SCOTUS hears Warner Chappell’s challenge to copyright law

Top court in the US addresses circuit split over Copyright Act statute | Music producer wants damages from Warner to be backdated more than 10 years, during which time he was jailed for drug dealing | Damages issue is ‘critical’ for copyright damages, say lawyers.

The US Supreme Court heard arguments yesterday (February 21) in a pivotal case that could clarify the length of time copyright claims can be backdated, and may change rules on burden of proof.

Warner Chappell Music appealed to the Supreme Court (SCOTUS) to review an Eleventh Circuit ruling that rapper and music producer Sherman Nealy could recover damages for infringement that occurred more than three years before the suit was filed.

This goes against the ‘discovery accrual rule’ under the Copyright Act's statute of limitations for civil actions—but justices are now deliberating whether bending this rule can be justified.

Crucially, there is a clear circuit split regarding the interpretation of Petrella v MGM, 2014, after SCOTUS barred recovery of damages for infringement that occurred more than three years prior to the filing of a copyright action.

Nealy sued Warner Chappell in December 2018 for alleged infringement of the 1984 electro-funk track, Jam the Box, sung by Tony Butler, aka ‘Pretty Tony’—the rights to which are owned by Nealy’s now-dissolved record label and co-petitioner Music Specialist.

According to Nealy, rapper and singer-songwriter Flo Rida, aka Tramar Dillar, sampled (or incorporated elements of) Jam the Box into his 2008 song In the Ayer.

Nealy is seeking to backdate damages by more than a decade, partly owing to the fact that he wasn’t aware of the alleged infringement until 2016, due to serving a near-20-year prison sentence for cocaine distribution between 1989 and 2008.

Circuit split leads to 'forum shopping'

Commenting on the case, Barry Werbin, counsel at Herrick, Feinstein, said: “Regardless of how the court comes out on this issue, there is an urgent need to establish a single, consistent standard among the Circuits on this critical copyright damages issue.”

He points out that currently, the Ninth and Eleventh Circuits permit retrospective damages without a time limit past the statutory three-year limitations period for bringing actions after a plaintiff first knew, or should have known, of its claims.

By contrast, the Second Circuit has held that the Copyright Act limits damages only to the three-year period prior to when a copyright infringement action is filed.

“This growing Circuit split inevitably leads to forum shopping and disparate damage rulings in copyright cases,” said Werbin. “This, in turn, makes it more difficult to settle such cases early on based on informed assessments of the potential maximum damage awards in infringement cases.”

Infringement ‘with impunity’

Werbin added that defendants within the jurisdictions of courts following the Second Circuit’s position can “arguably infringe with impunity, knowing that upon discovery of their actions their liability would be limited to only a three-year lookback for damages.

“The court needs to resolve the question of whether the term ‘accrued’—as it appears in the Copyright Act’s limitations section—also limits the reach-back period for assessing damages, despite the two concepts (limitations period for bringing actions and monetary damages, including a defendant’s profits)—being addressed separately in the Act, where there’s no limitations period mentioned in the provisions for monetary damages.”

Werbin noted the Supreme Court’s conservative stance as potentially limiting.

“With SCOTUS charged with interpreting statutory provisions as written and not expanding them for other purposes, it would appear this court’s conservative bloc may well conclude that the statutory limitations period for commencing actions is limited to just the time to sue,” he said.

He added that it “does not impact how far back damages may then be assessed under separate statutory damage remedy provisions, which do not impose any look-back time limitation.

“This is especially compelling because under the Second Circuit’s view, a plaintiff discovering an infringement who then sues within three years could potentially lose out on meaningful damages that would effectively reward a defendant for keeping things ‘mum’ over an extended period.”

Resolution of Petrella on the table

According to William Manske, a partner at Robins Kaplan, the Supreme Court appears likely to resolve and clarify Petrella.

“The justices’ view of that case will signal a lot about a final decision,” he said.

“In Petrella, the Supreme Court…stated in its decision that the statute of limitations ‘bars relief of any kind for conduct occurring prior to the three-year limitations period’ and that damages in a copyright action can be obtained ‘running only three years back from the date the complaint was filed.’”

But, Manske explained, circuit courts have split on the interpretation of this language. The Second Circuit held in Sohm v Scholastic that a plaintiff may only recover damages for copyright infringement that occurred within the three-year window preceding the filing of the suit, even when the discovery rule applies.

The Ninth Circuit held in Starz Ent v MGM Domestic Television Distrib that Petrella did not limit damages to the three-year period before the suit was filed, because such an interpretation ‘would eviscerate the discovery rule’.

Manske also pointed out that Petrella  is relatively recent, and that four of the six justices from the Petrella  majority (Justices Alito, Kagan, Thomas and Sotomayor) remain on the bench.

‘Open-ended liability’

“The court’s decision should have a clarifying and clear effect on the parameters of copyright damages,” he added. “Either damages are firmly limited, or they are subject to a more case-by-case analysis based on application of the ‘discovery rule’, if applicable.

“We will be watching oral arguments to see the justices’ receptiveness to the policy arguments advanced by Warner Chappell Music and the amici.

“The recurring theme among amici is that [the lower court’s decision] invites open-ended liability, which could create a chilling effect on uses of public good and encourage copyright trolls.”

He added that this case will “form an interesting companion to other recent copyright cases at the Supreme Court—Google v Oracle (2021) and Andy Warhol Foundation for Visual Arts v Goldsmith (2023), for example—which confront copyright concepts in the digital age.”

Arguing for Warner Chappell was Kannon Shanmugam, partner at Paul Weiss; and for Nealy was Wes Earnhardt, partner at Cravath.

The Supreme Court’s opinion is expected by the end of June.

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