Warner Chappell v. Nealy: Copyright Infringement and Statute of Limitations #208

In this episode of The Screen Lawyer Podcast, host Pete Salsich delves into a recent U.S. Supreme Court case that addresses the complexities of copyright infringement claims under the Copyright Act, particularly focusing on the statute of limitations and the recovery of damages for older infringements. The case in question is Warner Chappell Music Inc. v. Nealy, which explores whether damages can be claimed for infringements discovered long after they occurred.

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Transcript

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On this episode of The Screen Lawyer Podcast, we're going to spend some time talking about a very recent US Supreme Court case involving the copyright infringement claims under the Copyright Act, specifically how the statute of limitations works and whether damages can be recovered for old infringements. It's an interesting case. It doesn't get all the way there, but it gets us down the road to start. Stick around. Hey there. Welcome to The Screen Lawyer Podcast. I'm Pete Salsich, The Screen Lawyer. And today we're going to talk about copyright infringement. That's a topic we've talked about before. But in this episode we're going to dig a little bit more deeply into some of the nuances of a copyright infringement claim, specifically the statute of limitations. When someone can bring a claim and when how far back they can recover damages, all in the framework of a Supreme Court case. It was just issued in early May. it called Warner Chappell Music Inc versus Nealy And this is a case involving a question of some old copyright infringement that was discovered later. And then the question of how far back damages could go. Let me set the stage a little bit. First, the issue of a statute of limitations in the Copyright Act has been settled for many, many years. It's three years in the statute itself. Someone can bring a claim for copyright infringement within three years. Or really, the way it's you think of it no later than three years after the claim accrued, and that standard statute of limitations languish, that the claim accrues, the injury has happened. You've got three years to bring a lawsuit. If you don't, then it's too late. It's forever gone. There's some nuances in that, in the variety of different, areas of law, when perhaps the claim hasn't accrued because the plaintiff hasn't discovered it yet, because the defendant was concealing the bad acts or some level of fraud. But generally speaking, it's fairly straightforward. Now, on the copyright infringement, world, though, it's been a little bit different in the courts have struggled over the years of exactly how to apply it. There's really two schools of thought here, and this is a little bit geeky for you copyright lawyers out there. But there's the concept of the injury rule versus the cop, the concept of the discovery rule. The injury rule holds that the injury occurs. The claim your statute of limitations starts clicking. Your clock is running when the injury happens, and that's when the infringement occurred. And the theory behind that generally is that for the most part, a copyright infringement is a public act. It's doing something in public without the copyright owner’s permission that triggers the claim. So it's generally known pretty much right away. The album got published, the movie got released, the photographs got used publicly, that sort of thing. But of course, you can imagine environments where an infringement occurs, but the plaintiff didn't discover it right away because it wasn't everywhere. It wasn't on all billboards or all movies or things like that. So there's a little bit of nuance there. But generally speaking, the the premise of the injury rule is that the act happens. You know, about it and that's it. Now, if a new infringement happens later, then you could recover for the later infringement. Let's say you missed the time to file the first time the photographs were used or the music was released, but a later version is released. A new act of infringement happens, and you file that lawsuit within the three year period of that, the under the injury rule, you can recover for the damages for that infringement, but the old infringements are considered discrete acts. Those claims are have come and gone. The injuries already happened and you didn't file in time. So you're limited to recover the damages just for the most recent act of infringement. The third category is in this discovery rule situation, which is come what comes up in a variety of different cases over the years, most recently in Warner Chappell. In this case. And here the facts are kind of interesting. So the plaintiff here was a musician who, back 15 years or so ago, had recorded some music as part of a small group. They didn't have a lot of success, but the music was there. Then this plaintiff through a series of his own life choices, spent two long stints in prison, and it was in 2016 that he got out of prison that he realized that in the interim, the other part of his music group had licensed these songs to Warner Chappell. Warner Chappell had turned around and recognized some value in them, and licensed several of them to some artists who turned them into huge hits. So there was real money at issue here. The plaintiff in this case, Nealy gets out of prison, apparently learns about it, then had no way to know it before. Not sure whether that's accurate or not, but that wasn't really at issue here and filed a lawsuit in 2018 seeking damages for infringements going back to 2008. And his claim was that he didn't discuss over the infringements until 2016. His lawsuit was only two years later, so if his claim accrued, then he should be able to get everything that's the issue that made its way all the way up to the Supreme Court. The issue was whether or not the discovery rule applied, and the courts are split on that. Some circuits have recognized this concept of the discovery rule in copyright infringement claims, because you literally