Congress Enacts Controversial Copyright Alternative in Small-Claims Enforcement (CASE) Act

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The Copyright Alternative in Small-Claims Enforcement (CASE) Act was enacted on December 27, 2020 as part of the Consolidated Appropriations Act, 2021.[1] The CASE Act creates an administrative tribunal within the US Copyright Office—the Copyright Claims Board (Board)—to provide an alternative forum to adjudicate civil copyright claims and counterclaims capped at $30,000 in damages (actual or statutory), to seek declaratory judgment of non-infringement, and to pursue certain claims related to notices and counter-notices under the Digital Millennium Copyright Act (DMCA).[2] The Board must be operational by December 27, 2021 unless a 180-day delay is sought by the Copyright Office.[3]

A high-level overview of the new small claims process is provided below. Although styled as a “voluntary”[4] alternative for adjudicating copyright claims, under the statute you must affirmatively opt out of each Board proceeding in order to preserve your right to resolve that dispute in federal court. Failure to properly file an opt-out notice within 60 days of being served with a notice of a claim will: (i) serve as consent to the Board proceeding; (ii) forfeit your right to have the dispute decided by an Article III (federal) court; and (iii) waive the right to a jury trial regarding the dispute.[5] There is no general, pre-emptive opt-out process.[6]

THIS MATTERS TO YOUR BUSINESS

The CASE Act is likely to increase the number of copyright infringement claims brought in the United States. Once a rightsholder applies for a copyright registration,[7] the barriers to bringing and adjudicating an infringement matter before the Board are low: filing fees are low,[8] discovery is limited,[9] formal motion practice is not permitted,[10] the rules of evidence do not apply,[11] Board decisions and statements made during adjudication have limited preclusive effect,[12] proceedings are completely remote,[13] and recovery of attorney’s fees and costs is very limited.[14] Whether the Board will create a constructive forum for efficient, low-cost enforcement of meritorious claims or merely encourage the pursuit of questionable claims that had been deterred by the formality and expense of federal-court litigation cannot yet be determined.[15]

Regardless, parties that create, license, distribute, or host content should begin to prepare for Board proceedings. If you use third-party content (e.g., photographs, videos, music, artwork)—the CASE Act matters for your liability exposure and your strategy for mitigating such risks. If you own and seek to efficiently protect your content—the CASE Act matters for your options to enforce your rights. If you use or respond to DMCA takedown notices—the CASE Act matters for how you use those statutory procedures. If you’re operating outside the United States—you cannot be served with a claim, but you can initiate one (and can be subject to counterclaims once you do).[16]

SCOPE OF CLAIMS BEFORE THE COPYRIGHT CLAIMS BOARD

The CASE Act identifies the following categories of claims that can be adjudicated by the Board:[17]

  • Infringement of an exclusive right in a copyrighted work provided under Section 106[18]
  • A declaration of non-infringement of an exclusive right in a copyrighted work provided under Section 106[19]
  • A claim for failure to remove or disable access to allegedly infringing content after DMCA takedown procedures have been followed[20]
  • A claim under Section 512(f) for misrepresentation in connection with a DMCA notification of claimed infringement or a counter notification seeking to replace removed or disabled material[21]
  • A counterclaim that arises under Section 106 or Section 512(f) and out of the same transaction or occurrence (or agreement pertaining to such transaction or occurrence) that is the subject of the claim of infringement or non-infringement[22]
  • A legal or equitable defense under this title (such as first sale or fair use) or otherwise available under law (such as an express or implied license defense), in response to a claim or counterclaim[23]

The CASE Act specifically contemplates that the scope of the Board’s authority may be narrowed in regulations to be promulgated by the Register of Copyrights[24] and may be further modified or even expanded after the Copyright Office issues its study of the first several years of the Board’s operations.[25]

PROCEDURAL SAFEGUARDS AGAINST FRIVOLOUS AND BAD-FAITH CLAIMS

The CASE Act includes measures that may mitigate the risk of frivolous claims, including:

  • Empowering the Register of Copyrights to limit the number of proceedings that a particular claimant may bring in a single year[26]
  • Dismissing without prejudice claims and counterclaims that fail to meet certain procedural requirements (e.g., failure to include a properly certified statement of material facts in support of the claim) if failure is not timely cured[27]
  • Dismissing a claim with prejudice for failure to prosecute where a claimant misses one or more deadlines and fails to respond (or articulate good cause) within 30 days of receipt of the notice of possible dismissal

The CASE Act also includes several provisions that may deter bad-faith filers:

