How I Learned About The Copyright Act's Statute of Limitations

And how it relates to Warner Chappell Music, Inc. v. Nealy.

On Friday, the Supreme Court decided Warner Chappell Music, Inc. v. Nealy. This case involved the statute of limitations and remedies under the Copyright Act. The Copyright Act provides that a plaintiff must file suit "within three years after the claim accrued." 17 U. S. C. §507(b). When does a claim accrue? When the infringement occurred? Or when the plaintiff discovered the infringement? The circuits have divided on this question. Justice Kagan laid out the split:

Under the Copyright Act, a plaintiff must file suit"within three years after the claim accrued." §507(b). On one understanding of that limitations provision, a copyright claim "accrue[s]" when "an infringing act occurs." Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U. S. 663, 670 (2014). So a plaintiff can complain about infringements going back only three years from the time he filed suit. If that rule governed, many of Nealy's claims would be untimely, because they alleged infringements occurring as much as ten years earlier. But under an alternative view of the Act's limitations provision, a claim accrues when "the plaintiff discovers, or with due diligence should have discovered," the infringing act. Ibid., n. 4. That so-called discovery rule, used in the Circuit where Nealy sued, enables a diligent plaintiff to raise claims about even very old infringements if he discovered them within the prior three years.

Until fairly recently, I had never given this issue any thought. I never took an IP class in law school, and know very little about the subject. Until recently, at least.

In 2013, I published a blog post that included a copyrighted photograph. I had long ago forgotten about the post. And in the past decade, the post had about twenety views. Yet, in 2023, someone representing the copyright holder found the post, and sent me a demand letter. I promptly removed the copyrighted photograph, but the letter demanded that I pay damages.

My immediate reaction was, surely this claim was barred by the statute of limitations. But I did some research, and discovered there is a split of authorities about when a claim occurred. After giving the issue some thought, I reached a settlement, which disposed of all of the claims. Still, I was irked that courts had applied a discovery rule to the Copyright Act. My blog post was open to the public, was indexed by Google, was promoted on my social media channels, and could have been discovered shortly it was published. There was no attempt to conceal the information. It was, in the language of adverse and possesesion, open and notorious. (All of my posts are notorious.)

I wasn't the only person bothered by this rule. Warner Chappell Music's cert petition posed the following question presented:

Whether the Copyright Act's statute of limitations for civil actions, 17 U.S.C. 507(b), precludes retrospective relief for acts that occurred more than three years before the filing of a lawsuit.

But the Court would not resolve this issue. Indeed, the Court rewrote the question presented.

The question on which this Court granted certiorari is"[w]hether, under the discovery accrual rule applied by the circuit courts," a copyright plaintiff "can recover damages for acts that allegedly occurred more than three years before the filing of a lawsuit." Ibid. That question, which theCourt substituted for Warner Chappell's, incorporates anassumption: that the discovery rule governs the timeliness of copyright claims. We have never decided whether that assumption is valid—i.e., whether a copyright claim accrues when a plaintiff discovers or should have discovered an infringement, rather than when the infringement happened. See Petrella, 572 U. S., at 670, n. 4. But that issue is not properly presented here, because Warner Chappell never challenged the Eleventh Circuit's use of the discovery rule below.

Justice Kagan suggests in Footnote 1 the discovery rule issue was waived. She seemed annoyed:

Disregarding the limit in the reformulated question, Warner Chappell's briefing in this Court focuses almost entirely on the discovery rule itself… That choice is especially surprising given that Warner Chappell's own petition for certiorari raised the broader discovery-rule issue only in a footnote, which acknowledged that the issue was not raised below and is not the subject of a Circuit split. See Pet. for Cert. 14, n. But even supposing Warner Chappell's petition had urged us to opine on the discovery rule, our reformulation of the question presented should have put an end to such arguments.

We plebeians must never forget who is in charge of how a case is litigated. It's not the lawyers. It is the Oracles at One First Street.

If I had to guess, Warner usually benefits from a discovery rule, where others infringe the conglomerates copyrights, and Warner doesn't find out till much later. But this case presents the facts in reverse: a rights-holder brings a suit against a major records label. It makes sense that Warner only sought to limit the damages without touching the discovery rule issue in the lower court. But once the question was presented to the Supreme Court, Warner sought clarity on the discovery rule. But no luck.