could discover much later that infringement had happened much earlier. And in that circumstance, the courts that allowed this later discovery not a new active infringement. Remember, you're just discovering old infringement, but the court sort of allowed that claim to go forward. Had tried to wrap in this concept of the injury rule and typically limited. Yes, you can file suit now, but you can only recover damages that accrued going back three years from the time in the lawsuit creates. Kind of a weird situation there, because maybe all of the damages and remember and copyright infringement damages can be recovering the defendant's profits. Well, if the defendant earned its profits years ago, maybe isn't really earning much in the way of profits now. So limiting the damages in that context seems problematic. Other courts have said no. The discovery rule is not written into the statute. And unless you can alleged fraud or deceit or deliver something deliberate on the on the part of the defendant, then you really shouldn't be entitled to say, oh, I just discovered it. Now. Too bad for you. So that's where the courts are kind of split. What the court did in this case is it took up the issue really focusing only on whether you can reach back and get other damages. And the opinion actually said in this case, so long as the copyright infringement suit is timely brought. So that's the issue. Was it brought in time then? The damages are not limited to going back three years, but the damages can be recovered for all of the prior acts of infringement. So again, think about the situation where someone legitimately discovers much later that they were actively, the victim of copyright infringement. But all of the millions of dollars have been made by the defendant in the past. As we said before, in that circumstance, it seems pretty unfair to say, well, you can bring a lawsuit. You just discovered it. You are a victim, but too late. You can't go back and get the money that they made back years ago in this case, the court said, well, there's nothing that should that doesn't make sense. That's not equitable. We should know if the if the case is timely brought, then you should recover for all of the damages. Well, that could conceivably open up a significant new body of copyright infringement cases, because often you look at that case and say, well, yeah, I can see the infringement, but there's no money here because all the money was in the past, and you can only go back three years and it's really kind of a disincentive often for plaintiffs to bring expensive copyright infringement cases. On the other hand, part of the issue is whether or not this discovery rule really ought to be allowed if there wasn't something actively done wrong or fraudulent or deceitful by the defendant. And here Warner Chappell didn't do any, didn't do anything to the plaintiff to conceal from the plaintiff that this music had been licensed. So you couldn't allege the typical reason to delay the statute of limitations because you couldn't allege anything against Warner Chappell. And so what the court did, though, is it's the Supreme Court and Justice Kagan's opinion. It was A63 decision. She specifically said, we're going to assume that the discovery rule is in place. Okay. Remember where part of the issue is, is discovery rule versus injury rule. Does the discovery rule even apply to copyright infringement cases? And she said, assuming the discovery rule is in effect, which we are not deciding today, hint watch for a future case on that. If the discovery rule applies, then the lawsuit is timely, and if it's timely, you can go all the way back for damages. And when I first saw just like the headline of this case, I thought, oh, this is a big deal. Copyright damages can now go back way longer. But now, as I look more closely at the case, I realize that's only one part of the issue. But what hasn't been settled is whether and under what conditions the discovery rule applies. And I can see a lot of situations where that issue is going to make its way back up to the court. It's almost as if this particular version of the court is setting the tone for that. Now, there is a dissent. Judge Gorsuch filed a dissent here and sort of says, well, wait a second. If we're not deciding the underlying principle, we are not we shouldn't be deciding this issue either, because the premise for our decision is not set. We haven't decided the premise. And then you know, most, I think, examples of good Supreme Court opinions, Supreme Court jurisprudence, they don't take all of it. They only take a handful of cases. Tiny handful of cases. And they're typically based on an issue of law that they're going to decide to settle something. And they typically only take them when the premises that are put forward have been built up. And so the premises are accepted. And now, based on this premise, we decide this issue. Well, here, Judge Gorsuch said, wait a second. We we don't this underlying you're telling us we haven't decided this premise. We're not deciding whether the discovery rule applies, only that when a case is timely filed, you get all the damages, no matter how far back. And I think that particular statement is correct. There's nothing in the Copyright Act. There's nothing in the statute that says damages are limited only during a period of time. It says the claim has to be brought within a certain period of time. But if the claim is timely brought, you should get all the damages for that claim. That statement isn't really that controversial. It's sort of sends a message, I think, to the circuit courts who have done this hybrid way of saying, we're going to do a little discovery rule, but we're going to borrow a little of injury rule, and we're going to limit the damages to sort of say, that mess doesn't work. That's not the right approach. We're going to establish the principle under the Copyright Act. The damages are not limited time. Only claims are. And if a claim is timely brought damages not limited. So I don't think it was a waste of the court's time. That is an important principle to