What the Latest Supreme Court Copyright Ruling Means for You

Last week, in a 6-3 decision, the Supreme Court of the United States (SCOTUS) sided with music producer Sherman Nealy in his long-running case against Warner Chappell.

In the decision, SCOTUS found that, as long as a copyright infringement lawsuit is filed timely, there is no limitation on how far back the damages can go.

The decision increases the potential damages a plaintiff can claim in a copyright case. The plaintiffs will no longer be limited to a three-year window from when the lawsuit was filed.

Many artists are celebrating this victory, saying it is a major win for “individuals and small entities.” Others, however, are decrying the decision, saying it could greatly increase copyright liability and kick off a wave of lawsuits.

As such, it’s worth taking the time to understand what the Supreme Court said and how it may impact you, regardless of your position.

Background of the Case

In 2018, music producer Sherman Nealy filed a lawsuit against both Warner Chappel and Atlantic Records. He alleged that the 2008 Flo Rida song In the Ayer made unlicensed use of a sample from his 1984 song Jam the Box.

Copyright normally has a three-year statute of limitations on copyright infringement cases. However, according to the discovery rule, the clock does not start ticking until the plaintiff either learns of or should have learned of the infringement. Since Nealy was in prison when In the Ayer was released, he argued that he didn’t know about the sample until his release.

The lower courts decided with Nealy on that issue, ruling that the lawsuit was timely filed. However, there was still a question about what damages Nearly could collect.

On that issue, the district court ruled in favor of Warner and Atlantic. The judge said that, though the lawsuit was filed timely, he’s only eligible for damages going back three years. Nealy appealed that case, and the 11th Circuit Court of Appeals overturned that decision. Warner and Atlantic then appealed that decision to the Supreme Court.

The Supreme Court has now upheld the 11th Circuit’s decision, enabling Nealy to collect damages going back to 2008 if he wins.

However, while the decision is a key victory for Nealy, he has not won the lawsuit. The court has not ruled on any other issue in the case, so it is unclear if the sample is infringing, and there are still some factual issues around when Nealy should have learned about the infringement. The case will be remanded to the district court to address those issues.

However, while the decision doesn’t end this case, it does have some potentially big implications for future lawsuits.

The Issues at Hand

This case centers around two issues: When can a copyright infringement lawsuit be filed? And what damages can be collected?

The first issue wasn’t really addressed in this case. The Eleventh Circuit uses the “discovery rule,” which means that the three-year clock starts ticking when the infringed party either learns about the infringement or should have learned about it.

Since neither Atlantic nor Warner challenged the discovery rule, the Supreme Court didn’t comment on it. As such, there is still uncertainty about when a claim of copyright infringement accrues.

What the Supreme Court did look at was the damages issue. Atlantic and Warner argued that the three year statute of limitations also the look-back period for damages. As such, damages should be limited to the three years before the lawsuit was filed.

However, the Supreme Court disagreed. The court ruled that, as long as a case is filed in a timely manner, the plaintiff should be able to collect damages from when the infringement began.

In this case, it represents the difference of getting damages from 2015 to today versus 2008 to today.

For Atlantic and Warner, that could be a significant difference, especially since most songs earn the majority of their revenue in the months after their release.

What it Means for You

The big question no one knows the answer to is, “How many of these kinds of lawsuits are there?”

Theoretically, there shouldn’t be many of these kinds of cases. The circumstances where an infringement can go undetected for a long time despite due diligence should be few and far between. In this case, for example, Nearly was in prison for an extended period of time.

Nealy has one of the best arguments possible for why he was unaware of the infringement for a decade. Others, however, will struggle to make that argument.

That said, with new technologies for detecting samples and other smaller infringements, there could be more of these cases than it would seem. Faced with potential damages going back decades, there’s likely to be a push to settle such disputes.

In the cases where it does apply, filers will have a much bigger stick. They can use that to compel more favorable settlements or get more damages. This is potentially very powerful for smaller creators who may be dealing with older infringements.

However, it could be a nightmare for companies like Warner or Atlantic. As more older infringements come to light, the damages could be significant.

Still, it’s unknown how many applicable infringements there are and whether the discovery rule will survive long term.

Bottom Line

As IP attorney Jennifer Mauri said, “If the discovery rule goes away, so does this decision.”

It is frustrating that the discovery rule has not been decided. Instead, the Supreme Court wanted to clarify its 2014 decision in Petrella v. Metro-Goldwyn-Mayer Inc. In that case, the Supreme Court ruled there was a three-year lookback period, but only because it was an ongoing infringement case, not a discovery rule case.

Here, the Supreme Court says there is no limit on damages if a lawsuit is filed timely. However, without knowing the fate of the discovery rule, it’s difficult to say how much that means.

The discovery rule is fairly common right now. This means that rightsholders who have held off on filing a lawsuit due to a lack of damages may be motivated to do so. However, it’s unclear how many such cases there are.

In the end, I expect some cases to be filed with this ruling in mind. However, I don’t expect a tidal wave of litigation. With the discovery rule question unsettled and the unique circumstances of this case, a major shift doesn’t seem likely.

That is, at least not yet.