Legal News

Back in 2018, when music producer Sherman Nealy filed a lawsuit against Warner Music Group, it was just a run-of-the-mill copyright case. Nealy claimed that Flo Rida’s 2008 tune “In the Ayer” featured an unlicensed sample of “Jam the Box,” a 1984 track released by Pretty Tony that he owns.

It’s the same kind of claim that’s made in federal courts every day.

But five years later, Nealy’s lawsuit is now headed to the U.S. Supreme Court, which will use it as a vehicle to answer big unresolved questions about how much money can be awarded in copyright cases. Are those damages limited to just the last three years before a case was filed? Or can they range back decades, adding potentially many more millions to the total?

The high court’s eventual ruling, which the justices will issue next spring, will apply to all forms of copyrighted works, but the music industry is paying particularly close attention. In a filing earlier this year, record labels and music publishers called the case “exceptionally important” to their business.

Pay After Delay?

The controversy at the center of the case against Warner dates back to 2014, when the Supreme Court ruled that the movie studio MGM could be sued for copyright infringement over Raging Bull, even though the case was filed decades after the Martin Scorsese-directed film had first been released in 1980. The studio argued that long delay was unfair, but the justices pointed out that the Copyright Act has a three-year statute of limitations that resets with every new infringement.

Under the court’s interpretation of the law, as long as copies of an allegedly infringing book, song or movie had been sold during the three years prior to the lawsuit, it was fair game for a copyright case. Perhaps unsurprisingly, that ruling led to a surge in long-delayed infringement cases, including a high-profile lawsuit against Led Zeppelin over the 1971 song “Stairway To Heaven.”

But like many Supreme Court decisions, the Raging Bull ruling ultimately raised as many questions as it answered. Chief among them: if you can sue many years later, how far back can you seek damages? If you successfully sue someone in 2023 over a song that came out in 1995, can you demand payment based on 27 years of illegal sales?

In the Raging Bull ruling, the Supreme Court seemed to say no. In her opinion, the late Justice Ruth Bader Ginsburg was fairly clear: “A successful plaintiff can gain retrospective relief only three years back from the time of suit. No recovery may be had for infringement in earlier years. Profits made in those years remain the defendant’s to keep.”

In the years since, the New York-centric U.S. Court of Appeals for the Second Circuit has taken that language literally, ruling a copyright accuser cannot win damages for any for any conduct older than three years – full stop. If you wait to sue over a hit song from the 1990s, you cannot tap into those huge profits when you win the lawsuit.

But the U.S. Court of Appeals for the Ninth Circuit (covering California) disagrees. If you can prove that you only recently “discovered” the fact that your copyright was infringed, the Ninth Circuit says you can seek damages going back all the way to all the way back to the very first infringement – potentially decades worth of penalties.

That means the two courts that contain the vast majority of the country’s creative industries are directly divided over how copyright law works – a so-called “circuit split” that the Supreme Court is tasked with correcting.

Heading To Court

Nealy sued Atlantic Records, Warner Chappell and Artist Publishing Group in Florida federal court in 2018, arguing he had never actually granted them a valid license for his “Jam the Box” to be sampled in Flo Rida’s “In the Ayer,” which reached No. 9 on the Hot 100 after being released in July 2008.

In 2021, the judge overseeing the case cited Raging Bull and ruled that Nealy couldn’t win any money from earlier than 2015. Though Nealy said he had only learned of the illegal sample in 2016 and wanted damages going all the way back to 2008, the judge cited the Supreme Court’s “binding precedent” that had “explicitly delimited damages to the three years prior.”

But earlier this year, the U.S. Court of Appeals for the Eleventh Circuit overturned that ruling. Siding with the Ninth Circuit’s approach, the appeals court ruled that Nealy’s late discovery of the infringement was a different situation than the one dealt with in Raging Bull – and that any similar “discovery rule” cases would be allowed to seek damages as far back as they went.

Warner quickly appealed that decision to the Supreme Court. Repped by elite SCOTUS attorney Kannon Shanmugam of the law firm Paul Weiss, the company argued in a May petition that the “discovery” approach would unfairly expand the “financial exposure” of a copyright defendant and potentially lead to frivolous lawsuits that aimed to “extract settlements.”

“Deprived of a predictable limitations period and faced with expensive, time-consuming, and difficult litigation in order to defend years-old uses of copyrighted works, defendants will often be left with no choice but to settle claims early even in the absence of wrongdoing—or potentially never enter valuable agreements in the first place,” Shanmugam wrote for his client.

“Vitally Important”

The phrases “retroactive relief” and “three-year lookback period” might make your eyes glaze over, but the Nealy v. Warner case has big implications for copyright-heavy industries like music.

After the Raging Bull ruling dropped in 2014, artists and labels saw a rash of long-delayed cases. The lawsuit against Led Zeppelin – which resulted in more than six years of costly litigation before the band was ultimately cleared of all wrongdoing – was the most prominent, but it was just one of many. Meatloaf was sued over his 1993 song “I’d Do Anything For Love”; U2 was accused of ripping off its 1991 hit “The Fly”; and another case claimed that Notorious B.I.G.’s 1993 hit “Party and Bullshit” featured an unlicensed sample.

If the Supreme Court eventually rules in favor of Nealy, it would almost certainly encourage more age-old cases, creating a far larger potential prize for a successful accuser. As Nealy’s attorneys argued at an earlier stage of his case, when it comes to years-old copyright claims, “the vast bulk of damages” will typically fall outside the three-year limit.

Labels and publishers are watching the case closely. In a June brief at the Supreme Court, the Recording Industry Association of America and National Music Publishers’ Association didn’t advocate for either camp, but simply urged the justices to take up a case that is “vitally important to the music industry.”

“Because copyrights are the music industry’s most consequential asset, music labels and music publishers regularly find themselves both enforcing and defending copy right lawsuits,” lawyers for RIAA and NMPA wrote. “Without a clear national rule setting the temporal limits of recoverable damages, amici and their members face serious uncertainty.”