CASE-ing the Joint: The Copyright Alternative in Small-Claims Enforcement Act (Guest Blog Post)
By Guest Blogger Tyler Ochoa
[Eric’s note: Prof. Ochoa previously posted a 900 word summary of the CASE Act. This post does a 5,500 word deep dive into the law for those who want the details.]
On December 27, 2020, President Trump signed into law H.R. 133, the Consolidated Appropriations Act for Fiscal Year 2021 (CAA). The headlines focused on the $600 relief checks that will be sent to help people who have lost jobs due to the COVID-19 pandemic; but the massive legislation contains at least 121 different Titles stuffed into 32 Divisions. Among them is a single section (Division Q, Title II, section 212) enacting the Copyright Alternative in Small-Claims Enforcement Act, or CASE Act. The CASE Act adds a new Chapter to the Copyright Act (Chapter 15) containing eleven sections. Here is a detailed summary of its provisions:
The Short Summary
The CASE Act creates the Copyright Claims Board, “an alternative forum in which parties may voluntarily seek to resolve certain copyright claims.” [17 U.S.C. §1502(a)] Eligible cases are infringement claims (and §512 misrepresentation claims) against U.S. residents (except any State or Federal governmental entity) in which the claimant seeks $30,000 or less in damages. [17 U.S.C. §1502(c)] A respondent may “opt out” of a Board proceeding within 60 days of service, in which case the Board proceeding is dismissed without prejudice. [17 U.S.C. §1506(i)] Board proceedings are conducted solely by submission of documents and hearings conducted online, without any in-person appearance. [17 U.S.C. §1506(c)] The Board’s determination is binding on the parties, and if a party fails to comply with the determination, it may be enforced by having it confirmed in a federal District Court. [17 U.S.C. §1508(a)]
Background: Existing Remedies for Copyright Infringement
(Readers who are familiar with the existing remedial provisions of U.S. copyright law may skip to the next section.)
Under existing law, copyright infringement actions can be litigated only in federal district court. [28 U.S.C. §1338(a)] The Copyright Office must either have registered the work or denied registration before a lawsuit may be filed. [17 U.S.C. §411(a); Fourth Estate Benefit Corp. v. Wall-Street.com] Remedies for copyright infringement include preliminary and permanent injunctions [17 U.S.C. § 502]; and either actual damages plus the infringer’s profits (to the extent they do not overlap) [17 U.S.C. §504(b)] or statutory damages [17 U.S.C. §504(c)]. If a plaintiff elects statutory damages, it may recover a single award of damages per work infringed of between $750 and $30,000. [17 U.S.C. §504(c)(1)] If the plaintiff proves the infringement was willful, the maximum is increased to $150,000 per work; if the defendant proves the infringement was innocent, the minimum is lowered to $200 per work. [17 U.S.C. §504(c)(2)] The prevailing party is eligible to recovery its costs and attorneys’ fees, in the court’s discretion. [17 U.S.C. §505] However, the plaintiff cannot recover statutory damages or attorneys’ fees unless it registered the work before the infringement commenced, or (for infringement of a published work) within three months after first publication. [17 U.S.C. §412]
Internet service providers (ISPs) have a “safe harbor” from monetary damages for user-posted content if they comply with several conditions, including the “notice-and-takedown” procedure of 17 U.S.C. §512. If a copyright owner sends the ISP a notice of claimed infringement, the ISP must expeditiously remove or disable access to the allegedly infringing content. The ISP then notifies the user, who has an opportunity (rarely exercised) to send a counter-notification. If there is a counter-notification, the ISP must notify the copyright owner and, absent a lawsuit, the ISP must restore the challenged material within 10 to 14 days after the counter-notification. If the copyright owner files a lawsuit against the user, however, then the challenged material must remain taken down. [17 U.S.C. §512(g)(2)(C)]
The cost of litigation in federal court is high: discovery and pre-trial preparation can easily cost upward of $10,000 per month. Unless a plaintiff has registered its copyrights and is eligible to recover statutory damages and attorneys’ fees, most attorneys are unwilling to file an infringement claim on a contingent fee basis. And even when a lawyer is willing, it rarely makes economic sense to file an infringement claim if the expected recovery is only a few thousand dollars. The purpose of the CASE Act is to provide a less expensive administrative alternative to full-blown litigation in federal court.
