By Matthew F. Abbott
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Recently, bipartisan legislation has advanced through Congress that would create a tribunal within the Copyright Office to address copyright claims that do not exceed $30,000 in value. There is nearly universal agreement that a small claims adjudication process is needed to address the inequities in the enforcement of copyrights for independent creators for whom litigation is prohibitively expensive. However, the specifics put forth in the legislation have also raised concerns as to how effective and susceptible to abuse this process will be.

The Copyright Alternative in Small-Claims Enforcement (CASE) Act

The CASE Act calls for creation of a “Copyright Claims Board” (CCB) within the Copyright Office, which consists of three “Copyright Claims Officers” who are assisted by several “Copyright Claims Attorneys.” Copyright Claims Officers would serve for a term of six years and adjudicate copyright claims, counterclaims and defenses brought before the CCB. Proceedings are to be conducted at the CCB’s Washington, D.C. offices and take place through “written submissions, hearings and conferences carried out through internet-based applications and other telecommunications facilities.”

Some important features of the CCB process include:

Permissible Claims: The CCB may adjudicate infringement claims and counterclaims under 17 U.S.C. § 106, as well as claims under 17 U.S.C. § 512(f) for misrepresentation in connection with a DMCA notice. The CCB may also adjudicate any legal or equitable defense available at law. Parties to a proceeding may be, but are not required to be, represented by counsel. A party may not recover more than $30,000 in any one CCB proceeding, exclusive of attorney’s fees and costs. The Act provides that separate regulations may be established by the Register for claims in which damages do not exceed $5,000, and may be considered by a single Copyright Claims Officer.

Registration Requirement: A claim may not be asserted before the CCB unless an application for registration, deposit and filing fee have been submitted to the Copyright Office. However, the CCB may not render a determination in a proceeding until a registration certificate has been issued by the Copyright Office. If a registration is denied, the proceeding shall be dismissed without prejudice. The bill directs the Register to establish regulations allowing the Copyright Office to expedite the registration of an unregistered work that is before the CCB.

Voluntary Participation/Opt-Out: Following service of a Notice and Claim, a respondent can opt out of the proceeding within sixty days. If a respondent timely opts out, the proceeding is dismissed without prejudice and the claimant may choose to file the claim in a federal district court. If a respondent does not opt out within sixty days, the proceeding is deemed active and the respondent will be bound by a determination.

Permissible Remedies: The CCB may award actual damages and profits under 17 U.S.C. § 504(b). Additionally, the CCB may award statutory damages under § 504(c) as follows: (1) For works with an effective date of registration within three months of the date of publication under 17 U.S.C § 412, statutory damages may not exceed $15,000 per work; (2) for works not timely registered under § 412, statutory damages may not exceed $7,500 per work or a total of $15,000 in any one proceeding. The CCB may not consider an infringer’s willfulness in awarding statutory damages, but may consider whether the infringer has agreed to cease or mitigate the infringing activity. Additionally, the CCB may include a requirement to cease conduct if the infringing party agrees to stop infringing activity or cease sending misrepresentative DMCA notices or counter-notices.

Attorney’s fees: Attorney’s fees are only available upon a determination that a party pursued a claim or defense for harassing or other improper purpose or without reasonable basis in law or fact. An award of attorney’s fees and costs may not exceed $5,000 except in “extraordinary circumstances” showing a “pattern or practice of bad faith conduct.” Additionally, if a party is found to have pursued a claim or defense for harassing or other improper purpose or without reasonable basis in law or fact more than once in any twelve-month period, that party is barred from bringing a claim before the CCB for twelve months.

Reconsideration: A party may request that the CCB reconsider a determination based on clear error of law or material fact, or a technical mistake. If the CCB denies a request for reconsideration, a party may request review of the final determination by the Register of Copyrights. This review is limited to consideration of whether the CCB abused its discretion in denying reconsideration.

Enforcing A Determination: Where a party fails to pay damages or otherwise comply with relief, the claimant may, within one year of final disposition of the proceeding, apply to the U.S. District Court for the District of Columbia or “any other appropriate district court” for an order confirming the relief rewarded and reducing the relief to judgment. If the district court grants the order and enters judgment, the party who failed to pay damages must pay reasonable attorney’s fees and expenses incurred in obtaining the judgment.

Criticism of the CASE Act

Although the CASE Act is supported by a variety of sources, including industry associations, corporate copyright owners and artist advocacy organizations, it has also been criticized.

The legislation has been criticized on the basis that the opt-out procedure may result in respondents routinely opting out if they believe that a claimant can’t afford to litigate in federal court, thereby forcing the claimant to file in federal court or drop the claim. Reliance on the opt-out procedure may act as a deterrent to the filing of CCB claims by copyright owners with limited resources.

The CASE Act has also been criticized on the basis that it will empower “copyright trolls” seeking quick settlements based on the threat of statutory damages of up to $15,000 and emboldened by the fact that claims may be filed even without an issued copyright registration. Additionally, critics have charged that due process issues will arise where a respondent’s failure to opt out effectively waives his right to a jury trial and binds him to the determination of a Copyright Claims Officer, which is not appealable to any Article III court.

Currently the CASE Act has passed the House and awaits a full vote in the Senate. Given its bipartisan support, it seems likely that the CASE Act will eventually become law. Copyright owners whose claims fall within the jurisdiction of the CCB should consider it as a quicker and less expensive alternative to litigating in federal court. It remains to be seen whether the criticisms of the CCB will be borne out.