Unraveling Copyright's Discovery Rule: A Supreme Court Saga

• Published date: 05 April 2024
• Subject Matter: Intellectual Property, Litigation, Mediation & Arbitration, Copyright, Trials & Appeals & Compensation
• Law Firm: Romano Law
• Author: Carlianna Dengel and Jari Wilson

In February 2024, the Supreme Court heard oral arguments on a case that could have far-reaching implications for individuals and entities that own or use copyrighted works. The case of Warner Chappell Music, Inc. v. Nealy, addresses the important, unresolved issue of whether the copyright discovery rule places a time limitation on the recovery of damages.

Depending on the outcome, the decision in that case could empower copyright owners to recover damages tracing back decades from unsuspecting defendants, or it could leave little recourse for copyright owners who are unable to quickly discover their work has been infringed.

The consequences for copyright owners may be even broader if the Supreme Court decides to pick up another looming case. Hearst Newspapers LLC v. Martinelli could lead to an outright rejection of the discovery rule in the copyright context.

What Is The Copyright Discovery Rule?

The Copyright Act of 1976 sets a statute of limitations of three years that begins when the infringement claim "accrued." Once the statute of limitations period has passed, the copyright owner can no longer bring a claim for that infringing activity.

In the context of copyright infringement, courts have adopted a flexible approach to the statute of limitations. Known as the discovery rule, this approach provides that the statute of limitations period does not begin'and that three-year clock does not start ticking'until the plaintiff actually discovers or reasonably should have discovered the infringing activity.

Consider the following example: a work was infringed in 2012, but the copyright owner, despite acting with due diligence, did not discover that infringing activity until January 1, 2020. Applying the discovery rule, the statute of limitations would not begin until that date of discovery. This means the plaintiff could bring a timely claim at any point before January 2, 2023.

Circuit Split On Damages Under The Discovery Rule

While the courts have been generally consistent in applying the discovery rule, a major split between the circuits exists on the issue of how far back in time plaintiffs are entitled to collect damages under the discovery rule. The split arises from differing interpretations of language from the 2014 Supreme Court decision in Petrella v. MGM. Importantly, this split involves the Second Circuit (where New York is located) and the Ninth Circuit (where California is located), where most copyright cases are litigated.

The Second Circuit's...