In a decision issued this morning, the Supreme Court rejected the three-year cap on damages in copyright infringement actions espoused by the Second Circuit in Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020).   It did so without resolving the important underlying question whether the “discovery” or the “injury” rule determines when the statute of limitations begins to run in copyright cases.

Some background on the case can be found here: (https://ipandmedialaw.fkks.com/post/102ioxf/supreme-court-to-weigh-in-on-damages-for-copyright-infringement) and here (https://ipandmedialaw.fkks.com/post/102j0uo/quick-thoughts-on-the-supreme-court-argument-in-warner-chappell-v-nealy).  The case involved copyright claims by Sherman Nealy going back to 2008.  The issue on cert.--despite some confusion in the question presented explained in the second link above--was whether Nealy's damages were limited to the period commencing three-years before filing or whether he could look back further in seeking damages.  In the interests of full disclosure, the co-authors of this post represented Scholastic Inc. in the Sohm case.

The Court found that neither the text of the Copyright Act nor its decision in Petrella v. Metro-Goldwyn Mayer, Inc., 572 U.S. 663 (2014) supports a limit on the time-frame for damages. Rather, the text of the Act simply enforces a three-year statute of limitations for claims (without deciding when that statute of limitations begins running, as we'll discuss below), and does not include any separate limit on damages.  Although the Court acknowledged that the language in Petrella, if read out of context, could appear to support a damages limitation, such language must be read as applying to the facts before the Court in Petrella  as explaining how the statute of limitations worked when, as in Petrella, a plaintiff had no timely claims for infringement that were more than three years old.  The Court further noted that, such a limitation on the timeframe for damages would effectively gut the discovery rule, leaving a plaintiff able to file suit for older acts, but without any meaningful remedy.

The most interesting part of the decision, however, may be about what it says (and doesn't say) about the discovery vs. injury rule debate.  The majority opinion--authored by Justice Kagan and joined by Chief Justice Roberts and Justices Sotomayor, Kavanaugh, Barrett and Jackson--states multiple times that it is not taking a position on which rule governs.  The dissent, authored by Justice Gorsuch and joined by Justices Thomas and Alito, takes the majority to task for refusing to “answer a question that does matter [rather] than one that almost certainly does not.”  Justice Gorsuch opines that “the [Copyright] Act almost certainly does not tolerate a discovery rule,” suggesting that such a rule should be limited to cases where the applicable statute makes clear that the usual rule – that the cause of action accrues when the plaintiff can file suit and obtain relief (i.e., the injury rule)—is not to be applied.  In Nealy's case, given this delay in filing, the dissent argues that “the discovery rule thus has no role to play here—or, indeed, in the mine run of copyright cases.”  The dissent would have “dismissed [the petition] as improvidently granted and awaited another squarely presenting the question whether the Copyright Act authorizes the discovery rule.”

Interestingly, there is exactly such a case, Hearst Newspapers LLC v. Martinelli, No.23-274, awaiting a decision by the Supreme Court as to whether  to grant certiorari. Hearst has been twice conferenced by the Justices, but as of the publication of this post there has been no decision as to whether cert. will be granted.  We will keep you posted.