The Copyright Claims Board
The Copyright Claims Board will consist of three full-time Copyright Claims Officers, assisted by at least two full-time Copyright Claims Attorneys. [17 U.S.C. §1502(b)] The Officers must each have at least 7 years of legal experience; two of them must be experienced in copyright litigation or adjudication, and one must be experienced in alternative dispute resolution. [17 U.S.C. §1502(b)(3)(A)] The Officers are appointed by the Librarian of Congress (on the recommendation of the Register of Copyrights) and will serve staggered 6-year terms. [17 U.S.C. §1502(b)(1),(5)] The Attorneys are hired by the Register of Copyrights and must each have at least 3 years of experience in copyright law. [17 U.S.C. §1502(b)(3)(B)] The Board shall begin operations within one year of enactment (by December 27, 2021) [CAA, §212(d)(1)], except that the Register has the discretion to extend the deadline up to 180 days for good cause. [CAA, §212(d)(2)]
Participation in a proceeding before the Board is “voluntary” in the sense that a person claiming copyright infringement (or non-infringement) may choose to commence a proceeding with the Board or to file a lawsuit in federal court instead. [17 U.S.C. §1504(a)] The respondent against whom a claim is made has a 60-day period after service within which to “opt out” of the Board proceeding in writing, in which case the Board proceeding is dismissed without prejudice. [17 U.S.C. §1506(i)] If the defendant fails to “opt out” in writing, however, then the proceeding becomes an “active” proceeding, and the respondent is legally bound by the determination of the Board. [Id.] Obviously, this makes the provisions on service and default extremely important. (For service and default, see the section titled “Initiating the Proceeding” below.)
The Register is required to adopt a regulation permitting libraries and archives to prospectively and preemptively opt out of all Board proceedings, without paying any fee to do so. [17 U.S.C. §1506(aa)]
The Board may hear and determine the following claims, counterclaims, and defenses [17 U.S.C. §1504(c)]:
- A claim for copyright infringement, where the total monetary recovery sought does not exceed $30,000 [17 U.S.C. §1504(e)(1)(D)];
- A claim for a declaration of non-infringement;
- A claim under 17 U.S.C. §512(f) for misrepresentation in a notice of claimed infringement or a counter-notification seeking to restore removed or disabled material, subject to the $30,000 cap;
- A counterclaim for infringement or §512 misrepresentation, or for breach of contract, provided it adds no additional parties and that it arises out of the same transaction or occurrence as one of the above, subject to the $30,000 cap;
- A legal or equitable defense to any of the above claims or counterclaims.
Joinder of multiple claims, claimants, and respondents is permitted, provided the claims arise out of the same infringing activity or continuous course of infringing activities, and the aggregate monetary recovery does not exceed the $30,000 cap. [17 U.S.C. §1504(c)(6)]
Defining a “small claim” as one seeking $30,000 or less was controversial. As a result, it is startling to find in the statute a mechanism for changing the definition without any affirmative action by Congress. After three years have passed from date the first determination issues, the Register of Copyrights may “conduct a rulemaking to adjust the limits on monetary recovery or attorneys’ fees and costs that may be awarded under this chapter.” [17 U.S.C. §1510(a)(2)(A)] The Register must submit the proposed rule to Congress, and the rule shall take effect 120 days later unless Congress votes to disapprove the rule. [17 U.S.C. §1510(a)(2)(B)]
The Register is also required to adopt regulations “for the consideration and determination … of any claim … in which total damages sought do not exceed $5000.” [17 U.S.C. §1506(z)] The Regulation may provide that such claims are heard by a single Claims Officer instead of the entire Board. [Id.]
