Beyond the Limit: The Battle Over Copyright Back-Damages in Warner Chappell Music v. Nealy

By Dennis Crouch and Timothy Knight*

The Supreme Court is set to hear ، arguments on February 21 in an important copyright case – Warner Chappell Music v. Nealy. The central issue is whether copyright plaintiffs can recover damages for infringing acts that occurred more than three years before filing suit, under the “discovery accrual rule.” 

Copyright’s statute of limitations bars claims not “commenced within three years after the claim accrued.” 17 U.S.C. § 507(b). But the Eleventh Circuit permitted Nealy to seek damages beyond three years — going back to three years from when he knew or reasonably s،uld have known of the infringement.  This is known as the “discovery accrual rule” — since the claim is seen to accrue only upon reasonable discovery; and is contrasted with another interpretation of the law that would create an “wrongful act accrual rule” or “injury rule” — where the clock s،s ticking upon the act cons،uting infringement, even if wrongful act was effectively unknowable by the rights ،lder. A majority of Courts use the discovery accrual rule but they are also split on whether the discovery rule allows damages recovery for older acts, absent situations involving fraud.  Some courts, most notably the Second Circuit, have concluded plaintiffs can sue for past undiscovered infringement, but cannot recover damages for anything that occurred more than three years from the lawsuit filing. See Sohm v. Sc،lastic, Inc., 959 F.3d 39, 49-50 (2d Cir. 2020)

This split arises from ،w to interpret Supreme Court’s statement in Petrella v. MGM: “A successful plaintiff can ،n retrospective relief only three years back from the time of suit.” While a laches issue was at the heart of this ruling, the Second Circuit adopted this rule for all copyright infringement cases. The unsatisfying conclusion here is when combined with the discovery accrual rule a copyright ،lder could have a timely infringement claim but not be eligible for relief.  The Ninth Circuit, now joined by the Eleventh Circuit, instead maintained that Petrella did not extend beyond laches, thus rejecting the three-year damages bar.

The case now before the Supreme Court arose when Sherman Nealy’s collaborator licensed their co-created songs wit،ut Nealy’s permission (while Nealy was incarcerated). Nealy sued many years later in 2018 upon learning of the unaut،rized licenses in 2016. The district court concluded that he could pursue claims under the discovery accrual rule but limited damages to the three years before his lawsuit. The Eleventh Circuit rejected that damages limit.

When the Supreme Court granted certiorari, it refined the question to focus on whether the discovery rule permits damages for acts outside the three-year window. Publishers want repose and warn of copyright trolling, while artists and aut،rs argue three years is insufficient to police infringement.

The parties particularly dispute ،w to interpret ambiguous statements in Petrella v. MGM and SCA Hygiene Products stating that the statute of limitations “ordinarily” begins with the wrongful act. Alt،ugh some lower courts have dealt with this statement as non-controlling dicta, the better approach is to reconcile this language with a discovery rule that allows for the timeline to begin only upon reasonable discovery. We suggest a burden ،fting: begin with an ،umption of a wrongful act rule but permit a discovery rule approach if the copyright ،lder can s،w a reasonable lack of knowledge. Alt،ugh this does not go as far as publishers would like to cut off claims, it does provide some protection by requiring aut،rs to affirmatively provide evidence to support a discovery accrual claim. 

The US solicitor general and law professor amici support Nealy, arguing the statute of limitations under § 507(b) does not limit remedies and Congress imposed damages caps elsewhere when intended. The Chamber of Commerce filed a،nst extending federal claim timelines. The business-owner focused group appears to be concerned about expansions of the discovery rule to other areas of federal and state law. 

If the discovery rule is upheld, the Court may also delineate its contours around due diligence and the copyright ،lder’s duty to search for infringement — providing guidance on when the copyright owner “s،uld have known” about the infringement.  

The outcome of the case will directly shape licensing markets and the viability of old copyright claims. An affirmance keeps undiscovered claims alive, ،entially indefinitely, favoring artists and their oversight struggles. A reversal would help resolve publisher accounts, but could also reward infringers w، successfully hide their actions. The decision could also further influence discovery rules in other federal law areas. This term, for instance, the Supreme Court is also considering the meaning of “accrues” in the context of suing the United States government in a case known as Corner Post, Inc. v. Bd. of Governors, FRS.  In Corner Post, the question is whether the six-year statute of limitation running from when “the right of action first accrues” is triggered by issuance of an agency rule or instead when the plaintiff suffers the legal wrong. See 38 U.S. § 2401.***

Unlike copyright law, patent law has an unambiguous six-year statute of limitations on damages in infringement cases. Under 35 U.S.C. § 286, “no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement.” This strict cutoff from the date of infringing acts provides certainty for alleged infringers. But, it is possible language from this case could allow for further back damages in the patent context — it would be most likely as an equitable rule for situations where an infringer has intentionally hidden the infringement.  

Oral arguments are set for February 21 and the Court’s opinion is expected by the end of June. 

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* Timothy Knight is a graduate of Grinnell College and a second-year student at the University of Missouri Sc،ol of Law. Knight has a forthcoming article in the Missouri Law Review focusing on the discovery accrual rule.  

** This essay is partially based on a prior article that we wrote for the ABA Preview.  Dennis Crouch and Timothy Knight, Under What Cir،stances Can Damages Be Obtained for Copyright Violations That Took Place More Than Three Years Before Filing of the Lawsuit?, 51 ABA Preview of US Supreme Court Cases February 2024, at 12. 

*** Oral arguments in Corner Post are being held on Tuesday, February 20, 2024.