health invoked the principle that the statute of limitations do es not bar contract defense s and insisted that it was asserting fraud and duress defensively , to block enforcement of the contr act. The judge rejected this argument , holding that Consumer Health was using rescission offensively in a suit to recover damages for copyright infringement

. Alternatively, the judge held that the suit was unti mely under the Copyright Act’s three

- year stat ute of limitations. 17 U.S.C. § 507(b). B e cause the copyright claim was essentia lly a dispute over copyright ownership , the judge determined that the claim accrued in March 2006 when the parties signed the contract clearly g iving Amylin “all right, title, and interest in and to ” the copyright to the educational materials Consumer Health had and would develop

. On this accrual analysis, any suit seeking to reclaim copyright ownership had to be filed by March 2009

. To avoid th is time bar, Consumer Health urge d the court to apply the separate

- accrual rule , which holds that each infringing use of copyrighted material triggers a new three

year limitations period. See Petrella v. Metro

- Goldwyn

- Mayer, Inc. , 134 S. Ct. 1962, 1969 (2014). The judge rejected this argu ment, distinguishing between ordinary infringe ment cases and cases disput ing copyright ownership

. Following the Ninth Circuit’s decision in Seven Arts Filmed Ent ertainment
, Ltd. v. Content Media Corp. PLC , 733 F.3d 1251 (9th Cir. 2013) , t he judge held that i n the latter category, the cause of action

accrue s when the ownership dispute becomes explicit. Because this owne rship dispute w as obvious in March 20066 No. 14

- 3231

when the parties executed the M aster S ervices A greement , the suit was more than four years too late.
II. D iscussion
The judge dismissed Consumer Health’s complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure , so our review is de novo

. Thulin v. Shopko Stores Operating Co. , 771 F.3d 994, 997 (7th Cir. 2014). Consumer Health attacks
t he judg e’s rulings under both the four

- year statute of limit ations for contract rescission and the Copyright Act’s three

year limitations period

. B oth rulings were sound, and either

one independently justif ies dismissal , but w e’ll begin with the rescission statute of limitations

. I f Consumer Health cannot successfully avoid the contractual assignment by rescinding the Master Services Agreement , its claim under the Copy right Act is doomed

. A. California ’s Statute of Limitations for Rescission As we’ve noted, u nless the claim for rescission can go forward , Consumer Health cannot hope to satisfy the first and necessary element of a claim for copyright infringement: ownership of a valid copyright. See Feist Publ ’ ns

. , Inc. v. Rural Tel

. Serv

. Co

. , Inc. , 499 U.S. 340, 361 (1991). Consumer Health alleges that it was induced to enter into the Master Services Agreement by fraud or economic du ress , giving it the option to rescind.
The merits of this rescission argument are not before us; we have only the qu estion of timeliness. The parties’ contract specifies that Califor nia law controls

. California has enacted a four

- year statute of limita tions for claims of contract resci ssion based on allegations that the contract was induced b y fraud or economic duress. C AL

. C IV

. P ROC

. C ODE § 337.No. 14

- 3231 7

The judge held that Consumer Health’s rescission claim accrued in March 2006, when the contract was signed, or at the latest in October 2006, when Consumer Health would have known the factual basis for rescission

. Consumer Heal th doesn’t quarrel with this part of the judge’s analysis. Instead, it seeks refuge in the general principle that statute s of limita tions do not apply to contract defenses

. See Styne v. Stevens , 26 P.3d 343, 350 (Cal. 2001) (“Under well

- established authority, a defense may be raised at any time, even if the matter alleged would be barred by a statute of limitations if asserted as the basis for affirmative relief.”). Consumer Health characterizes its fraud and ec onomic

- duress allegations as defensive claims, asserted as a means to avoid enforcement of the M aster S ervices A gre ement

. This argument both mis understands the legal rule and mischaracterizes Consumer Health’s own litigating posi tion. The Supreme Court of California describes t he legal rule thi s way: “One [who is] sued on a contract may urge defenses that render the contract unenforceable, even if the same matters, alleged as grounds for restitution after rescission, would be untimely.” Id

. More generally, “ w hether affirm ative defenses are exemp t from statutes of limitations largely hinges on a realistic assessment of the parties’ litigation posture.” City of St. Paul v. Evans , 344 F.3d 1029, 1035 (9th Cir. 2003) (applying an identical rule from another state)

. To state the obvious here, Amylin d idn’t sue Consumer Health to enforce the contract

. Consum er Health sued Amylin asking for rescission as a necessary predicate to a clai m of copyright ownership and recovery of d amag es for infringement. In short, Consumer Health is asserting fraud8 No. 14

- 3231

and economic duress offensive ly , not defensive ly , and as such cannot avoid the statute of limitations. The suit is untimely under California ’s four

- year statute of limitations for resci ssion claims

. B. The Copyright Act Statute of Limitations
Consumer Health also argues that its infringement claim is timely under the Copyright Act ’s three

