May 10, 2024Client Alert

U.S. Supreme Court Revises 3 Year Statute of Limitations for Copyright Infringement Damages

The Supreme Court resolved a critical circuit split, ruling that copyright infringement damages are not confined within the Copyright Act’s three-year statute of limitation period. The decision arose from a contentious case involving Sherman Nealy, a music producer, and Warner Chappell Music, Inc., relating to a song by the artist Flo Rida. Read the full decision here.

Understanding the Facts of the Case

Flo Rida’s 2008 song “In the Ayer” included elements of the song “Jam the Box,” created by Tony Butler (aka Pretty Tony). Butler’s former business partner, Sherman Nealy, claimed that he had rights in the song and never agreed to license it to Warner Chappell. Nealy sued Warner Chappell for copyright infringement in 2018 for damages from the unauthorized use of the song, seeking damages that stretched back to 2008. The Copyright Act has a three-year statute of limitations (“No action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.” 17 U.S.C. § 507(b)). Under the “discovery rule,” a claim is timely filed if it is filed within three years of when a plaintiff became aware (or should have been aware) of the claim. Nealy argued that since he was in prison when the alleged infringement first occurred, he was unaware of it until much later, and therefore he should not be barred from seeking damages all the way back to 2008.

The district court judge ruled that Nealy could only recover damages that occurred during the three years prior to filing the lawsuit, applying the statute of limitations for copyright infringement claims. The case was appealed to the 11th U.S. Circuit Court of Appeals where the decision was reversed, holding that there is “no bar to damages in a timely action.” The case was further appealed and heard by the U.S. Supreme Court.

The Court's Verdict

Justice Kagan, writing for the majority in a 6-3 decision, agreed with the 11th Circuit and held that copyright owners could seek damages without a time limit, provided that the action is brought in a timely manner after discovering the infringement. This opinion rebuffed Warner Chappell’s view, previously supported by a 2nd Circuit ruling, which barred lawsuits related to infringements and corresponding damages older than three years.

Justice Kagan noted that the Copyright Act explicitly provides a three-year window for a plaintiff to file a lawsuit, but clarified that “‘the time-to-sue prescription,’ as we have called it, establishes no separate three-year period for recovering damages, this one running from the date of infringement.” Warner Chappell Music, Inc., et al. v. Nealy et al., No. 22-1078, slip op. at 7 (U.S. May 9, 2024). This resolves a critical circuit split and provides more guidance for future copyright infringement litigation.

Notably, the dissent, written by Justice Gorsuch and joined by Justices Thomas and Alito, criticized the majority by noting that it assumed the discovery rule applied in this case because the Court was not asked to opine on it. The majority writes: “In this case, we assume without deciding that a claim is timely under that provision if brought within three years of when the plaintiff discovered an infringement, no matter when the infringement happened.” Id. at 3 (emphasis added). The dissent explained that deciding this case was premature because it leaves open the threshold question of whether the discovery rule applies in copyright infringement cases – whether a plaintiff may only bring a case within three years starting from when the infringement occurs, or within three years of discovering the infringement – and, with that open question, it’s futile to opine on a case addressing far back reaching damages. The dissent, stating that the Copyright Act “almost certainly does not tolerate a discovery rule,” casts strong doubt on whether the discovery rule would continue to stand if it was properly brought before the Supreme Court. Id. at 10.

Key Takeaways for Copyright Owners

  1. Extended Recovery Period: Copyright owners are now empowered to claim damages for infringement regardless of when the infringement occurred, so long as the litigation is brought in a timely manner upon discovering the infringement.
  2. Need for Vigilance: The ruling underscores the importance of vigilance on the part of copyright owners in monitoring the use of their works and taking prompt action upon discovery of an infringement.
  3. Prepare for Complexity: Recovery of damages may be complicated by factors such as the need to establish evidence of the infringement's history, making the involvement of experienced attorneys even more critical.
  4. Watch for Further Developments: A case asking whether the discovery rule applies to the Copyright Act’s statute of limitations, Hearst Newspapers L.L.C. v. Martinelli, 65 F.4th 231 (5th Cir. 2023), is currently pending before the Court. If decided in line with the dissent, it could provide copyright infringement defendants with greater clarity on potential liability now that Nealy has held that plaintiffs can seek damages to the commencement of infringement.

Final Thoughts

This move by the Supreme Court bolsters copyright protection, offering a substantial tool for owners to protect their work long-term, assuming the discovery rule applies to such cases. While this decision clarifies certain aspects of copyright law, it also introduces complexities that warrant careful legal guidance.

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