SCOTUS Rejects Three-Year Limit on Copyright Damages But Sidesteps Accrual Question

“The Court said that it chose not to decide whether a copyright claim accrues when a plaintiff discovers or should have discovered an infringement, rather than when the infringement happened’ because the issue was not properly presented in the case.”

copyright damagesThe U.S. Supreme Court today issued its decision in Warner Chappell Music v. Nealy, a case that asks whether a copyright plaintiff can recover damages for acts that allegedly occurred more than three years before the filing of a lawsuit.

The Justices ruled 6-3 that “the Copyright Act entitles a copyright owner to recover damages for any timely claim,” with no limit preventing recovery for infringement that happened beyond three years. As to the issue of when a claim for infringement “accrues,” the Court said it “assumes without deciding” that accrual occurs upon discovery of the infringement.

The case stems from a U.S. Court of Appeals for the Eleventh Circuit decision in February 2023 that held that the discovery accrual rule allows plaintiffs to collect retrospective relief for infringements occurring outside of the Copyright Act’s three-year limit against civil actions for infringement claims, codified at 17 U.S.C. § 507(b). The appellate court found that the plain language of Section 507, which requires that an action commence “within three years after the claim accrued,” does not impose a limitation on recovery for claims that are timely under the discovery accrual rule.

Warner Chappell petitioned the Supreme Court in September 2023 and argued that the Eleventh Circuit’s decision deepened a circuit split on the application of the discovery accrual rule to Section 507(b). The rule tolls the statute of limitations until the date that the plaintiff copyright owner could have reasonably discovered the infringement with due diligence. While the Eleventh Circuit joined the Ninth Circuit in determining that the three-year recovery period begins from the date of the claim’s accrual, the Second Circuit has ruled in cases like Sohm v. Scholastic (2020) that recovery begins from the date that the lawsuit was filed, even when the discovery rule tolls the statute.

More than a dozen amici weighed in, including the U.S. Solicitor General, who participated in the February oral arguments. The Solicitor General backed Nealy and urged the Court to affirm the Eleventh Circuit’s interpretation of the High Court’s ruling in Petrella v. Metro-Goldwyn-Mayer (2013) over competing interpretations in the Second Circuit. Petrella is at the heart of the circuit split on the discovery accrual rule and focused on the application of equitable laches to claims filed within the Copyright Act’s statute of limitations. Since Petrella, circuit courts have been left to interpret whether Petrella’s holding requires strict adherence to the three-year limitation on recovery in cases where the discovery accrual rule applies.

The Court in today’s decision explained that its decision in Petrella does not support a three-year damages cap. The opinion explained:

“There, the Court noted that the Copyright Act’s statute of limitations allows plaintiffs “to gain retrospective relief running only three years back from” the filing of a suit…. Taken out of context, that line might seem to address the issue here. But that statement merely described how the limitations provision worked in Petrella, where the plaintiff had long known of the defendant’s infringing conduct and so could not avail herself of the discovery rule to sue for infringing acts more than three years old. The Court did not go beyond the case’s facts to say that even if the limitations provision allows a claim for an earlier infringement, the plaintiff may not obtain monetary relief.”

The Court also said that it chose not to decide “whether a copyright claim accrues when a plaintiff discovers or should have discovered an infringement, rather than when the infringement happened” because the issue was not properly presented in the case, since Warner Chappell did not challenge the Eleventh Circuit’s use of the discovery rule.

The dissent—authored by Justice Gorsuch and joined by Justices Thomas and Alito—criticized the majority’s approach and countered that “the Act almost certainly does not tolerate a discovery rule.” While the dissent conceded that it is understandable that the Court left the question for another case considering the parties did not question whether a discovery rule exists, “if that is a permissible course, it does not strike me as the most sensible one,” Justice Gorsuch wrote. He concluded by saying that he would have dismissed the case as improvidently granted and waited for a better one where the issues were squarely presented. “Better, in my view, to answer a question that does matter than one that almost certainly does not.”

Commenting on the decision today, Knobbe Martens partner Jeff Van Hoosear called it “a victory for copyright owners, and in particular individuals and small entities that own copyrights.” Van Hoosear added:

“These plaintiffs, like Sherman Nealy, often rely on the ‘discovery rule’ for remedies. As the 9th Circuit held in Starz Entertainment v. MGM, the discovery rule would be eviscerated if the plaintiff was restricted to only damages from three years prior to the institution of the infringement action.”

Image Source: Deposit Photos
Author: alexlmx
Image ID: 118290464 

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One comment so far. Add my comment.

  • [Avatar for Gene Quinn]
    Gene Quinn
    May 9, 2024 01:34 pm

    The Supreme Court does it once again, with a clear as mud ruling that evades the most important question.

    It seems that what we know is that the Copyright Act requires a copyright infringement claim to be brought within three years. Three years from when? Uncertain and unanswered.

    The Court also characteristically criticizes lower courts for literally reading and applying its own prior decision in Petrella.

    As far as I can tell, this opinion answers nothing. It does, however, breathe new uncertainty into something as basic as the statute of limitations and from what point damages are available. Well done SCOTUS! Well done!

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