Statute of Litigations: The Supreme Court Remixes Copyright Rules

The Supreme Court has granted a petition to review the Eleventh Circuit’s decision in Nealy v. Warner Chappell Music, Inc. to resolve a circuit split regarding the Copyright Act’s statute of limitations and the circuit courts’ discovery rules regarding copyright infringement.

An exciting function of the Supreme Court is addressing federal circuit splits , which occur when the wording or precedent for a legal issue is ambiguous enough to leave multiple reasonable interpretations. The issue in the present case, Nealy v. Warner Chappell Music, Inc., revolves around confusion regarding whether the statute of limitations for a copyright infringement claim begins at the time of injury or the time of discovery of said injury. Hopefully, this confusion  will be resolved once and for all by a pending Supreme Court decision.

The Copyright Act’s statute of limitations states that “[n]o civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.” Two rules generally apply to the recovery of damages under the Copyright Act. The first is the discovery rule, which is applied in cases where a plaintiff discovered, or reasonably should have discovered the infringement. The second is the injury rule, which is applied where the infringement occurred within three years of filing the suit.

The origin of the issue in Nealy is the Supreme Court’s unclear language interpreting this provision in Petrella v. Metro-Goldwyn-Mayer, Inc., which was a case decided under the injury rule. In Petrella, the Court observed that “a successful plaintiff can gain retrospective relief only three years back from the time of suit.” This observation sparked a divergence in interpretation among various circuit courts.

The Second Circuit interpreted the phrase "from the time of suit" literally and applied it to cases brought under both the injury rule and the discovery rule. This interpretation led to a scenario where a plaintiff utilizing the discovery rule (where the infringing activity did not occur within the past three years) might be restricted from receiving damages for infringement that occurred more than three years before filing the suit, despite being allowed to file the suit within three years of learning of the infringement.

Conversely, the Ninth Circuit held that the "from the time of suit" language applied exclusively to cases using the injury rule, ensuring that it would not limit or exclude discovery rule plaintiffs from damages, unlike in the Second Circuit. This distinction is critical as it shows how the interpretation of the Supreme Court’s language can significantly impact a plaintiff's ability to seek compensation for copyright infringement brought under the discovery rule.

With respect to Nealy, the plaintiff was in and out of prison when the alleged copyright infringement by Warner Chappell Music occurred. He did not learn of it until eight years later but filed suit within three years of discovering the injury. In Nealy, the Eleventh Circuit adopted the Ninth Circuit’s interpretation, holding that “from the time of suit” only applied to injury rule cases. This ruling allowed Nealy to recover for damages that occurred as many as ten years before the filing of his claim based on the premises that he could not have reasonably known of the infringements during his stint in prison, and that he filed suit within three years of discovering of the infringement after he was released from prison.

On September 29, 2023 the Supreme Court granted Warner Chappell Music’s petition for a writ of certiorari to review the Eleventh Circuit’s decision. The Court will consider whether the Ninth and Eleventh Circuits’ interpretation of the “from the time of suit” language aligns with the original intentions of the Copyright Act. If the Court decides to reverse the Eleventh Circuit’s decision, plaintiffs going forward will bear the burden of uncovering breaches within the three-year statute of limitations to avoid losing out on a right to damages.