On May 20, 2024, the U.S. Supreme Court denied certiorari in Hearst Newspapers, L.L.C. v. Martinelli1. In its petition, Hearst Newspapers had asked the Court to decide the issue of whether the Copyright Act's statute of limitations for civil claims incorporates the "discovery rule," which states that a claim does not accrue until the claimant knows or should know of the facts giving rise thereto. Hearst had argued that the discovery rule is inconsistently applied by lower courts and that its application in copyright cases has no support in the Copyright Act.
The denial was somewhat surprising given that it followed closely on the Court's decision in Warner Chappell Music v. Nealy2. In Nealy, a 6-3 decision issued on May 9, 2024, the Court held that assuming, without deciding, the discovery rule applies – and the Court merely assumed the discovery rule applied because the litigants in Nealy conceded for the purposes of the petition that it does – a plaintiff is entitled to seek all damages flowing from an infringement, irrespective of when the infringement occurred, so long as the action was commenced within three years of the "discovery" of the infringement.
Justice Kagan, writing for the majority in Nealy, held that the Copyright Act's statutory "time to sue prescription" is a "singular one" that does not establish a separate three-year period for recovering damages. In other words, if a claim is timely, the plaintiff can recover damages for infringing acts regardless of when they occurred. Prior to Nealy, many courts, including those in the Second Circuit,3 applying the discovery rule, interpreted the Copyright Act's three-year statute of limitations (17 U.S.C. § 507(b)) to limit copyright damages only to those incurred in the three years preceding the commencement of the infringement action.
What the Court in Nealy did not address, however, was what would happen under the discovery rule where a plaintiff failed to sue within three years of either discovery of the alleged infringement or within three years of when the plaintiff should have reasonably discovered the alleged infringement. In order to reconcile Nealy with the Court's decision in Petrella,4, it would suggest that where a plaintiff did not sue within three years of discovery or when it should have discovered the alleged infringement, then unless it was a continuing infringement, with infringing acts within the three years prior to the commencement of the action, the claim would be totally time barred. If there were a continuing infringement with infringing acts within the three years prior to commencement of the action, for Nealy to be consistent with Petrella, it would appear that the plaintiff can only recover damages going back three years.
The Court also did not decide whether a suit brought later than three years from the date of the infringement can nevertheless be timely under the "discovery rule." In fact, Justice Gorsuch authored a dissenting opinion in Nealy (joined by Justices Thomas and Alito) arguing that the discovery rule is limited to cases concerning fraud or concealment and thus, as a brightline rule, does not apply in copyright infringement actions. Based on that view, Justice Gorsuch warned that the majority's decision in Nealy "promises soon enough to make anything [the Court] might say [] about the rule's operational details a dead letter."
Despite Justice Gorsuch's warning to make the Nealy decision "a dead letter," the Court declined to hearHearst Newspapers' petition for certiorari. By denying certiorari, the Court has left open the question of whether the discovery rule applies in actions not involving fraud or concealment. For now, under Nealy a copyright plaintiff is entitled to recover damages irrespective of when the alleged infringement occurred—so long as the plaintiff can satisfy the arguably inapplicable (or non-existent) discovery rule. Thus, Nealy may require copyright defendants to conduct new risk-exposure analyses as their clients could conceivably be exposed to greater damages than initially assessed (and the issue of discovery of the alleged infringement or when it reasonably should have been discovered is likely to become a significant new litigated issue in infringement actions).
Undeterred by the Court's decision, Hearst Newspapers' attorney Jonathan Donnellan expressed that he "expects the issue to be back before the Court in light of [the Nealy] dissent."5
Footnotes
1. Petition for Writ of Certiorari, Hearst Newspapers, L.L.C., et al. v. Antonio Martinelli, No. 23-474(Nov. 2, 2023); https://www.supremecourt.gov/orders/courtorders/052024zor_d1o3.pdf.
2. Warner Chappell Music, Inc. v. Nealy, 144 S. Ct. 1135 (2024).
3. Compare Sohm v. Scholastic Inc., 959 F.3d 39, 51 (2d Cir. 2020) ("[A] plaintiff's recovery is limited to damages incurred during the three years prior to filing suit..."); with Starz Ent., LLC v. MGM Domestic Television Distribution, LLC, 39 F.4th 1236, 1243 (9th Cir. 2022) (rejecting Sohm's application of the discovery rule and finding instead that "Applying a separate damages bar based on a three-year 'lookback period' that is 'explicitly dissociated' from the Copyright Act's state of limitations in § 507(b) would eviscerate the discovery rule.").
4. Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 670 (2013).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.