In a 6-3 decision issued on Thursday in Warner Chappell Music Inc. et al. v. Sherman Nealy et al., the U.S. Supreme Court affirmed an Eleventh Circuit decision allowing a copyright owner to recover damages for infringement occurring more than three years from the filing date of a lawsuit, providing “there is no time limit on monetary recovery.” The Supreme Court used the opportunity to address a split between the Second Circuit, which recognizes a three-year cap on damages, and the Eleventh Circuit, which held that damages could be recovered for infringement occurring more than three years from the filing date of a lawsuit.

Background

Music producer Sherman Nealy and production company Music Specialist Inc. sued Warner Chappell Music Inc. and Artist Publishing Group LLC for using songs without authorization in violation of U.S. copyright law. Nealy, who was imprisoned for several years, claimed he was not aware of Defendants’ unauthorized use while in prison and proceeded to file a lawsuit in 2018 once he was released – more than three years following the alleged infringement.

The federal district court’s decision allowed the claims to proceed, but with a limitation that it imposed based on its reading of Second Circuit precedent from Sohm v. Scholastic Inc., 959 F. 3d 39, 51–52 (CA2 2020) – that Nealy could only seek damages for infringement that occurred within three years of the filing date of the lawsuit. The District Court’s decision was reversed by the U.S. Court of Appeals for the Eleventh Circuit, which rejected the three-year damages bar on timely claims. Defendants appealed to the Supreme Court, noting the decision’s violation of the Second Circuit’s three-year statute of limitations. Upon review, the Supreme Court affirmed the Eleventh Circuit’s decision and rejected the Second Circuit’s view.

Supreme Court Opinion

Justice Elena Kagan, writing for the majority, wrote, "The Second Circuit's contrary view, on top of having no textual support, is essentially self-defeating. With one hand, that court recognizes a discovery rule, thus enabling some copyright owners to sue for infringing acts occurring more than three years earlier," the majority said. "And with the other hand, the court takes away the value in what it has conferred, by preventing the recovery of damages for those older infringements." Kagan went on to note that there is no reason to limit the availability of monetary damages, and that a copyright owner possessing a timely claim for infringement is entitled to damages “”[n]o matter when the infringement occurred.”

The dissent, however, found that the lawsuit did not address the bigger question: does the Copyright Act authorize the discovery rule? The “discovery rule,” a judicially-created rule, dictates that a plaintiff’s ‘clock’ for recovery starts once infringement is discovered, rather than when it actually happened. Writing for the dissent, Judge Gorsuch wrote, “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.” Gorsuch continued that the Copyright Act “almost certainly does not tolerate a discovery rule,” and “[t]hat fact promises soon enough to make anything we might say today about the rule’s operational details a dead letter.”

Conclusion

The Justices’ split opinions and strong viewpoints on allowable recovery under the Copyright Act indicates that copyright claim accrual rules – and the processes behind those rules – will continue to evolve and be subject to debate.

 

The case is Warner Chappell Music Inc. et al. v. Sherman Nealy et al., No. 22-1078, and the decision can be found here.

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