Important SCOTUS ruling on copyright infringement damages

The Copyright Act's statute of limitations may set a three-year period for filing a suit from when the claim is discovered but does not impose a separate three-year limit on recovering damages.

Earlier today the United States Supreme Court issued an opinion that discusses the damages available to a plaintiff in a copyright infringement case. The case is important because it will affect the strategy of parties seeking remedies for infringements that occurred many years earlier but were not discovered until later. It can be seen as a boon for copyright plaintiffs and a broader source of headache for accused infringers.

The specific issue is whether a copyright owner can recover damages only for the period of time going back three years from the date the lawsuit is filed (because the statute of limitations period is three years) or whether the copyright holder can get damages going all the way back, even before the three year window. The Supreme Court held the latter - a copyright owner can obtain full retrospective monetary relief for any claim timely filed, no matter when the infringement occurred.

The Backstory

Plaintiff Nealy and his former business partner Butler founded a company in 1983 that produced several music tracks (including "Jam the Box," which many years later was used in Flo Rida's hit "In the Ayer" and various TV shows). After their partnership dissolved in the 80s, Butler secretly granted a license to these tracks to defendant Warner Chappell Music. Nealy did not know about the secret licensing deal until he got out of prison in 2016. Two years later, in 2018, he sued Warner Chappell for copyright infringement that began occurring in 2008. The District Court limited his potential damages to those occurring in the three years prior to filing the lawsuit. But the Eleventh Circuit overturned this, allowing full damages all the way back to 2008.

Even though plaintiff filed the lawsuit more than three years after the first infringement (2018 is ten years after 2008), the lower court allowed the suit to proceed because it held that the claim accrued when Nealy learned of the lawsuit, in 2016, after he got out of jail. So because he filed within three years of discovering the infringement, the suit was timely. This is called the "discovery rule."

Three year window or not?

As for what damages are available in situations such as this, before today, there was a split among federal circuit courts. For example, case law from the Ninth Circuit said that a plaintiff with a timely claim under the discovery rule may obtain all retrospective relief for an infringement even if it occurred more than three years before the lawsuit’s filing. The Second Circuit had held differently. In these proceedings, the Eleventh Circuit sided with the Ninth Circuit, ruling that so long as a plaintiff files within three years of discovering the infringement, it can seek full damages for infringements, even further back than the three-year window. The Supreme Court affirmed the Eleventh Circuit's decision.

The scope of the Court's opinion

The Court specifically said that its decision related only to the availability of damages and did not address the question of whether the discovery rule is a valid doctrine. (Courts generally try to answer only the questions that are before them.) In this situation, the Court clarified that the Copyright Act's statute of limitations may set a three-year period for filing a suit from when the claim is discovered but does not impose a separate three-year limit on recovering damages. Therefore, under the court's holding, if a claim is timely filed under the discovery rule, the plaintiff is entitled to all damages irrespective of when the infringement occurred.

Warner Chappell Music, Inc. v. Nealy, No. 22-1078 (May 9, 2024)