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SCOTUS Sides with the 11th Circuit by Allowing Copyright Damages Beyond 3 Years

By Michael A. Kolcun

SCOTUS Sides with the 11th Circuit by Allowing Copyright Damages Beyond 3 Years

After years of uncertainty due to a split among three Circuits, the U.S. Supreme Court has sided with the Eleventh Circuit by allowing damages for copyright infringement that occurred more than three years before the suit was filed.

The underlying facts and the proceedings in the Eleventh Circuit were the subject of a previous blog post (The 11th Circuit Joins the Split by Refusing to Limit Copyright Damages). In short, the Warner Chappell Music, Inc. v. Nealy litigation involved copyright claims against Warner Chappell for its alleged infringement of Nealy’s works in the decade before Nealy filed suit. Because Section 507 of the Copyright Act requires a claim to be filed within three years of its accrual, Nealy was required to rely on the “discovery rule” used in the Eleventh Circuit that provides for accrual when the plaintiff discovers, or with due diligence should have discovered, the allegedly infringing act. In the proceedings below, Warner Chappell did not dispute the timeliness of Nealy’s claims; it instead argued that Nealy’s damages were limited to infringements that happened three years before he filed suit pursuant to Petrella v. MGM, 572 U.S. 663 (2014). Allying itself with the Ninth Circuit, and disagreeing with the Second, the Eleventh Circuit held that a plaintiff with a timely claim under the discovery rule may recover retrospective relief for infringements occurring more than three years before the suit is filed. To resolve the Circuit split, the Supreme Court granted certiorari.

In an opinion authored by Justice Kagan, the Supreme Court first noted that because Warner Chappell had never challenged the use of the discovery rule, the Court’s holding would incorporate the assumption that the discovery rule governs the timeliness of the copyright claim, rather than when the infringement occurred. Confined to the limited issue of whether a plaintiff with a timely claim can recover damages going back more than three years, the majority of the Supreme Court held in the affirmative based on the plain text of the Copyright Act. Much like the Eleventh Circuit, the Supreme Court found that the only limitations provision in the Copyright Act concerned the accrual of claims in Section 507, while nothing limited damages that are recoverable in the Act’s remedial provisions. The Court also reasoned that the Second Circuit’s contrary view was “self-defeating” because while it recognized the discovery rule, it simultaneously took away the value conferred by that rule by preventing the recovery of damages for older infringements.

Concluding, the majority rejected the argument that its decision in Petrella had endorsed the bar on damages that Warner Chappell advocated for it to invoke. In doing so, the Court noted that the plaintiff in Petrella could only recover damages going three years back because that plaintiff could only sue for infringements within that time, whereas Nealy invoked the discovery rule to bring claims for infringements occurring more than three years before he filed suit, a significant factual distinction. So, the Supreme Court held, if “Nealy’s claims are thus timely, he may obtain damages for them. The Copyright Act contains no separate time-based limit on monetary discovery.”

Although the Supreme Court has endorsed the expansive damages sought in this instance, it is uncertain whether other copyright claimants will be afforded the same relief. The majority opinion repeatedly noted that its decision assumed the discovery rule applied since Warner Chappell never challenged it. Justice Gorsuch’s dissenting opinion, which Justices Thomas and Alito joined, reasoned that the Copyright Act “almost certainly does not tolerate a discovery rule” and it argued that the Court should have dismissed the entire case as improvidently granted and waited for another that squarely presented the antecedent question of whether the Copyright Act allows the discovery rule. Stay tuned.

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