Long Anticipated Supreme Court Copyright Decision Falls Short of Expectations

Supreme Court building

The Supreme Court sidestepped the main question.

On May 9, 2024, the United States Supreme Court issued its decision in Warner Chappell Music Inc. v. Nealy.  Frankly, it was a letdown for those hoping to have an answer to the question of when a Copyright lawsuit accrues. Under the Copyright Act, a plaintiff must file suit “within three years after the claim accrued.” The big question is when does the claim accrue? Is it when the infringement occurred? When it was discovered? Or when it should have been discovered. The Federal Circuit Courts disagree on this question. It was hoped that this case would provide the answer, but that didn’t happen.

Background of the case

In 1983, Sherman Nealy and Tony Butler formed Music Specialist, Inc, which recorded and released one album and several singles, including the works at issue. This collaboration dissolved a few years later. Nealy went to prison on drug charges, and Butler, unbeknownst to Nealy, licensed the Music Specialist catalog to Warner Chappell who had success in promoting some of the works. In 2018, after leaving prison, Nealy sued Warner Chappell for copyright infringement. He claimed the infringement went back 10 years and that he didn’t discover the infringement until 2016.  Under the discovery rule, his lawsuit was timely filed.

The Court’s Decision

The Supreme Court defined the question that it was answering. “The question on which this Court granted certiorari is “[w]hether, under the discovery accrual rule applied by the circuit courts,” a copyright plaintiff “can recover damages for acts that allegedly occurred more than three years before the filing of a lawsuit.”  The Court made it clear that it was not answering the bigger question of when a copyright lawsuit accrues. Only the narrower question of, when a suit is timely filed, are damages limited to a three year period from the filing date of the lawsuit.

The majority opinion stated, “In this case, we assume without deciding that a claim is timely under that provision if brought within three years of when the plaintiff discovered an infringement, no matter when the infringement happened.”

What the Court did decide was, “no such limit on damages exists (referring to a three-year limitation on damages). The Copyright Act entitles a copyright owner to recover damages for any timely claim.”

The Dissenting Opinions

Three justices dissented and stated that the majority “sidesteps the logically antecedent question whether the Act has room for such a rule. Rather than address that question, the Court takes care to emphasize that its resolution must await a future case. The trouble is, the Act almost certainly does not tolerate a discovery rule (emphasis added) and that fact promises soon enough to make anything we might say today about the rule’s operational details a dead letter.”  They stated that the majority answered a question that doesn’t matter.

The Takeaway

The question of when a Copyright lawsuit accrues is still dependent on where the lawsuit is filed. Federal law dictates that copyright actions can only be brought in a district in which the defendant (the party alleged to have committed the violation) resides or may be found. If you have a copyright claim that occurred more than three years before filing suit, but that was discovered within three years of filing suit, you’re okay if the infringer is within a “discovery jurisdiction.” You can file your case and collect damages for the entire period of infringement. If the defendant is in a jurisdiction that holds that you must file within three years of the infringement, you are barred from suing.

The big question of when the lawsuit accrues will have to await another case that the Supreme Court decides to take up. Hopefully, that will be soon, so we will all know the answer to this question. Based upon the dissent’s comments, and the majority’s silence, the discovery rule will likely not to survive. As the dissent stated, “A copyright claim thus arises or ‘accrue[s]’ when an infringing act occurs, not at some later date.”

About the Author:

Bill Honaker, “The IP Guy” is a former USPTO Examiner, a partner with Dickinson-Wright, and author of the forthcoming book, Invisible Assets – How to Maximize the Hidden Value in Your Business. To download a sample chapter, click here.

To get answers to your questions click here. To schedule a time to talk, you can access my calendar by clicking here, email Bill@IPGuy.com, or call me at 248-433-7381.

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