The Copyright Claims Board Is Opening Next Week. Are You Excited?

The Copyright Office has completed its initial rulemaking for the new copyright “small claims” court called the “Copyright Claims Board” (the CCB). It has also launched a website with explanatory material. This post will round up what we know about the CCB after the rulemaking process.

Overview

The CCB is intended to provide a quicker and cheaper venue for small-scale copyright disputes. The theory is that copyright owners are getting screwed by infringement that they cannot afford to redress in federal court. In response, Congress created a “small claims” “court,” with virtual proceedings, a cap on damages, and limited discovery, appeals, and other due process rights.

The CCB is housed in the Copyright Office, which is part of Congress, and it’s weird for the legislative branch to operate a judicial function. To overcome this obvious separation-of-powers problem, Congress made participation in the CCB “optional.” “Optional” means that defendants can opt-out of a CCB proceeding–which forces the plaintiff to sue them in federal court or drop the matter–but only if the defendants opt-out within 60 days. (Libraries and archives can categorically opt-out of all CCB proceedings, but not you or me). I expect most defendants will choose to opt-out of every CCB proceeding…which would defeat Congress’ goal. ¯\_(ツ)_/¯

For over a year, the Copyright Office has made rules to implement the CCB as required by the authorizing legislation (the CASE Act). The Copyright Office hasn’t consolidated the rules into a single file, and the rules do not appear to be in the CFRs yet, so digesting the rules (including “clarifications” of final rules) tediously requires reviewing and synthesizing nine different files. If you read only one ruleset, this is the most important one.

Key Design Features of the CCB

Registrations Aren’t Needed Upfront. Copyright owners must have a copyright registration or denial in hand before initiating a federal court case. A CCB case, in contrast, can be initiated after filing a registration application. However, the CCB can choose to delay the case pending registration (and cannot make a final decision until the registration issues). Copyright owners can pay to accelerate review of their applications.

Pleading Standard. All CCB filings must conform to these standards:

(a) It is not being presented for any improper purpose;
(b) Any legal contentions are made in good faith based on the participant’s reasonable understanding of existing law;
(c) Any factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(d) Any denials of factual contentions have evidentiary support or, if specifically so identified, are reasonably based on belief or a lack of information.

Many copyright owners will be proceeding pro se, so their filings surely will be deficient. How vigorously will the hearing officers apply these standards to poorly drafted or researched complaints?

Filings diverging from these standards (called “bad faith” filings) can be sanctioned with an attorneys’ fee award of up to $5k and, if it’s a second violation within a 12 month period, a ban on using the CCB for 12 months and dismissal of pending CCB cases.

Screening Before Service Authorized. A CCB attorney will review filings to see if they meet the statutory requirements before authorizing service. Despite the narrow scope of this review, I’m sure some plaintiffs will trumpet that they have “valid” claims if they get past the pre-review.

Filing Cost. $40 to file and $60 more if the defendant doesn’t opt-out, compared to $402 in federal court.

Smaller Claims. If the plaintiff requests $5,000 or less of damages, the plaintiff may have the case heard by only one hearing officer and the case will have even more limited discovery.

Cap on the Number of CCB Cases. A party, “including a corporate claimant’s parents, subsidiaries, and affiliates,” can initiate up to 30 cases in a 12 month period. A solo lawyer may bring no more than 40 CCB cases in a 12 month period, and a law firm is limited to 80 cases in a 12 month period. Defendant opt-outs still count towards the cap.

I blogged about these volume limits in a prior post, when the Copyright Office proposed allowing only 10 cases per year per plaintiff. The Copyright Office raised the cap for plaintiffs, but my prior question stands: do these numbers make it economically viable for any plaintiff or lawyer to specialize in the idiosyncratic CCB procedures? If not, a copyright owner or law firm may have better economies of scale in consolidating all cases in federal court, where there are no volume caps, more discovery, and bigger potential damages. Also, I still don’t know whether the Copyright Office can limit the number of cases a lawyer can bring, because this implicates clients’ choice of counsel.

Appeals. Appellate rights are more limited than in federal court. The losing party may ask the panel to reconsider its decision. The request “must identify a clear error of law or fact that was material to the outcome or a technical mistake.” If unsatisfied with the reconsideration response, the losing party may appeal to the Register of Copyrights. The Register may reverse the decision only if it finds that “the Board abused its discretion in denying reconsideration of the determination.” Appeals of the Register’s decision go to federal court, which may reverse the Register only if “the Copyright Claims Board exceeded its authority or failed to render a final determination concerning the subject matter at issue.” In other words, it will be virtually impossible to overturn the Register of Copyright’s decision; and the Register of Copyright can overturn the panel’s initial determination only on an “abuse of discretion” standard. The difficulties correcting any initial mistaken decisions is one of the many compelling reasons for defendants to opt-out of the CCB.

Damages. The CCB cannot issue injunctions. For copyrighted works registered on a timely basis, the CCB can award statutory damages of up to $15,000 per work (max of $30,000 per proceeding). For other works, the CCB can award statutory damages of $7,500 per work (max of $15,000 per proceeding). Note that copyright owners with works not timely registered can get statutory damages only in the CCB, not federal court–a possible draw to pursue a CCB claim.

Law Student Representation. The CCB will permit supervised law students to represent clients. While I generally favor giving students more opportunities to get real-world experience, I don’t expect law schools will be rushing to implement this option because: (1) the 60 day opt-out period virtually ensures that many cases will run longer than a semester, (2) if the defendant opts-out, the student’s work is done before it really started, and (3) defendants will opt-out to force the plaintiffs to sue in federal court, which the law student can’t help with. The law student practice option seems more like regulatory supply-side thinking (i.e., “wouldn’t it be great if free student labor helped otherwise unrepresented litigants in this small claims court?”), not actually a thoughtful option for law school clinics.

Implications

Are you excited about the launch of this new venue for people to sue each other? Personally, I’m watching it warily. Some of the things I worry about the most:

• the low filing cost and simplified procedures will invite unmeritorious claims that will prompt defendants to accept low-value settlements rather than fight.
• plaintiffs will use their filing of a CCB claim (or passing the screening test) to scare defendants into accepting unwarranted settlements.
• Dubious service by unsophisticated plaintiffs will lead to bogus default judgments.

After a year-and-a-half of launch prep, we’re about to begin to find out how much demand there really is for the CCB. It would not surprise me if its caseload volume underwhelms.