The US Supreme Court has ruled in favor of Sherman Nealy, a record producer who sued Warner Music for copyright infringement over a 2008 song by rapper Flo Rida, finding “there is no time limit on monetary recovery” in copyright cases filed before the statute of limitations has expired.
As the decision notes,
Under the Copyright Act, a plaintiff must file suit “within three years after the claim accrued.” 17 U. S. C. §507(b). On one understanding of that limitations provision, a copyright claim “accrue[s]” when “an infringing act occurs.” Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U. S. 663, 670. But under an alternative view, the so-called discovery rule, a claim accrues when “the plaintiff discovers, or with due diligence should have discovered,” the infringing act. Ibid., n. 4. That rule enables a diligent plaintiff to raise claims about even very old infringements if he discovered them within the three years prior to suit.
The case has a long history.
In 1983, Nealy and Tony Butler formed Music Specialist, Inc., a company that recorded and released one album and several singles, including the works at issue in this case.
A few years later, the collaboration dissolved and Nealy went to prison for drug-related offenses, serving from 1989 to 2008 and 2012 to 2015.
Butler (unbeknownst to Nealy) entered into an agreement with Warner Chappell Music, Inc. to license works from the Music Specialist catalog.
As the Court noted,
One Music Specialist work (“Jam the Box”) was interpolated into Flo Rida’s hit song “In the Ayer,” which sold millions of copies and reached No. 9 on the Billboard chart. Use of that song was in turn licensed to several popular television shows, including “So You Think You Can Dance.” Other Music Specialist songs found their way into recordings by the Black Eyed Peas and Kid Sister.
In 2018, after he got out of prison for the second time, Nealy sued Warner Chappell for copyright infringement, alleging that he held the copyrights to Music Specialist’s songs.
Nealy alleged that his claims were timely because he didn’t learn of Warner Chappell’s infringing conduct until 2016—just after he got out of prison and less than three years before he sued.
A district court applied the “discovery rule” discussed above but ruled that even if Nealy could sue for infringements going back ten years, he could recover damages or profits for only those occurring in the last three. The 11th Circuit disagreed and reversed.
Justice Kagan, writing for the Court, noted that US copyright law states that an infringer is liable either for statutory damages or for the owner’s actual damages and the infringer’s profits.
However,
There is no time limit on monetary recovery. So a copyright owner possessing a timely claim for infringement is entitled to damages, no matter when the infringement occurred.
This, said the Court, the district court limiting damages to three years “is essentially self-defeating”:
With one hand, that court recognizes a discovery rule, thus enabling some copyright owners to sue for infringing acts occurring more than three years earlier. And with the other hand, the court takes away the value in what it has conferred, by preventing the recovery of damages for those older infringements.
Three of the Justices dissented, suggesting that the “discovery rule” itself is invalid:
Because everyone agrees Sherman Nealy filed suit more than three years after many of Warner Chappell’s alleged infringing acts, … some (if not all) of his claims are untimely. Everyone agrees, too, that he has not alleged any fraud or concealment that would entitle him to equitable tolling. … The discovery rule thus has no role to play here—or, indeed, in the mine run of copyright cases.
The dissenters acknowledged that the discovery rule wasn’t before the court (because it wasn’t challenged in lower courts) but said they would have dismissed the case and awaited another case in which the discovery rule was at issue.
According to the dissenters,
…the [Copyright] Act almost certainly does not tolerate a discovery rule. And that fact promises soon enough to make anything we might say today about the rule’s operational details a dead letter.
That “soon enough” suggests that at least the dissenting Justices would welcome an appeal in which the discovery rule was directly at issue, and that they’ll invalidate if given the opportunity.
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