Justice Kagan's majority opinion "assume[d] without deciding that a claim is timely under that provision if brought within three years of when the plaintiff discovered an infringement, no matter when the infringement happened."

Instead, the Court only addressed the remedial question. The Court found that damages are not limited to the three-year period before the lawsuit is filed. Rather, damages can stretch back to the initial infringement. Kagan concluded, "There is no time limit on monetary recovery. So a copyright owner possessing a timely claim for infringement is entitled to damages, no matter when the infringement occurred." To use my case as an example, if a blog posts is published in 2013 with a copyrighted photograph, a timely claim could be brought in 2023, and damages would be awarded for a full decade of infringement. (I still have no idea how to calculate damages for a blog post viewed about two dozen times over the course of a decade, but I digress.) In short, Plaintiffs can avail themselves of the discovery rule, but still seek damages dating back far longer than three-years.

Justice Gorsuch dissented, joined by Justices Thomas and Alito. (Gorsuch had a busy day, with a separate concurrence on civil forfeiture in Culley v. Marshall). Gorsuch faults the majority for sidestepping the critical question of whether there is actually a discovery rule. Any questions about the remedy become irrelevant if there is no discovery rule.

The Court discusses how a discovery rule of accrual should operate under the Copyright Act. But in doing so it sidesteps the logically antecedent question whether the Act has room for such a rule. Rather than address that question, the Court takes care to emphasize that its resolution must await a future case. The trouble is, the Act almost certainly does not tolerate a discovery rule. And that fact promises soon enough to make anything we might say today about the rule's operational details a dead letter.

Gorsuch is exactly right. To be clear, the Court rewrote a question presented to avoid deciding an issue that has divided the circuits, and then decided a subsidiary question that would become mooted if the Court answered the principal question. How's that for judicial minimalism?

Still, Justice Gorsuch offers a qualified defense of the majority:

In one sense, the Court's decision to pass over this complication may be understandable. After all, none of the parties before us questioned the application of a discovery rule in proceedings below, but joined issue only over how it should work. See ante, at 5, n. 1. And the Court may, as it does, resolve the parties' dispute while leaving for another day the antecedent question whether a discovery rule exists under the Act.

Here, Gorsuch would do what he often recommends--dismiss the case as improvidently granted (a DIG in the lingo).

But if that is a permissible course, it does not strike meas the most sensible one. Nothing requires us to play along with these particular parties and expound on the details of a rule of law that they may assume but very likely does not exist. Respectfully, rather than devote our time to this case, I would have dismissed it as improvidently granted and awaited another squarely presenting the question whether the Copyright Act authorizes the discovery rule. Better, in my view, to answer a question that does matter than one that almost certainly does not.

By my count, Gorsuch would have DIG'd Helix Energy Solutions Group, Inc. v. Hewitt, Kemp v. United States, and Shoop v. Twyford

On the merits, Gorsuch explains that discovery rules generally only apply "in case of fraud and concealment," and should not apply here. Consider a chestnut from property class. In O'Keefe v. Snyder, a discovery rule was applied for an adverse possession claim of a stolen painting that was displayed in a private residence where it could not be discovered. But in this case, the offending music was blasted on radios, television, and other media. If you had ears in 2008, you probably heard this song and its interpolation:

Then again, the plaintiff was in prison, so this is not the normal case for the discovery rule. (Some states toll the statute of limitations for adverse possession against prisoners.) Then again again, I frequently receive letters from prisoners who hear me on the radio, so it is conceivable that Nealy heard the song while incarcerated.

I hope the Court can address the discovery rule issue in the future--at least for the benefit of bloggers who have been in the game for more than three years.

Comments

[Bruce Hayden]

Got into both sides of the Discovery Rule in Trade Secrets. First, in TX, I came out in favor of the rule. My employer said “no”. Ended up writing a brief opposing it. But then, several years ago, someone we knew had his trade secrets and inventions stolen by UC at Lawrence Livermore (LLNL). The lab signed an NDA with our friend. He showed them his trade secrets. They disclosed to a German National, who filed for a patent there. They actively hid their reach of the NDA, and his trade secrets. It was only when the friend found out about te German patent application that he realized his trade secrets had even disclosed. He sued UC and the other managing partners, for breach of his trade secrets. CA Supreme Ct said that the statute of limitations had run (despite him not knowing about the breach and LLNL intentionally hiding the brief).

