The Copyright Alternative in Small-Claims Enforcement Act (CASE Act), enacted in December 2020, established the new Copyright Claims Board (CCB) within the Copyright Office, which is intended to provide an alternative, cost-efficient, streamlined forum for copyright owners to enforce their rights without having to resort to federal court litigation, which can be lengthy and expensive. The CCB is currently scheduled to begin hearing cases by no later than June 2022. But will this forum achieve its intended goals? What are the potential pros and cons presented by the CCB process for the parties?
The first thing to note is that the CCB proceedings are voluntary. A party served with a CCB claim can opt out of the CCB proceeding within 60 days, which will result in a dismissal of the claim without prejudice.
On the Plus Side … for Both Sides: Prompt, Scalable and Cost-Efficient
Despite the opt-out right, however, there are a number of reasons why parties on each side may want to participate in the voluntary CCB proceeding.
From the copyright owner’s point of view, there may be a reason the owner needs a prompt resolution and hopes to achieve that with the streamlined CCB process. A copyright owner may have a pending copyright application that has not yet proceeded to registration—the CCB permits claims based on pending applications while the federal courts require that the copyrights in the work at issue be registered before a complaint can be filed—so the CCB process will permit a copyright owner to pursue its claim more quickly. A copyright owner may be having issues with a cloud on the title to its copyrights. Or the owners may be dealing with a high number of alleged infringements and want to get those issues resolved, which could be prohibitively expensive and time-consuming if all the claims were brought in federal court.
For alleged infringers, the CCB process could allow the mounting of a defense in a forum that would likely be faster, less costly, and involve a lesser allocation of resources. The alleged infringer may be facing a number of claims from the same or different copyright owners and hope to use the CCB process to streamline their defenses, processes and costs. Unlike in federal court, the CCB cannot order injunctions unless the other side agrees to it—so the risk of being enjoined is eliminated or at least minimized in a CCB proceeding. Further, small businesses and individuals could benefit from the CCB process to help control the costs and time issues in dealing with multiple copyright owners or with the type of copyright owners who use automated tools to find uses of their works and send demands for multiple works at the same time. Another possible advantage for individual defendants or small businesses is that the parties do not need to be represented by counsel, which would be another possible way to streamline the defense. Of course, it could be difficult and challenging for a small entity or individual to represent themselves against a party with counsel, no matter which side they are on.
Potential Downsides: Limited Remedies, Waived Rights and Lack of Complexity
On the other hand, there are also reasons why a party would not want to participate in CCB proceedings, and either choose not to file its claims in that forum or opt out of a claim against it.
Available damages and remedies could be a significant factor. The CCB can only award total damages up to $30,000, either as actual or statutory damages, regardless of the number of works at issue, and can award attorneys’ fees and costs but only up to $5,000 and only against “bad faith” infringers (or higher amounts in “extraordinary circumstances”). These relatively low limits on damages and attorneys’ fees that can be recovered can be an impediment to filing in the CCB, especially for smaller rights owners, and notably for those whose copyrighted works are often used without permission, such as photographers. In comparison, the potential amounts of damages and attorneys’ fees that can be recovered in federal court are significantly higher—particularly for infringement of works that are eligible for statutory damages. Defendants, on the other hand, may not want to opt out because of the limited damages and other relief available to a CCB claimant.
When a defendant does not opt out, they are waiving their right to a jury trial. This could be a significant factor, particularly if it is a matter where credibility and likability of the parties and witnesses could sway the decision or have a substantial effect on the damages and other relief that could be awarded, such as in instances of willful infringement.
As noted above, the CCB cannot grant injunctions, which could be very frustrating in instances where there is a clear, ongoing infringement that is very harmful to the copyright owner and/or to the value of or market for the copyrights work(s) at issue. Further, the CCB cannot grant attorneys’ fees unless the Board determines that there was “bad faith,” a vague standard and one that can be difficult to prove. And if the losing party fails to pay the damages award, the winning party must go to federal court to enforce any relief granted by the Board, resulting in additional time and expense that could defeat the purpose of having used the CCB process.
Other limitations are in play, as well. One potential disadvantage of the CCB proceedings is that they may not be well suited to complex copyright issues, but rather would work best for relatively straightforward copyright cases where the facts and law are relatively clear and where there is no split between the circuits. Another potential disadvantage, particularly for complex matters, is that the claim at issue will be limited to copyrights: the parties will not be able to include other related federal claims or any state law claims in the case; they would need to litigate those claims in federal or state court, thus defeating the goal of a relatively inexpensive and quick resolution of all the issues between the parties involved. Also significant is the fact that there is no deadline for final decisions by the Board, so theoretically it could take a long time to obtain a resolution, which goes against the goal of using the CCB process to obtain relatively speedy decisions.
Another issue for both sides to consider is that appeal rights in the CCB are very limited. The losing party can request reconsideration of the CCB’s decision and, if that is denied, can request that the Copyright Office review the CCB’s decision for “abuse of discretion” or ask a federal court to vacate modify or correct the CCB’s decision. A federal court, however, will be hamstringed in what actions it can take, only being able to change the CCB’s decision if (1) it was issued because of “fraud, corruption, misrepresentation or other misconduct,” (2) the CCB exceeded its authority or didn’t issue a final determination, or (3) if “excusable” neglect caused a default or failure to prosecute.
Precedent is another key factor both sides should consider. CCB decisions are binding only as to the parties in the action and cannot be relied on as legal precedent, even in future proceedings before the CCB. It may be important to try to establish favorable precedent on an important copyright issue so that it can be used by other copyright owners or defendants in the future. As for legal precedent, the CCB is required to rely on such precedent in making its decisions. However, sometimes copyright precedent is not clear. For example, what happens when there is a split among the circuits—which is often the case for key copyright issues? And what if the decision that caused the split is issued while the CCB claim is pending?
Letting Facts, Circumstances and Good Counsel Guide You
Ultimately, the CCB process presents potential advantages and disadvantages to both sides, and the ability to opt out could potentially allow copyright owners to force alleged infringers to litigate in federal court anyway. While this possibility goes against the purported purpose of the CCB process, the opt-out option is nevertheless important to ensure that highly significant copyright issues are fully litigated and decided by federal courts, that important copyright precedents are established, and that litigants have the opportunity to have a trial by jury if desired.
Whether the CCB is a good option for a party will depend on the specific facts and circumstances in each case. Some of the variables include the nature of the parties and who they are; the type and magnitude of infringement; what the copyright owner is trying to achieve and the goals in bringing the action; whether the work at issue is registered or an application is pending instead; other circumstances affecting the timing needs of the parties; damage issues both as to the type and magnitude of available damages, the remedies available, and issues of proof; whether the ability to seek injunctive relief is important; the desirability of an appeal and of establishing precedent for important copyright issues; and how challenging it may be to prove willfulness in court or bad faith in the CCB. The bottom line is that it will be important for parties to weigh the pros and cons and various factors at play in each situation, and consult with a knowledgeable attorney, before deciding whether to participate in a CCB proceeding.