Analyzing the Supreme Court Ruling on the Time Bar and Copyright Infringement Claims

By Kelley S. Gordon and Gregory J. Chinlund

The United States Supreme Court recently ruled that there is no time bar to the recovery of monetary damages for copyright infringement claims. In other words, the Copyright Act entitles a copyright owner to obtain monetary relief for any infringement claim brought within the three-year statute of limitations, no matter when the infringement occurred. The decision in Warner Chappell Music, Inc. v. Nealy opens the door to higher damages awards for copyright plaintiffs and increases possible exposure to would-be defendants.

Although the Supreme Court issued its ruling in the summer of 2024, the actions giving rise to the dispute between Sherman Nealy and Warner Chappell Music, Inc., date back to 2008 — 10 years before Nealy sued Warner Chappell. Nealy had a brief joint music venture with third-party Tony Butler in the 1980s when the pair recorded and released an album and various singles. The group parted ways in the 1980s, and eventually Nealy spent time in prison for drug-related charges (1989-2008 and 2012-2015).

While Nealy was in prison, Butler licensed works from the pair’s music venture to Warner Chappell, apparently without Nealy’s knowledge or approval. Importantly, a single co-owner of a copyright cannot unilaterally grant an exclusive license to the work without the consent of all other co-owners.

Warner Chappell used the works licensed from Butler in various subsequent popular recordings by groups like Flo Rida, the Black Eyed Peas, and Kid Sister. Nealy initiated his lawsuit against Warner Chappell in 2018, approximately two years after Nealy claimed to have first discovered Warner Chappell’s conduct.

THE “DISCOVERY RULE” IMPACT

In reaching its decision, the Supreme Court carefully predicated its ruling on the assumption that the plaintiff’s claim was timely under the “discovery rule” currently followed by all 11 of the United States’ circuit courts. In the Seventh Circuit, for example, the discovery rule triggers the Copyright Act’s three-year statute of limitations only when the plaintiff learns or reasonably should have learned of infringement.

The alternative to the discovery rule is the so-called injury or accrual rule, where claims accrue when the infringement occurs, regardless of when a plaintiff learns of it. In their dissent, Justices Neil M. Gorsuch, Clarence Thomas, and Samuel A. Alito Jr. criticized the majority for failing to address what the justices saw as the predicate question, that is, whether the Copyright Act “has room for” recognition of the discovery rule, a question the dissent answered in the negative.

Here, however, Warner Chappell did not challenge that the discovery rule governed the timeliness of Nealy’s claims but argued instead that recovery of damages or profits was limited to the three years immediately preceding the lawsuit.

The Supreme Court’s majority opinion rejected Warner Chappell’s call to apply a “judicially invented damages limit” not present in the Copyright Act that would otherwise seemingly undermine the preservation of damages provided by the discovery rule. The majority opinion clarified that the Petrella v. MetroGoldwyn-Mayer Inc. decision, upon which Warner Chappell relied to support its position, did not enunciate a three-year damages cap for copyright infringement. Instead, Nealy could seek decades’ worth of damages.

GUIDANCE FOR POTENTIAL COPYRIGHT INFRINGEMENT CLAIMS

Importantly, the Supreme Court majority opinion explicitly did not opine on whether the discovery rule or an accrual rule properly governs the timeliness of a copyright infringement claims. The decision serves as a reminder of practical guidance for potential infringement claimants and defendants:

• Ensure written permission from all copyright holders before accepting/granting an exclusive license.

• Ask to see pertinent agreement(s) or, at a minimum, for a representation and warranty as to the nature of copyright ownership before utilizing third-party content.

• Include the appropriate material representation, indemnification, and/or other trigger provisions to safeguard agreements should it be discovered that not all required permission was secured.

• If third-party unauthorized use is discovered, document the use swiftly with screenshots, downloads, and internal notes.

• Seek copyright registrations early and often for content, as it is a predicate to initiating a claim for infringement in District Court. It is a relatively inexpensive process and provides the option to seek statutory damages and attorneys’ fees so long as infringement begins after registration or within three months of publication.

Kelley S. Gordon and Gregory J. Chinlund are partners at the Chicago-based intellectual property law firm Marshall Gerstein. They work with companies worldwide to develop and protect their copyrights and trademarks in the U.S. and internationally. They can be reached at kgordon@marshallip.com and gchinlund@marshallip.com.