News & Insights

What Does the SCOTUS Nealy Decision Mean for Copyright Plaintiffs?

May 21, 2024


Plaintiffs suing under the Copyright Act, rejoice. If your case was timely filed pursuant to the discovery rule, you’re entitled to damages going back more than three years prior to the filing of your lawsuit.

On May 9, 2024, the Supreme Court issued its opinion in Warner Chappell Music, Inc., et al. v. Nealy et al., 144 S. Ct. 1135 (2024). The question in Nealy was whether, under cases filed pursuant to the discovery rule, a copyright plaintiff may recover damages for acts that allegedly occurred more than three years before the filing of a lawsuit. A six-person majority of the Court answered that question in the affirmative, holding that the “Copyright Act entitles a copyright owner to recover damages for any timely claim.” Id. at 1137.

In settling a decade-long circuit split on the correct interpretation of the Copyright Act’s damages provision, the Court began with the text. While the Act’s statute of limitations “establishes a three-year period for filing suit,” there is “no time limit on monetary recovery.” Id. at 5 (citing 17 U.S.C. § 507(a)-(c)). The Act states “without qualification that an infringer is liable either for statutory damages or for the owner’s actual damages and the infringer’s profits.” Id. (citing § 504(a)-(c)).

While the Court’s decision may appear simple, the disputed issue and circuit split was borne out of confusion surrounding the Court’s previous opinion in Patrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 670 (2014). In Patrella, a plaintiff sued for copyright infringement after she had “long known of the defendant’s infringing conduct” and thus could “not avail herself of the discovery rule.” Nealy, 144 S. Ct. at 1140. Accordingly, the plaintiff in Patrella was limited to damages “running only three years back from” the filing of the lawsuit. Id. (quoting Patrella, 572 U.S. at 672).

Over time, however, some courts—most notably the Second Circuit—interpreted Patrella more broadly as limiting the recoverable damages period to three years before filing suit in all copyright cases, even those where the plaintiff was not aware of its injuries for several years but timely filed suit under the discovery rule. See Sohm v. Scholastic, Inc., 959 F.3d 39, 51–52 (2d Cir. 2020). In rejecting this interpretation, the Supreme Court described the Second Circuit’s position as “self-defeating.” 144 S. Ct. at 1139. The Supreme Court observed that the Second Circuit’s interpretation would allow a litigant to bring a claim for infringement dating back several years under the discovery rule, only to limit the plaintiff’s recovery to damages sustained (if any) in the three years immediately preceding the lawsuit. Such a view “makes the discovery rule functionally equivalent” to the accrual rule. Id. The Court rejected applying a “judicially invented damages limit to convert one of them into the other.” Id.

Two things stand out in the Court’s opinion.

First, the Court assumed without deciding the antecedent question of whether the discovery rule may be properly applied in Copyright Act cases. Both sides in Nealy agreed that the discovery rule applied, and so both the district court and the Eleventh Circuit likewise assumed that Nealy’s claims were “timely under the discovery rule.” Id. at 1138 (quoting Warner Chappell Music, Inc., et al. v. Nealy, et al., 60 F. 4th 1325, 1331 (11th Cir. 2023)). Accordingly, the question of whether the discovery rule applies in Copyright Act cases was not before the Court, and the Court granted certiorari on a question which “incorporates an assumption: that the discovery rule governs the timeliness of copyright claims.” Id.  Although Warner Chappell attempted to reframe its challenge on appeal, the Court was unwilling to answer the question, confining its review of the case to only the disputed issue of whether damages are limited to three years under the Copyright Act.

Second, Nealy only applies in circuits where the discovery rule has been upheld in the context of the Copyright Act. The Court was careful in describing its holding as generally applying to a “timely claim” for infringement, regardless of whether the discovery rule applies. Id. at 1139.

The dissent, authored by Justice Gorsuch and joined by Justices Thomas and Alito, expressed disagreement with the Court’s decision to avoid answering the antecedent question of whether the discovery rule applies. In Justice Gorsuch’s view, “the Act almost certainly does not tolerate a discovery rule,” leading to the conclusion that damages beyond three years would not be permissible under the Act. 144 S. Ct. at 1140 (Gorsuch, J., dissenting). Justice Gorsuch stated that he would have dismissed the case as improvidently granted and awaited another case that squarely presented the question of whether the Act authorizes the discovery rule.

The disagreement amongst the justices regarding the discovery rule means that the issue is almost certain to appear before the Court in the right case. Until then, “a copyright owner possessing a timely claim for infringement is entitled to damages, no matter when the infringement occurred.” Id. at 1139.

The Court’s opinion may be accessed here.

Maryam Ghaffar 713.951.6208