Welcome to a special episode from Finnegan, breaking down the Supreme Court's decision in Warner Chapel Music, Inc. v. Neely. Joining us today are Anna Chauvet, head of Finnegan's copyright practice. and Finnegan associate Troy Viget. So Anna, first of all, tell us what this case is ultimately about.
So this case concerns the scope of damages for claims under the Copyright Act, you know, whether the statute of limitations, which imposes a three-year time limit on bringing a copyright claim, similarly imposes a time bar on damages. Spoiler alert, the Supreme Court in this case have found that damages in a copyright infringement case are not time limited. But what's interesting is the court declined to decide which test should apply in determining when a copyright...
claim is timely? In other words, should the so-called discovery rule apply? or should the injury rule apply? And we're going to talk more about what the discovery rule and the injury rule are during this podcast, which is important to understand the kind of broader implications of this case. And we're also going to talk about
actually whether this case could in fact be short-lived and why that might be. Okay. Well, let's first start off with the Copyright Act statute of limitations. What does it provide? What is the underlying policy behind the Copyright Act statute of limitations? So under the Copyright Act, plaintiff bringing a copyright claim must file suit.
according to the statute, within three years after the claim accrued. One of Congress's stated purposes of this new provision when it was enacted was to have a consistent limitation period across the country and prevent forum shopping. But ultimately, the question has really become like, how do you determine when a copyright claim has accrued?
what does accrued mean? And we can talk a little bit more about this, but differing interpretations of what accrued means has ultimately resulted in these two different tests, the injury rule and the discovery rule. And under the injury rule, Each act of infringement occurs separately, so beginning at the time the infringement occurs, regardless of whether or not the plaintiff has any knowledge of such acts.
When applying the statute of limitations under the injury rule then, so each act of infringement occurring more than three years prior to the filing of the suit is time barred. And so all acts occurring within the three-year statute of limitations are timely. On the other hand, under the discovery rule, the statute of limitations begins only once a plaintiff knows or reasonably should have known that his or her copyright has been infringed.
So under the discovery rule, all acts of a defendant's infringement accrue simultaneously, beginning when the plaintiff is aware or should have been aware of the violation of his or her copyright. All right. Thank you, Annie. Troy, tell us a little bit about Neely and his lawsuit. Why did he sue Warner Chappell? So Sherman Neely is a music producer, and he formed a company with a business partner to record and release music.
And after this formation, Neely was imprisoned twice. And during his time in prison, his business partner formed a different company and entered into various agreements with others. and attempted to grant a license to interpolate portions of Neely's musical works.
And once Neely was out of prison, he filed suit against Warner Chappell, alleging that Warner was infringing his copyrights to his musical works because Warner was using and licensing the musical works in reliance on an invalid license. And importantly, Neely alleged that due to his incarceration, he did not become aware of the infringement until 2016, which was less than three years before he brought suit in 2018.
And so what was the main issue before the district court? The district court was faced with whether Neely's damages for copyright infringement are limited by the Copyright Act's three-year statute of limitations. And what happened with Neely's suit? The district court ultimately held that Neely's damages were limited to the three-year period before he filed suit. And importantly, this was a question of first impression within the 11th Circuit. So the district court...
ultimately certified its holding for intellectual appeal. So what did the 11th Circuit do? What was its holding? The 11th Circuit ultimately granted permission to appeal, and it reversed the district court's holding. And the 11th Circuit held...
that where a copyright plaintiff has a timely claim for infringement occurring more than three years before the filing of the suit, the plaintiff may obtain retrospective relief for that infringement. And the 11th Circuit concluded that the text of the Copyright Act Copyright Act does not support a separate damages bar. And it also concluded that the Supreme Court's decision in Petrella v. MGM also did not bar damages and actions that are timely under the discovery rule.
And has the Supreme Court ever interpreted the Copyright Act statute of limitations? Yes, about 10 years ago in Petrella MGM, which Troy just referred to. The Supreme Court in that case, they held that latches cannot be invoked to preclude a claim for damages brought within the three-year.
limitations period of the Copyright Act. So a critical difference in the Petrella case was that the plaintiff sought relief only for acts of infringement occurring within the three-year period before filing suit, which is a little bit different than the situation we have here. So in Parchella, the plaintiff had inherited her father's copyright to a screenplay. She informed MGM that its commercial exploitation of any work derived from the screenplay would infringe her copyright.
For many years, she repeatedly threatened to take legal action, but she didn't actually sue MGM for copyright infringement until after MGM's film Raging Bull had started to turn a profit. MGM argued that her suit was barred by latches or should be barred by latches given her 18-year delay in bringing suit from the time that she renewed her copyright until the time when she actually commenced suit.
The Supreme Court rejected this argument, though. It held that latches cannot be invoked to preclude adjudication of a claim for damages that's brought within the three-year window prescribed by the Copyright Act. But again, because Pacella had sued only for infringing acts alleged to have occurred within the three-year period before filing suit, the Supreme Court didn't have occasion to determine the appropriate approach to defining accrual under the Copyright Act.
