By number of total cases commenced in 2022, the largest five Courts of Appeals are the 9th (9,018 cases commenced), 5th (6,194 cases commenced), 11th (4,702 cases commenced), 4th (4,105 cases commenced), and 2nd (3,794 cases commenced). The two appeals courts with the largest volume of copyright disputes specifically, the Ninth Circuit and Second Circuit, have interpreted the question of damages in discovery-rule copyright cases differently.
The Second Circuit applied the “discovery rule” for determining when a copyright claim accrues and stated the Supreme Court “explicitly delimited damages to the three years prior to the commencement of a copyright infringement action.” See Sohm, 959 F.3d at 50-51 (contemplating Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663, 134 S. Ct. 1962, 188 L. Ed. 2d 979 (2014)). Two years later, the Ninth Circuit distinguished the case decided by the Second Circuit, noting that “the discovery rule had no place” in the Petrella decision noting the Court had “not passed on the question” of the discovery rule. See Starz, 39 F.4th at 1240-1242. “[B]ecause the Petrella Court was solely concerned with laches . . . it could not have intended its language to address the situation where a copyright holder does not know about the infringing act to which the discovery rule.” See See Starz, 39 F.4th at 1242.
Early this year, the Eleventh Circuit added to the Ninth and Second Circuits by weighing on the issue of damages in a discovery rule copyright action and similarly sticking to its previous precedent. In Nealy v. Warner Chappell Music, Inc., 60 F.4th 1325, 1327 (11th Cir. 2023), the Court reasoned that “an absolute three-year bar on damages ‘would eviscerate the discovery rule.’” (citing Starz, 39 F.4th at 1244). The Eleventh Circuit’s analysis further clarifies that the statements in Petrella were “in the context of a claim that was timely because of the injury rule.” Nealy 60 F.4th at 1332.
Two weeks ago, the Fifth Circuit issued its opinion in Martinelli v. Hearst Newspapers, L.L.C., No. 22-20333, 2023 U.S. App. LEXIS 8914, at *10 (5th Cir. Apr. 13, 2023). In its analysis, the court noted that “even accepting as true that Petrella ‘leads to the conclusion that’ the discovery rule does not apply to § 507(b), the rule of orderliness still requires us to follow [precedent]. Martinelli 2023 U.S. App. LEXIS 8914 at *18. The case notes that “[b]oth circuits that have considered whether Petrella and Rotkiske overturned their Copyright Act discovery rules have rejected the argument and stuck with their precedents.” Martinelli 2023 U.S. App. LEXIS 8914 at *28 (discussing the Ninth and Second Circuit decisions). The Fifth Circuit continues that, since the parties have already stipulated damages, the case “does not present the issue of whether” this Court should limit damages. Martinelli 2023 U.S. App. LEXIS 8914 at N.7.
The takeaway for litigants should be clear; generally, the discovery rule is alive and well. However, the Second Circuit has interpreted a significant limitation to damages stemming from claims relying on the discovery rule. This limitation is not present in other circuits, and other circuits appear reluctant to extend the same limitation.