  • Awarding costs and attorney’s fees of up to $5,000 against a party that brought a claim, counterclaim, or defense in bad faith—defined as “for a harassing or other improper purpose, or without a reasonable basis in law or fact”[28]
  • Barring a party (including an attorney) from initiating a claim before the Board for 12 months and dismissing (without prejudice) additional pending claims if the Board finds such party to have pursued a claim, counterclaim, or defense in bad faith on two or more occasions within a 12-month period[29]

Whether these provisions and the forthcoming regulations from the Copyright Office strike an effective balance between providing efficient resolution of small claims and blocking frivolous claims will be the subject of future study by the Copyright Office with opportunities for public comments to improve the system.[30]

OVERVIEW OF THE OPERATIONS OF THE COPYRIGHT (SMALL) CLAIMS BOARD

Unless narrowed by forthcoming regulations, the Board—typically comprising the three Copyright Claims Officers (Officers)[31]—has authority to render determinations (and award monetary damages) on civil copyright claims, counterclaims, and defenses; and, to facilitate settlements and include agreements to cease or mitigate certain challenged activities as part of final written determinations.[32] Notably, a proceeding before the Board will “qualify as an alternative dispute resolution process under section 651 of title 28 for purposes of referral of eligible cases by district courts of the United States upon the consent of the parties”—in other words, even after commencing a federal lawsuit, the parties to a copyright infringement or DMCA dispute could agree to allow the Board to resolve their dispute, instead.[33]

The high-level process to initiate, opt-out, and engage in proceedings before the Board is outlined below:[34]

Initiating Claims: To initiate a proceeding before the Board, a part must pay the filing fee (capped below federal court fees) and submit “a statement of material facts in support of the claim;” certified in accordance with forthcoming regulations.[35] The claim is then reviewed by attorneys designated to assist the Board and, within 90 days after notification from such attorneys that the claim is sufficient to serve, the claimant must effectuate and file proof of service on the respondent(s) in accordance with the regulations to be established by the Register of Copyrights.[36]

Opting Out/Default Judgments: The claim will be dismissed without prejudice if the respondent files a proper opt-out notice with the Board within 60 days from the date of proper service of the claim.[37] Failure to properly and timely opt out will result in the claim being deemed active and the respondent will be bound by the determination in the proceeding.[38] By failing to opt out, the respondent also will “lose[] the opportunity to have the dispute decided by” an Article III court and waive the right to a jury trial regarding the dispute.[39] Moreover, the Board can enter a binding default determination against the respondent if they fail to appear or cease participating in the proceeding (including failure to meet one or more deadlines).[40] As discussed below, there are very limited options for appeal.

Response/Counterclaims/Defenses: Once a respondent elects to move forward with the Board proceeding (either affirmatively or by default), the respondent has 30 days to file a substantive response to the claim, including any defenses and counterclaims.[41]

Applicable Law: Board determinations will be based on the Copyright Act, judicial precedent, and the applicable regulations from the Register of Copyrights.[42] Further, if there appears to be conflicting judicial precedent on substantive issues of copyright law, the Board must follow the law of the federal jurisdiction in which the case could have been brought, or, if there are multiple jurisdictions, the Board applies the law of the federal jurisdiction that it determines has the most significant ties to the parties and conduct at issue.[43] The CASE Act does not specify how the Board should resolve conflicts of laws amongst non-federal jurisdictions that might arise under certain defenses to copyright infringement.

Remedies: A party may elect to recover actual or statutory damages as a remedy for infringement of one or more copyrights at issue in a proceeding.[44] Total damages in any single proceeding (excluding attorney’s fees and costs, discussed above) are capped at $30,000, regardless of the number of claims and the type of claims (infringement, DMCA, or mixed).[45] And, while a claim can be asserted prior to issuance of a copyright registration, the registration must issue before the Board can award damages or issue any other final determination.[46]

For infringement claims, actual damages and profits will generally be determined in accordance with existing case law regarding 17 U.S.C. § 504(b), subject to the overall cap above.[47] Statutory damages, however, while generally determined in accordance with 17 U.S.C. § 504(c), will be modified as follows:

  • Works registered prior to infringement or within three months of first publication will be eligible for statutory damages of up to $15,000 per work (and subject to the $30,000 overall cap)
  • Works that were not registered prior to infringement will—only for purposes of the Board—be eligible for statutory damages of up to $7,500 per work (and subject to a reduced overall cap of $15,000)
  • The Board may not consider whether infringement was willful, but may consider whether the infringer has agreed to “cease or mitigate the infringing activity”[48]

The CASE Act does not provide specific guidance about damages for DMCA claims.

