Resolving a circuit split on the issue of damages in copyright infringement cases, the U.S. Supreme Court held, in a 6-3 decision, in Warner Chappell Music, Inc. v. Nealy, 601 U.S.___ (2024), that a copyright infringement claimant is entitled to damages in a timely filed action regardless of when the infringement occurred.
Justice Kagan wrote for the Court. Respondent Sherman Nealy co-produced an album and singles through a jointly-held music production company. Shortly thereafter, he went to prison, and his co-producer and co-founder entered into a licensing agreement with Appellant Warner Chappell, unbeknownst to Nealy. Upon release from prison, he filed suit for copyright infringement against Warner Chappell. The lower courts noted the presence of the so-called “Discovery Rule,” which allowed Nealy to pursue his infringement claim after he discovered the alleged infringement. The Copyright Act §507(b), states:
No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.
17 U.S.C. §507(b)
Justice Kagan noted that the Copyright Act considers the date of filing as the date the plaintiff must file suit is within the prior three years after accrual of the claim; that is, the discovery of the infringement. However, the circuits split on when damages can be obtained. If plaintiff were in the Ninth Circuit, damages could accrue from the initial infringement (see, Starz Entertainment LLC v. MGM Domestic Television Distribution, LLC, 39 F.4th 1236, 1246 (9th Cir. 2022)). If, however, the plaintiff were in the Second Circuit, damages could accrue only from within three years of when the plaintiff filed the suit (see, Sohm v. Scholastic, Inc., 959 F.3d 39, 52 (2d Cir. 2020)). It is apparent there are inherent problems that arise when two different plaintiffs with identical claims will recover starkly different recoveries merely because they reside in different geographic locations of the country.
Justice Kagan further notes:
The Second Circuit’s contrary view . . . is essentially self-defeating. [On] one hand, that court recognizes a discovery rule, thus enabling some copyright owners to sue for infringing acts occurring more than three years before. And [on] the other hand, the court takes away the value in what it has conferred, by preventing the recovery of damages for those older infringements.
Warner Chappell Music, Inc. v. Nealy, 601 U.S.___ (2024) (Kagan, J.)
As a result, and consistent with the Discovery Rule, damages can be recovered for infringements occurring at any time, assuming the timely filed claim.
Takeaways:
- Nealy makes it easier for copyright owners to be able to assess damage claims consistently, regardless of where they or the infringement occurred in the country;
- Recovery for copyright infringement is always based on a valid copyright registration;
- The Discovery Rule does not allow for procrastination in filing the claim; it must be filed within that three-year statutory period in order for full recovery of infringement to be allowed.
For more information, please contact Yonaxis I.P. Law Group.