High Court Copyright Decision Leaves Big Question for Another Day

In this article for Bloomberg Law, Lauren Schweitzer analyzes the high court case Warner Chappell Music, Inc. v. Nealy and identifies the open questions regarding discovery and copyright.

The U.S. Supreme Court’s May 9 opinion in Warner Chappell Music, Inc. v. Nealy is narrow and clear, but leaves a major question open for a future case, perhaps as soon as next term.

In a 6-3 decision by Justice Elena Kagan, the court held the Copyright Act doesn’t impose a time limit on a plaintiff’s monetary recovery.

This decision resolves a split among the Second, Ninth, and Eleventh Circuits over whether a plaintiff who files a copyright claim that is more than three years old but timely under the discovery rule is nevertheless barred from recovering damages for infringement that occurred more than three years pre-suit. Notably, the court expressly declined to address whether the discovery rule applies to copyright claims at all.

In many ways, the Nealy decision is a narrow and unsurprising (albeit significant) one. Procedurally, it’s unsurprising that the court confined itself to the narrow issue of a time limit for damages rather than the larger issue of whether the discovery rule applies to copyright claims at all.

When granting certiorari, the court narrowed the question presented to the issue of whether “under the discovery accrual rule applied by the circuit courts and the Copyright Act’s statute of limitations . . . a copyright plaintiff can recover damages for acts that allegedly occurred more than three years before the filing of a lawsuit.”

This formulation assumes that the discovery rule applies to copyright infringement claims, possibly because the justices found that the validity of that assumption (that the discovery rule applies) wasn’t challenged in the lower courts or squarely raised in the briefing on the petition for certiorari.

Nevertheless, at oral argument multiple justices asked whether the court should decide (possibly in another case) whether a discovery rule applies to the Copyright Act, while multiple other justices asked pointed questions suggesting that given the limited question presented and history of the litigation, it shouldn’t do so here. It thus isn’t surprising that the court decided only the damages bar question and didn’t reach the antecedent question of whether the discovery rule even applies.

Substantively, the ruling is both narrow and clear. The discovery rule is a delayed-accrual rule under which the statute of limitations period doesn’t begin to run until the plaintiff knew or should have known of the basis for its claim. It operates to extend the limitations period so that a plaintiff whose claim would otherwise be time-barred may nevertheless proceed.

The court began its analysis of whether there is a separate damages bar applicable to cases made timely by the discovery rule by examining the language of the Copyright Act. The court found that the act contains no express time limit for monetary remedies separate from the limitations period for filing claims.

The court further stated that imposing a separate damages bar that limits monetary recovery to three years pre-suit would eviscerate the discovery rule by denying the plaintiff meaningful relief for an otherwise timely claim. The court thus held that there is no separate time limit on damages for a copyright claim that is otherwise timely filed. This holding follows the approach adopted by two out of the three circuits to have addressed this issue.

Notably, the three dissenting justices have no substantive quarrel with the court’s holding, instead arguing that the court should have dismissed Nealy and waited for another case in which the court could first reach the issue assumed by the question presented: whether a discovery rule applies to copyright infringement claims in the first place.

In not following the dissent’s preferred approach, the court’s opinion sidesteps this large elephant in the room. As the dissent notes, the court’s opinion would be a “dead letter” if the discovery rule doesn’t apply. The court thus could have dismissed the case on procedural grounds without reaching the merits and waited for another case that squarely presented this “antecedent” issue. In fact, a petition for certiorari that does just that is currently pending before the court in Hearst Newspapers, LLC v. Martinelli.

Perhaps the majority chose to address the merits of the damages-bar issue in anticipation of soon affirming the applicability of the discovery rule to copyright claims. Or perhaps the majority chose simply to resolve a circuit split on which it had clear views. Or it could be that the majority recognized that nearly all circuits apply a discovery rule and didn’t wish to unsettle the law in all those circuits, while still wanting to clarify the damages-bar issue.

Future—and potentially imminent—rulings may clarify the majority’s intentions, but the result of those unresolved questions remains to be seen.

The case is Warner Chappell Music, Inc. v. Nealy, U.S., 22-1078, 5/9/24.