On May 9, 2024, in a 6–3 decision, the United States Supreme Court held that the Copyright Act does not limit monetary damages for copyright infringement to those incurred within the three-year statute of limitations: “There is no time limit on monetary recovery,” the Supreme Court declared, “[s]o a copyright owner possessing a timely claim for infringement is entitled to damages, no matter when the infringement occurred.”[1] However, the Supreme Court did not decide the broader question of whether the Copyright Act incorporates a discovery rule extending the copyright holder’s deadline for filing a case based on when it discovers or reasonably should have discovered the infringement, rather than when the infringement occurred. While those Courts of Appeals that have addressed the issue have unanimously applied the discovery rule to the Copyright Act,[2] Nealy calls into question whether a copyright infringement claim accrues when the infringing activity occurs, or when the copyright holder discovers or reasonably should have discovered the infringement.

The Path to the Supreme Court

The dispute in Nealy involved rapper and music producer Sherman Nealy’s copyright infringement claim arising from works recorded and released in the 1980s by Music Specialist Inc., a company that Nealy formed with disc jockey Tony Butler. In the years following Music Specialist’s release of various recordings, the company dissolved and Nealy went to prison twice on drug-related charges—first from 1989 to 2008, and later from 2012 to 2015. While Nealy was in prison, Butler, unbeknownst to Nealy, agreed with Warner Chappell Music to license works from the Music Specialist catalogue to recording artists including Flo Rida, The Black Eyed Peas and Kid Sister, who in turn interpolated the works into their hit songs.

In 2016, after his release from prison, Nealy learned about Warner Chappell’s licensing activity. In 2018, within three years after that discovery, Nealy sued Warner Chappell for copyright infringement in the U.S. District Court for the Southern District of Florida. According to Nealy, beginning in 2008, Warner Chappell licensed songs without Nealy’s consent in violation of his copyrights. Nealy sought damages and profits generated during the decade before he brought his lawsuit. In the District Court, Warner Chappell accepted that the discovery rule applied and Nealy’s claims were therefore timely, but argued that Nealy could not recover damages or profits for acts of infringement occurring earlier than the beginning of the Copyright Act’s three-year statute of limitations period.

The District Court in South Florida agreed with Warner Chappell and imposed a three-year limit on Nealy’s monetary recovery. Applying Second Circuit precedent, the court determined that Nealy “could bring claims for infringing acts beyond th[e] three-year period, but could not recover any money for them.”[3] On interlocutory appeal, the Eleventh Circuit reversed. Opting instead to follow the Ninth Circuit, the Eleventh Circuit held that “a plaintiff with a timely claim under the discovery rule may obtain ‘retrospective relief for [an] infringement’ even if it ‘occurr[ed] more than three years before the lawsuit’s filing.’”[4]

The Supreme Court Decision

The Supreme Court granted certiorari to resolve the Circuit split on the question of whether a plaintiff with a timely copyright infringement claim under the discovery rule can recover damages going back more than three years.[5] The Supreme Court so decided, affirming the Eleventh Circuit. Justice Kagan authored the majority opinion, in which Justices Roberts, Barrett, Sotomayor, Kavanaugh and Jackson joined. Justice Gorsuch filed a dissenting opinion, in which Justices Thomas and Alito joined.

The majority undertook a plain-meaning interpretation of the Copyright Act. Section 507(b) contains a “time-to-sue prescription,” which 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.”[6] The Supreme Court observed that the Copyright Act’s remedial sections “state without qualification that an infringer is liable either for statutory damages or for the owner’s actual damages and the infringer’s profits.”[7] Thus, the Supreme Court held, “a copyright owner possessing a timely claim for infringement is entitled to damages, no matter when the infringement occurred.”[8]

Section 507(b) of the Copyright Act provides that a lawsuit must be filed “within three years after the claim accrue[s],”[9] but does not specify when a claim accrues. Because at the trial court level Warner Chappell accepted that the discovery rule applied and Nealy’s claims were thus timely, that issue was ineligible for review when the case reached the Supreme Court.[10] The Supreme Court therefore left for another day the question of what qualifies as “a timely claim for infringement.”[11]

Supreme Court guidance on whether lower courts may apply the discovery rule to determine the timeliness of a copyright infringement claim is murky. In Petrella v. Metro-Goldwyn-Mayer, Inc. (2014), the Supreme Court stated that “a copyright claim … arises or ‘accrue[s]’ when an infringing act occurs.”[12] However, in a footnote in which it qualified that it had “not passed on the question,” the Supreme Court acknowledged that, at the time, “nine Courts of Appeals ha[d] adopted … a[n alternative copyright] ‘discovery rule’ which starts the limitations period when the plaintiff discovers, or with due diligence should have discovered, the injury that forms the basis for the claim.”[13] To date, all Courts of Appeals that have addressed the issue have adopted the discovery rule in copyright infringement actions.[14]

