The U.S. Supreme Court agreed on Friday to hear a case this term to decide whether a copyright plaintiff can recover damages for acts that occurred more than three years after the filing of a lawsuit. The case is poised to resolve a judicial split among the federal courts of appeal in how they apply the U.S. Copyright Act’s three-year statute of limitations and prior Supreme Court precedent in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014).
The case is styled Warner Chappell Music Inc. v. Sherman Nealy and arises out of musician Sherman Nealy’s claims that Warner Chappell did not have authority to sublicense various musical compositions that Nealy had helped fund and create with his former business partner, disc jockey Tony Butler, in the 1980s. Among the compositions at issue is a composition called “Jam the Box” that Butler independently licensed for use in Flo Rida’s 2008 hit song “In the Ayer.”
Following two lengthy prison sentences, Nealy reportedly learned of the alleged infringement in January 2016 and filed suit in the Southern District of Florida in December 2018—more than ten years after the alleged infringement began and almost three years after learning about it. The district court relied on the Supreme Court’s prior holding in Petrella to conclude that the plaintiffs could not recover damages for acts that occurred more than three years before filing suit. On interlocutory appeal, the Eleventh Circuit reversed.
The basis for the legal question stems from the U.S. Copyright Act’s provision requiring that civil actions be “commenced within three years after the claim accrued.” 17 U.S.C. § 507. Federal courts across the country have applied this provision using one of two different rules: the injury rule, which states that a claim accrues with each act of infringement, and the discovery rule, which starts the clock for statute of limitation purposes once a plaintiff knows or reasonably should have known of the infringement. The Eleventh Circuit applies the discovery rule and therefore held that a plaintiff should be able to recover damages for infringing acts occurring more than three years before the lawsuit’s commencement, so long as the plaintiff brought a timely claim under the discovery rule.
In reaching this decision, the Eleventh Circuit sided with the Ninth Circuit’s holding on the same issue in Starz Entm’t, LLC v. MGM Domestic Television Distrib., LLC, 39 F.4th 1236, 1242-44 (9th Cir. 2022), deepening the split with the Second Circuit’s holding in Sohm v. Scholastic Inc., 959 F.3d 39, 49-50 (2d Cir. 2020) (barring recovery for all acts of infringement occurring before the three-year look-back period). In reaching its decision in Sohm, the Second Circuit relied on the Supreme Court’s opinion in Petrella, in which the Supreme Court had held that the equitable defense of laches is not available to copyright defendants because “an infringement is actionable within three years, and only three years, of its occurrence.”
The Ninth and Eleventh Circuits, meanwhile, distinguished Petrella on the basis that the holding only applied to cases involving the injury rule, and not to discovery-rule cases, where the defense of laches would not be in issue. Both courts of appeal also raised concerns that limiting damages to three years before filing suit would eviscerate the utility of the discovery rule and lead to the creation of timely claims without recoverable damages.
This is the situation that Nealy and his music company are potentially facing as the respondents in the suit. Noting “the vast bulk of damages being sought fall outside of the three-year lookback period,” the district court in Florida granted the parties’ motion for interlocutory appeal in recognition of the fact that limiting the recovery to three years prior “will render this matter no longer practical to pursue.”
The outcome of this case should resolve the split among the circuits as to whether a plaintiff bringing copyright claims within three years of discovery can recover damages for infringing actions occurring more than three years before commencement of the suit. The case will also hopefully provide more guidance on the application of the discovery rule, which the Court previously declined to address in Petrella. In the meantime, copyright owners contemplating litigation should consider filing suit sooner rather than later to avoid losing the opportunity to recover damages on active incidents of infringement.
