A blog about patent, copyright and trademark law in the U.S. District Court
for the Southern District of New York

Court Declines to Rescind Copyright Assignments, and Dismisses Infringement Claims

In a January 13, 2014 ruling, Judge William H. Pauley III granted summary judgment in favor of defendants Thomas v. Conigliaro and another defendant dismissing plaintiff Christian McDonald’s copyright infringement and other claims against them. Judge Pauley ruled that McDonald could not rescind his assignment of the copyrights at issue because Conigliaro was a bona fide purchaser, and that McDonald’s rescission claim was time-barred in any event.

McDonald claimed that an interim August 2006 assignment of the copyrights to Reiss had been fraudulently induced, and that the later assignment to Conigliaro was void because Conigliaro “had notice of the alleged fraud.” Judge Pauley noted that “[c]ontracts effecting the sale and license of copyrights are construed ‘according to state law principles of contract interpretation,’” and wrote that under “‘New York law, a recipient of property takes the property free of any equitable interest, such as would give rise to a constructive trust, when the recipient is a bona fide purchaser.’” After considering the evidence of Conigliaro’s knowledge of the alleged fraud urged by McDonald, the Court concluded that “no reasonable jury could find that Conigliaro was on notice of Reiss’s purported fraud,” and ruled that Conigliaro was a bona fide purchaser of the copyrights.

With regard to the statute of limitations issue, Judge Pauley wrote that “McDonald’s claim to the . . . copyrights rests on rescission of the 2006 assignments because Reiss allegedly fraudulently induced them.” The Court ruled that a “‘claim for rescission based on actual fraud is governed by the statute of limitations for claims based on fraud.’” Since McDonald filed the action more than six years after the supposed fraud giving rise to the rescission, the action was, according to the Court, time barred unless it was nevertheless filed within “’two years from the time the plaintiff . . . discovered the fraud, or could with reasonable diligence have discovered it.’” Judge Pauley found that McDonald was aware of the alleged fraud more than two years before filing suit, and held that the rescission claim was time barred.
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