The Supreme Court of the United States issued a much-awaited decision on May 9, 2024, in Warner Chappell Music, Inc. v. Nealy, resolving a circuit split in favor of copyright plaintiffs and rejecting a "three-year damages cap" on the recoverable damages for infringement claims. In a 6-3 decision, the Court held that so long as a plaintiff's claims are timely, "[t]he Copyright Act contains no separate time-based limit on monetary recovery," and accordingly, damages are not restricted by the three-year statute of limitations period described in 17 U.S.C. § 507(b). The Court, however, was careful to limit its decision to damages, and explicitly did not opine on whether a plaintiff's claims brought after the three-year limitations period under the "so-called discovery rule" would be timely in the first place. Thus, while the decision is a clear victory for copyright plaintiffs in cases when the discovery rule applies to claims brought more than three years following an infringement, this victory may be short-lived pending future guidance from the Supreme Court.
The underlying dispute in Warner Chappell stemmed from purported copyright infringement dating back 10 years before the suit was filed. Since some of the alleged infringing activity occurred outside the three-year statute of limitations period provided by the Copyright Act, the plaintiff relied on the discovery rule. As noted in the Supreme Court's decision, the timeliness of the lawsuit was not challenged in the lower courts. The sole question presented to the Supreme Court, therefore, was whether the plaintiff could recover damages dating to more than three years prior to the filing of the lawsuit.
The Court granted certiorari to weigh in on a split among circuits stemming from differing interpretations of the Supreme Court's decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014). The Petrella decision stated that copyright plaintiffs may "gain retrospective relief running only three years back from" the filing of the suit. 572 U.S. at 672. The Second and Ninth Circuits proffered different interpretations of Petrella as the basis for decisions regarding copyright damages available in conjunction with the discovery rule. While the Second Circuit in Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020) limited copyright damages to "the three years prior to filing" of the action, the Ninth Circuit ruled the opposite way in Starz Entertainment, LLC v. MGM Domestic Television Distribution, LLC, 39 F. 4th 1236 (9th Cir. 2022), holding that a plaintiff may recover damages beyond three years from the date of filing so long as the claim is timely under the discovery rule. Although the trial court in Warner Chappell followed the Second Circuit's interpretation of a three-year damages bar for a timely claim, the Eleventh Circuit reversed and allowed the plaintiff to seek damages on any infringement claims that were timely under the discovery rule. The Supreme Court agreed with the Eleventh Circuit's position, noting that the three-year period in the Copyright Act is a "time-to-sue prescription" and the Act is otherwise silent on damages, even in the remedial sections, and thus affirmed.
Lurking in the background of this victory for the plaintiff, however, remains the question of whether such claims are in fact timely under the Copyright Act. Under the discovery rule, a claim accrues (i.e., starts the relevant limitations period) when a plaintiff discovers, or with due diligence should have discovered, the injury that forms the basis for the claim. Without the discovery rule, a copyright claim generally accrues when the infringement occurs and the plaintiff can file suit and obtain relief under the "incident of injury rule." The Supreme Court deliberately left open whether a claim brought more than three years after the infringement occurred may be timely under the discovery rule, finding only that the Copyright Act "contains no separate time-based limit on monetary recovery." The dissenting justices took issue with this approach, noting that they would have "awaited another [case] squarely presenting the question whether the Copyright Act authorizes the discovery rule" rather than deciding the damages issue now.
In fact, the Supreme Court currently has pending on its docket Hearst Newspapers, L.L.C., et al., v. Antonio Martinelli, in which this very question has been presented. The Court has not yet decided whether to grant certiorari. If the dissent or oral arguments in the Warner Chappell case are any indication, the Supreme Court may be interested in answering this "antecedent question," as it is characterized by the dissent. Although the dissent in Warner Chappell casts a shadow over the availability of the discovery rule since at least three justices appear ready to limit its scope in copyright cases, the majority opinion may imply a willingness to increase available damages at least in some instances. Even the three dissenting justices seem to acknowledge that the discovery rule could apply in instances of fraud or concealment, albeit not cases in which the plaintiff simply did not discover the infringement until after the limitations period had run.
Although the Warner Chappell decision provides a victory for copyright plaintiffs seeking damages for infringements dating back further than three years, it bears noting that this only provides relief where the discovery rule applies. Thus, the decision nevertheless provides an important reminder for copyright owners to diligently monitor their works and to promptly take action regarding claims of infringement. While the discovery rule is currently available to plaintiffs, there remains a threshold requirement of reasonable diligence, aside from the (potentially imminent) possibility that the Supreme Court will further limit or close this door in the future.
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