establish to remove that consideration from the discovery rule. But it tees up this other case, this other issue that still has to be determined under and I, I don't think the court's going to come out and say there's no such thing as a discovery rule because, you know, a lot of times when you're sort of reading Supreme Court cases and you're you're trying to figure out what's really going on here, it's very common for scholars and people to go, which judge which justices are on this side? What are they telling us? There's there's a fair amount of forecasting that can happen in Supreme Court opinions for what's coming next. Sometimes it's almost a signal to the litigants. Next time you bring a case to us, put enough evidence in on this issue so that we can decide this issue. So we're not deciding it yet, but we're telling you, we think that it's enough of a real thing to decide what happens if we decided that. So you all litigants, you need to bring up a case where we can decide that issue head on. Now, again, if you're reading the tea leaves, you might say, well, why would they even assume? Why would they take this case now as the one to decide this discrete principle of damages? not being limited in time? Well, probably because they think the discovery rule does apply, but maybe recognize that's not really the issue that the under the district court and the circuit court had certified. And sort of as a little aside, just, you know, there's another geeky part of the legal practice for issues that need to get up to the Supreme Court. Sometimes in the middle of a larger case, the district court will certify one particular legal question to send up to the Court of Appeals before it decides the facts of the case, and then the Court of Appeals will issue a ruling, and then the parties might agree. Well, we need to take this all the way up to the Supreme Court to get this one issue decided, and then we're going to come back and see what happens next. So the case is going to go back to trial. All we know is to this one little rule that if the case is timely filed, then damages are not limited. That's a good thing. But there's this case is going to go back to the trial court. And now we know, I think we can safely predict, and perhaps we'll come back here in a year on the podcast and tell you what happened in the cases that went forward, because now they're going to have to argue and put forth evidence on whether or not the discovery rule applies in this case. And I think this is a good case to do it, because you clearly have a case that's the claim filed long after the original acts of infringement occurred. And frankly, where most of the damages are. But you also have some level of legitimate non discovery. I was in prison. Now do you get into issues. Well did you cause your own inability discovery? I don't know if we're going to get into that level of stuff. Are you going to be there have been cases that have held that if a plaintiff was truly, like mentally incapacitated, spent ten years in a, you know, in an institution unable to make decisions for themselves? Well, there's a reason that they might not have discovered or as and we mentioned before, cases where you could point to some conduct by the defendant that was deliberately trying to conceal the existence of the infringement until after the limitations period. Well, those are pretty well established exceptions. or where the quote unquote discovery occurs and that seems to fit. But we have a situation here where there's no allegation that the defendant, Warner Chappell, did anything to try to conceal the infringement and no allegation that the plaintiff was mentally incapacitated wasn't in an institution with diminished capacity. It was just in prison, presumably quite able to, you know, find out what's going on in the world. There's plenty of music that could have been an easy way to find that out. So those those facts may come forward in the case as it gets tried. And then the issue of whether the discovery rule applies in under these facts might come up. It wouldn't surprise me for the court to take this opportunity to limit the discovery rule and give us some, you know, you know, types of evidence that would say, in this case, we can delay the accrual of the claim under the limitations period until it was discovered, because discovery happened later for some legitimate reason. or it may, you know, not it may just simply say an absent fraud or delivered, you know, diminished capacity. It may say that's the only circumstances. We'll see. But I think there is something to take away from this case. And that is that if your claim is filed on time, you can get all of the damages that you're entitled to no matter when the damages occurred. But the question of when the case is going to be time, timely filed, but the question of whether or not the case itself is filed in time still needs to be determined. And I think that's where this case will go next. So stick around. We'll come back to this issue. I'm sure it'll be interesting to follow. Be interesting to see if in the interim there is an increase in copyright infringement claims filed. It certainly opens up some consideration for attorneys who might take these copyright infringement cases, particularly if the money's big enough, take them on a contingency basis. because most of these cases are not really worth taking unless the money's real. And if that money really was earned by the defendants more than three years ago, you have to look closely at this case and try to figure out where the courts might go on the discovery rule, be fun to watch, or at least fun for me. because I geek out on this stuff. So that's it for today. If you enjoyed this content, if you're interested in more about copyright law, entertainment law, anything else, check us out. You can find The Screen Lawyer Podcast anywhere you get your audio podcast, find us, follow us there. And if you're watching on our YouTube channel, hit that Like and Subscribe button so you can get all of our video content. And you can always find us at TheScreenLawyer.com. Take care.