Summary
In Warner Chappell Music, Inc. v. Nealy, a 6-3 decision published last week, the U.S. Supreme Court held that a copyright plaintiff can recover damages for all infringing acts, including for infringement that occurred more than three years prior to the filing of the lawsuit, as long as the lawsuit is timely filed. This decision leaves open a broader question about when the statute of limitations begins to run.
The Upshot
- Copyright plaintiffs may recover all damages for a timely claim, not just damages for infringement that occurred within the last three years.
- The Court’s decision overruled the Second Circuit’s holding in Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020), which limited monetary recovery to the three years prior to initiation of the lawsuit.
- The majority opinion notably does not take a position on the broader question of whether an infringement claim accrues – and the statute of limitations begins to run – when an act of infringement occurs or when the plaintiff discovers the infringing act. The dissent raises the possibility that last week's ruling may be short-lived if the U.S. Supreme Court takes up this issue and concludes, as the dissent urges, that a claim accrues when infringement occurs.
The Bottom Line
For the moment, the Supreme Court has expanded the time period for which a copyright infringement plaintiff may recover damages. It remains to be seen, however, whether the Court will address the broader question of when a claim accrues, which could limit this decision’s reach.
In Warner Chappell Music, Inc. v. Nealy, No. 22-1078, 601 U.S. __ (2024), the U.S. Supreme Court held in a 6-3 decision that a copyright plaintiff who timely files an infringement suit may recover damages for all acts of infringement that preceded the suit. The Court’s ruling settles, for now, a dispute between the Second Circuit and the Ninth and 11th Circuits over whether damages were limited to the three-year period prior to the filing of a suit.
The background of this case involves a failed music venture, Music Specialist, Inc., which released an album and a number of singles. The company, formed by Sherman Nealy and Tony Butler, fell apart a few years after it was created in the 1980s. Without Nealy’s knowledge, Butler subsequently licensed works from the Music Specialist catalog to Warner Chappell Music, Inc., a music publishing company that sublicenses works. Music Specialist songs ended up in recordings by Flo Rida, the Black Eyed Peas, and Kid Sister, among others, with relevant uses dating back to 2008.
In 2018, Nealy sued Warner Chappell for copyright infringement based on its licensing of Music Specialist songs. Given that some of the allegedly infringing acts occurred more than three years prior, he had to show that his claims were timely. The parties did not dispute the application of the discovery rule, which starts the statute of limitations “clock” when the plaintiff discovers (or reasonably should have discovered) the alleged infringement. But Warner Chappell “argued that even if Nealy could sue under that rule for infringements going back ten years, he could recover damages or profits for only those occurring in the last three.”
The district court adopted this argument. It relied on the Second Circuit’s decision in Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020), which held that “even when claims for old infringements are timely, monetary relief is ‘limited’ to ‘the three years prior to the filing’ of the action.” The 11th Circuit, aligning itself with the Ninth Circuit instead of the Second, reversed the district court’s ruling. It reasoned that imposing a bar on recovery of older damages “‘would gut the discovery rule by eliminating any meaningful relief’ for the very claims it is designed to preserve.”
The Supreme Court set out to resolve this circuit split, but first made clear what it was not ruling on in this opinion. Section 507(b) of the Copyright Act provides that a plaintiff must initiate an infringement action “within three years after the claim accrued.” The majority noted that the Court had “never decided” the underlying question of “whether a copyright claim accrues when a plaintiff discovers or should have discovered an infringement, rather than when the infringement happened.” For purposes of this case, it assumed without deciding that the discovery rule applied because the issue was not raised in the court below. The Court therefore limited its review to the “disputed remedial issue,” “asking only whether a plaintiff with a timely claim under the rule can get damages going back more than three years.”
Justice Kagan wrote for the majority, joined by Chief Justice Roberts and Justices Sotomayor, Kavanaugh, Barrett, and Jackson: “[Section 507(b)] establishes a three-year period for filing suit, beginning to run when a claim accrues—here, we assume, upon its discovery. And that clock is a singular one.” The majority held that “a copyright owner possessing a timely claim for infringement is entitled to damages, no matter when the infringement occurred.” It overruled the Second Circuit’s “contrary view,” calling it “self-defeating.”
The dissent, written by Justice Gorsuch and joined by Justices Thomas and Alito, took issue with the majority’s assumption that the discovery rule applies: “The trouble is, the Act almost certainly does not tolerate a discovery rule. And that fact promises soon enough to make anything we might say today about the rule’s operational details a dead letter.” The dissenting Justices “would have dismissed [this case] as improvidently granted and awaited another squarely presenting the question whether the Copyright Act authorizes the discovery rule.”
A petition for certiorari raising that very issue, Hearst Newspapers, L.L.C. v. Martinelli, No. 23-474, is currently pending. It remains to be seen whether last week's significant ruling expanding the universe of damages available to plaintiffs in copyright infringement cases will withstand a future challenge to the application of the discovery rule.
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