The Board cannot determine claims pending before a court of competent jurisdiction, unless the court grants a stay to permit the claim to be proceed before the Board. [17 U.S.C. §1504(d)(2)] However, except for any class actions [17 U.S.C. §1507(a)], a U.S. District Court “shall issue a stay of proceedings … with respect to any claim brought before the court that is already the subject of a pending or active proceeding before the Board.” [17 U.S.C. §1509(a) (emphasis added)] These dueling provisions result in a forum-shopping race to be the first to file; however, as noted above, the respondent in a Board proceeding may “opt out” in writing, resulting in a dismissal without prejudice [17 U.S.C. §1506(i)], which would disable the mandatory stay and allow a subsequently filed case in District Court to proceed.
The Board cannot hear claims by or against any Federal or State governmental entity. [17 U.S.C. §1504(d)(3)] The Board cannot hear claims against any person or entity residing outside the United States, except for counterclaims against a person or entity that initiated the proceeding. [17 U.S.C. §1504(d)(4)] In other words, the CASE Act does nothing to address the oft-asserted problem of foreign-based infringement (willful or otherwise).
In addition, since the Act expressly refers to infringement claims “under section 106,” leaving section 106A conspicuous by its absence, the Board cannot hear claims for infringement of moral rights under the Visual Artists Rights Act (VARA) [17 U.S.C. §106A], except perhaps as a permissible counterclaim.
If a party to an active proceeding receives notice of a pending class action arising out of the same transaction or occurrence as the Board proceeding, it may either opt out of the class action, or it may seek dismissal of the proceeding before the Board. [17 U.S.C. §1507(b)(2)]
As noted above, with limited exceptions, an infringement claim may not be filed in federal District Court until the Register of Copyrights has either issued a registration certificate, or registration has been refused. [17 U.S.C. §411(a); Fourth Estate Benefit Corp. v. Wall-Street.com] The CASE Act lifts this rule for claims in a proceeding before the Board: the copyright owner must file a completed application for registration (including the fee and deposit copies) before “asserting” a claim, but the case may proceed if “a registration certificate has either been issued or has not been refused.” [17 U.S.C. §1505(a)(1),(2)] A claimant “shall be eligible to recover” actual damages and profits or statutory damages as long as the application requirement is met, but the Board “may not render a determination” of the claim until the registration certificate issues. [17 U.S.C. §1505(b)] Although the claimant should file the registration application before the claim is filed, the use of the word “asserted” indicates that the application may be filed after the claim is filed, as part of the post-filing procedure to determine whether a claim is “compliant.” (See “Initiating a Proceeding” below.) This is confirmed by a provision directing the Register to expedite registration (or denial) for “an unregistered work that is at issue before the Board.” [17 U.S.C. §1505(d)]
If a claim is brought against an online service provider that may be subject to the safe harbor in section 512(b), (c), or (d), then the claim “shall be considered noncompliant” unless the claimant certifies that it notified the service provider and the service provider failed to remove or disable access to the allegedly infringing material expeditiously. [17 U.S.C. §1506(f)(1)(C)(i)] If a claim is filed without the required certification, the Board shall instruct the claimant how to comply. [17 U.S.C. §1506(f)(1)(C)(ii)] Thus, the notice-and-takedown procedure of 17 U.S.C. §512(c)(3), which applies to subsections (b) and (d) as well, is essentially a procedural prerequisite to a Board proceeding (analogous to exhaustion of administrative remedies). A non-compliant claim cannot proceed to service and must be dismissed with prejudice (see “Initiating a Proceeding”), so if the service provider removes or disables access to the allegedly infringing material, then the claim against the service provider must be dismissed without prejudice. A Board proceeding against the user that posted the material, however, can proceed. For purposes of the §512 notice-and-takedown procedure, filing a claim before the Board qualifies as “an action seeking a court order to restrain the subscriber from engaging in infringing activity” within the meaning of §512(g)(2)(C) [17 U.S.C. §1507(d)], meaning that the material taken down must remain taken down during the pendency of the proceeding against the user in order for the ISP to qualify for the safe harbor.
