What You Need to Know
- Key takeaway #1The Supreme Court’s decision in this case will have significant implications for copyright plaintiffs seeking to recover damages for acts that occurred prior to the statute of limitations. It could clarify whether the discovery rule or the injury rule approach is correct, and create a consistent rule across all circuits.
- Key takeaway #2We advise that copyright holders consult with legal counsel to ensure compliance with applicable statutes of limitations and other relevant legal requirements. Stay informed about developments in copyright law to make informed decisions regarding potential claims and litigation strategies.
The U.S. Supreme Court has granted review of an 11thCircuit ruling in the case of Nealy et al. v. Warner Chappell Music Inc. et al. The issue at hand is whether a copyright plaintiff can recover damages for acts that allegedly occurred more than three years before filing the case. Specifically, the court will examine the application of the discovery accrual rule, which determines when the clock starts ticking for the statute of limitations in copyright infringement cases. Warner Chappell Music argues that a copyright plaintiff should not be able to recover damages for acts that occurred outside the three-year statute of limitations. The company aims to establish a precedent that would limit the timeframe in which copyright plaintiffs can seek additional damages.
The 11thCircuit had previously held that Nealy could recover damages for acts that occurred prior to the three-year statute of limitations, as he only discovered the infringements within the last three years of filing the lawsuit. The Eleventh and Ninth Circuits both have ruled that a plaintiff who timely files a copyright lawsuit within three years of the date by which they knew or should have known about their claim avoids a statute of limitations bar (discovery rule) and can recover damages for infringements taking place more than three years prior. Other circuits, like the Second Circuit, do not allow damages recovery prior to three years from infringement under the discovery rule, but apply the time passed to when the plaintiff was injured (injury rule).
The Supreme Court previously applied the injury rule used by the 9thCircuit in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014), finding recoverable damages were limited to a three-year period from before the time of filing the suit, but left open the question of whether a claim is timely in a discovery rule jurisdiction even when the infringement occurred more than three years before filing suit. Applying the injury rule in Petrella, the Court held that claims brought fourteen years after an act of infringement were barred by the three-year statute of limitations. The opinion explained that defendants couldn’t invoke a laches defense for copyright claims damages, as the Copyright Act contains a statute of limitations, but laches may limit equitable relief in extraordinary circumstances. Courts that apply the discovery rule, however, allow for claims within three years of the plaintiff discovering the infringement, regardless of when the discovery actually occurred. In discovery rule jurisdictions, a lawsuit for an infringement four or more years old could still be brought; however, damages would still be limited to three years prior to filing suit.
Take Action: Copyright holders and in-house counsel should be diligent in reviewing their existing potential copyright infringement cases, and assess implications based on the Supreme Court’s forthcoming decision. Consider your company’s or firm’s resources utilized to track and review potential infringements of copyrights, and act as soon as possible to avoid a time-barred dismissal or reduced damages for infringement.
For further information, please contact:
William H. Frankel, Partner, Crowell & Moring
wfrankel@crowell.com
