Warner Chappell Music, Inc. v. Nealy

Warner Chappell Music v. Nealy, decided May 9th, 2024. By a vote of six to three, in an opinion by Justice Kagan, the Supreme Court affirmed the Eleventh Circuit and held that the Copyright Act contains no separate three-year cap on damages. A copyright owner with a timely infringement claim may recover damages no matter how long ago the infringement occurred. Here's the brief.

In 1983, Sherman Nealy and Tony Butler formed Music Specialist, a short-lived label that recorded one album and several singles. The venture dissolved, and Nealy spent much of the next three decades in prison. While he was away, Butler — unbeknownst to Nealy — licensed Music Specialist works to Warner Chappell Music, and Warner Chappell found takers. One work was interpolated into Flo Rida's hit "In the Ayer," which sold millions of copies and reached the Billboard top ten; other songs surfaced in recordings by the Black Eyed Peas and Kid Sister, and in popular television.

In 2018, after his release, Nealy sued Warner Chappell for copyright infringement. He claimed the copyrights and pointed to licensing activity dating back to 2008 — ten years before he sued. The Copyright Act's statute of limitations, section five-oh-seven b, requires suit within three years after a claim accrues. Nealy relied on the discovery rule, under which a claim accrues when the plaintiff discovers the infringement; he said he first learned of Warner Chappell's conduct in 2016.

In the District Court, Warner Chappell accepted that the discovery rule governed timeliness, but argued that even if Nealy could sue for older infringements, he could recover only for those in the last three years. The District Court agreed and, relying on Second Circuit authority, capped monetary relief at the three years before suit. On interlocutory appeal, the Eleventh Circuit reversed, siding with the Ninth Circuit and rejecting any separate three-year damages bar on an otherwise timely claim.

The question the Court agreed to decide was narrow. Assuming a claim is timely under the discovery rule, may the plaintiff recover damages for infringement that occurred more than three years before filing? The Court substituted that question for the one Warner Chappell had raised, and it built in an assumption — that the discovery rule governs when a copyright claim accrues. It expressly declined to decide whether that assumption is correct.

The governing text is that statute of limitations. It sets one three-year clock, running from when a claim accrues. The disputed question was whether a second, separate clock caps damages.

The Court held there is no such second clock. Section five-oh-seven b establishes a period for filing suit, not a limit on recovery. Justice Kagan explained that the time-to-sue prescription sets no separate three-year bar on damages. If a limit existed, it would have to come from the Act's remedial sections — but those simply make an infringer liable for statutory damages, or the owner's actual damages and profits, without any time qualification.

The Court rejected the Second Circuit's contrary view, which had read a three-year damages cap into an earlier decision, Petrella v. Metro-Goldwyn-Mayer. In Petrella, the Court explained, the plaintiff had long known of the infringement and could sue only for acts within the prior three years, so her recovery naturally ran three years back. That was a description of how the limitations clock worked on those facts — not a freestanding cap. Read the Second Circuit's way, the Court said, a judicially invented damages limit would gut the discovery rule by stripping value from the very claims it is meant to preserve.

Justice Gorsuch dissented, joined by Justices Thomas and Alito. He would have dismissed the case as improvidently granted. In his view, the Copyright Act almost certainly does not tolerate a discovery rule at all, and the Court should have resolved that antecedent question rather than assume an answer that may not exist.

Nealy resolved a division among the circuits over whether a timely copyright claim carries a hidden three-year ceiling on damages. It does not. But the decision is expressly narrow. The Court took no position on whether the discovery rule itself is valid — the premise on which the entire case rested. As Justice Gorsuch's dissent underscored, that antecedent question remains open for a future case that squarely presents it.

Warner Chappell Music v. Nealy, 601 U.S. 366, decided May 9th, 2024. I'm Kyle Coleman. Thanks for watching.