Supreme Court Rules Copyright Damages Can Extend Beyond Three-Year Statute of Limitations

On May 9, 2024, the United States Supreme Court issued a pivotal ruling in Warner Chappell Music, Inc. v. Nealy, 144 S.Ct. 1135, Case No. 22-1078, addressing the scope of damages recoverable in copyright infringement cases. In a 6–3 opinion authored by Justice Kagan, the Court held that the Copyright Act permits copyright owners to recover damages beyond the three-year statute of limitations period for any claim filed timely under the discovery rule.

This decision resolves a longstanding circuit split regarding whether monetary recovery for copyright infringement is confined to damages arising within the three years preceding the filing of a lawsuit. The ruling opens the door to potentially open-ended damages that cover the entire period of alleged infringement, even if some infringing acts occurred more than three years before the suit was initiated.

The case arose when plaintiff Sherman Nealy sued Warner Chappell Music and others, alleging that he held copyrights to certain songs that Warner Chappell improperly licensed and interpolated into other recordings. Although the alleged infringement dated back approximately ten years, Nealy invoked the discovery rule, asserting that he only became aware of the infringing activity within three years prior to filing suit.

Under Section 507(b) of the Copyright Act, a copyright infringement claim must be brought within three years after the claim accrues. A claim accrues either when the infringing act occurs or, under the discovery rule, when the plaintiff discovers or reasonably should have discovered the infringement. Nealy contended that his incarceration prevented earlier discovery, making his claim timely.

Warner Chappell conceded the applicability of the discovery rule but argued that damages should be limited to infringements occurring within three years before the lawsuit was filed. The Supreme Court rejected this limitation, holding that the statute of limitations governs only the timeliness of filing a claim, not the temporal scope of damages recoverable.

The Court assumed, without deciding, that the discovery rule applies and clarified that a timely claim entitles the copyright owner to damages for infringement at any time, not just within the three-year window preceding the claim’s filing.

Justice Gorsuch dissented, joined by Justices Thomas and Alito, contending that the Copyright Act likely does not permit a discovery rule and that the Court should have dismissed the case as improvidently granted.

This ruling is expected to have significant implications for copyright litigation. Defendants may face increased exposure to damages covering extended periods of infringement, and the discovery burden will expand to encompass the entire alleged infringement timeline. Consequently, damages awards in copyright cases may rise substantially.

Businesses, creators, and legal practitioners should anticipate a potential increase in disputes invoking the discovery rule and prepare for broader discovery obligations related to damages.

Nixon Peabody’s Intellectual Property team continues to monitor the evolving impact of this decision on copyright enforcement and risk management strategies. The firm advises clients on navigating these changes to protect intellectual property rights and mitigate litigation risks.