The U.S. Supreme Court recently ruled that the Copyright Act entitles a copyright owner to damages for any timely infringement claim, no matter when the infringement occurred. That means copyright infringement does not have a three-year cap on damages.

Damages can go back much later, resolving a split among lower courts.

Background

Sherman Nealy sued Warner Chappell Music for copyright infringement of the 1984 song “Jam the Box.” Nealy argued that his record label, Music Specialist, owned the rights to the song. However, Nealy’s music venture largely stopped shortly after the song’s release because he was jailed off and on for twenty years. Without his approval, Nealy’s business partner licensed works from Music Specialist’s catalog, including “Jam the Box.” One of the licensees included Warner Chappell Music. Under this license, the musical elements of the 1984 song were used to create the 2008 hit “In the Ayer” by Flo Rida. Due to his incarceration, Nealy claimed he did not learn of the alleged copyright infringement until 2016. Nealy sued Atlantic Records, Warner Chappell, and Artists Publishing Group in 2018, claiming copyright violations going back to 2008.

Under the discovery rule, Nealy argued that his copyright infringement claims were timely, as a claim accrues when the plaintiff discovers (or should have reasonably discovered) the infringing act. If a suit is brought within three years of such discovery, then a plaintiff may recover for past damages at any time.

Warner Chappell agreed that the discovery rule is the appropriate standard for timeliness of a copyright claim. However, it argued that the Supreme Court previously interpreted the Copyright Act as applying a three-year limit on a plaintiff’s damages. In Petrella v. Metro-Goldwyn-Mayer, the Supreme Court held that a plaintiff is barred from recovery for copyright infringement past the three-year window. Under the discovery rule, the court held a successful plaintiff can gain retrospective relief only three years back from suit.

The District Court agreed with Warner Chappell. Relying on a Second Circuit decision, the court held that Nealy’s damages are limited to the three years before the action was filed — not back to 2008. However, the Court of Appeals for the Eleventh Circuit reversed. Following the Ninth Circuit, the Court of Appeals rejected the view that the discovery rule establishes a three-year limitation to a copyright owner’s damages. The court said Nealy was entitled to damages since the creation of the infringing song.

The Supreme Court’s Decision

The Supreme Court granted certiorari to resolve the circuit spilt, ultimately finding the Copyright Act did not set a three-year cap on damages.

“The ‘time-to-sue prescription,’ as [the Court has] called it, establishes no separate three-year period for recovering damages, this one running from the date of infringement,” Justice Elena Kagan wrote in the court’s opinion. She added “[t]here 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.”

With the 6-3 decision affirming the Eleventh Circuit’s decision, the court held that having a three-year cap to recovery “would gut the discovery rule by eliminating any meaningful relief for the very claims it is designed to preserve.”

The majority declined to resolve whether the discovery or injury rule is the proper standard governing the timeliness of copyright claims.

The dissent, written by Justice Neil Gorsuch, emphasizes the dangers of the discovery rule. Prior decisions held that the discovery rule is “not applicable across all contexts,” and should be applied only in cases of fraud or concealment. The dissent made clear that the “incident of injury” rule is the standard when evaluating timeliness of copyright claims. Justice Gorsuch adds that there is “little reason to suppose the Copyright Act’s provisions at issue in this case contemplate any departure from the usual rules.”

The Impact

This decision does not explain when the statute of limitations clock starts for an infringement claim, but it does clarify that plaintiffs are no longer bound by a three-year cap on damages.

But a plaintiff must still be diligent when an infringement happens. If a copyright owner seeks monetary relief three years after discovery (or reasonably should have known), then the three-year limitation on damages may still apply.

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