The statute of limitations for commencing a proceeding before the Board is the same as for civil litigation: three years after the claim accrued. [17 U.S.C. §1504(b)(1)] Presumably this will be interpreted in the same manner as the corresponding provision for infringement lawsuits [17 U.S.C. §507(b)], including all of the existing ambiguities regarding the discovery rule. [See my previous post on that topic.] If a proceeding is commenced before the Board, it tolls the statute of limitations for filing a lawsuit in District Court “during the period in which the proceeding is pending.” [17 U.S.C. §1504(b)(2)]
Initiating a Proceeding
A proceeding before the Board is commenced by filing a claim with the Board, accompanied by a filing fee. [17 U.S.C. §1506(e)] The amount of the fee will be set by the Register, but it cannot exceed the fee for filing in a federal District Court. [17 U.S.C. §1510(c)] The claim must include a statement of material facts and it must be certified to be truthful and accurate. [17 U.S.C. §1506(e); §1506(y)(1)]
The claim is reviewed by a Copyright Claims Attorney to determine whether it complies with the statute and applicable regulations. If it does, the claimant is notified and instructed to proceed with service. [17 U.S.C. §1506(f)(1)(A)] If it does not comply, the claimant is notified and given 30 days to file an amended claim. [17 U.S.C. §1506(f)(1)(B)] If the claim still does not comply, the claimant is given a second opportunity to amend. After that, if no compliant claim has been filed, the claim is dismissed without prejudice. [Id.] Counterclaims are subject to the same review. [17 U.S.C. §1506(f)(2)] The Board also may dismiss a claim without prejudice if it determines the claim is unsuitable for determination for any reason, including: (A) failure to join a necessary party; (B) lack of an essential witness, evidence, or expert testimony; or (C) the claim requires the determination of a relevant issue (of law or fact) that “could exceed” either “the number of proceedings that the [Board] could reasonably administer or the subject matter competence of the [Board].” [17 U.S.C. §1506(f)(3)]
Once the claim has been deemed to be compliant, the claimant has 90 days to file with the Board proof of service of notice on the respondent. [17 U.S.C. §1506(g)] The notice must prominently state that, by not opting out within 60 days, the respondent loses the opportunity to have the dispute decided by a court, and waives the right to a jury trial. [17 U.S.C. §1506(g)(1)] The manner of personal service on an individual is the same as provided in Federal Rule of Civil Procedure 4(e) [17 U.S.C. §1506(g)(4)]. A corporation, partnership, or unincorporated association may designate an agent to receive service of notice of claims filed against it with the Board; otherwise, service may be made in a manner provided by State law. [17 U.S.C. §1506(g)(5)] (The option of using the means of service specified in FRCP 4(h) for such parties is conspicuously absent.) Alternatively, the claimant may request a waiver of service by mail or “other reasonable means,” in a manner that is similar, but not identical, to the corresponding provision in FRCP 4(d). [17 U.S.C. §1506(g)(6)] If a claimant fails to serve a respondent within 90 days of being notified that the claim is compliant, then the claim is dismissed without prejudice. [17 U.S.C. §1506(v)(1)]
Once served, the respondent has 60 days within which to submit a written notice opting out of the Board proceeding. [17 U.S.C. §1506(i)] In “exceptional circumstances,” the Board may extend the 60-day period “in the interests of justice.” [Id.] If the respondent opts out in a timely manner, the proceeding is dismissed without prejudice. If the respondent does not opt out in a timely manner, then the proceeding becomes an “active” proceeding, and the respondent is legally bound by the Board’s subsequent determination. [Id.]
