These are bustling times for copyright law in the Supreme Court corridors with cases such as ‘Unicolors v. Hennes & Mauritz’ in 2021 and ‘Andy Warhol Foundation v. Goldsmith’ last year. The recent inclusion of ‘Nealy v. Warner Chappell Music‘ in the Supreme Court docket, a case that explores the degree to which a copyright infringer can retain profits made through infringement when the copyright holder files a case within the statute of limitations, continues this tendency.
This is a much-deserved boon for creative communities, more so with individuals in the Second Circuit who have had to grapple with the aftereffects of the Sohm v. Scholastic decision of 2020. For the uninitiated, the decision effectively transformed the compensation process for copyright infringements in the Second Circuit.
A brief recount of the Sohm problem would be amiss at this juncture. The copyright claims carry a three-year statute of limitations. Dubbed the “discovery rule,” a copyright claim “accrues” when the artist becomes cognizant of, or reasonably should have known of, the infringer’s rights violation. The logic behind this rule stems from the fact that copyright infringement often goes unnoticed for a significant duration before the rights holder learns of the violation.
It was a given that a copyright holder could recover all of the infringer’s profits irrespective of the time, provided the infringement claims were brought within three years of reasonable discovery, until Sohm. The Second Circuit court’s interpretation of ‘Petrella v. MGM’, led to the ruling that, though one may file claims within three years of reasonable discovery, the compensation would only account for the damages in those three years. This situation could potentially lead to zero compensation for many artists as the damages wouldn’t have accured within that three year period.
Several courts have since come forward rejecting the Sohm methodology. The Ninth Circuit, in ‘Starz Ent., LLC v. MGM Domestic Television Distribution, LLC‘, and the Eleventh Circuit in ‘Nealy v. Warner Chappell Music, Inc.’ have adopted a counter position. The consistent argument is that the Sohm ruling didactically contradicted the “discovery rule” and denied rightful claimants their entitlements according to the statute and case laws. The Nealy decision is now pending in the Supreme Court.
Most district courts deny the claims made in relation to Petrella for compensations made timely pursuant to the discovery rule, thereby isolating Sohm as an outlier. Undoubtedly, more clarity is sought on copyright infringement compensation, and the Supreme Court’s decision in the Nealy appeal is keenly awaited as it could potentially resolve the situation and reestablish harmony among the circuit courts.