- year limitations period i f the separate

- accrual rule is applied . Under th at rule each alleged act of infring ement “gives rise to a discrete ‘claim’ that ‘accrue[s]’ at the time the wrong occurs.” Petrella , 134 S. Ct. at 1969. Because “each infringing act starts a new limitations period,” any infringing act w ithin the three

- year look

- back period from the date of the co mplaint can form the basis of an infringement claim

. I d

. at 19 69, 1975

. Consumer Health cannot benefit from th e separate

accrual rule , which applies to ordinary infringement suits , not suits in which the central disput e is copyright ownership

. As the Ninth Circuit has explained, copy right claim s pre mised on dispute s about ownership accrue “ ‘when plain and express repudiation of co

- ownership is communicated to the claimant, and are barred three years from the time of rep udiation.’” Seven Arts , 733 F.3d at 125 4 (quoting Zuill v. Sh anahan , 80 F.3d 136 6, 1369 (9th Cir. 1996)).
Other circuits recognize the same distinction between o rdinary infringement suits and suits in which the core dispute is about copyright ownership . The Second, Sixth, and Tenth Circuits have held that when the gravamen of a copyright suit is a contest over copyright ownership , the claim accrues when the claimant has express notice of a competing claim of ownership. See Stan Lee Media, Inc. v. Walt Disney Co. ,No. 14

- 3231 9

774 F.3d 1292, 1300 n.4 (10t h Cir. 2014); Kwan v. Schlein , 634 F.3d 224, 229 (2d Cir. 2011); Ritchie v. Williams , 395 F.3d 283, 288 n.5 (6th Cir. 2005).
This distinction makes sense for purposes of claim

accrual analysis

. “In the ordinary infringement case, owne rship is not in di spute

... .” Seven Arts , 733 F.3d at 1254. Instead, t he focus is on the infring ing acts

— the nature and scope of the unauthorized work

— and any defenses to liability ( i.e., “fair use”). Id. But d isputes about copyright ownership are different. Unlike an ordinary infringement case in which each infringing act is a discrete wrong trigge ring a new limitations period, ownership claims “accrue only once,” when the claimant receives notice that his ownership has been expressly repudiated or contested

. Id. ; see also Kwan , 634 F.3d at 228 (“An ownership action accrues only once, when ‘a reasonably diligent plaintiff would have been put on inquiry as to the existence of a right.’” ( quo ting Stone v. Williams , 970 F.2d 1043, 1048 (2d Cir. 1992)) )

. Consumer Health a ck nowledges th is line of cases but a rgues that the Supreme Court’s decision in Petrella has unse ttled the distinction between ordinary infringement claims and disputes about copyright ownership . We disagree. Petrella did not involve a n issue of copyright own ership. 134 S. Ct. at 1971 (“Petrella is now sole owner of the cop yright in that work.”). T he C ourt had no reason to

— and did
not

— address whether the separate

- accrual rule applies to disputes about copyright ownership . Indeed, the Court made no mention at all of the Second, Sixth, or Ninth Circuit

cases we’ve cited . And the Tenth Circuit ’s decision in Stan Lee Media

— adopting the approach of the Second, Sixth, and Ninth Circuits

— was issued after the Supreme Court’s dec i-10 No. 14

- 3231

sion in Petrella

. 774 F.3d at 1300 n .4 (relying on Seven Arts , Kwan , and Ritchie ). Accordingly, Petrella has not displaced the consensus view of our sister circuits that disputes about copyright ownership accrue only once. Finally, Consum er Health seeks support from Chicago Building Design, P.C. v. Mongolian House, Inc. , 770 F.3d 610 (7th Cir. 2014) ; Kling v. Hallmark Cards Inc. , 225 F.3d 1030 (9th Cir. 2000) ; and Taylor v. Meirick , 712 F. 2 d 1112 (7th Cir. 1983)

. R eliance on these decisions is misplaced. Taylor involved a garden

- variety infringement action ; copyright ownership was not in dispute. 712 F. 2 d at 1117 (“The validity of [the plaintiff’s] copyrights is conceded

... . ”). Similarly, Chicago Building Design did not address the distinction between ordinary infringement cases and disp utes abo ut copyright ownership; the decision straightforwardly applied the separate

- accrual rule in an infringement

- focused case. 770 F.3d at 616. T he question in Kling was wheth er a cop yright owner must sue for a declaration of ownership prior to any infr inging conduct. 225 F.3d at 1037. And Kling can not unsettle the Ninth Circuit’s decision in Seven Arts , which

c a me later and specifically addressed the accrual rule for disputes over copyright ownership.

W e ’re persuaded by the unanimous line of cases from our sister circuits and now hold that w he n the grava men of a copyright suit is a question of copyright ownership, the claim accrues when the ownership dispute becomes expli cit

— that is , when the claimant has notice that his claim of ownership is repudiated or contested. Applying this accrual rule here, Consumer Health knew when it signed the Master Services Agreement in March 2006 that Amylin owned the copyright via express assignment

. Consumer Health’s suit toNo. 14

- 3231 11

reclaim copyright ownership

— filed in July 2013

— was more than four years too late.
A FFIRMED

.