[dirc]

Could the NDA have been written in such a way as to make breach of the NDA, whenever discovered, cause for damages to your friend? In other words, could the damages for disclosing trade secrets been made separate from damages for breach of the NDA itself?

[Noscitur a sociis]

On Friday

Nope.

[kotodama]

TGIF

1. A blog post that remains accessible as of the current day could easily be considered an ongoing act of infringement. So regardless of the discovery rule, you're still on the hook for at least the preceding 3 years of damages. That surely came up in discussions with the copyright owner (CO).

2. A blog post is just one example of a situation where it's difficult to determine actual damages. That's exactly why statutory damages exist. Surely that also came up with the CO.

3. Of course, any potential plaintiff benefits from a discovery rule. That said, a bigtime repeat player like Warner is unlikely to care that much, because they have sophisticated techniques for identifying infringement shortly after it occurs anyway. So nixing the rule tends to harm small timers like the ex-prisoner in question here. Quelle surprise that such an outcome appeals to Gorsuch.

4. I look forward to the upcoming post reviewing Twenelve Years a Slave.

[Dan Schiavetta]

My comment from last May 19:

Petrella v. MGM, 572 U.S. 663 (decided May 19, 2014): widow of co-writer of “Raging Bull” entitled to damages for copyright violation despite passage of 18 years since first alleged violation but entitled to only the past three years’ damages which is the statute of limitations for the statute allowing damages

As you point out, the post was accessible since 2013, which was arguably the same kind of continuing violation from repeated showings of “Raging Bull”

[Griffin Klema]

1. is wrong. See Petrella FN6.

2. judges often rubber-stamp grossly excessive statutory awards wholly disconnected from the actual harm.

3. copyright trolls benefit from the discovery rule--particularly the single photograph ilk who nabbed Josh Blackmun. "Nixing" that rule is the correct outcome regardless of who benefits and who doesn't (and there are lots of little guys who are extorted for excessive sums by other little guys). Federal courts are being clogged with nominal and dubious claims that should have long ago expired, but for the atextual "discovery rule."

[mse326]

Is there a material difference between a discovery rule in interpreting "accrual" vs a tolling of the statute of limitations as an equity response to the defense that it ran? Or is this just another way of saying the same thing?

I always understood tolling as a separate doctrine not involved in the statutory interpretation of accrual. There may be a question of whether that statute displaced the common law tolling doctrine, but that, too, is separate from what "accrual" means. If this is an accurate understanding then perhaps the discovery rule is wrong only in a strict sense that it is looking at the wrong thing. At the least this seems like a question that shouldn't be answered merely as a predicate.

I think the majority's decision to only answer the damages question is perfectly appropriate. I personally would DIG the case, but that doesn't mean the majority is wrong. The dissent should have stopped there. I disagree with the dissent's opining on the predicate question. It is too complex with different doctrines in play to make those statements without propper litigation below and briefing for the Court.

I don't like the bashing that people reflexively give Blackman on this blog, even if I do frequently disagree with him, but it is hard not to notice how often he rails against Kavanaugh for doing this, but seems quite supportive of it here

[ReaderY]

While there is a place for answering narrower questions if broader ones can be avoided, here I agree with Justice Gorsuch that the court risks giving an advisory opinion. There is no point in addressing the details of a rule whose existence is merely hypothesized. Since Warner appears to have abandoned the question originally presented in its brief, the Supreme Court should have dismissed the case as an unsuitable vehicle for answering the original question, rather than using it to answer a different, potentially irrelevant question.

[Griffin Klema]

Victims of copyright trolling often wonder how they've been caught up in the extortion scheme, but the Nealy case was not that.

Kagan's footnote 1 rightly criticizes counsel for Warner Chappell for pivoting from what was argued below and what was argued at the cert stage. I was a bit surprised to see Barrett did not sign onto the dissent, since she openly questioned whether the court should DIG the case.

