Why You Should Be Cautious of the New Copyright Small Claims Court

Copyright owners always have to make a federal case out of the smallest disputes. But tucked away in the latest coronavirus relief bill is the authorization of a small claims copyright tribunal.

The Copyright Alternative Small-Claims Enforcement Act of 2020 (CASE Act) previously passed the House of Representatives with bipartisan support, but couldn’t get a vote in the Senate.

The CASE Act provides for the creation of a Copyright Claims Board. The board consists of three officers chosen by the Librarian of Congress and the Register of Copyrights. The board will be housed inside the Copyright Office. The officers will essentially act as arbitrators for copyright disputes.

This process may help to resolve relatively small copyright disputes efficiently. As of now, the exact workings of the board and its usefulness are open questions. Here’s what copyright owners and alleged infringers should know.

Parties may opt out of adjudications before the board.

Parties in these actions can simply opt out of the action within 60 days of service. However, parties must take an affirmative step to opt out. The board can grant default judgments, so ignoring notices of cases filed in the tribunal could be dangerous and expensive. When a party does opt out, the copyright owner will maintain the ability to file a standard copyright action in federal court.

It’s less formal than normal litigation.

Proceedings in front of the board will be less formal than suits brought in district courts. The CASE Act allows for written discovery but not depositions. Unlike actions brought in court, the board can hear disputes involving registered works before the copyright owner receives the registration. Additionally, expert testimony will only be allowed in “exceptional cases.”

The board has limited ability to award monetary damages and attorneys’ fees.

The board can award both statutory and actual damages of up to $30,000. The statutory damages available from the board are capped at $7,500 per work or $15,000 per work for those that were timely registered.

These authorized damages are significantly less than what could be awarded in federal court. However, the board can award statutory damages for works that are not timely registered, which a court cannot.

Unlike federal district courts, the board generally cannot award attorneys’ fees to prevailing parties.

The board’s decisions might not always be small claims.

While the board is limited in awarding monetary damages, it can hear claims for a declaration of non-infringement and misrepresentation claims related to notifications under the Digital Millennium Copyright Act. A declaration of non-infringement might theoretically put an end to an infringement claim of millions of dollars.

Why should you be cautious?

• No right to appeal legally incorrect decisions: You cannot appeal board decisions on matters of law. Appeals are limited to claims of fraud, corruption, misrepresentation and misconduct. Assuming that limit is enforceable, it means parties could be stuck with obviously wrong decisions.
• Uncertain applications of law: Different jurisdictions are more, or less, favorable to copyright infringement claims. In every jurisdiction, your lawyer can provide advice about how courts have handled specific claims in the past. It is unknown how the board will resolve disputes. That creates uncertainty for litigants.
• Uncertainty around the constitutionality of awards: Defendants may collaterally attack awards by the board. They could argue it violates the Constitution’s separation of powers obligation by having executive branch bureaucrats decide questions that fall within the judicial branch’s authority. This possibility means that instead of saving money through a small claims adjudication, copyright owners may be forced to fight a collateral attack on an award and then bring the same claim again in a federal trial court.

Our Intellectual Property Practice Group will continue to monitor the implementation of the CASE Act. Please contact Mary Ellen Roy, Andrew Coffman or any member of Phelps’ Intellectual Property team if you have questions or want advice and guidance.