So tell us about the petition for cert and the questions the Supreme Court granted for review. The question that was presented by Warner Chappell in its cert petition was whether the Copyright Act statute of limitations precludes retroactively for acts that occurred more than three years before filing suit.
What's interesting is that the court in granting cert clarified the question on which it was going to be deciding. In other words, its question was whether under the discovery accrual rule applied by the circuit courts.
a copyright plaintiff can recover damages for acts that occurred or allegedly occurred more than three years before the filing of the lawsuit. So in issuing its decision, the majority... noted that the question presented incorporates the assumption that the discovery rule governs the timeliness of claims.
But the majority was careful in acknowledging that it has never decided whether that assumption is valid, whether a copyright claim accrues when a plaintiff discovers or should have discovered infringement.
or rather when the infringement happened. So because the issue was not encompassed within the grant of cert, the court did not address it and instead confined its review to whether a plaintiff with a timely claim under the discovery rule is eligible for damages going back more than three years.
And so the Department of Justice filed an amicus brief in this case, which the U.S. Copyright Office signed on to. Tell us more about the DOJ's position. And do you think it was influential on the Supreme Court's decision?
I definitely think it was influential. What was interesting is that the Department of Justice filed an amicus brief in support of Neely and asserted that when a claim for copyright infringement is filed within three years after the claim accrued, and is therefore timely, there's nothing in the Copyright Act that imposes any further time-based limit on damages that the plaintiff may recover.
So the Copyright Act, according to the Department of Justice, cannot plausibly be read to establish two distinct three-year windows. One for filing suit, which would be measured from the date of actual or constructive discovery. And then another for recovering damages measured from the date of the infringing conduct.
So rather, the provision under the Copyright Act establishes a single three-year period that begins to run when the claim accrues. And it specifies that no legal civil action commenced after that period shall be maintained. So as you noted, the Copyright Office signed on to the federal government's brief, and I do think it's highly influential.
The Copyright Office is seen by the expert agency on copyright on many of these issues, especially when you're dealing with copyrightability and issues of novel. With novel implications, this is something the Copyright Office does literally almost every day, being asked to advise on novel issues, whether that be for Congress, the Supreme Court, or even within different areas of the government.
So I think it's always helpful if you are a party before the Supreme Court, getting the federal government to be on your side, but then also having the Copyright Office with its expert knowledge also siding with you can be very, very helpful. Great. Thank you, Ian. Troy, tell us about the Supreme Court's decision. Who wrote for the majority? Who joined? And were there any dissenters? So Justice Kagan authored the decision, and she was joined by Chief Justice Roberts and Justices Sotomayor.
Kavanaugh, Barrett, and Jackson. And there were a couple dissenters, which I'll get to in a minute, but the majority held that a copyright owner may obtain monetary relief for any timely infringement claim. no matter when the infringement occurred. In other words, there is no time limit on damages. And it based its conclusion and held that the Copyright Act establishes no separate time limit on recovering damages.
And did the majority address its previous decision in Petrella? Yes. It explains that Petrella does not support a three-year damages. Okay. And what about the dissent? How did the dissent address the majority's decision? Yeah, so the dissent was authored by Justice Gorsiewicz and was joined by Justices Thomas and Alito, and the dissent criticized the court's majority opinion.
as kind of sidestepping the question of whether the Copyright Act has room for a discovery rule. To the dissent, the trouble is that the Act almost certainly... does not tolerate a discovery rule, and that the rule thus has no role to play here or indeed in the Mayan run of copyright cases. The dissent argued that
Anything they may say today about the discovery rules operational details may be a dead letter and light to come. Okay, so I guess the question is, how will courts now interpret both Petrella and Neely? I think that Neely now makes clear that where the claims are timely in a copyright infringement act, that the copyright plaintiff may recover damages regardless of when those acts of infringement occurred.
Anna, is it clear whether the discovery rule or incident of injury rule governs the timeliness of copyright infringement claims? Not really. The Supreme Court was very clear, Neely, that it was not deciding. Whether the injury rule or the discovery rule is a better test into determining the timeliness of copyright claims. In Neely, what's interesting is that Warner Chapel at the lower level never challenged the 11th Circuit's use of the discovery rule.
So the Supreme Court, for purposes of its decision, assume that the copyright claim had been timely asserted under that particular test. So in the end, what are the practical implications of the Supreme Court's decision? Well, for the moment, the discovery rule lives on. And I say for the moment because Hearst has filed a cert petition with the Supreme Court from a Fifth Circuit case on the direct issue.
Namely, whether the discovery rule applies to the Copyright Act statute of limitations for civil damages. So should the Supreme Court grant cert in that case would then determine the specific issue of whether discovery rule applies to determining. the timeline is a filing suit under the copyright act, or if the injury rule should in fact be the better test to apply. Anna and Troy, thank you so much. You've been listening to a special podcast episode from Finnegan.
one of the largest IP law firms in the world. Our guests have been Finnegan attorneys Anna Chauvet and Troy Vijay. To listen to other podcasts and to receive additional information on the firm, please visit www.finnegan.org. Thank you for listening to this podcast from Finnegan.