New U.S. Copyright Law Alert – Intellectual Property Reforms Tucked Into COVID-19 Relief Package

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On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021 and the act was signed into law on December 27, 2020. But don’t let the bland title fool you. Buried among the government funding and coronavirus relief provisions are significant changes to intellectual property law and practice, touching upon trademarks, copyrights, patents, domain names, false advertising, and more. Owners of these assets and those with an interest in enforcing in these fields must take note of the changes.

We focus on the copyright implications of the new law in this article, but please see our companion article here for a summary of the trademark and branding implications.

The Consolidated Appropriations Act, 2021, Pub. L. No. 116-260 (2020) (full text here) contains the Copyright Alternative in Small-Claims Enforcement Act of 2020 at 995 – 1019 (full 2019 bill text here) (the “CASE Act”) and the Protecting Lawful Streaming Act at 994 – 995  (the “PLSA”). These laws create an alternative dispute resolution body at the Copyright Office to resolve copyright infringement claims and make the for-profit illegal streaming of copyrighted content a felony.

New enforcement venue at the Copyright Office for copyright claims

The CASE Act creates the Copyright Claims Board at the U.S. Copyright Office, a new small-claims forum in which copyright owners and counterclaimants may bring disputes regarding copyright infringement, declarations of non-infringement, and misrepresentations in take-down requests. The Board will consist of three copyright “claims officers” appointed by the Librarian of Congress to hear the disputes. Other notable features of this venue include:

  • The parties asserting claims must have at least filed a copyright application, but the Board will not act upon the claim unless and until a copyright registration issues. Claims must be brought within 3 years of their accrual.

  • Representation by an attorney is not required.

  • Participation in the proceedings is voluntary and defendants may opt out within 60 days of being served with notice of the proceedings. Notably, failure to opt-out within 60 days after valid service forfeits the defendant’s right to have the dispute brought in federal court and their right to a jury trial.

  • No formal motion practice will be available, but the parties may submit requests to address case management and discovery matters.

  • Discovery is limited to production of information and documents, written interrogatories, and written requests for admission, with additional discovery (such as depositions) available upon request and a showing of good cause.

  • Recovery is limited to (i) actual damages and profits or (ii) statutory damages capped at $15,000 per work infringed. With that being said, total recovery in any one proceeding will be capped at $30,000, with each party bearing their own attorneys’ fees & costs. However, attorneys’ fees & costs (capped at $5,000 in the absence of extraordinary circumstance) are available where the Board finds bad faith conduct by a party or their attorney.

  • The Board may issue pseudo-injunctive relief in the form of an agreement to cease infringing activity; provided, however, that the infringer agrees to this cessation of conduct.

  • Final determinations by the Board have a preclusive effect on federal district court litigation.

  • Unsatisfied parties may request the Board’s reconsideration, review of the Board’s decision by the Register of Copyrights, and, in certain circumstances, further appeal to federal district courts (preferably the United States District Court for the District of Columbia).

  • The Copyright Office will issue further regulations concerning even more expedited proceedings before a single copyright claims officer with recovery capped at $5,000 per proceeding.

Prior to the CASE Act, the only way to enforce one’s copyright rights was to file a federal copyright infringement lawsuit – a resource- and time-intensive endeavor. Proponents of this law therefore contend that the Copyright Claims Board will provide an comparatively inexpensive and streamlined avenue for adjudicating copyright disputes. But critics of law express concern that the Board will be overrun, just as federal courts have been, by “copyright trolls” seeking to leverage the legal system to extract unreasonable settlement payments from individuals and smaller entities that frequently don’t have the resources or capacity to defend against exaggerated damages claims. The threat of proceedings at the Board also have the potential to chill free speech on the internet, considering that the majority of instantly sharable memes and viral videos on social media are often technical copyright infringements – but seldomly litigated through to determinations of liability or fair use.

Enhanced criminal penalties for commercially streaming copyrighted works

Prior to the PSLA, it was a felony to “reproduce” and “distribute” copyrighted works, but “streaming” such works was only a misdemeanor. The PSLA closes this loophole – it is unlawful to provide digital transmission services that are primarily designed to publicly perform copyrighted works for financial gain without the copyright owner’s permission, and that have no other “commercially significant purpose.” Such act is a felony, with penalties of up to 10 years in prison if the defendant knew or should have known that the work was prepared for a commercial public performance (e.g., illegally streaming a motion picture before its actual, lawful premiere by the film studio).

Proponents of the law have assured that it only targets large-scale “commercial, for-profit streaming piracy services” and is not intended to sweep in individuals who stream movies or video games online. Moreover, as this is a federal crime, any prosecution of this law needs to be brought by the U.S. Department of Justice, making it unlikely this provision will be frequently enforced except for egregious violations.

Next steps

While the new Copyright Claims Board has the potential to disrupt copyright enforcement strategy in positive and negative ways for copyright owners and creators, the Copyright Office still must promulgate regulations to stand up the new tribunal – a process that Congress did not set a timeline for. As such, it is entirely unclear when the Board will begin accepting cases and how the Board will operate in practice. Moreover, it remains unclear how effective the Board’s proceedings can and will be considering that defendants can opt-out of the proceedings, forcing plaintiffs to bring their claims in federal court anyway.

Given the significant number of regulations required to set up the Board, creators and copyright owners should stay tuned for further developments as there will likely be an opportunity for public comment on these draft regulations. To date, the U.S. Copyright Office just opened a submission period for preliminary input on what the draft regulations should entail; more information is available here.

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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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