The Flood Gates for Copyright Infringement Damages are Assumably Open—For Now

By Robert D. Michaux

The U.S. Supreme Court ruled 6-3 that for a copyright owner possessing a timely claim, there is no time-based limit for obtaining damages for past infringement in the Copyright Act.

How far back can a copyright infringement plaintiff reach for damages? Before the U.S. Supreme Court’s decision May 9, 2024 in Warner Chappell Music, Inc. v. Nealy, No. 22-1078, the answer depended on where the infringement claims were brought. In the Second Circuit, damages were limited to within three years of when the infringement occurred, and in the Ninth and Eleventh Circuits, so long as the claims were brought within three years of discovering the infringement, damages were available regardless of when the infringement occurred. The circuit split between the injury rule in the Second Circuit and the discovery rule in the Ninth and Eleventh Circuits appears to have been resolved in favor of the latter. But is that what the Supreme Court really did in this case?

The dispute began in 2018, when Sherman Nealy filed his copyright infringement claims against his former business partner, Tony Butler, and Warner Chappell Music. The infringing acts, however, occurred years before. Apparently, while Nealy was in prison, Butler licensed music from Music Specialist, Inc., the defunct recording company he formed with Nealy in 1983, to Warner Chappell Music. “Nealy alleged that he held the copyrights to Music Specialist’s songs and that Warner Chappell’s licensing activities infringed his rights. The infringing activity, Nealy claimed, dated back to 2008—so ten years before he brought suit.”

Under the Copyright Act, a plaintiff must file suit “within three years after the claim accrued.” 17 U.S.C. § 507(b). “On one understanding of that limitations provision, a copyright claim ‘accrues’ when ‘an infringing act occurs.’” Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 670 (2014). If that were the case, the Court surmised, then Nealy’s claim would have been untimely because the alleged infringements occurred as much as ten years before he filed suit.

Nealy, however, asserted that his claims were timely under the discovery rule since he learned about the infringement after he got out of prison and less than three years before he filed suit. “Nealy ran into a different timing objection, related not to his ability to bring suit but to his recovery of damages.” Warner Chappell curiously did not contest that the discovery rule applied to the timeliness of Nealy’s claims, but rather argued that he could only recover damages for infringement that occurred in the last three years. The trial court agreed with Warner Chappell, “Nealy could bring claims for infringing acts beyond that three-year period, but could not recover any money for them.”

The Eleventh Circuit, aligning with the Ninth rather than the Second Circuit, reversed and held “that a plaintiff with a timely claim under the discovery rule may obtain retrospective relief for an infringement even if it occurred more than three years before the lawsuit’s filing.” Central to this holding, however, was the Eleventh Circuit’s assumption that Nealy’s claims were timely under the discovery rule.

The Issue
The question before the Supreme Court became “whether, under the discovery accrual rule applied by the circuit courts, a copyright plaintiff can recover damages for acts that allegedly occurred more than three years before the filing of a lawsuit[,]” which assumes the discovery rule governs the timeliness of copyright infringement claims. Although the Court observed that whether that assumption is valid was not before it because it was not argued below, it “confined [its] review to that disputed remedial issue, excluding consideration of the discovery rule and asking only whether a plaintiff with a timely claim under the rule can get damages going back more than three years.”

The Decision
The Court then observed that “[t]he text of the Copyright Act answers that questions in favor of copyright plaintiffs.” Finding the text silent, the Court determined that “a copyright owner possessing a timely claim for infringement is entitled to damages, no matter when the infringement occurred.” After distinguishing this case from Petrella, and the Second Circuit’s improper imposition of a three year damages limitation from Petrella, it found Nealy’s case to be a “different situation.” Without questioning the propriety of it, the Court reiterated “[it] took this case on the assumption that such claims may be timely under the Act’s limitations provision[,]” and concluded that if his claims were timely, then there is no time-based limit for obtaining damages for past infringement in the Copyright Act.

In the dissent, Justice Gorsuch took issue with the unbridled decision of the majority because, as the Court had previously observed in Petrella, the discovery rule only applies “in cases of fraud or concealment.” It was obvious to Gorsuch that regardless of whatever agreements existed about the facts or the issues before the Court, under the plain language of the statute, “[a] copyright claim thus arises or accrues when an infringing act occurs, not at some later date.” Therefore, Gorsuch concluded “[t]he discovery rule thus has no role to play here—or, indeed, in the mine run of copyright cases.”

The Implications
The impact of the decision will be felt immediately. Copyright owners will undoubtedly use the majority opinion to seek maximum damages for every infringing act they can prove. And current plaintiffs will need to consider whether they should move to increase their damage claims and for expanded discovery about infringement that occurred more than three years before they filed suit. But maybe the better forecast of its impact lies in the dissent: “Nothing requires us to play along with these particular parties and expound on the details of a rule of law that they may assume but very likely does not exist.” After all, we all know what assuming usually makes out of you and me.

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Intellectual Property

This item has been provided as an informational service and does not constitute legal counsel or advice, which can only be rendered in the context of specific factual situations. If a legal issue should arise, please contact an attorney listed or retain the assistance of other competent legal counsel. Case results depend on a variety of factors unique to each case and results do not guarantee or predict a similar result in any future case undertaken.