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To Discover or Not to Discover, That is the Question: What's Next for the Discovery Rule When it Comes to Copyright Infringement?

Mar 4, 2024

Emily Kirsch, of Kirsch & Niehaus PLLC, argued Michael Grecco Productions, Inc.  v. RADesign, 23-1078 in the Second Circuit last week on behalf of celebrity shoe designer, Ruthie Davis. Ms. Kirsch urged the Court of Appeals to affirm the District Court’s Rule 12(b)(6) dismissal of Grecco’s copyright infringement claim for untimeliness.  Michael Grecco Productions, Inc.  v. RADesign, -- F. Supp. 3d --, 2023 WL 4106162 (S.D.N.Y. Jun. 20, 2023). 


Section 507(b) of the Copyright Act provides that a civil action for an infringement claim must be “commenced within three years after the claim accrued.” The Second Circuit follows the “Discovery Rule,” pursuant to which a copyright infringement claim accrues when a plaintiff knew or, with the exercise of due diligence, should have known, that an infringement had occurred. Though followed in every Circuit, the problematic Discovery Rule has been treated with skepticism and questioned by many courts as inconsistent with Supreme Court precedent, contrary to established principles of statutory construction, and at times, nonsensical.


Plaintiff Michael Grecco Productions, Inc. (“MGP”) had pled that it is an industry leader in scouring the internet for infringements, utilizes sophisticated search software, spends time and money searching for infringements, and employs a method and workflow for ensuring that it systematically discovers infringements of its copyrights. MGP nevertheless pled it did not discover the alleged infringement until almost four years after it occurred and offered no allegation to explain why it could not have discovered the alleged infringement sooner. Agreeing with Ruthie Davis, the District Court found that accepting as true all of MGP’s allegations regarding its own sophistication, expertise, resources, and diligent searching, and drawing all reasonable inferences in MGP’s favor, it was not plausible that it could not have discovered the infringement sooner – that is, based on this plaintiff’s own allegations, it reasonably should have discovered the infringement sooner under the Discovery Rule. MGP appealed, arguing, among other things, that the District Court erred by requiring it to anticipate the affirmative defense of timeliness and holding it to a higher standard than a less sophisticated copyright plaintiff. 


The ultimate outcome of the appeal will have a significant impact on future for copyright litigants in the Second Circuit. If, under the Discovery Rule, any plaintiff can survive a timeliness motion by pleading that it did not discover the infringement until recently without having to allege the reasonableness of its late discovery, then putative defendants have no repose from allegations of even decades-old infringement and will be forced to settle or engage in costly discovery in order to make their timeliness motions at a later stage.


The Second Circuit heard the MGP argument just one day after the Supreme Court heard oral argument in Warner-Chappell Music, Inc. vs. Nealy, No. 22-1078.  Nealy addressed whether, under the Discovery Rule for accrual of copyright infringement claims applied by the circuit courts, a copyright plaintiff can recover damages for acts allegedly occurring more than three years before the filing of a lawsuit. The Ninth and Eleventh Circuits have held that a copyright plaintiff can recover damages dating back to the beginning of the alleged infringement, whereas the Second Circuit has restricted damages to a three-year lookback period. Though the Nealy case did not involve the question of whether the Discovery Rule should apply to copyright infringement cases in the first place, the question permeated the argument.


Next up for those following developments in the copyright law will be to see whether the Supreme Court grants certiorari in Hearst Newspapers L.L.C. v. Martinelli, and if it finally “passes on the question” of the applicability of the Discovery Rule.

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