On December 27, 2020, Congress passed the CASE Act, which provides a "small claims" procedure, administered by the U.S. Copyright Office, for handling copyright infringement claims. The idea of a copyright small claims court has been discussed in Congress since at least 2006, but it finally passed, without fanfare, hidden in the 5,500-page Consolidated Appropriations Act (the recent Covid-19 stimulus bill). The promise of the CASE Act is that it will provide a much needed, low-budget remedy for content creators and copyright owners to protect their copyrights without resort to expensive and time-consuming court litigation. Will the CASE Act deliver on its promise? Perhaps, for a select number of disputes. But various loopholes and limitations of the CASE Act process pose possibly significant limitations on its future effectiveness.
Overview of the CASE Act Small Claims Procedure
Ordinarily, copyright infringement claims must be filed in a federal court. The CASE Act creates an alternative forum, the Copyright Claims Board ("Claims Board"), which will resolve copyright infringement disputes. Proceedings before the Claims Board are voluntary—a party served with a claim can opt out of the proceeding within 60 days and choose to resolve the dispute in federal court.
The Claims Board, which will be part of the Copyright Office, will consist of three Copyright Claims Officers who will function as hearing officers and issue rulings. Proceedings under the CASE Act will be more streamlined than in federal court. For example, parties to a CASE Act action will waive the right to formal motion practice and to trial by jury. Also, the discovery permitted in a CASE Act proceeding will be more limited than in federal litigation, which should substantially reduce litigation costs and duration.
A tradeoff for engaging in streamlined procedure, however, will be a limitation on available recoveries. The Claims Board is limited to awarding damages of $15,000 per work and a maximum of $30,000 in damages per case.
Claims Board decisions will be subject to limited judicial review. The losing party may request a reconsideration by the Claims Board and, if the request is denied, a review by the Register of Copyrights. The review is limited to consideration of whether the Claims Board abused its discretion in denying reconsideration of its decision. A review and order by a federal court is only available in very limited circumstances, if i) the decision was the result of fraud, corruption, misrepresentation or other misconduct; ii) the Claims Board exceeded its authority or failed to render a final decision; or iii) the decision was based on a default or failure to prosecute due to excusable neglect.
Will the CASE Act Deliver on its Promise?
The intent behind the CASE Act is commendable. Content creators with limited financial resources should have a means of protecting their copyrights that is effective, inexpensive, and not too time consuming. There are issues with the CASE Act, however, that threaten to undermine its effectiveness
The Process is Voluntary. Because either party can opt out of a CASE Act claim, anyone who derives a tactical advantage from having the dispute proceed in federal court likely will not consent to proceeding before the Claims Board. This would include well-funded defendants who would want to make costs of enforcement prohibitively expensive for less well-funded plaintiffs. It also would include copyright plaintiffs who wish to use the threat of a large damages recovery, including potential recovery of their reasonable attorney’s fees, in a federal litigation to leverage an early settlement. Likewise, a defendant asserting a legally or factually complex claim or defense, such as fair use, may opt for more experienced federal judges to rule on this issue, in particular because the limited judicial review of Claims Board decisions does not necessarily permit a federal court to vacate a Claims Board decision for an error of law. As a result, the number of cases that proceed before the Claims Board may be far fewer than the number of claims filed.
The Process is New and Unpredictable. One hope for the CASE Act is that content creators can resolve their disputes without needing the assistance of counsel. The concern here is that individuals may not understand all the procedures and deadlines involved in a dispute before the Claims Board. Notably, there may be an increased risk of default judgments as defendants who are unfamiliar with the CASE Act process may not understand the significance of the notices they receive from the Claims Board, and may not realize that their time to opt out of the CASE Act is limited to 60 days from the date of service of the notice and claim. Presumably, this is a problem that will mitigate over time as procedural questions are ironed out and more information becomes available to the public. It will be incumbent on the Copyright Office, however, to have the necessary information available on its website in a format that is easy to navigate and understand.
Claims Board Decisions Are Not Precedent. Decisions of the Claims Board, much like a decision in arbitration, are binding only with respect to the parties to the action and may not be relied upon as legal precedent, even in future proceedings before the Board. Thus, a participant involved in multiple Claims Board disputes will have to prove each element of its claim or affirmative defense for each proceeding, thus increasing the time and costs involved in prosecuting or protecting against multiple claims of infringement.
The Claims Board Process Could Be Subject to Constitutional Challenge. Although it is common to have federal agencies issue rulings subject to review by federal courts, the narrow scope of review afforded the federal courts for Claims Board decisions could be subject to constitutional challenge, particularly if the standard of review does not allow the federal courts to correct for errors of law.
Although we still have some time before we see the CASE Act procedures implemented and operational at the Copyright Office, initial indicators are that it may work well for disputes between individuals and entities without the resources to resolve copyright infringement disputes in federal court. The incentives for well-funded litigants and plaintiffs with claims for substantial damages recovery, however, will still lie in federal court, thereby raising a question as to whether the CASE Act will live up to its promise.