If the proceeding has become “active,” but the respondent has failed to appear or has ceased participating (missed one or more deadlines without justifiable cause), the Board may enter a default determination. [17 U.S.C. §1506(u)] If the Board finds that the evidence is sufficient to support a finding in favor of the claimant, it prepares a proposed default determination and sends it to the respondent, who has 30 days to oppose it with evidence or additional information. [17 U.S.C. §1506(u)(1),(2)] If the respondent does so, then the Board shall consider it and the case proceeds to a final determination. [17 U.S.C. §1506(u)(3)] If the respondent fails to respond, the default determination becomes the final determination. [17 U.S.C. §1506(u)(4)]
If the proceeding has become “active,” but the claimant fails to proceed (has missed one or more deadlines without justifiable cause), the Board must give the claimant 30 days’ notice to respond. After considering any such response, the Board may enter a final determination dismissing the claim (presumably with prejudice). [17 U.S.C. §1506(v)(2)]
The Act contemplates that there will be a substantive written response (defenses and counterclaims) to a claim, but it does not specify a deadline by when such a response must be filed. Presumably, either the Register will impose such a deadline in the regulations that it is instructed to adopt [17 U.S.C. §1510(a)(1)], or else the Board will impose such a deadline as part of the initial schedule it issues after the case has become an “active” proceeding. [17 U.S.C. §1506(k)] As an incentive to waive service, a respondent that does so must be given an additional 30 days to file any substantive responses (defenses and counterclaims) to the claim. [17 U.S.C. §1506(g)(7)(B)] Confusingly, this extension of time apparently does not apply to the 60-day opt-out period. Upon a written request, a party that files a claim or counterclaim may voluntarily dismiss it, without prejudice, before the respondent files its substantive response. [17 U.S.C. §1506(q)]
One major advantage of a Board proceeding is that it takes place solely “by means of written submissions, hearings, and conferences carried out through internet-based applications and other telecommunications facilities,” “without the requirement of in-person appearances by parties or others.” [17 U.S.C. §1506(c)(2),(1)] The sole exception is that the Board may arrange for the submission of “physical or nontestimonial evidence” that is “material” and cannot be furnished to the Board electronically. [17 U.S.C. §1506(c)(2)] The Act specifies that a party may be, but is not required to be, represented by an attorney (or a law student acting pro bono that is otherwise qualified to represent parties). [17 U.S.C. §1506(d)] Given the complexity of the statute, however, it is difficult to imagine that a party could represent themselves effectively without the aid of an attorney (or qualified law student).
The Act provides for discovery “limited to the production of relevant information and documents, written interrogatories, and written requests for admission.” [17 U.S.C. §1506(n)] Upon request and for good cause, the Board may approve “additional relevant discovery, on a limited basis, in particular matters,” and it may request specific information and documents from parties and “voluntary submissions from non-participants.” [17 U.S.C. §1506(n)(1)] In other words, there are no depositions as a matter of course, and the Board may not issue any subpoenas to non-parties. (Whether the Board may approve a deposition as “additional relevant discovery” is unclear.) The Board may issue a protective order to limit the disclosure of confidential information. [17 U.S.C. §1506(n)(2)] For good cause, and after notice and an opportunity to be heard, the Board may draw an adverse inference “against a party who has failed to timely provide discovery materials in response to a proper request.” [17 U.S.C. §1506(n)(3)]
The formal rules of evidence do not apply. The Board may consider (1) documentary and other non-testimonial evidence; and (2) testimonial evidence submitted under penalty of perjury. [17 U.S.C. §1506(o)] Such testimonial evidence ordinarily is submitted in written form; but the Board has discretion to hold hearings (by electronic means) to receive oral testimony and oral argument. [17 U.S.C. §1506(o),(p)]
Unless the parties settle [17 U.S.C. §1506(r)], the Board must make factual findings based on a preponderance of the evidence [17 U.S.C. §1506(s)] and issue a written determination explaining the factual and legal basis [17 U.S.C. §1506(t)(1)(B)], which “shall be made available on a publicly accessible website.” [17 U.S.C. §1506(t)(3)]
As with existing remedies, the Board is empowered to award EITHER actual damages and the defendant’s profits OR statutory damages, subject to the following limitations [17 U.S.C. §1504(e)(1)(A)]:
- The Board may award actual damages and profits under section 504(b), “taking into consideration … whether the infringing party has agreed to cease or mitigate the infringing activity”; or
- The Board may award statutory damages under section 504(c), except that the Board “may not make any finding that, or consider whether, the infringement was committed willfully.” If the copyright was timely registered under section 412, the Board may award up to $15,000 for each work infringed, subject to the maximum total award of $30,000. If the copyright was not timely registered under section 412, the Board may still award up to $7,500 for each work infringed, subject to a maximum total award of $15,000 “in any 1 proceeding.”
