Supreme Court solves only half of the Copyright damages question

Uncover how copyright damages are calculated and what you need to know to protect your creative work. Keep reading to learn the critical factors that courts consider when awarding compensation for copyright infringement.

by Stephen Carlisle of Nova Southeastern University

On May 9, 2024, the Supreme Court definitively ruled that damages in a copyright infringement suit were unlimited. In other words, as long as the suit was timely filed, damages for infringement could be recovered, no matter how old they might be. ¹ What they failed to answer was when a copyright lawsuit was “timely filed.”

The case arose from a copyright lawsuit brought by Sherman Nealy against Warner Chappel Music and other defendants. He claims his works were infringed multiple times dating back to 2008. ² Normally, one must file suit within three years from when the claim “accrues.” ³The question is, when does the claim accrue? There are two different rules applied by the Courts. The first is three years from when the infringement starts. The other is the “discovery” rule: that the claim accrues when the copyright owner knows or should have known that an infringement has occurred.

As to this case, the Plaintiff has a pretty good excuse for not knowing about the infringements sooner: he was in prison for over 22 years. During that period, his songs made it into a good many recordings, including FloRida’s “In The Ayer” which went to number 9 in the Billboard charts and sold over a million copies. ⁴

In the suit, Warner agreed that Nealy could use the “discovery rule” for the purposes of deciding whether the claim was timely filed, but argued he was limited to damages only for the three years preceding the filing of the suit. ⁵ The trial court agreed, but the 11^th Circuit reversed, citing the Ninth Circuit’s decision in Starz v. MGM, a case I wrote about previously. ⁶

“[T]he plain text of the Copyright Act,” the Eleventh Circuit stated, “does not support the existence of a separate damages bar for an otherwise timely copyright claim.” [citation omitted] And imposing such a bar, the court reasoned, “would gut the discovery rule by eliminating any meaningful relief” for the very claims it is designed to preserve.” ⁷

And now, the Supreme Court of the U.S. agrees.

“The text of the Copyright Act answers that question in favor of copyright plaintiffs. The Act’s statute of limitations provides in full: “No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.” [citation omitted] That provision establishes a three-year period for filing suit, beginning to run when a claim accrues—here, we assume, upon its discovery. And that clock is a singular one. The “time-to-sue prescription,” as we have called it, establishes no separate three-year period for recovering damages, this one running from the date of infringement. [citation omitted] If any time limit on damages exists, it must come from the Act’s remedial sections. But those provisions likewise do not aid a long-ago infringer. They state without qualification that an infringer is liable either for statutory damages or for the owner’s actual damages and the infringer’s profits. [citation omitted] There is no time limit on monetary recovery. So a copyright owner possessing a timely claim for infringement is entitled to damages, no matter when the infringement occurred.” ⁸

And:

“The…contrary view, on top of having no textual support, is essentially self-defeating. With one hand, [it] recognizes a discovery rule, thus enabling some copyright owners to sue for infringing acts occurring more than three years earlier. And with the other hand, [it] takes away the value in what it has conferred, by preventing the recovery of damages for those older infringements. As the court below noted, the three-year damages bar thus “gut[s]” or “silently eliminate[s]” the discovery rule. [citation omitted] Or said another way, the damages bar makes the discovery rule functionally equivalent to its opposite number—an accrual rule based on the timing of an infringement.” ⁹

But, as the dissent points out, the Court fails to rule on the prerequisite: should the “discovery rule” be allowed at all? For if a Court rules that the three-year limitation begins when the infringement occurs, discovered or not, then the damages extension granted by the SCOTUS means nothing. It’s at best half of a full resolution of the issue.

Also, even though the Court may accept the “discovery rule,” it could refuse to apply it given the “relative sophistication” of the Plaintiff. As this Court stated:

“Plaintiff’s relative sophistication as an experienced litigator in identifying and bringing causes of action for unauthorized uses of [Plaintiff’s] copyrighted works leads to the conclusion that it should have discovered, with the exercise of due diligence, that the Rose Photographs were posted within the three-year limitations period. In this respect, as Defendants persuasively argue, this case is akin to Minden Pictures, Inc. v. Buzzfeed, Inc., {citation omitted] (“Minden”). In that case, although the plaintiff alleged that it had been unable to discover infringing activity until many years after it began, the court nevertheless dismissed the copyright claim as time-barred, reasoning that a “reasonable copyright holder in Minden Pictures’ position—that is, a seasoned litigator that has filed 36 lawsuits to protect its copyrights, beginning as early as [seven years before the complaint]—should have discovered, with the exercise of due diligence, that its copyright was being infringed within the statutory time period.” [citation omitted] The same logic applies with equal force here, where Plaintiff had filed 134 separate copyright infringement cases between 2010 and early 2022.” ¹⁰

So as with the Plaintiff here, the Court could accept the “discovery rule” but still rule that Nealy should have discovered it sooner.

22 years is a long time.

Notes:

1. Warner Chappel Music, Inc. v. Nealy 2024 WL 2061137 ↩
2. Id. at 3 ↩
3. 17 USC 507 (b) ↩
4. Nealy at 3 ↩
5. Id. ↩
6. Court of Appeals Rules That a Timely Filed Copyright Infringement Lawsuit Can Recover All Damages, No Matter How Long Ago They Occurred ↩
7. Nealy at 4 citing 60 F.4^th 1325 (11^th Cir. 2023) ↩
8. Nealy at 4 ↩
9. Id. ↩
10. Michael Grecco Productions, Inc. v. RADesign, Inc.678 F.Supp.3d 405 (SDNY 2023) ↩