Supreme Court Hears Arguments on the Copyright Act’s Statute of Limitations

In Warner Chappell Music, Inc. v. Nealy, the Supreme Court addresses whether, under the discovery accrual rule applied by the circuit courts and the Copyright Act’s statute of limitations for civil actions, 17 U.S.C. §507(b), a copyright plaintiff can recover damages for acts that allegedly occurred more than three years before filing the lawsuit.

In the 1980s, Sherman Nealy and Tony Butler formed Music Specialist, Inc. (MSI). MSI released an album and some singles from 1983 to 1986 before dissolving as a corporation, though it did have continuing business activities until 1989. Nealy was incarcerated for unrelated drug offenses, and Butler formed a new company, 321 Music, LLC, and began licensing rights to MSI’s works. When Nealy was released in 2016, he discovered the third party usage but did not take any action. Allegedly, he was also unaware of the litigation over the MSI works among entities including Warner Chappell Music, Inc., among others, and Butler’s 321 Music, LLC.

In December 2018, Nealy and MSI filed a lawsuit alleging copyright infringement by Atlantic, Warner, and Artist for activities dating back to 2008. The case was framed as an ownership dispute and the district court granted in part and denied in part the defendants’ motion for summary judgment. The Eleventh Circuit held that when a copyright plaintiff has a timely claim under the discovery accrual rule for infringement that occurred more than three years before the suit was filed, the plaintiff may recover damages for that infringement. The Eleventh Circuit’s decision was based on the discovery accrual rule which begins the limitations period at the moment a plaintiff learns of or should reasonably learn of the infringement.

During oral argument, it became clear that the issue before the Court involves broader issues of whether a discovery rule applies to the Copyright Act’s statute of limitations and, if so, the boundaries of its scope. The Justices questioned the Second Circuit’s approach of barring a successful copyright plaintiff from recovering damages for acts occurring outside the three year statute of limitations. Justice Jackson asked Nealy and MSI’s counsel how the statute of limitations could affect the damages provision of the Copyright Act. Justice Alito questioned the possibility of dismissing the case as having been improvidently granted because another case pending before the Court, Hearst Newspapers LLC v. Martinelli, more cleanly presents the question the Court took this case to address. Other Justices seemed sympathetic to Justice Alito’s suggestion.

The case was argued on February 21, 2024. A decision is expected later in the term. Stay tuned for Dykema’s client alert discussing the Court’s opinion.

For more information, please contact Chantel Febus, James Azadian, Cory Webster, Christopher Sakauye, McKenna Crisp, Monika Harris, or Puja Valera.