The Board may not issue injunctive relief or impoundment remedies, but the Board’s determination must include any agreement by a party to cease conduct found to be infringing; to remove, disable, or destroy infringing materials; or to stop sending a DMCA notice or counter-notice that the Board finds to be a knowing material misrepresentation under Section 512(f).[49]

Enforcement: A final determination must be reached by at least two of the three Officers;[50] be issued in writing and include an explanation of the factual and legal basis of the determination; set forth any terms by which a respondent or counterclaim respondent has agreed to cease infringing activity; include the terms of any settlement (to the extent requested by the parties); and include a clear statement of all damages and other relief awarded.[51] Final determinations will be published and available on a publicly accessible website (subject to any redactions required pursuant to a protective order),[52] but cannot be relied upon as legal precedent in any other action or proceeding before any court, tribunal, or the Board.[53]

If a party fails to pay damages or to otherwise comply with the relief awarded in a final determination of the Board, the aggrieved party has one year from the last administrative action in the matter to seek an order from the appropriate federal district court to confirm the relief awarded, enter such judgment against the delinquent party, and order that the delinquent party pay the reasonable expenses required to secure such order, including attorney’s fees.[54]

Limited Appeals: There is no federal court appeal of the merits of a Board determination. Notably, the Board’s determinations, and the Register of Copyrights’ actions in connection with such determinations (including limited reviews and guidance on questions of law), are only subject to limited judicial review under Section 1508(c). In fact, Section 1503(g) purports to expressly prohibit review of Board determinations under the Administrative Procedure Act, which applies to nearly all other actions of the Copyright Office.[55]

That said, a party may request the Board’s reconsideration of, or an amendment to, a determination, provided that the party identifies clear error of law or fact material to the outcome, or a technical mistake.[56] If the Board denies the request, within 30 days, the requesting party may seek the Register of Copyrights’ limited review of the Board’s denial of reconsideration for abuse of discretion.[57] Within 90 days of the final administrative determination issued by the Board (after any modifications on remand from the Register of Copyrights), a party has the option under Section 1508(c) to seek an order from the appropriate district court vacating, modifying, or correcting the determination, but only in one or more of the following limited circumstances:

  • The determination was issued as a result of fraud, corruption, misrepresentation, or other misconduct
  • The Board exceeded its authority or failed to render a final determination concerning the subject matter at issue
  • In the case of a determination based on default or a failure to prosecute, it is established that the default or failure was due to excusable neglect

WHAT’S NEXT

Over the next year, the Copyright Office will conduct rulemaking proceedings to implement the regulations to make the Board operational.


[1] Division Q, Title II, Subtitle A, § 212 “Copyright Small Claims”, Consolidated Appropriations Act, 2021, Pub. L. No. 116-___ (Dec. 27, 2020). For additional background, see the Copyright Office’s 2013 policy study that recommended creation of an administrative tribunal to adjudicate small copyright claims. The CASE Act closely tracks these recommendations.

[2] The CASE Act adds Chapter 15 to Title 17 of the United States Code. Section references within this article are to Title 17 save where otherwise stated.

[3] Consolidated Appropriations Act, 2021 § 212(d) “not later than 1 year after the date of enactment of this Act, the Copyright Claims Board. . . shall begin operations.”

[4] Compare § 1504(a) (“Participation in a Copyright Claims Board proceeding shall be on a voluntary basis in accordance with this chapter, and the right of any party to instead pursue a claim, counterclaim, or defense in a district court of the United States, any other court, or any other forum, and to seek a jury trial, shall be preserved.”) with § 1506(h)(1) (explaining that by failing to opt out, the respondent will “lose[] the opportunity to have the dispute decided by” an Article III court and will waive the right to a jury trial regarding the dispute); § 1506(u) (authorizing the Board to enter a binding default determination against the respondent if they fail to appear or cease participating in the proceeding (including failure to meet one or more deadlines)).

[5] § 1506(g)(1)(A)-(B).

[6] Section 1506(aa) provides that certain libraries and archives must be able to opt out pre-emptively pursuant to regulations to be issued by the Copyright Office.

[7] See § 1505(a) (permitting assertion of a claim while an application for registration is still pending).

[8] Filing fees will be established by the Copyright Office, but must remain under the cost to file a claim in federal court. § 1510(c).

[9] § 1506(n) (generally limiting discovery to “production of relevant information and documents, written interrogatories, and written requests for admission”).

