On May 9, 2024, the U.S. Supreme Court decided Warner Chappell Music, Inv. v. Nealy, 601 U.S. ______, No. 22-1078 (2024) to answer a question which, in the dissent’s view “almost certainly does not” matter. Id., slip op. at 3. (Gorsuch, J., dissenting). In doing so, the Court closed the door on whether the statute of limitations for copyright claims extends to the Plaintiff’s recovery of damages, while almost certainly setting the stage for a future question the majority emphasized it was ignoring for this particular case.

As the dissent suggests, the Court’s decision seems somewhat paradoxical—answering a question even the Court acknowledges would be preemptively determined by the question it had to assume to be true and which is subject to a large “division [] among the many Courts of Appeals . . . (11 at last count).” Id., slip op. at 4. Notwithstanding the Court’s decision on which question it sought to answer, the new decision certainly offers hope to Plaintiffs looking to cash in on past copyright infringements.

Setting the Stage

This case is four decades in the making. In 1983, the Plaintiff Sherman Nealy (“Nealy”) and partner Tony Butler formed Music Specialist, Inc. in which they recorded and released “one album and several singles.” Id., slip op. at 1. While Nealy was serving an unrelated prison term, Butler licensed these works to Warner Chappell Music, Inc., which later led to numerous hits by famed artists with one work even reaching No. 9 on the Billboard chart. After release from prison, Nealy discovered the activity and sought to claim copyright infringement since he allegedly still held his copyright in the works. Nealy sued in 2018 for the infringing activity, which he claimed dated back to 2008.

Statute of Limitations and “Accrual”

Before the Court could turn to the question they sought to answer, it first assumed, without deciding, that the case was timely brought. The Court correctly noted that 17 U.S.C. § 507(b) limits copyright actions and requires such to be “commenced within three years after the claim is accrued.” § 507(b). But the Court noted the various views that phrase has assumed over the years through the Circuit Courts of Appeal. “On one understanding of that limitations [sic] provision, a copyright claim ‘accrue[s]’ when ‘an infringing act occurs.’” Warner, 601 U.S. ____, No. 22-1078, slip op. at 2 (quoting Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 670 (2014). However, the Court noted the alternative view that “a claim accrues when ‘the plaintiff discovers, or with due diligence should have discovered,’ the infringing act.” Id. (quoting Id. at n.4).

Nealy sued in the Eleventh Circuit, which followed the so-called “discovery” rule. Under that view, the statute of limitations is tolled until the infringing act is actually discovered—i.e., only upon discovery of the infringement does the three-year period to bring a lawsuit begin. Indeed, considering the infringing act allegedly occurred in 2008, and the lawsuit was subsequently filed in 2018, Nealy’s suit would only be allowed under the “discovery” rule. However, noting that neither party challenged the validity of the discovery rule, the Court refused to analyze, and assumed for this case, its validity despite knowledge that the discovery rule’s application in copyright infringement is questionable and subject to a significant circuit split.

Damages Under the Discovery Rule

Assuming the discovery rule could be applied, the Court then turned to the question at hand—is the statute of limitations for copyright infringement applicable to recovery of damages, or does the discovery rule additionally allow for the Plaintiff’s recovery of damages for the time period prior to the statute of limitations’ deadline? Taking a textualist approach, the Court held that the Plaintiff could recover damages for the entire period of infringement, including infringement which occurred more than three years prior to accrual of the claim, thereby extending the recovery past the three-year statute of limitations.

Indeed, this seems like the logical holding under the Copyright Act’s statutory framework. The Act separates the sections regarding the statute of limitations and recovery. While § 507 governs the statute of limitations, requiring a lawsuit to be brought within three years of the claim accruing, § 504 governs the recovery of damages for copyright infringement, which includes the plaintiff’s actual damages and lost profits, or, if the plaintiff qualifies under the applicable rules, statutory damages.. See 17 U.S.C. § 504(b).

Importantly, § 504 does not state any limitation to the recovery of the copyright owners’ damages or the infringers’ profits. For the Court to hold otherwise in this case would require imputation of § 507’s time limitation into § 504. As the Court states, “[i]f any time limit on damages exists, it must come from the Act’s remedial sections.” Warner, 601 U.S. ____, No. 22-1078, slip op. at 5 (emphasis added). Instead, the Court found that the Second Circuit’s alternative view, that recovery of damages is likewise subject to the three-year statute of limitations period, defeats the discovery rule that the Court itself recognizes. Stated differently, such viewpoint would toll the statute of limitations, from the original infringement to the Plaintiff’s discovery of it, which may be years or decades later, to then ultimately bar recovery for that same time period.

Instead, the Court held that “a timely claim for infringement is entitled to damages, no matter when the infringement occurred,” but left for another day the determination of what qualifies as “a timely claim.” Id.

Takeaways

• Recovery for copyright infringement is not limited to the three-year statute of limitations period for timely bringing a copyright claim in Circuits which recognize the “discovery rule.”

• Logically, it seems the Court would extend the same textualist approach for copyright infringement claims in Circuits that do not recognize the “discovery rule.”

• The Court expressly refused to resolve the circuit split of whether the “discovery rule” should be applied to claims of copyright infringement, thus potentially encouraging forum shopping in copyright infringement disputes.