In his dissenting opinion joined by Justices Thomas and Alito, Justice Gorsuch opined that the Supreme Court should not have granted certiorari on the remedial issue without consideration of the discovery rule.[15] Instead, the dissenters would have waited to grant certiorari in a case that presented the question of whether the Copyright Act authorizes the discovery rule.[16] Were the Supreme Court to hear that case, the dissenters would not so decide, ramming against the headwinds of the Courts of Appeals. The dissent leaned into the principle that courts should “apply the discovery rule only in cases of fraud or concealment … [u]nless the statute at hand directs otherwise.”[17] According to the dissenters, because the Copyright Act is silent as to when an infringement claim accrues, “[t]he discovery rule … has no role to play … in the mine run of copyright cases.”[18]

The Takeaway

Rejecting the discovery rule in copyright infringement actions would deal a significant blow to copyright holders, particularly smaller holders who lack tools or resources to monitor and identify infringing uses of their works. Fortunately for copyright holders, the Supreme Court appears unlikely to upend the status quo any time soon. On May 20, 2024, two weeks after it decided Warner Chappell v. Nealy, the Supreme Court denied certiorari in a case that squarely presented the question of whether the Copyright Act incorporates a discovery rule.[19]

[1] Warner Chappell Music, Inc. v. Nealy, 144 S. Ct. 1135, 1139 (2024).

[2] See, e.g., Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199, 202 (4th Cir. 1997); Bridgeport Music, Inc. v. Rhyme Syndicate Music, 376 F.3d 615, 621 (6th Cir. 2004); Warren Freedenfeld Assocs. v. McTigue, 531 F.3d 38, 46-47 (1st Cir. 2008); William A. Graham Co. v. Haughey, 568 F.3d 425, 437 (3d Cir. 2009); Diversey v. Schmidly, 738 F.3d 1196, 1200 (10th Cir. 2013); Chi. Bldg. Design, P.C. v. Mongolian House, Inc., 770 F.3d 610, 614 (7th Cir. 2014); Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120, 124-25 (2d Cir. 2014); Starz Ent., LLC v. MGM Domestic Television Distrib., LLC, 39 F.4th 1236, 1238 (9th Cir. 2022); Nealy v. Warner Chappell Music, Inc., 60 F.4th 1325, 1330-31 (11th Cir. 2023); Martinelli v. Hearst Newspapers, LLC, 65 F.4th 231, 233 (5th Cir. 2023).

[3] Warner Chappell Music, Inc. v. Nealy, 144 S. Ct. at 1138.

[4] Id. (citing Nealy v. Warner Chappell Music, Inc., 60 F.4th 1325, 1331 (11th Cir. 2023)).

[5] Id. (citing Warner Chappell Music, Inc. v. Nealy, 144 S. Ct. 478 (2023)).

[6] 17 U.S.C. § 507(b).
[7] Warner Chappell Music, Inc. v. Nealy, 144 S. Ct. at 1139 (emphasis added) (citing 17 U.S.C. § 504(a)–(c)).

[8] Id.

[9] 17 U.S.C. § 507(b).

[10] Despite this, Warner Chappell tried to raise the discovery rule issue after the Supreme Court agreed to hear the case. See Warner Chappell Music, Inc. v. Nealy, 144 S. Ct. at 1139 n.1 (“Disregarding the limit in the reformulated question, Warner Chappell’s briefing in this Court focuses almost entirely on the discovery rule itself. That choice is especially surprising given that Warner Chappell’s own petition for certiorari raised the broader discovery-rule issue only in a footnote, which acknowledged that the issue was not raised below and is not the subject of a Circuit split.”).

[11] Warner Chappell Music, Inc. v. Nealy, 144 S. Ct. at 1139.

[12] See Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 670 (2014).

[13] See id. at 670 n.4 (quotations omitted).

[14] See, e.g., Chi. Bldg. Design, P.C. v. Mongolian House, Inc., 770 F.3d 610, 614 (7th Cir. 2014); Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120, 124-25 (2d Cir. 2014); Starz Ent., LLC v. MGM Domestic Television Distrib., LLC, 39 F.4th 1236, 1238 (9th Cir. 2022); Nealy v. Warner Chappell Music, Inc., 60 F.4th 1325, 1330-31 (11th Cir. 2023); Martinelli v. Hearst Newspapers, LLC, 65 F.4th 231, 233 (5th Cir. 2023). See also 3 Melville Nimmer, Nimmer on Copyright § 12.05 (2024).

[15] Warner Chappell Music, Inc. v. Nealy, 144 S. Ct. at 1140 (Gorsuch, J., dissenting).

[16] Id.

[17] Id. at 1141 (quoting TRW Inc. v. Andrews, 534 U.S. 19, 27 (2001)).

[18] Id.

[19] Martinelli v. Hearst Newspapers, LLC, 65 F.4th 231 (5th Cir. 2023), cert. denied, No. 23-474 (May 20, 2024).