By Shane Wax
Just before Christmas, Congress passed the Consolidated Appropriations Act 2021, which included a second round of Coronavirus relief as well as several important changes to federal copyright and trademark law. In a pair of articles, our team addresses these legislative changes so you can understand their potential impact. Below Shane Wax discusses both the Copyright Alternative in Small-Claims Enforcement Act of 2019 (or “CASE Act”) and the Protecting Lawful Streaming Act of 2020(the “PLSA”). In a companion article, Gloria Tsui-Yip explores the Trademark Modernization Act of 2020.
THE COPYRIGHT ALTERNATIVE IN SMALL-CLAIMS ENFORCEMENT ACT
From a big picture perspective, the CASE Act[1] is fairly straight forward in that it does what its full name suggests: it creates a small claims court for copyright infringement claims under Section 106 of the Copyright Act, or for DMCA false misrepresentation claims under Section 512, allowing independent artists, authors and content creators to pursue copyright claims and defenses at lesser expense, but at the cost of smaller damage awards.
Specifically, the CASE Act creates the Copyright Claims Board (the “CCB”), which is chiefly composed of three appointed Copyright Claims Officers, each of whom must have at least seven years of legal experience; further, two of the three Claims Officers must have “substantial” and “diverse” experience evaluating, litigation or adjudicating copyright infringement claims.[2] The Claims Officers are authorized to conduct and manage proceedings akin to judicial proceedings – from rendering scheduling, discovery and evidentiary rulings, to conducting hearings, to ruling on claims, counterclaims and defenses to awarding monetary and equitable relief.[3]
The procedural requirements to file a small claims copyright infringement proceeding are identical to the requirements for commencing a federal lawsuit – in particular, a copyright owner cannot file a claim with the Copyright Claims Board (or in federal court) until an application to register the infringed work has been submitted to and acted upon by the US Copyright Office, and infringement claims are subject to the same three-year statute of limitations.[4]
Proceedings can be commenced by the owner of an infringed work or an alleged infringer, including those who have had digital content removed by an ISP under the DMCA’s notice-counternotice takedown procedures, and the Copyright Claim Board is also empowered to exercise jurisdiction over any sufficiently related claim or counterclaim, such as contract claims, just as a federal a court might exercise what’s known as “supplemental jurisdiction” over state law claims.
Upon filing, the claims are reviewed for procedural compliance and suitability,[5] and if approved, claimants are given 90 days to serve the respondent and file proof of service. The notice of claim must inform the respondent that, among other things, they have 60 days from the date of service to “opt out” of proceedings, and that failure to do so will result in the proceedings being binding upon the respondent.[6] Indeed, any final CCB determination on the merits is binding the parties and given preclusive effect (meaning cases cannot be re-litigated); on the other hand, CCB determinations are not accorded any legal precedential value in any other proceedings, even other CCB proceedings.[7]
Once underway, CCB proceedings are handled like streamlined, simplified lawsuits. For example, discovery is limited to documents and written information, and generally precludes oral depositions.[8] Similarly, evidence is mostly limited to documents, written party statements, and any testimony heard before two or more Claims Officers; however, a showing of “good cause” is required for expert testimony to be considered.[9] Most significantly, there is no motion practice – no motions to dismiss or for summary judgment, for example – cases are filed, discovery is exchanged, points and counterpoints are submitted to the CCB by the parties, and then the CCB makes a determination.[10] The streamlined nature of these proceedings, particularly the lack of motion practice, will result in significantly lower attorney’s fees per case.
Once evidence and arguments are submitted, the Claims Officers make a determination on all claims, counterclaims and defenses presented to it and within its jurisdiction and are empowered to award monetary damages of up to $30,000 aggregate on all claims.[11] In small claims infringement cases, like in civil infringement cases, the copyright owner elects between actual damages and profits or statutory damages – except, whereas statutory damages in civil cases are set at $750-$30,000 per work, and up to $150,000 per work in cases of willful infringement, they are reduced to $15,000 per work (or $7,500 per work if the work was not timely registered) with no allowance for enhanced statutory damages in the case of willfulness.[12] Another difference is that while district courts have broad discretion to award costs and attorney’s fees to a prevailing party (subject to the standards enunciated by the Supreme Court[13]), the CASE Act law expressly provides that attorney’s fees may only be in “extraordinary circumstances, such as where a party has demonstrated a pattern or practice of bad faith conduct.”[14]
Once the CCB issues its final (or amended final) determination in a proceeding, the non-prevailing party has 30 days to request reconsideration or amendment by the CCB. If the CCB denies the reconsideration request, the non-prevailing party has another 30 days from the date of the denial to request review of the final determination by the Register of Copyrights, subject to an abuse-of-discretion standard. Additionally, within 90 days of any determination by the CCB or Register, a party may seek a federal court order “vacating, modifying, or correcting the determination,” in three narrow circumstances:
- If the determination was the result of “fraud, corruption, misrepresentation, or other misconduct”
- if the CCB “exceeded its authority or failed to render a final determination,” or
- the case was decided on default or failure to prosecute and such default or failure was excusable.
Thus, there a non-prevailing party cannot appeal an unfavorable determination for “de novo” review by an article iii court, such as often is the case with agency proceedings. Given the binding, but voluntary nature of these proceedings, it will be interesting to see how many parties will opt out so as “to instead pursue a claim, counterclaim, or defense in a district court of the United States, any other court, or any other forum, and to seek a jury trial.”[15] However, it is clear that a copyright owner will incur significantly less costs utilizing the CCB instead of federal court.
