US Supreme Court says no time limit on damages in copyright dispute involving Warner Music

Uncertainty regarding impact of ruling over work sampled in artist Flo Rida’s music as it relies on a “discovery rule” that could be invalidated in future cases

The Supreme Court of the US (SCOTUS) has ruled there is no time limit on monetary recovery in a copyright infringement case involving a Miami record producer and Warner Chappell Music, a subsidiary of Warner Music. 

Record producer Sherman Nealy sued Warner Chappell Music in 2018 over his work being sampled without his permission in songs including artist Flo Rida’s hit In the Ayer, which went on to sell millions of records worldwide. In this case, Nealy invoked the “discovery rule” to sue Warner Chappell Music for copyright infringements going back 10 years to 2008.

Under the US Copyright Act, a plaintiff must file suit within three years after an infringement act occurs. But under an alternative view, the “discovery rule”, a claim accrues (that is infringement happens) when the “plaintiff discovers, or with due diligence should have discovered”, the infringing act.

That rule enables a diligent plaintiff to raise claims about even very old infringements if they discovered them within the three years prior to suit.

The works were not just created by Nealy, however, but with his then business partner Tony Butler; they created music under the name Music Specialists. Unbeknownst to Nealy, while serving time in prison for drug offences, Butler had entered into an agreement with the major record publisher and their work was also used and licensed out to appear in television programmes.

Nealy argued that his claims were timely because he first heard of the infringements less than three years before he sued. SCOTUS in a 6-3 verdict delivered by Justice Elena Kagan on 9 May agreed, stating that a copyright owner possessing a timely claim is entitled to damages for infringement, no matter when the infringement occurred.

The district court initially sided with Warner Chappell that Nealy could recover damages or profits for only those occurring in the last three years and not the older infringements.

The Eleventh US Circuit Court of Appeals reversed that finding, rejecting the notion of a three-year damages bar on a timely claim and that the only time this could happen is in cases of fraud.

Nealy was represented by Cravath Swaine & Moore; partners Antony Ryan and Wes Earnhardt argued the appeal. In a statement on its website the firm commented: “The Supreme Court, assuming without deciding that the discovery rule governs the timeliness of the limitations period, affirmed the Eleventh Circuit’s decision. The court reasoned that the Copyright Act states without qualification that an infringer is liable for damages and profits without time limitation.”

Justice Kagan delivered the opinion of the court, in which Justices John Roberts, Sonia Sotomayor, Brett Kavanaugh, Amy Coney Barrett and Ketanji Brown Jackson, joined.

Justice Neil Gorsuch filed a dissenting opinion, however, and was joined by Justices Clarence Thomas and Samuel Alito.

Gorsuch said: “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 authorises the discovery rule.”

Jennifer Mauri, senior associate at Michelman & Robinson, said that the impact of the ruling is a “bit uncertain given the potential for the discovery rule to be invalidated, which would render the Warner-Chappell Music decision moot”.

She added that three of the justices telegraphed that they would strike down the discovery rule if it comes before them in the future. “This shines a light on that uncertainty, especially since the Hearst Newspapers v Martinelli case currently on petition for review would provide the opportunity to do so,” she said.

It presents the same question that Gorsuch would have preferred the court to consider, which is whether the Copyright Act authorises the discovery rule at all.

Mauri added: “Still, if the discovery rule is not invalidated, then Warner-Chappell Music confirms that a plaintiff relying on the discovery rule can seek damages without any time-based limitations.”


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