Supreme Court Considers Whether Copyright Plaintiffs May Recover Damages for Infringing Acts Occurring Outside the Copyright Act's Three-Year Statute of Limitations
The Supreme Court recently heard argument in a case that stands to have significant implications for the scope of damages available in a copyright case. In Nealy v. Warner Chappel Music, Inc., the Court is asked to decide whether, under the discovery rule, a copyright plaintiff can recover damages for infringing acts that occurred outside the Copyright Act's three-year statute of limitations. The discovery rule generally measures the limitations period from when the plaintiff discovered or reasonably should have discovered its claim, whereas the injury rule measures the limitations period in a copyright case from the act of infringement. The defendant seeks reversal of the Eleventh Circuit's holding that, where a plaintiff timely commences suit under the discovery rule, the Copyright Act's three-year statute of limitations does not preclude the plaintiff from obtaining damages for acts that occurred more than three years before filing suit and before the plaintiff's discovery of its claim.
Circuit courts are split on this question based largely on diverging interpretations of the Supreme Court's 2014 decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014). There, the Court held that a defendant cannot invoke the doctrine of laches (i.e., unreasonable, prejudicial delay in bringing suit) to bar a timely claim seeking damages for acts within the Copyright Act's three-year window for commencing suit. Id. at 667. The Court noted that, under the separate-accrual rule, each act of infringement “starts a new limitations period,” and the plaintiff sought damages only for infringing acts within the limitations period. Id. at 668, 671. Thus, a defendant cannot use laches to argue that the plaintiff's failure to bring suit over infringing acts outside the limitations period bars a claim for damages as to infringing acts within the limitations period. In reaching its decision, the Court explained that the Act's statute of limitations “itself takes account of delay” because a plaintiff “can gain retrospective relief only three years back from the time of suit” and “[n]o recovery may be had for infringement in earlier years.” See id. at 677. The Court noted that it was not passing on the question of whether the discovery rule applies in copyright cases, which was not at issue. See id. at 670 n.4.
The Second Circuit read Petrella to mean that, even where the discovery rule applies to determine when a claim accrues, the Copyright Act nonetheless limits recovery to “damages incurred during the three years prior to filing suit.” See Sohm v. Scholastic Inc., 959 F.3d 39, 52 (2d Cir. 2020). The Ninth and Eleventh Circuits have disagreed with that reading. Both courts held that the Act's three-year statute of limitations does not foreclose recovery of damages for infringing acts that occurred before the plaintiff discovered or reasonably should have discovered its claim, even if those acts occurred more than three years before suit. See Starz Entm't, LLC v. MGM Domestic Television Dist., LLC, 39 F.4th 1236 (9th Cir. 2022); Nealy v. Warner Chappel Music, Inc., 60 F.4th 1325 (11th Cir. 2023). The Ninth Circuit stated that the Second Circuit's approach would “eviscerate the discovery rule.” Starz Entm't, 39 F.4th at 1244. The Eleventh Circuit explained that a contrary reading of Petrella “ignores the question presented, conflates the Court's discussion of claim accrual under the injury rule with the availability of damages under the discovery rule, and cannot be squared with the Court's express preservation of the discovery rule.” Nealy, 60 F.4th at 1334.
In addition to their differing readings of Petrella, the parties in Warner disagree over whether the Copyright Act's statute of limitations cabins the scope of recoverable damages. The plaintiff argues that the limitations period for civil claims codified in Section 507(b) of the Copyright Act determines only when suit may be brought, not the scope of recoverable damages. That section provides that a civil action may not be brought unless it is commenced within three years of the claim's accrual. Section 504 provides that a copyright owner may recover “the actual damages suffered” and “any profits” attributable to the infringement. The plaintiff also points to other sections of the Copyright Act and argues that where Congress sought to limit the temporal scope of damages for certain types of copyright infringement, it has done so explicitly.
The defendant argues, among other things, that the Court should limit the scope of the discovery rule in copyright cases, contending that it has traditionally been applied only in cases of fraud, latent disease, or medical malpractice. The plaintiff has asserted that such arguments are beyond the question presented, which it claims the Court modified to assume the discovery rule applies. During argument, several justices questioned whether it was appropriate for the Court to decide the scope of the discovery rule in this case before it in light of the question presented. In a separate case, Martinelli v. Hearst Newspapers LLC, a cert petition is currently pending before the Supreme Court on the question of whether the discovery rule applies at all in copyright cases.
The Court's decision in Warner may have important implications for the scope of damages that plaintiffs can recover in copyright cases involving the discovery rule. Under current precedent, a plaintiff that files suit in the Second Circuit is foreclosed from obtaining damages for infringing acts that occurred more than three years before suit, whereas certain other circuits permit such recovery when the discovery rule applies and the suit is timely. A uniform rule in either direction will thus either expand or narrow the scope of damages recoverable when the discovery rule applies. In Nealy, the plaintiff filed suit in 2018, but seeks to recover damages for alleged infringement extending as far back as 2008, illustrating the difference the Court's decision of this issue stands to make in copyright cases going forward.
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