All of the above is subject to the limitation that a party “may not seek or recover” a total of more than $30,000 “in any single proceeding.” [17 U.S.C. §1504(e)(1)(D)]
The provisions on statutory damages are a big change from existing law. Under existing law, a copyright owner cannot recover statutory damages unless it registered the copyright before the infringement commenced or (for infringements of a published work) within three months after first publication. [17 U.S.C. §412] The CASE Act makes it clear that a copyright owner can recover statutory damages of up to $7,500 for each work infringed without having registered the work in advance (although an application to register must still be submitted to “assert” a claim before the Board, and the registration must issue before a final determination can be rendered). Of course, a respondent may “opt out” of the Board proceeding at the outset and force the plaintiff to file a lawsuit in federal court, where the plaintiff will still be subject to the existing limits on recovering statutory damages. Thus, knowledgeable respondents will be able to preserve the existing limits on statutory damages by opting out, whereas unsophisticated respondents will likely end up paying statutory damages that otherwise could not have been recovered in federal District Court.
Moreover, there is nothing to prevent a copyright owner from evading the monetary limits by commencing multiple proceedings against a single defendant, except that the Register “may establish regulations relating to the permitted number of proceedings each year by the same claimant.” [17 U.S.C. §1504(g) (emphasis added)] It is unclear whether the Register will be allowed to limit the number of proceedings against a single defendant, while still permitting multiple proceedings against different defendants. Unless the Register is permitted to do so, this loophole could largely defeat the purpose of limiting the total monetary recovery before the Board. Again, however, sophisticated defendants will be able to choose their preferred forum by “opting out” at the outset. In addition, if a party commences multiple proceedings in a 12-month period for an improper purpose, or without a basis in law or fact, it may be barred from initiating a claim before the Board for a further 12-month period. [17 U.S.C. §1506(y)(3)]
There is at least one significant ambiguity. Statutory damages “shall be determined in accordance with section 504(c),” which provides for a single award of statutory damages of between $750 and $30,000 per work infringed. [17 U.S.C. §504(c)(1) ] Under the CASE Act, the maximum award of statutory damages per work infringed is $15,000 (if the work was timely registered) or $7,500 (if not timely registered). But what about the minimum? Section 504(c)(2) provides that if the court finds “that such infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages to a sum of not less than $200.” [17 U.S.C. §504(c)(2)] But the CASE Act provides that the Board “may not make any finding that, or consider whether, the infringement was committed willfully.” [17 U.S.C. §1504(e)(1)(A)(ii)(III)] Does this restriction prevent the Board from considering or determining whether the infringement was innocent? On the one hand, this restriction was likely intended simply to prevent increasing the maximum award of statutory damages for willfulness. [H.R. Rep. 116-252, at 25] On the other hand, how can a court consider whether a party acted innocently without simultaneously considering the converse, whether that party acted willfully? If innocent infringement cannot be considered, that would leave the minimum the Board can award at $750 per work infringed, instead of $200. The House Report states that the Board can “take into account … any clause or provision of 17 U.S.C. § 504(c) not specifically prohibited by the Act.” [H.R. Rep. 116-252, at 30] Thus, the better reading is that the Board may consider innocent infringement and lower the minimum amount of statutory damages accordingly.
