On May 9, 2024, in Warner Chappell Music, Inc. v. Nealy, the U.S. Supreme Court held that the Copyright Act permits a copyright owner to recover damages for infringing acts that occurred more than three years before bringing a claim, so long as the claim is timely filed. Although this decision brings clarity and resolves a circuit split on the damages assessment, the Court left unresolved the more fundamental question of when a copyright infringement claim accrues: when an infringing act occurs, or upon its discovery.

Background and Procedural History

The case involved a dispute between music producer Sherman Nealy, the founder of a company called Music Specialist, Inc., and the music publishing company Warner Chappell Music, Inc. Nealy alleged that, during a period in which Nealy was incarcerated, Nealy’s former business partner purported to license certain of Music Specialist’s songs to Warner Chappell. Warner Chappell subsequently licensed those songs for various purposes, including as a music sample used in the Flo Rida song, “In the Ayer.” Nealy asserted that he personally owned the copyrights in the Music Specialist works, and that Warner Chappell’s licensing activities infringed upon his rights. Nealy discovered the infringement in 2016 after his release from prison, and in 2018 sued Warner Chappell for copyright infringement in the Southern District of Florida.

The Copyright Act’s statute of limitations provides that a copyright owner must bring an infringement claim within three years of its accrual. U.S. circuit courts are divided as to whether a claim accrues when the infringing act occurs or upon the copyright owner’s discovery of the infringement.

In the District Court, Warner Chappell accepted the application of the discovery rule, but argued that Nealy could recover damages only for those infringements occurring in the past three years. The District Court agreed. Citing the Second Circuit decision Sohm v. Scholastic Inc., the District Court held that even in a timely filed claim, monetary relief is available only with respect to infringements in the three-year period prior to the commencement of the suit.

On appeal, the Court of Appeals for the Eleventh Circuit reversed, rejecting the three-year damages bar. Declining to follow the Second Circuit, the court instead adopted the Ninth Circuit’s view, holding that in a timely filed suit, a copyright owner is entitled to damages regardless of when the infringing acts occurred.

The Supreme Court Decision

In a 6-3 decision, the Supreme Court affirmed the Eleventh Circuit’s ruling, holding that where the discovery rule applies, there is no time limit to recovery of monetary damages in a timely filed copyright infringement action. Thus, a copyright owner that brings a timely claim is entitled to damages no matter when the infringement occurred. The majority criticized the Second Circuit’s approach as “self-defeating,” by, on the one hand, allowing a copyright owner to sue for infringing acts that occurred more than three years earlier, but on the other hand, prohibiting the copyright owner from recovering damages for those older infringements.

The Court expressly declined to decide on the appropriateness of the discovery rule, or “whether a copyright claim accrues when a plaintiff discovers or should have discovered an infringement, rather than when the infringement happened.” According to the majority, the issue of the discovery rule was not properly presented, as Warner Chappell did not challenge the Eleventh Circuit’s application of the rule.

Writing in dissent, Justice Gorsuch criticized the majority’s approach, stating that the Copyright Act “almost certainly does not tolerate a discovery rule.” Justice Gorsuch contended that, except in cases of fraud or concealment, the statute of limitations period should begin to run when the injury occurs, which is when the plaintiff is first entitled to file suit and obtain relief. Justice Gorsuch would have dismissed the case as improvidently granted.

Comments

In the near term, the Court’s decision in Warner Chappell could be a boon for copyright owners seeking to recover damages for past infringements in courts that apply the discovery rule, including in the Second Circuit. The ruling could materially increase the size of monetary damages recoveries. Yet, the Court has left unresolved the validity of the discovery rule. The dissenting opinion casts doubt on its long-term prospects and suggests that it is ripe for challenge. As Justice Gorsuch noted, this could render the Court’s decision a “dead letter.”

* * *

The case is Warner Chappell Music, Inc. v. Nealy, No. 22-1078 (U.S. May 9, 2024). The opinion is available here.