Karen Stetson (Warner's trial counsel) had a difficult time arguing the discovery-vs-injury rule both in the district court and circuit court because of the improper distinction the Eleventh Circuit makes between copyright ownership claims (which is really just a declaratory judgment action which requires an actual dispute/knowledge as an element of the claim) and copyright infringement claims (no knowledge element), which it established in Webster v. Dean Guitars. It's not "discovery" of an ownership claim that makes it accrue, it's the fact that a genuine, justiciable dispute exists between competing interests to intangible property. Once there's a bona fide dispute, a declaratory claim to settle it comes into existence at that moment. But that nuance was too deep in the weeds and thus omitted from Kagan's opinion and, unfortunately, its omission improperly suggests the Eleventh Circuit has a discovery rule for ordinary infringement claims (it doesn't).

Which accrual rule applies for ordinary infringement claims is a novel question in the Eleventh Circuit and is teed-up in Affordable Aerial Photography v. Property Matters, set for oral argument next month. I predict the Eleventh Circuit will correctly analyze the text of 507(b), as informed by SCOTUS limitations cases and be the first circuit to clearly hold infringement claims accrue upon the incident of injury unless there was active concealment by the defendant (and properly frame claim accrual with post-accrual equitable tolling). That opinion will presumably issue before SCOTUS decides to take up the direct issue in Martinelli next term, which seems likely. If you listen to the oral argument in Nealy, it appears Gorsuch is eager to grant cert in Martinelli ("nobody's going to say [the injury-vs-discovery rule is] off the table, all right? I haven't --you know, it may --may not be on this table. It may be on another table. But it's on the table, okay?... I'm well aware [of the Martinelli petition]").

[M L]

I think maybe we should go back to 14 + 14 years for copy right terms.

[Noscitur a sociis]

Okay? What does that have to do with anything?

[Noscitur a sociis]

So… is there a circuit split on the discovery rule (versus the question of how to apply it that the court addressed here)? Kagan says there isn’t, and Gorsuch doesn’t say there is. But Prof. Blackman seems pretty confident.

[Griffin Klema]

On a careful reading there is arguably a split. I made the case for why the Seventh Circuit actually follows the incident of injury rule for infringement claims (relying on Taylor v. Meirick, 712 F.2d 1112 (7th Cir. 1983) as a correct application of accrual-then-toll for active concealment). Harrington v. Baby Gizmo Co., no. 23-cv-5306 (N.D. Ill. Nov. 1, 2023). The plaintiff didn't want to take a chance on the pending Rule 12(c) motion so the case settled. There may well be other vestiges of older decisions in other circuits before the "fad" of the discovery rule, but only a very careful reading of them would reveal that.

[Paul Alan Levy]

Regardless of whether the discovery rule should EVER apply to copyright claims, there are countervailing arguments against allowing copyright trolls to invoke that rule. I have been discussing that issue for some time, in dealing with the depredations of two notorious copyright trolls, first Mathew Higbee https://clpblog.citizen.org/higbee-threatens-copyright-enforcement-of-stale-claims-and-other-turns-for-the-worse/, and more recently CopyCat Legal. https://clpblog.citizen.org/open-letter-to-copycat-legal-about-a-prepared-food-photos-infringement-claim/

Let us simply say that when I respond to their demand letters about long-ago alleged infringements, both Higbee nor CopyCat tend to lose their appetite for litigation.

And in a current case where victim did not find me, and CopyCat Legal made the mistake of suing, it will soon be facing a claim for attorney fees

https://clpblog.citizen.org/prepared-food-photos-faces-financial-repercussions-from-copyright-trolling/

We need other lawyers willing to take these cases pro bono. As a practical matter, little businesses cannot afford to pay by the hour to defend the cases.

[Publius_2020]

The Court's "resolution" of this one case should be viewed with some salt. It has been sitting on a cert petition in Hearst v. Martinelli for three months -- a case that squarely presents the issue of the discovery rule, but which was brought to the court after Nealy was briefed.

Nealy is a strange case due to the positions of Warner-Chappell below, and the odd decision of the Second Circuit in Sohm (which is effectively the only thing the SCT touched here). But the Hearst case is straight up on point with regard to the discovery rule. Given the dissent (3 votes), and the positions of other justices in other "accrual" SOL cases, it seems clear that they should grant cert in Hearst and decide this issue next term.