Justices’ ‘Discovery’ Dodge Has Copyright Lawyers Wondering When

The US Supreme Court has shunned three bids to challenge the application of what’s called the “discovery rule” to copyright cases in the last two years, and attorneys are questioning what case could force the court’s doors open.

The justices have sent signals of their interest: three of them suggested the rule is wrong in a case last year, and the court has twice requested a response to petitions challenging the widely-accepted rule that tolls the Copyright Act’s statute of limitations if claims are brought within three years of when they were or should’ve been discovered. But the court last week still refused to consider it.

Attorneys’ theories as to why the court hasn’t taken up what is a threshold question for copyright law liability despite the apparent interest include the lack of a circuit split, a fourth skeptical justice, or the right fact pattern.

The still-early stage of photographer Michael Grecco’s revived case—and the lack of a developed record—for instance, made it a poor vehicle, Andrew D. Lockton of McHale & Slavin PA said of the most recent denial. Plaintiffs like Grecco get the benefit-of-the-doubt on motions to dismiss, so defendant RADesign Inc. needed to establish what Grecco should’ve been able to know based on the complaint alone.

“The most fundamental aspect of this discovery rule issue is who bears the burden of proof, and you’re not going to resolve that fundamental question in a case that’s only at the pleading stage,” said Lockton, who has twice urged the high court to take up—and do away with—the discovery rule in friend-of-the-court briefs. “You’re going to need to get a case where there’s an early summary judgment motion.”

It could be some time before a more viable case presents itself. It’s relatively rare for an infringement to be both undetected for three years and lucrative enough justify expensive litigation up to the high court.

Each of 11 circuit courts to consider the discovery rule has endorsed it. Even so, until the high court tackles the issue “attorneys are going to see things as somewhat uncertain,” IP attorney Gerard M. Donovan of Reed Smith LLP said.

Some attorneys argue the rule makes small, unintentional infringers vulnerable to open-ended liability and destabilizes content industries, while others say undoing the rule could allow impunity for under-the-radar infringement.

Passing Time

The Copyright Act requires suits to be brought within three years from when a claim “accrues,” but litigators disagree whether copyright claims accrue upon infringement or only when they’re discoverable.

Despite a Justice Department brief criticizing the discovery rule, the justices declined an invitation to decide the question last year in Warner Chappell Music Inc. v. Nealy and limited the case to a damages question that assumed the discovery rule is valid. Narrowly considering that question was “a no-brainer,” IP attorney Marsha Gentner of Dykema Gossett PLLC said, as Warner Chappell didn’t challenge the rule’s validity in lower courts.

Justice Neil Gorsuch’s dissent—joined by Justices Samuel A. Alito and Clarence Thomas—said the Copyright Act “almost certainly does not tolerate a discovery rule.” But days later the court declined to hear a case presenting a direct attack on the discovery rule.

The high court may want to take up the question “in a fact pattern that goes more to the policy behind the discovery rule,” Donovan said. Copied business documents and software code could present a “more nuanced, complex fact pattern” with infringement more difficult to uncover than in cases of copied music or images on the internet, he said.

“That could present opportunity for a flexible rule that has some diligence requirement,” he said. A circuit “split on the diligence aspect might tee this up for the Supreme Court.”

But others said such a case is unlikely to present itself because while the infringement may be more obscured, so is the original work. Most proprietary code or documents are hidden except from business partners, Lockton said. Any infringement of such work would also likely be concealed rather than posted online, likely implicating equitable tolling doctrines to pause the statute of limitations other than the discovery rule, such as fraudulent concealment.

“Business cases are almost certainly going to have an equitable tolling argument,” Lockton said, while “software cases are going to have their own set of factual circumstances most times.”

Shifting Burdens

The discovery rule has a simple monicker, Lockton said, but courts’ approach to it has been anything but.

“The problem is that the ‘discovery rule’ has no specific meaning,” Lockton said. “There are far too many views as to what the discovery rule is, where circuits fall under a spectrum.”

Broader equitable tolling doctrine can already rectify most of the unfairness to plaintiffs the discovery rule targets, Lockton said. But, he said, circuit courts have crafted the discovery rule to unreasonably shift burdens and costs to defendants.

To take up a discovery rule case, Lockton said, the justices will likely need a dispute over who must establish when a claim should’ve been discovered. Forcing a defendant “to prove what’s in the plaintiff’s mind” and what they “should have known” from the complaint implies “there’s no more statute of limitations,” at least before the summary judgment stage, he said.

“Most cases where the discovery rule issue is a critical issue are the copyright troll cases,” he said, referring to lawsuits filed by plaintiffs seeking quick settlements. “The statute of limitations protects the small infringer, the innocent infringer, who didn’t know.”

While Lockton pointed to improving tools such as web crawlers to detect infringement faster, Gentner cautioned against placing too heavy a burden on plaintiffs.

“That seems to be the opposite of what you want copyright owners to be doing,” she said. “You don’t want them sitting around looking for infringement, you want them creating.”