THE LATEST COPYRIGHT LAW DECISION BY THE U.S. SUPREME COURT FAVORS COPYRIGHT OWNERS IN INFRINGEMENT LAWSUITS

Take Home Points:

1.???? The potential damages in a copyright infringement lawsuit are not limited to infringement occurring within the Copyright Act’s 3-year statute of limitations.?

2.???? The judicially created “discovery of infringement” rule favors copyright owners by extending the Act’s 3-year statute of limitations.

3.???? The High Court has never “ruled” on the merits of the “discovery of infringement” rule which is not referred to in the Act.

?The Copyright Act of 1976 states that copyright infringement actions must be “commenced within three years after the claim accrued.”? 17 U.S.C. § 507(b).? ?In the context of copyright infringement, some circuits have adopted a flexible approach to the statute’s “accrued” statute of limitations. Known as the discovery rule, this judicially created approach provides that the statute of limitations period does not begin—and that three-year clock does not start ticking—until the plaintiff actually discovers or reasonably should have discovered the infringing activity.? The discovery rule recognizes that copyright infringement can be difficult to determine.?

But what about damages under the statute if infringement is proven? Are the potential damages limited to infringement occurring only within the three-year statute of limitations? ?The U.S. Supreme Court had the opportunity to decide the issue in Warner Chappell Music Inc., et al. v. Sherman Nealy et al., a case originating in the Southern District of Florida. ?Nealy, the owner of the copyright in an electronic dance work, filed his copyright infringement lawsuit in 2018, three years after the alleged infringement.? The district court allowed Nealy’s lawsuit to proceed because he claimed he was not aware of the Defendants' unauthorized use of his work while he was in prison.? However, Nealy could only seek damages for infringement that occurred within three years of the filing date of the lawsuit.?

The Eleventh Circuit Court of Appeals reversed the district court’s decision and rejected the 3-year damages bar on timely filed copyright infringement lawsuits. In a 6 to 3 decision, the High Court affirmed the Eleventh Circuit’s decision allowing a copyright owner to recover damages for infringement occurring more than three years from the filing date of the lawsuit.? In doing so, the majority explicitly relied on the discovery rule.

The dissenting judges did not technically dispute the majority’s conclusion.? Instead, they opined that the appeal did not address the bigger question:? Does the Copyright Act authorize the discovery rule?? Writing for the dissent, Judge Gorsuch stated, “Respectfully, rather than devote our time to this case, I would have dismissed it as improvidently granted and awaited another squarely presenting the question whether the Copyright Act authorizes the discovery rule.”? According to Justice Gorsuch, the statute does not tolerate the discovery rule and "[t]hat fact promises soon enough to make anything we night say today about the rule’s operational details a dead letter.”

How do federal “infringement statues” for other types of intellectual property compare with the Copyright Act?? Patent law has no standalone statute of limitations or time bar to filing suit.? Instead, the statute specifically limits damages to “six years prior to the filing date” of the infringement claims.? 35 U.S.C. § 286.

The federal Defendant Trade Secrets Act (“DTSA”) contains a three-year statute of limitations but here the statue explicitly incorporates the discovery rule by stating: (“A civil action . . . may not be commenced later than 3 years after the date on which the misappropriation with respect to which the action would relate is discovered or by the exercise of reasonable diligence should have been discovered.”? To date, the number of DTSA lawsuits is slim, but following the reasoning of Warner Chappell, plaintiffs may be able to collect damages resulting from misappropriation occurring for previous periods before the lawsuit was commenced. ?Florida’s Trade Secret Act also has a three-year statute of limitations from discovery.?

As for federal trademark infringement, the Lanham Act does not specify a statute of limitation. Defendants rely on laches to bar inexcusably delayed lawsuits. Federal courts use the limitations period for analogous state law claims as a standard for the defense of laches. For Florida, the analogous statute of limitations for infringement of a Florida state trademark is 4 years. See Amend the Lanham Act: Trademark Infringement Needs a Statute of Limitations by Aaron Schlinder in Marquette Intellectual Property and Innovation Law Review, Vol. 27/Issue 2, Summer 2023 wherein the author persuasively argues that Congress should add a statute of limitations to the Lanham Act.

In conclusion, any potential intellectual property infringement plaintiff has the responsibility to “detect” infringement and timely bring a lawsuit once that infringement is established.? Unfortunately, infringement can be difficult to uncover.? Regarding copyright infringement in particular, AI tools are helping copyright owners to more readily detect the unauthorized usage of creative works.? Finally, copyright owners should also timely register their copyrights with the U.S. Copyright Office.? A registration is required to commence a copyright infringement lawsuit.? Failure to have a registration could cause problems with meeting the statute of limitations even under the “discovery” rule.

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