7 www.loubar.org July 2024 Serving your practice as our own For more information call us at 502-568-6100 or Submit for a quick quote at www.LMICK.com The Second Circuit and Sohm The Court of Appeals for the Second Circuit was the first appeals court to interpret Pe- trella in Sohm v. Scholastic Inc., 959 F.3d 39 (2d Cir. 2020). In Sohm, the plaintiff timely filed suit in 2018, within three years of dis- covering that defendant had been infringing his copyrighted photographs since 2004. On appeal from the district court’s summary judgment order, the Second Circuit held that Petrella did not alter the circuit’s application of the discovery rule but, citing the above language, Petrella did limit the plaintiff’s recoverable damages to the three years prior to filing suit. The Ninth Circuit and Starz Like the plaintiff in Sohm, the plaintiff in Starz Entertainment, LLC v. MGM Domestic Television Distribution, LLC, 39 F.4th 1236 (9th Cir. 2022), timely filed suit after discov- ering the defendant’s infringing conduct, but some of the infringements occurred more than three years before the date of filing. The defendant claimed that Petrella established a complete bar to monetary recovery for infringements beyond the three-year “look- back” period. The Ninth Circuit disagreed and, taking direct aim at Sohm, held that the Petrella Court did not pass on the ap- plicability of the discovery rule, but instead only addressed laches as a bar to recovery. The Starz court held that a plaintiff could reach money damages incurred more than three years before the date of suit so long as the entire claim was timely under the discovery rule. The Supreme Court and Nealy As explained above, Nealy discovered that a record company had been profiting from his songs when he got out of prison on comple- tion of his ten-year criminal sentence. The district court found that Nealy’s claim was timely under the discovery rule and that he was entitled to recover damages for all infring- ing acts. The defendant appealed, urging the Eleventh Circuit to adopt the Second Circuit’s holding in Sohm and limit Nealy’s recovery to the three years before suit. Nealy v. Warner Chappell Music, Inc., 60 F.4th 1325 (11th Cir. 2023). The Eleventh Circuit instead adopted the Ninth Circuit’s holding in Starz, and de- fendant appealed to the Supreme Court to resolve the split. In a short opinion by Justice Elena Kagan, the Court assumed, without deciding, that the discovery rule applied in copyright infringement cases. The Court went on to find that nothing in the plain text of the Copyright Act imposed a time limit on monetary damages, and that the Second Circuit’s application of a three-year dam- ages bar “makes the discovery rule func- tionally equivalent” to the accrual rule. The Court also clarified that Petrella dealt with the Act’s limitations provision “when a plaintiff has no timely claims for infringing acts more than three years old.” Because the plaintiff in Petrella “had long known of the defendant's infringing conduct, she could not avail herself of the discovery rule,” and was limited to damages for claims that accrued within the three-year lookback period. And so, the Supreme Court in Nealy held that the “Copyright Act entitles a copyright owner to recover damages for any timely claim.” The Dissent and the Future of Nealy Justice Neil Gorsuch dissented from the ma- jority’s opinion, joined by Justices Thomas and Alito. The dissenters took aim at the majority’s assumption that the discovery rule had any application in federal civil claims. Citing Rotkiske v. Klemm, 589 U.S. 8 (2019) (not a copyright case), the dissenters claimed the Court interprets statutes with the injury rule as the standard, and that the discovery rule should only apply in cases of fraud or concealment. They would have dismissed the case as improvidently granted and awaited a case that squarely addresses the question whether the Copyright Act authorizes the discovery rule. Hearst Newspapers, L.L.C., et al. v. Marti- nelli, 65 F.4th 231 (5th Cir. 2023), cert. denied --- S.Ct. ---- (2024), posed that very question to the Court on a recent petition for certiorari, which the Court denied without opinion on May 20, 2024. What Does the Nealy Decision Mean for Your Clients? The Nealy decision was undoubtedly a win for copyright plaintiffs. In a digital world where unauthorized reproductions, displays and performances of copyrighted works are both easier to commit and harder to detect, Nealy allows plaintiffs to recover money damages for infringements whenever they occur, so long as the claims are brought within three years of the plaintiffs’ discovery (or construc- tive discovery) of their injury. It is always prudent to advise copyright owners, content creators and licensors to diligently police their copyrights for potential infringements, but after Nealy there is at least some certainty that they may obtain full monetary recovery for timely claims. For defendants, especially large institutions or organizations that use lots of creative content, Nealy means exercising additional diligence to root out and mitigate poten- tial infringements. An accused copyright infringer can no longer rely on Sohm to limit a plaintiff’s damages for old infringe- ments. This is especially important where a defendant’s licensed uses may be difficult to substantiate due to loss or destruction of old records. Jason Hart Raff is a law clerk and incoming associ- ate attorney at the firm Gray Ice Higdon, PLLC, in Louisville. In May, Jason graduated summa cum laude from the Louis D. Brandeis School of Law at the University of Louisville. Prior to attending law school, Jason was a staff Spanish interpreter for the Kentucky Court of Justice in Jefferson County, managed a translation and interpreting depart- ment for the Presbyte- rian Church, U.S.A., and was a performing classical cellist and or- chestral conductor. He is especially excited by all aspects of intellectual property law. n (continued from previous page)