[10] § 1506(m).

[11] The Federal Rules of Evidence will not apply, but the Board will still be able to consider testimonial evidence, limited to statements of the parties and non-expert witnesses, and, in exceptional cases, expert witness testimony or other types of testimony may be permitted. § 1506(o).

[12] § 1507(a) & (c).

[13] § 1506(c)(1)-(2).

[14] § 1506(y)(2).

[15] See AIPLA Report of the Economic Survey of 2019 at I-208 (reporting that it costs $397,000, on average, to pursue a federal copyright litigation through trial for a claim valued at less than $1,000,000).

[16] § 1504(d)(4).

[17] Excluded claims include: (1) claims pending or finally adjudicated in a federal court; (2) claims against a federal or state governmental entity; (3) a person or entity residing outside the United States, unless such person or entity initiates a claim before the Board, in which case, they are subject to counterclaims. § 1504(d).

[18] § 1504(c)(1). Note also that Section 1507(d) provides that infringement claims before the Board will “qualif[y] as an action seeking an order to restrain a subscriber from infringing activity” sufficient to disallow reposting of allegedly infringing content for purposes of Section 512(g), provided the claimant sends notice of the Board proceeding to the service provider before the content is reposted.

[19] § 1504(c)(2).

[20] § 1506(f)(1)(C) (explaining that, for “a claim against an online service provider for infringement by reason of the storage of or referral or linking to infringing material,” the claimant’s statement of material facts under section 1506(e)(1) must establish that the claimant has complied with any applicable DMCA notification requirements and the service provider nonetheless “failed to remove or disable access to the material expeditiously”).

[21] § 1504(c)(3).

[22] § 1504(c)(4).

[23] § 1504(c)(5).

[24] § 1504(c).

[25] Consolidated Appropriations Act, 2021 § 212(e)(2), (3) & (5).

[26] § 1504(g).

[27] § 1506(f)(1)-(2). The Board must also dismiss a claim or counterclaim without prejudice if, at any time during the proceeding, the Board determines that it is “unsuitable for determination,” for reasons such as, failure to join a necessary party; lack of an essential witness, evidence, or expert testimony; or determination of a relevant issue of law could exceed the subject matter competence of the Board. § 1506(f)(3).

[28] § 1506(y)(2). “Extraordinary circumstances” may justify a higher award of attorney’s fees and costs. Id.

[29] § 1506(y)(3).

[30] § 1511(e).

[31] § 1502 (The Officers will be appointed by the Librarian of Congress based on recommendations from the Register of Copyrights. All of the Officers must be attorneys. Two Officers must have substantial experience representing or presiding over copyright infringement claims on behalf of owners and users of copyrighted works, while the third Officer must have “substantial familiarity with copyright law and . . . alternative dispute resolution.”).

[32] § 1503(a)(1).

[33] § 1509(b).

[34] Forthcoming regulations will set forth additional procedural requirements. §§ 1506(a), (e), (f), (g), (h), (i), (j), (m), (n), (t), (u), (x), (y), (z) & (aa); 1510(a).

[35] § 1506(e); 1506(y)(1).

[36] § 1506(g).

[37] § 1506(i).

[38] § 1506(i).

[39] § 1506(h)(1).

[40] § 1506(u). After the Board makes a proposed default determination, the respondent has an opportunity to respond with evidence that the Board “shall consider.” Id.

[41] § 1506(g)(1)(7)(B).

[42] § 1503(b)(1)

[43] § 1506(a)(2)

[44] § 1504(e)(1)(B) (allowing such election to be made “any time before final determination is rendered”); § 1506(k).

[45] § 1504(e)(1)(D); 1504(e)(1)(C) (“Damages for claims and counterclaims other than infringement claims, such as those brought under section 512(f), shall be subject to the limitation under [Section 1504(e)(1)](D).”).

[46] § 1505(b).

[47] § 1504(e)(1)(A); 1503(b)(1).

[48] § 1505(b); 1504(e)(1)(A).

[49] § 1504(e)(2).

[50] Note, however, a single Officer will be able to render determinations for claims with total damages of $5,000 or less. 17 U.S.C. § 1506(z).

[51] § 1506(t)(1).

[52] § 1506(t)(3).

[53] § 1507(a)(3).

[54] § 1508(a).

[55] See 17 U.S.C. § 701(e) (Except as concerns copies of Copyright Office records, “all actions taken by the Register of Copyrights under this title are subject to the provisions of the Administrative Procedure Act”).

[56] § 1506(w).

[57] § 1506(x).

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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