Supreme Court Rejects Three-Year Damages Limit on Timely Copyright Claims | Practical Law

Supreme Court Rejects Three-Year Damages Limit on Timely Copyright Claims | Practical Law

On May 9, 2024, in Warner Chappell Music, Inc. v. Nealy, the US Supreme Court resolved a circuit split and affirmed the US Court of Appeals for the Eleventh Circuit's decision, holding that copyright plaintiffs with infringement claims brought within the statute of limitations can recover monetary relief for any infringing acts, including those occurring more than three years before a lawsuit's filing.

Supreme Court Rejects Three-Year Damages Limit on Timely Copyright Claims

Practical Law Legal Update w-043-1186 (Approx. 4 pages)

Supreme Court Rejects Three-Year Damages Limit on Timely Copyright Claims

by Practical Law Intellectual Property & Technology
Published on 09 May 2024USA (National/Federal)
On May 9, 2024, in Warner Chappell Music, Inc. v. Nealy, the US Supreme Court resolved a circuit split and affirmed the US Court of Appeals for the Eleventh Circuit's decision, holding that copyright plaintiffs with infringement claims brought within the statute of limitations can recover monetary relief for any infringing acts, including those occurring more than three years before a lawsuit's filing.
On May 9, 2024, in Warner Chappel Music, Inc. v. Nealy, the US Supreme Court affirmed the US Court of Appeals for the Eleventh Circuit's holding permitting copyright plaintiffs with timely filed infringement claims to obtain monetary relief for any infringing acts, including those occurring more than three years before the lawsuit's filing ( (U.S. May 9, 2024)).

Background

Music Specialist Inc., a Miami-based independent record label owned by Sherman Nealy, released an album and several singles in the mid-1980s with the help of Tony Butler, a DJ and the author or co-author of all of the musical works at issue. In 1989, MSI ceased operations when Nealy began serving a 20-year prison sentence.
While Nealy was in prison from 1989 to 2008 and 2012 to 2015, Butler licensed rights to musical works from the MSI catalog to Warner Chappell Music, Inc., Artist Publishing Group, LLC, and Atlantic Recording Co. without Nealy's authorization. Nealy claimed that he first learned about the unauthorized licenses in January 2016, after serving his second prison sentence.

The District Court Decision

In 2018, Nealy and MSI sued Warner Chappell, Artist Publishing Group, and Atlantic Recording:
  • Alleging copyright infringement of several musical works because the defendants used the works based on invalid licenses obtained from third parties.
  • Seeking relief for infringing activity dating back to 2008.
The defendants moved for summary judgment on all claims. The US District Court for the Southern District of Florida:
  • Denied summary judgment in part because a genuine issue of fact existed on when accrual occurred.
  • Certified for interlocutory appeal to the US Court of Appeals for the Eleventh Circuit the question of whether MSI's damages were limited to the three-year period preceding the date of the complaint filing under the Copyright Act and Petrella v. Metro-Goodwyn-Mayer, Inc., (572 U.S. 663 (2014)).
In Petrella, the Supreme Court ruled that laches could not bar the plaintiff from pursuing her copyright claims (572 U.S. at 670 n.4, 677). Referring to that particular plaintiff, who had no infringement claims more than three years old, the Court made a statement about retrospective relief that some courts have interpreted to exclude damages for infringement occurring more than three years before a claim's filing, even if the claim is timely. The Court of Appeals for the Second Circuit is among these courts (see Sohm v. Scholastic Inc., 959 F.3d 39, 49-51 (2d Cir. 2020)).

The Eleventh Circuit Decision

On appeal, the Eleventh Circuit held, in a matter of first impression, that a copyright plaintiff may recover retrospective relief for infringement occurring more than three years before the lawsuit's filing if the plaintiff's claim is timely under the discovery rule. Under this rule, a copyright claim accrues when the copyright holder knew or reasonably should have known of the infringement. The Eleventh Circuit therefore rejected any separate three-year damages bar for timely claims as inconsistent with the discovery rule and the Copyright Act.

Certiorari Granted

On September 29, 2023, the US Supreme Court granted certiorari on whether the Copyright Act's statute of limitations for civil actions, 17 U. S. C. § 507(b), prevents copyright plaintiffs from recovering damages for acts occurring more than three years before the lawsuit's filing.

Outcome

In a short opinion, drafted by Justice Kagan, the majority affirmed the Eleventh's Circuit's decision, holding that the Copyright Act entitles a copyright owner to all monetary relief for any infringement claim that is timely under the statute, no matter when the infringement occurred. In doing so, the Court relied on the text of the Copyright Act and noted that the Act's:
  • Statute of limitations, which sets a three-year clock for filing suit, has no time provision limiting the recovery of damages (17 U.S.C. § 507(b)).
  • Remedial sections, likewise, contain no time limit on damages (17 U.S.C. § 504(a)-(c)).
The Court expressly assumed for the purpose of the decision that the discovery rule applied, making Nealy's copyright claims timely if brought within three years of when the infringement was or should have been discovered.
Though widely applied to determine copyright claim accrual, the discovery rule is not considered settled law. The majority declined to decide the rule's validity, however, as this went beyond the question before the Court. Nevertheless, the majority spent much of its opinion discussing the rule and criticizing the Second Circuit for taking the Court's Petrella's statement out of context to strictly limit copyright damages in its Sohm decision.
In the dissenting opinion, Judge Gorsuch, joined by Justices Thomas and Alito, challenged the majority's reliance on the discovery rule and accused it of sidestepping the question of the rule's validity. Justice Gorsuch did acknowledge that the rule's application was not an issue before the Court but posited that the better course would have been to dismiss this case as improvidently granted and await one that addresses the rule.

Practical Implications

This decision is likely to encourage copyright claims as it removes constraints some courts had imposed on the scope of monetary relief available for infringement. So long as the complaint is timely filed, there is no limit to how far back one may recover copyright damages. Plaintiff enthusiasm may be tempered somewhat, however, by the evidentiary challenge of proving dated damages.
Although the Court did not decide the issue of the discovery rule's application to copyright claims, it devoted a large part of the majority decision and the entire dissent to discussing the rule, teeing up this issue for further debate and potential resolution.