There is also a bizarre provision concerning election of remedies: “at any time before final determination is rendered, … the claimant or counterclaimant shall elect— (i) to recover actual damages and profits or statutory damages … or (ii) not to recover damages.” [17 U.S.C. §1504(e)(1)(B)] Existing law already provides for an election between actual damages and profits, on the one hand, and statutory damages on the other [17 U.S.C. §504(a), §504(c)(1)]; but why would a claimant who bothered to commence a proceeding ever elect “not to recover damages”? Perhaps this mandatory election is somehow meant to promote the possibility of settlement; but one imagines it will simply add an extra procedural step to Board proceedings that will never result in a real difference in the outcome
The Board cannot issue an injunction, but the Board’s determination “shall include a requirement to cease conduct” if a party agrees to cease activity found to be infringing, “including removing or disabling access to, or destroying, infringing materials,” and the agreement is reflected in the record. [17 U.S.C. §1504(e)(2)(A), (B)] (A party may similarly agree to cease sending a takedown notice or counter notice under section 512.) Both damages remedies allow the Board to consider whether the infringer “has agreed to cease or mitigate the infringing activity.” [17 U.S.C. §1504(e)(1)(A)(i), §1504(e)(1)(A)(ii)(III)] In other words, cooperative respondents can agree to cease infringing, and they will likely be subject to smaller awards; whereas respondents who maintain that their use is fair despite an adverse determination will be hit with larger awards. Of course, intransigent infringers can fail to respond at all and suffer a default determination; and intransigent but sophisticated infringers can opt out in advance, forcing the copyright owner to file a lawsuit in federal District Court instead.
In general, parties must bear their own attorneys’ fees. [17 U.S.C. §1504(e)(3)] However, if the Board determines “that a party pursued a claim, counterclaim, or defense for a harassing or other improper purpose, or without a reasonable basis in law or fact,” then the Board shall award reasonable costs and attorneys’ fees to any adversely affected party, in an amount of not more than $5,000 [17 U.S.C. §1506(y)(2)], except if a party appears pro se (without a lawyer), the award is limited to costs only, in an amount of not more than $2,500. [17 U.S.C. §1506(y)(2)(A)] These amounts are in addition to the maximum total damages of $30,000. [17 U.S.C. §1504(e)(1)(D)] In “extraordinary circumstances,” such as if a party has demonstrated a pattern or practice of bad faith conduct, the Board may award costs and attorneys’ fees in excess of the limits. [17 U.S.C. §1506(y)(2)(B)] If a party has “pursued a claim, counterclaim, or defense … for a harassing or other improper purpose, or without a reasonable basis in law or fact” more than once in a 12-month period, then the Board may bar that party from initiating a claim before the Board for a further 12-month period. [17 U.S.C. §1506(y)(3)]
Within 30 days after the final determination issues, a party may request reconsideration in writing, “if the party identifies a clear error of law or fact material to the outcome, or a technical mistake.” [17 U.S.C. §1506(w)] After providing the other parties an opportunity to respond, the Board may either deny the request or amend the determination. [Id.]
If the Board denies the request for reconsideration, within 30 days the party may pay an additional fee and request review by the Register of Copyrights. [17 U.S.C. §1506(x)] Such review is limited to “whether the … Board abused its discretion in denying reconsideration of the determination.” [Id.] After providing the other parties an opportunity to respond, the Register may either deny the request or remand the proceeding to the Board to reconsider specified issues and issue an amended determination. [Id.] ‘Such amended final determination shall not be subject to further consideration or review” by the Register or the Board. [Id.]
A final determination by the Board shall preclude litigation of the claims or counterclaims asserted and finally determined by the Board. [17 U.S.C. §1507(a)] However, the determination does not preclude litigation of the same or similar issues of law or fact with respect to claims that were not asserted and finally determined by the Board. [17 U.S.C. §1507(a)(1)] A determination of copyright ownership by the Board does not have any preclusive effect in any other action or proceeding. [17 U.S.C. §1507(a)(2)] Failure or inability to assert a counterclaim does not preclude assertion of that counterclaim in a subsequent action or proceeding. [17 U.S.C. §1507(e)] Submissions or statements made to the Board may not be cited or relied upon in, or serve as the basis for, any action or proceeding under Title 17. [17 U.S.C. §1507(c)] Finally, except for its limited preclusive effect, a determination by the Board may not be cited or relied upon as legal precedent in any other action or proceeding. [17 U.S.C. §1507(a)(3)]
Within 90 days after the date of the determination (or the post-determination reconsideration), a party may seek an order from a U.S. District Court vacating, modifying, or correcting the determination. [17 U.S.C. §1508(c)(1)] The only grounds for such a challenge are: (A) fraud, corruption, misrepresentation, or other misconduct; (B) the Board exceeded its authority or failed to render a final determination; or (C) a default or failure to prosecute was due to excusable neglect. [17 U.S.C. §1508(c)(1)] If a party has failed to pay damages or otherwise comply with the relief awarded, then within one year of the date of the determination (or the post-determination reconsideration), the aggrieved party may apply to a U.S. District Court for an order and judgment confirming the relief awarded. [17 U.S.C. §1508(a)] In either case, the party making the challenge or the aggrieved party must provide notice to all other parties to the determination. [17 U.S.C. §1508(b)(1), §1508(c)(2)(A)] If the court confirms the relief awarded, then the party that failed to comply must pay the reasonable expenses of the court proceeding, including attorneys’ fees. [17 U.S.C. §1508(a)]
Is this Constitutional?
