Intellectual Property

Supreme Court Permits Unlimited Damages for Copyright Owners Relying on Discovery Doctrine

Copyright owners are celebrating a major victory in the United States Supreme Court. In the case of Warner Chappell Music, Inc. v. Nealy, decided May 9, 2024, the Court held that a plaintiff who brings a copyright infringement action within three years of discovering the infringement can recover damages dating back to the original infringement, even if it occurred decades ago. 

Under the Copyright Act, a plaintiff must file suit within three years of the accrual of the infringement claim. Traditional notions of statutes of limitations dictate that, for an ongoing tort or statutory violation, a claim accrues each time there is a violation. For example, if a song that infringed on a copyrighted song was reproduced or publicly performed yesterday, then an infringing act occurred yesterday, and the copyright owner would have three years to file suit. Even if the song was very old, the plaintiff could have a valid infringement claim due to ongoing infringement. As a result, under this theory of accrual, the copyright owner could recover damages that accrued during the three years immediately preceding the lawsuit, or infringements within the statute of limitations, also known as the “look-back period.”  

The Supreme Court upheld the accrual rule in the matter of Petrella v. Metro-Goldwyn-Mayer, Inc. While the holding of the case was that the laches doctrine could not be used to limit a plaintiff’s rights when Congress has enacted a governing statute of limitations, the Court approved the look-back period to limit recoverable damages. In allowing a plaintiff to wait to judge the success of an infringing work and decide “whether litigation is worth the candle,” the Court stated that the plaintiff “will miss out on damages for periods prior to the three-year look-back.” 

Rather than simply accepting the damages limitations caused by the look-back rule, the plaintiff in Nealy argued that his damages should not be limited at all because he only discovered, for the first time, the infringement during the three years prior to filing suit. This was not a case of the plaintiff waiting to see if litigation was worth the candle. If the late discovery limited damages, then the discovery doctrine would not serve its purpose.

But the District Court limited the plaintiff’s damages to the look-back period, finding that “even when claims for old infringements are timely, monetary relief is ‘limited’ to ‘the three years prior to the filing’ of the action.” 

The Court of Appeals for the Eleventh Circuit reversed. The court held that a plaintiff with a timely claim under the discovery rule may obtain relief for infringement even if it occurred more than three years before the lawsuit was filed. The court reasoned that the Copyright Act does not include a separate damages bar for an otherwise timely copyright claim. 

The Supreme Court began its opinion with an important premise—that the discovery rule governs the timeliness of copyright claims. Warner Chappell did not challenge that legal issue, so the Court left the issue unsettled. The circuits are split on this issue, but, at least for now, the Eleventh Circuit continues to follow the discovery rule for copyright infringement actions. 

Assuming the applicability of the discovery doctrine, the Supreme Court held that there is no time limit on monetary recovery. The holding is significant because the Copyright Act permits recovery of both the copyright owner’s actual damages and the infringer’s profits. 17 U.S.C. § 504(a) – (c).

Copyright holders should take special notice of the holding in Nealy for two reasons. First, a plaintiff must move relatively quickly upon discovering infringement of her work if she wants to maximize her recovery. A copyright owner should memorialize the date of the discovery to mark the beginning of the three-year window to file a lawsuit. That window must be strictly observed to preserve a claim for the maximum amount of damages. An owner should contact intellectual property counsel in plenty of time to file a copyright infringement lawsuit before the expiration of the three-year period. 

Second, plaintiffs (and copyright counsel) may adequately plead the discovery doctrine to maximize the potential recovery of damages based on the infringer’s profits, as opposed to relying merely on the fact that an act of infringement occurred within the last three years.  If the infringing work has been successful over a long period of time, this pleading decision could be the difference between a significant damages recovery and an average one.

Turkel Cuva Barrios is experienced in copyright infringement actions, having represented numerous artists in claims for money damages and injunctive relief. Contact us if you have any questions or are in need of counsel.