Time’s Up: Supreme Court to Grapple with Damages Dilemma in Warner Chappell Music v. Nealy

On February 21, 2024, the Supreme Court of the United States heard oral arguments in Warner Chappell Music, Inc. et al. v. Nealy et al. The case involves whether plaintiff music producer Sherman Nealy may recover damages for infringing acts by publishers Warner Chappell Music and Artist Publishing Group that occurred as early as 2008—ten years before Nealy filed suit in district court, in the Eleventh Circuit.

The Copyright Act provides a three-year statute of limitations, but under the “discovery rule” followed by many circuits including the Eleventh Circuit, a copyright infringement suit is timely if the plaintiff filed the suit within three years of discovering infringing acts. Nealy was incarcerated from 2012 – 2015 and alleges that he did not discover Warner Chappell Music’s and Artist Publishing Group’s infringing conduct until early 2016. Nealy filed suit against Warner Chappell Music nearly three years later, in 2018. Because Nealy’s suit was timely filed under the discovery rule, the Eleventh Circuit answered the district court’s certified question of whether damages in Nealy’s copyright action are limited to a three-year lookback period as measured from the filing date of the complaint by holding that Nealy may recover damages for infringing acts that occurred more than three years before the suit was filed.

Warner Chappell Music and Artist Publishing Group asked the Supreme Court to review the Eleventh Circuit’s judgment. Relying on the Supreme Court’s statements in Petrella v. Metro-Goldwyn-Mayer, 572 U.S. 663, Warner Chappell Music’s Petition argues that a plaintiff may not recover damages for any infringements occurring more than three years before the lawsuit was filed.

The Supreme Court held in Petrella v. Metro-Goldwyn-Mayer that laches cannot be a defense against a copyright infringement claim brought within the three-year statute of limitations. Petrella, 572 U.S. 663, 667-68, 134 S. Ct. 1962, 1971, 188 L. Ed. 2d 979 (2014). Plaintiff Petitioner Paula Petrella sought relief only for infringements occurring within the three years before she filed her complaint. Therefore, the question of whether a plaintiff may recover damages for infringing acts that occurred more than three years before filing its complaint when the discovery rule applies was not before the Supreme Court.

Since Petrella, certain circuits that apply the discovery rule—namely, the Second, Ninth, and Eleventh—have split on whether Petrella precludes a copyright plaintiff from recovering for infringement occurring more than three years before the plaintiff filed suit. The Second Circuit has held that under the discovery rule, a plaintiff may file suit over infringing conduct that occurred more than three years earlier, but may not recover any damages arising from that period because the Supreme Court “explicitly asserted that ‘a successful plaintiff can gain retrospective relief only three years back from the time of suit’ and that ‘[n]o recovery may be had for infringement in earlier years’.” Sohm v. Scholastic, Inc., 959 F.3d 39, 49 – 52 (2d. Cir. 2020) (quoting Petrella at 677, 134 S.Ct. 1962). In 2022, the Ninth Circuit declined to adopt the approach taken by the Second Circuit in Sohm and held that “the discovery rule…allows copyright holders to recover damages for all infringing acts that occurred before they knew or reasonably should have known of the infringing incidents and that the three-year limitations period runs from the date the claim accrued, i.e., from the date when the copyright holder knew or should have known of the infringement.” Starz Ent., LLC v. MGM Domestic Television Distribution, LLC, 39 F.4th 1236, 1244 (9th Cir. 2022). In the 2023 Nealy decision currently up on appeal, the Eleventh Circuit joined the Ninth Circuit in disagreeing with the Second Circuit’s interpretation of Petrella. The appeals court specifically stated that the Copyright Act “do[es] not place a three-year limitation on the recovery of damages for past infringement,” and held that a plaintiff may recover for infringement that occurred more than three years before the timely filing of a suit under the discovery rule. Nealy v. Warner Chappell Music, Inc., 60 F.4th 1325, 1334 (11th Cir.), cert. granted in part, 144 S. Ct. 478, 216 L. Ed. 2d 1313 (2023).

During Wednesday morning’s oral arguments in Warner Chappell Music, the parties addressed the specific question of “[w]hether, under the discovery accrual rule applied by the circuit courts and the Copyright Act’s statute of limitations for civil actions, a copyright plaintiff can recover damages for acts that allegedly occurred more than three years before the filing of a lawsuit.” Warner Chappell Music contended that the Copyright Act imposes a three-year limit on monetary relief except in cases of fraud and, therefore, that Nealy may not recover damages for any infringements occurring more than three years before he filed his lawsuit. In contrast, Nealy argued that the Copyright Act imposes no such limitation and that the three-year statute of limitation in the Copyright Act pertains only to when a lawsuit is time-barred. The U.S. solicitor general notably sided with Nealy, asking the Supreme Court to affirm the Eleventh Circuit’s ruling. While it is difficult to predict how the Supreme Court will rule, the justices’ line of questioning and remarks related to the Copyright Act’s statutory language and legislative history suggest some hurdles to adopting Warner Chappell Music’s position. For example, Justice Jackson asked counsel for Warner Chappell Music why the three-year statute of limitations specified in Section 507 is relevant to the damages discussion in Section 504 of the Copyright Act: “But what do we do with [Section] 504 and the discussion of being entitled to recover the actual damages suffered…? I take it your position is you can’t go back any more than three years, but I don’t see that in the statute.” Transcript of Oral Argument at 21, Warner Chappell Music, Inc. et al. v. Nealy et al. (No. 22-1078).

Many hope that whatever the Supreme Court decides, its ruling will clarify the issue and resolve the circuit split. Until then, copyright owners hoping to recover damages that occurred more than three years before the timely filing of a suit under the discovery rule will likely continue forum shopping, favoring bringing suit in the Ninth or Eleventh Circuit over the Second Circuit.