The legislative history of the CASE Act [H.R. Rep. 116-252] explains several features of the legislation that were designed to make sure that the alternative small-claims procedure complies with the U.S. Constitution. First, Congress has the power to enact the legislation under the Patent and Copyright Clause: “to promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” [Art. I, §8, cl. 8] Second, the Copyright Claims Officers are “inferior officers” within the meaning of the Appointments Clause [Art. II, §2, cl. 2], because they are appointed by and can be fired by the Librarian of Congress, a “Head of Department” that is subject to Senate approval. [H.R. Rep. 116-252, at 20-21] Third, both the Seventh Amendment right to jury trial and the right to have one’s claim heard by an Article III court can be waived “so long as the waiver is knowing and voluntary.” [H.R. Rep. 116-252, at 21] This is the reason that Board proceedings are voluntary: the plaintiff can choose to file in federal court instead, and the defendant must be informed of its right to opt out of the Board proceeding. Fourth, the Board must follow existing precedent and cannot make new law. [17 U.S.C. §1506(a)(1),(2)] Fifth, the CASE Act provides for the basic elements of procedural Due Process, including notice and the opportunity to be heard. [H.R. Rep. 116-252, at 22] Finally, the Board cannot enforce its own determinations, and enforcement is subject to limited judicial review in a manner that parallels the Federal Arbitration Act. [H.R. Rep. 116-252, at 21-22]
Having a small-claims alternative to full-blown proceedings in federal court isn’t a bad idea; but $30,000 still seems like a very large number to anyone who isn’t a copyright owner. Moreover, the CASE Act is so complex that it will be difficult for parties to navigate the system without a lawyer. This means that the cost of bringing and responding to a $30,000 claim will likely be nearly as expensive as bringing or responding to a federal lawsuit. It seems likely that sophisticated litigants will “opt out” of the new system and force the copyright owner to file in federal court, with its existing limitations on remedies, including statutory damages. However, the monetary limits on recovery may persuade some prospective defendants to allow the claims to be heard by the Board.
The model for this type of alternative dispute resolution is the Uniform Domain-Name Dispute Resolution Policy, or UDRP, the mandatory arbitration provision for domain-name disputes that has successfully resolved an average of 2,000 cases per year over the past 20 years. UDRP proceedings are conducted online and are quite inexpensive. They are binding unless the losing party takes the case to court, which rarely happens. But domain-name disputes have two significant advantages that make them uniquely well-suited to alternative dispute resolution. First, because one cannot obtain a domain name without entering into a contract, ICANN was able to make the UDRP mandatory by inserting it into every domain-name contract. Second, parties rarely challenge UDRP decisions because no damages can be awarded; the only relief available is transfer of the domain name. When damages are at stake, one can expect that the parties will opt out of the purely voluntary Broad proceedings at a much higher rate.
Within three years after the Board begins operations, the Register must file a report with Congress assessing the use and efficacy of this experimental procedure. [CAA, §212(e)] One hopes that the experiment will prove to be successful, and that copyright owners will be able to recover for genuine infringements without significantly deterring routine internet practices such as linking. One fears, however, that so-called copyright “trolls” will find a way to monetize Board proceedings, in much the same way that they have monetized mass copyright litigation.