By Anisha Kingra
In a 6-3 decision, the United States Supreme Court held in Warner Chappell Music Inc. et al. v. Sherman Nealy et al. that copyright owners are entitled to obtain monetary relief for timely infringement claims regardless of when the infringement occurred. To reach that conclusion, the Court assumed without deciding that a claim accrues (and thus triggers the statute of limitations period) when the plaintiff discovers, or reasonably could have discovered, the infringement. In affirming the Eleventh Circuit’s ruling, the Court saved for another day the antecedent question of whether a copyright infringement claim accrues under the discovery rule or the incident of injury rule.
The Accrual Rules and Time-Limits on Monetary Damages
This case involved two open questions, only one of which the Court addressed. Under the Copyright Act, a copyright infringement claim must be brought “within three years after the claims accrued.” 17 U.S.C. § 507(b). There are two rules that can be used to assess when a claim “accrues”: the incident of injury rule and the discovery rule. Under the former, a copyright infringement claim accrues when an infringing act occurs; and, under the latter, such a claim accrues when a plaintiff discovers, or reasonably could have discovered, the infringing act. See Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 670, n.4 (2014). The Court assumed without deciding that the discovery accrual rule applied to the copyright infringement claim. The Court then addressed the second open question: if the discovery accrual rule applies, can a plaintiff recover monetary damages more than three years before the lawsuit was filed? It answered that question in the affirmative.
In 1983, respondent Sherman Nealy entered a music venture with Tony Butler called Music Specialist, Inc. The company released one album and several singles and eventually dissolved. Nealy was then incarcerated for drug offenses, serving one term from 1989 to 2008 and another term from 2012 to 2015. Meanwhile, Butler licensed several of the Music Specialist works to petitioner Warner Chappell Music. One Music Specialist work called “Jam the Box” was interpolated into Flo Rida’s song “In the Ayer,” which reached No. 9 on the Billboard chart.
In 2018, Nealy sued Warner Chappell for copyright infringement seeking damages and profits. Although the infringing activities occurred in 2008, Nealy contended he did not learn of the infringement until 2018. Because the discovery accrual rule applies in the Eleventh Circuit, the District Court determined that Nealy’s claims were timely. As to damages, the District Court determined that Nealy could only recover monetary compensation for the three-year period prior to the filing of his civil action.
On appeal, the Eleventh Circuit assumed that Nealy’s claims were timely under the discovery rule. However, a circuit split existed on whether a three-year limitations period applies to monetary damages for infringement claims. In the Second Circuit, if infringing activity occurred more than three years before an action was filed, those claims are timely, but the monetary relief is limited to the three-year period prior to the filing of the action. See Sohm v. Scholastic Inc., 959 F.3d 39, 51-52 (2d Cir. 2020). In the Ninth Circuit, a plaintiff with a claim that is timely under the discovery accrual rule can obtain monetary damages for the infringement even if the infringement occurred more than three years before the lawsuit was filed. See Starz Entertainment v. MGM, 39 F. 4t h 1236, 1244 (9th Cir. 2022). Adopting the latter approach, the Eleventh Circuit held that Nealy was entitled to monetary damages for the infringing activities that occurred more than three years before he filed his action.
The Decision
The Supreme Court granted the petition for a writ of certiorari to address whether, in circumstances when the discovery accrual rule applies, a plaintiff can recover damages for acts that occurred more than three years before the filing of a lawsuit. The Court explained that the question of whether the discovery rule or incident of injury rule applied to infringement claims was not properly before it. Therefore, the Court assumed without deciding that the discovery accrual rule applied, and the Court emphasized that its analysis was constrained to the narrow remedial question of monetary damages.
The Court held that, when the discovery accrual rule applies, a plaintiff can recover damages for infringing acts that occurred more than three years before the lawsuit was filed. Drawing from the text of the Copyright Act, the Court noted that there was a single provision on the limitations period which establishes a three-year period for filing an action. See 17 U.S.C. § 507(b). There was no separate three-year period for recovering damages, and the remedial sections of the Copyright Act placed no time limit on monetary recovery. See § 504(a)–(c). Accordingly, a copyright owner bringing a timely infringement claim can recover monetary damages regardless of when the infringement occurred.
In reaching this conclusion, the Court described the Second Circuit’s position as “self-defeating” because it enables copyright owners to bring infringement claims for acts that occurred more than three years before filing a cause of action but prevents recovery of monetary damages for those older claims.
The Dissent
In the dissenting opinion, the justices noted that the majority’s decision hinged on the assumption that the discovery rule could apply under the Copyright Act. By doing so, the majority declined to address the antecedent question of whether the Copyright Act has room for the discovery rule. The dissenting justices made clear that, in their view, the Act supports an application of the incident of injury rule, not the discovery rule. The dissent would have dismissed the certiorari petition as improvidently granted and would have waited for a case that squarely presents the antecedent question of whether the Copyright Act authorizes the discovery rule at all.
Looking Forward
From a practical standpoint, the outcome of this case is favorable to copyright owners as they can now recover monetary damages for infringing conduct that occurred beyond the three-year limitations period as long as their underlying infringement claims were timely filed. Practitioners should be mindful about providing damages assessments in light of this opinion.
The question of whether the discovery rule or incident of injury rule applies to copyright infringement claims remains open. Furthermore, the dissent has clearly signaled it believes that the incident of injury rule is better supported by the Copyright Act. The Court may wish to resolve this open question in a case that better presents the issue.
