By: Jason Raff, Law Clerk, Gray Ice Higdon, PLLC
On May 9, the Supreme Court resolved an important question about whether the three-year statute of limitations under the Copyright Act also limits monetary damages to a period of three years before filing suit. In a 6-3 decision authored by Justice Elena Kagan, the Court held in Warner Chappell Music, Inc. v. Nealy, that a copyright owner can obtain monetary damages for any timely infringement claim, no matter when the infringement occurred.
The decision resolved a split among the Federal Circuit Courts of Appeals resulting from differing interpretations of the Supreme Court’s last major decision about the recovery of damages for copyright claims in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014). Confusing language in Petrella caused the circuit courts to split over whether there was a three-year lookback period on damages for timely claims even if the plaintiff did not or could not discover the infringements which occurred more than three years before filing suit.
The facts in the Nealy case clearly illustrate the issue. Imagine you are an aspiring musical artist who has recorded a few songs, but whose career has not yet taken flight. You make some poor choices and end up in prison. When you get out ten years later, you discover that all the while a record company has been profiting from your songs. You immediately hire a lawyer to file suit for copyright infringement, claiming money damages for the last ten years. You win the case, but the infringer argues that, under Petrella, you can only recover damages for the three years prior to filing suit, while the infringer gets to keep its profits from the remaining seven years of infringements. The trial court held that the suit was timely filed, so damages were owed for the entire ten-year period.
The Supreme Court majority opinion assumed, without deciding, that a copyright infringement claim is timely if filed within three years after the infringement is discovered or reasonably could have been discovered. This is known as the “discovery” rule, which is currently the rule for copyright cases in all Federal Circuit Courts. The question of whether the discovery rule applies at all in copyright cases was not before the Court—though it came up in oral arguments.
The three dissenting justices argue that the case should have been dismissed because a pending petition for certiorari in another case (Hearst Newspapers, L.L.C., et al. v. Antonio Martinelli) would, if granted, allow the Court to rule on whether the discovery rule should apply in copyright infringement cases. The dissent would not apply the discovery rule, and instead, apply the “injury rule.” Under the injury rule, the three-year statute of limitations runs from the date the “injury,” or infringement, first occurs. In the Nealy case, the infringement started ten years earlier, and therefore, damages from infringements that occurred more than three years before the date of suit would have been barred as untimely under the injury rule. Thus, while the Nealy case allows a plaintiff to look back more than three years for recovery, repeal of the discovery rule would lead to drastically different results. For this reason, the impact of the Nealy case will not be known until there is a resolution of the Hearst case. If the Court decides to grant certiorari and hear the case, the discovery rule will be under scrutiny. If the petition for certiorari is denied, the discovery rule will remain in place.
What does this mean for you? If you run a creative business or are a copyright owner, the Nealy decision is good news. Despite new technologies that allow easier discovery of infringements, particularly if they occur online, infringements can still be difficult to detect. A person in a car wreck will know when an injury occurs. By contrast, an author may not necessarily know when an infringer has sold copies of their book in another country. Many creators simply do not have the time or resources to scour the world for potential infringements of their works.
If you are a business or individual who consumes content that may be protected by copyright, the decision in Nealy means you can be exposed to damages claims for long-term infringement. This is particularly troublesome when you are unaware that the action constitutes infringement. You should always try to obtain permission or licenses from copyright owners before using copyrighted works such as photographs, visual artworks, music, video clips, magazine articles, and computer code.
Attorneys at Gray Ice Higdon are experienced in all aspects of copyright law and intellectual property, including registration, counseling, licensing, enforcement, and litigation of IP rights. We look forward to helping you with your IP needs.
