IP Tech Knowledgy

The Supreme Court has ruled that copyright damages are no longer limited only to the defendant’s prior three years of activity.  While this may seem like good news for plaintiffs seeking redress for many years of infringement, it is not clear what real impact the decision will have.  In Warner Chappell Music, Inc. v. Nealy, the Court resolved a split among lower courts by determining that the three-year statute of limitations in the Copyright Act does not apply to how far back a plaintiff may reach for damages.  

The statute, however, still requires that a copyright infringement action must be “commenced within three years after the claim accrued.”  The heavier emphasis in a copyright case will now be on when the claim accrues.  A strict interpretation is that a claim accrues at the time the defendant first infringes (the “injury rule”), so the plaintiff must file suit within three years of the initial infringement.  Currently, most courts apply the more lenient “discovery rule,” which requires the plaintiff to file suit within three years of when the plaintiff knew of, or should reasonably have discovered, the infringement.  Where the injury rule would effectively allow for only three years of damages, the discovery rule could allow for a longer period.

There are at least two reasons why potential plaintiffs should read this case with an “asterisk,” and not see Warner Chappell as a windfall for obtaining many years’ worth of damages.  

Without the protection of a three-year statutory limit on damages, defendants – and thus courts – will now focus more on when the plaintiff should have known about the infringement.  Courts may find that a long delay in a plaintiff’s knowing its work is being infringed is unreasonable and may disallow the entire claim. 
 
Additionally, the Supreme Court may, as soon as next term, find that the injury rule, not the discovery rule, applies.  In Warner Chappell, the majority specifically did not address the discovery rule.  In the dissent, three Justices wrote that the more pressing issue was whether the discovery rule was valid, suggesting that in the near future, the Court would find the discovery rule inapplicable.  If the Court agrees to review the pending appeal of Hearst Newspapers, L.L.C. v. Martinelli, the Court will decide on just this issue within the year.  That case would need only two more votes to find that the injury rule -- not the discovery rule -- is the proper analysis.  If this happens, then, as Justice Gorsuch wrote in the dissent, the Warner Chappell decision will be a “dead letter.”

Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw. com