Widening Circuit Split, Eleventh Circuit Decides Retroactive Damages Are Recoverable for Timely Copyright Claims

The U.S. Court of Appeals for the Eleventh Circuit widened a circuit split regarding whether a plaintiff may obtain damages for copyright infringement occurring more than three years before filing suit pursuant to the three-year statute of limitations under the Copyright Act, 17 U.S.C. § 507(b). Joining the Ninth Circuit and disagreeing with the Second Circuit, the Eleventh Circuit held that under its circuit’s discovery accrual rule for copyright claims, a copyright plaintiff may recover damages for infringement occurring more than three years before filing suit as long as the suit is filed within three years of when the plaintiff knew or reasonably should have known of the infringement.  

In the district court below, Plaintiffs Music Specialist, Inc. (“MSI”) and its president Sherman Nealy (together, “MSI/Nealy”) sued Defendants Warner Chappell Music, Inc. and Artist Publishing Group, LLC (together, “Warner”) (for copyright infringement on the basis that Warner had used copyright protected works owned by Nealy through invalid licenses by third parties. The works at issue were licensed by MSI’s former Vice President Tony Butler and his new company 321 Music, LLC (“321”) after MSI had ceased operating in the 1980s when Nealy went to prison for cocaine distribution. Nealy alleged that he did not authorize anyone to exploit the rights to MSI’s catalog while he was in prison.  After Nealy was released, he discovered in January 2016 that litigation over the rights to the works at issue had ensued between Warner, Butler, 321, and other third parties. Nearly three years later, in December 2018, MSI/Nealy filed suit for infringement allegedly occurring as early as 2008, ten years earlier.

After discovery, Warner moved for summary judgment on statute of limitations grounds. Warner argued that although a plaintiff may sue for harm that occurred more than three years earlier, no damages may be recovered under the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014) purportedly bars retrospective relief for infringement occurring earlier than three years from the date of a copyright lawsuit.  The district court granted in part and denied in part summary judgement for Warner, finding a dispute of material facts existed regarding when MSI/Nealy’s copyright claim accrued under the circuit’s discovery accrual rule. It then certified to the Eleventh Circuit for interlocutory appellate review under 28 U.S.C. § 1292(b) the question of whether “damages in this copyright action are limited to the three-year lookback period as calculated from the date of the filing of the Complaint pursuant to the Copyright Act and Petrella.”

On review of the certified question, the Eleventh Circuit confirmed that the circuit’s discovery accrual rule governed the timeliness of copyright claims. The Court explained that the copyright statute of limitations runs from the day that a claim “accrues” and there are two recognized rules for determining that date: the injury rule and the discovery rule. Under the injury rule, a copyright plaintiff’s claim accrues when the infringement occurs, regardless of when the plaintiff learned of it.  Under Eleventh Circuit precedent, however, the Court determined that where the gravamen of a copyright claim is ownership, a plaintiffs’ claim accrues under the discovery rule, or when the plaintiff knew or should have known about the infringement. 

Here, the Court stated it had “little difficulty” in concluding that the gravamen of MSI/Nealy’s claim sounded in ownership because ownership of the copyrighted works at issue was the only disputed issue. The Court noted that the parties had entered into a joint-pretrial stipulation in which they agreed “that this case presents an ‘ownership dispute’ within the meaning of the statute of limitations for copyright claims” and that Warner conceded that if MSI/Nealy proved ownership, the only remaining issue would be damages because their use of the works would constitute infringement.

Additionally, the Eleventh Circuit rejected Warner’s argument that Petrella barred damages relief for infringement occurring more than three years before suit was filed. Rather, the Court held that the Supreme Court merely decided that the equitable doctrine of laches does not bar copyright claims that are timely within the three-year statute of limitations period because Section 507(b) “itself takes account of delay.” The Eleventh Circuit found that the language in Petrella cited by Warner that retrospective relief is available to a copyright plaintiff “running only three years back from the date the complaint was filed” involved the application of the statute of limitations when claims accrue under the injury rule, not the discovery rule.  Indeed, the Eleventh Circuit held that Petrella “did not present the question whether a plaintiff could recover for harm that occurred more than three years before the plaintiff filed suit if his claim was otherwise timely under the discovery rule.” And the Court noted that Petrella expressly addressed the discovery rule and reserved the question of the rule’s propriety for a later date, and accordingly did not cap damages for timely claims pursuant to that rule.

Finally, the Eleventh Circuit determined that the Copyright Act also did not support a bar on retrospective damages relief for an otherwise timely copyright claim. The Court stated that the plain text of the Copyright Act statute of limitations does not limit remedies on an otherwise timely claim because it provides only that “[n]o civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.” 17 U.S.C. § 507(b). Instead, the Court noted that the Copyright Act makes an infringer liable for actual damages and profits. Accordingly, the Court concluded that “[g]iven that the plain text of the Copyright Act does not support the existence of a separate damages bar for an otherwise timely copyright claim, we hold that a copyright plaintiff with a timely claim under the discovery rule may recover retrospective relief for infringement that occurred more than three years prior to the filing of the lawsuit.”

The case is Nealy v. Warner Chappell Music, Inc., No. 21-13232, 2023 WL 2230267 (11th Cir. Feb. 27, 2023).