On May 9, 2024, in a 6-3 decision, the Supreme Court of the United States affirmed the US Court of Appeals for the Eleventh Circuit’s prior ruling, holding that a plaintiff with a timely infringement claim under the discovery rule is entitled to damages regardless of when the infringement occurred. Warner Chappell Music, Inc. v. Nealy, Case No. 22-1078, 2024 WL 2061137 (U.S. May 9, 2024) (Kagen, J.) (Gorsuch, J., dissenting). This means the Copyright Act entitles a copyright owner to obtain monetary relief for any timely infringement claim no matter when the infringement occurred.

IN DEPTH

Section 507(b) of the Copyright Act includes a three-year statute of limitations that runs from the time the claim accrues. A claim may only accrue one time under the discovery rule. In 2014, in Petrella v. Metro-Goldwyn-Mayer, Inc., the Supreme Court held that the equitable doctrine of laches does not bar copyright claims that are otherwise timely under the three-year limitations period set forth in Section 507(b). Since that time, the circuits have been split on Petrella’s application – the Second Circuit strictly limited damages from copyright infringement to the three-year period before a complaint is filed whereas the Ninth and Eleventh Circuits permitted retrospective relief for infringement occurring more than three years before the lawsuit’s filing as long as the plaintiff’s claim is timely under the discovery rule.

In 2018, Music Specialist, Inc. and Sherman Nealy (collectively, Nealy) filed a copyright infringement suit against Warner alleging Warner was using Nealy’s musical works based on invalid third-party licenses and in violation of 17 U.S.C. § 501. The alleged copyright infringement occurred more than 10 years before Nealy filed the present lawsuit. The district court denied Warner’s motion for summary judgment on statute of limitation grounds, finding that there was a genuine dispute of material fact regarding when Nealy’s claim accrual occurred. In a separate order, the district court certified for interlocutory appeal the issue of whether “damages in this copyright action are limited to the three-year lookback period as calculated from the date of the filing of the Complaint pursuant to the Copyright Act and Petrella.” Nealy appealed.

The Eleventh Circuit concluded that where a copyright plaintiff has a timely claim for infringement occurring more than three years before the filing of the lawsuit, the plaintiff may obtain retrospective relief for that infringement. The Court found that Petrella focused on the application of 17 U.S.C. § 507(b) to claim accrual under the injury rule, not the discovery rule, and was therefore inapplicable. Warner appealed to the Supreme Court.

Justice Kagan wrote for the majority, joined by Chief Justice Roberts and Justices Sotomayor, Kavanaugh, Barrett and Jackson. The Supreme Court affirmed the Eleventh Circuit’s decision, holding that a plaintiff with a timely infringement claim under the discovery rule is entitled to damages regardless of when the infringement occurred. The Supreme Court confirmed that Section 507(b) of the Copyright Act does not establish a separate three-year limit on recovering damages. As such, there is no time limit on monetary recovery and a copyright owner possessing a timely claim is entitled to damages for infringement no matter when the infringement occurred. The Supreme Court upheld the ruling in Petrella and distinguished the present case on the facts because “[u]nlike the plaintiff in Petrella, Nealy has invoked the discovery rule to bring claims for infringing acts occurring more than three years before he filed suit.” The Supreme Court’s ruling here overruled the Second Circuit’s holding in Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020), which limited monetary recovery to the three years prior to initiation of the lawsuit, and clarifies the circuit split between the courts.

Justice Gorsuch wrote the dissent, joined by Justices Thomas and Alito. The dissent argued that the Copyright Act does not tolerate a discovery rule and would have preferred to dismiss the case “as improvidently granted and awaited another squarely presenting the question whether the Copyright Act authorizes the discovery rule.”

Practice Note: The Supreme Court’s ruling incentivizes copyright owners to pursue older infringements, which may lead to an uptick in lawsuits as plaintiffs review histories to discover potential infringements. On the other hand, this ruling impacts defendants by exposing them to liability for infringements that occurred well beyond the three-year statute of limitations, provided these infringements are discovered within three years prior to filing the lawsuit.