The uniqueness of the CCB may raise some Constitutional concerns, however, because the CASE Act vests judicial power in an administrative agency other than an Article III court (i.e., the Supreme Court and lower federal courts). The Copyright Claims Board is established within the Copyright Office, itself a legislative agency existing under Article II. While the Supreme Court has permitted quasi-judicial agencies to make purely legal determinations – such as in the case of the Patent Trial and Appeal Board presiding over inter partes proceedings under the 2011 America Invents Act to re-review previously issued patents for the requisite novelty and nonobviousness (purely legal questions)[16] – the Copyright Claims Board would be unique in that it would have the ability to make factual and legal determinations in an adversarial proceeding, powers normally reserved for an Article III Court.
In fact, it can be expected that a non-prevailing respondent will make such an argument in taking advantage of the right to review by a federal district court, and that a federal appellate court will make a ruling on the constitutionality of the CASE Act fairly early on, perhaps before the end of 2021.
THE PROTECTING LAWFUL STREAMING ACT
Also tucked into the recent omnibus spending bill was the Protecting Lawful Streaming Act of 2020, a law in the making for the better part of the past decade.[17]
The PLSA amends the federal criminal law relating to stolen property. However, contrary to misinformed belief, it does not make a felon out of every private streamer.
The PLSA makes it a felony to “willfully, and for the purposes of commercial advantage or private financial gain, offer or provide to the public a digital transmission service that is primarily designed or provided for or has no commercially significant purpose other than to publicly perform copyrighted works via digital transmission without permission, and gives the Department of Justice authority to prosecute this new felony.[18]
First, as the PLSA only applies to “digital transmission services” that operate “for the purposes of commercial advantage,” the law does not reach individuals at home on their computer – neither content creators nor consumers. Further, the PLSA only applies to apps and websites that specialize in digital streaming without offering any other services. Presumably, this would cover services like YouTube, Spotify or Twitch, but not broader services like Facebook or Twitter, and it definitely would not cover the individual content creators.
However, felony charges for unlawfulness requires proof that the streaming service in question was, effectively, designed for the purposes of streaming copyrighted content without the owner’s permission. YouTube, Spotify and Twitch all have valid, commercially significant purposes.
On the other hand, one might imagine the prolific number of websites that offer free streams of blacked-out sporting events or of adult entertainment, or of the recent technological development that allows users to stream illegal torrents without downloading any files to their own computer.
Given the degree of proof that would be required to prove that a service lacks a legitimate commercial purpose, one can breathe a sigh of relief that popular streaming services are unlikely to be affected.
[1] Copyright Alternative in Small-Claims Enforcement Act of 2019 (“CASE Act of 2019”), H.R. 2426, 116th Congress (2020), codified at 17 U.S.C. § 1501–1511, available in substantially similar form at: https://www.congress.gov/116/bills/hr2426/BILLS-116hr2426pcs.pdf (last accessed Jan. 4, 2021).
[2] 17 USC § 1502(b)(3)A). The three Claims Officers are to be assisted by two Claims Attorneys, whose duties are akin to judicial clerks, and who must have at least “3 years of substantial experience in copyright law.” Id. § 1502(b)(3)(B). Appointments are made by /the Librarian of Congress shall, upon the recommendation of and in consultation with the Register of Copyrights.’ Id. § 1502(b)(1) and (b)(6)(A)(i).
[3] Id. § 1503(a)(1) (duties of claims officers).
[4] Compare Id. § 1504(b) with Id. § 507(b) (statute of limitations); Compare Id. § 1505(a) with Id. § 411 (registration requirement).
[5] Notably, the CCB has discretion to reject otherwise valid claims in the event of an overloaded docket. See 17 USC 1506(f)(3). To be sure, any dismissal or denial of a claim for unsuitability or non-compliance is “without prejudice” to refiling (either with the CCB or in federal court) and does not constitute a decision on the merits.
[6] Id. § 1506(g).
[7] Id. § 1507.
[8] Id. § 1506(n).
[9] Id. § 1506(o).
[10] Id. § 1506(m).
[11] Id. §§ 1503(a)(1)(A) & 1504(e)(1)(D).
[12] Contrast 17 U.S.C. § 504(c) with Id. § 1504(e)(1)(A)(ii).
[13] See Kirtsaeng v. John Wiley & Sons, Inc., 59 U.S. —, 136 S. Ct. 1979 (2016).
[14] Contrast Id. § 505 with Id. § 1504(e)(3); see Id. § 1506(y)(2)(B).
[15] Id. § 1503(g) (judicial review); Id. § 1504(a) (opt out provision).
[16] See Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 584 U.S. — , 138 S. Ct. 1365 (2018); see generally Susan Neuberger Weller, Congress Considers Creation of a “Copyright Claims Board” as an Alternative to Handle Small Copyright Claims, 10 Natl L. Rev. 8 (Jan. 8, 2020), available at https://www.natlawreview.com/article/congress-considers-creation-copyright-claims-board-alternative-to-handle-small.
[17] In May 2011, Senator Klobuchar introduced Bill S.978, known colloquially (unofficially) as the Commercial Felony Streaming Act, which “died in committee,” but which had the same premise and goals of the PLSA.
[18] Protecting Lawful Streaming Act S.___, 116th Congress (2020), codified at 18 U.S.C § 2319B et seq.