CDSA

Inside the New Copyright Claims Board

A few short weeks ago, the new Copyright Claims Board, “an efficient and user-friendly option” to resolve copyright small claims (up to $30,000), opened for business. “Efficiency” and “friendliness,” however, are relative terms — not ones characteristic of federal bureaucracy.

The utility of the CCB is the subject of some concern. When you consider that copyright impacts things such as software, websites, marketing materials, interviews, manuals, podcasts, designs, photographs, social media, and software, it’s clear that industries beyond content are impacted.

It launched to the tune of 40 cases, which is certainly quite the workload, but it seems like oddly little for something that was supposed revolutionize copyright litigation.

It’s especially underwhelming when it’s so dominated by photographs, and, with minimal barriers to filing, there will probably be several easy dismissals for every claim that goes forward.

So how important is this for entertainment companies to focus on? Here’s what you need to know about the Copyright Claims Board.

What is the Copyright Claims Board?

The Copyright Alternative in Small Claims Enforcement Act of 2020, or CASE Act, established the Copyright Claims Board (CCB), an administrative tribunal intended to offer fast, low-cost adjudication of small copyright claims when formal litigation is expensive or impractical.

Its stated purpose is to allow claimants who would not otherwise be able to afford legal action to recover from large copyright holders who use their work without permission.

The CCB is characterized as an “alternative” to bringing copyright claims directly to court, but that is a slight oversimplification. It is an administrative law tribunal, a decision-making body embedded in an administrative agency rather than the regular judicial system. For example, the Securities and Exchange Commission’s Office of Administrative Law Judges adjudicates breaches of securities law, but it is not part of the judiciary as such.

However, it is typical for administrative decisions to be able to be challenged in a trial court, thus opening them to appeal. The basic advantage of an administrative tribunal is that it is able to apply specialized knowledge of the agency’s rules and field, while functioning more efficiently than a court since it only hears one kind of case. However, the tradeoff is that the court system has procedural safeguards and a multilayered review system which administrative courts do not.

The CCB hears “small claims,” specifically those falling under a $30,000 maximum amount-in-controversy requirement. An amount-in-controversy requirement means that a claimant who intends to assert more than $30,000 in damages against one respondent must bring their case in federal court, not use the CCB. Multiple claims against the same respondent may be joined together in a single action, and ones relating to the same transaction or occurrence must be joined.

The value of each joined claim is aggregated for the purposes of the amount in controversy. However, a respondent may file counterclaims, asserting that the claimant owes the respondent damages in addition to or instead of the ones the claimant is seeking from the respondent. Counterclaims will be adjudicated in the same action, but they do not count towards the amount-in-controversy requirement.

However, they are separately subject to it, so for example, if a claimant asserted $25,000 in damages, and a respondent asserted $35,000 in damages as a counterclaim, the respondent’s counterclaim would be blocked. It would have to be adjudicated separately in federal court.

How Does It Work in Theory?

A copyright must be registered with the Copyright Office before a claim can be filed.

One of the CCB’s advantages is that in theory, claimants do not need legal representation. They simply log onto the Copyright Office’s website and electronically submit a complaint, identifying the respondent and providing a brief statement of their claim. A CCB attorney will examine the claim for procedural compliance, construing it more generously for unrepresented claimants. No substantive determinations or fact-finding will occur at this stage. If the claim is deficient, the claimant will be notified and given thirty days to rectify it.

Then claimants must serve initial notice on respondents and submit proof of having done so to the CCB within ninety days. Initial notice must explain the nature of the claim, the CCB’s purpose and procedures, and the action needed from the respondent. The Copyright Office will provide forms for appropriate notice, which must be filled out and included with the initial submission of the complaint for review before being served on the respondent.

Notice must be served in accordance with the rules for service of process for court cases in the state where service is made. In layman’s terms, this means that the respondent should be notified of the claim as they would be if the claimant were suing them in court. The notice can be delivered by any adult. For individual respondents, delivery to them personally or to their residence is satisfactory, while organizations like corporations are more complicated. State law on how to serve an organization varies somewhat, but generally it entails delivery to an officer, managing agent, or designated agent to receive service of process.

The CCB established a database on which entities could register their designated agent. The database is separate from but patterned after one used under the Digital Millennium Copyright Act. However, under the DMCA, entities must register their agent in order to receive safe harbor protection as an internet service provider. By contrast, no substantive effect is contingent on the registry of a designated agent with the CCB, hence the fact that only thirty companies across the entire content and software landscape have registered despite the opportunity to do so being open for months even before the board launched.

Furthermore, the CCB will send a second notice to the respondent as well. A claimant and respondent may also agree to circumvent the formalities through a waiver of service of process. In this case, the claimant will send a request for the waiver, composed from another form provided by the CCB, to the respondent, and the respondent may send back an acceptance at no cost. This is functionally similar, but it circumvents the formal requirements of service of process.

Assuming that the respondent has, through one means or another, received or waived service, it then falls to them to make one of two reactions within sixty days. First, they may file a response to the complaint. Importantly, unlike most court systems, the CCB does not require that defenses be raised in the initial response in order to be argued later, because this requirement would place an undue burden on unrepresented respondents. Thus, the response has less substantive impact on the case, and is instead essentially a confirmation of intent to litigate through the CCB system.

Second, the CCB is not mandatory. Respondents, including those who waived service of process, may instead choose to opt out of the CCB process. In this event, claimants will be forced to pursue their claim in court if at all. Instructions for opting out are included both in the initial notice form claimants will send and in the second notice the CCB will send. Generally, an opt-out applies to the specific case at issue, so respondents who do not want to use the CCB at all will have to opt out of every case individually.

However, libraries and archives are permitted a “blanket” opt-out from all CCB proceedings.

If a respondent neither opts out nor files a response, a default judgment will be entered in the claimant’s favor. If there are extenuating circumstances, the deadline may be extended by the CCB or the default challenged in court.

After filing a response, a respondent may also file a counterclaim if it is related to the same transaction or occurrence as the initial claim. The claimant may not opt out of litigating the counterclaim before the CCB, because they necessarily proposed it as the dispute resolution forum in the first place. This requirement is not directly expressed in the statute, but it is the Copyright Office’s current proposed rule. If the respondent files a counterclaim, the claimant must similarly file a response to it.

Once all claims and responses are submitted, the case is reviewed by the three officers of the CCB. Barring a specific directive from the board to the contrary, discovery mainly consists of submission of documentary evidence and written interrogatories, and evidence consists of documents and written testimony. The Board may — but is not required to — call for a live hearing, which parties may attend electronically.

After evidence has been submitted, the board will reach a decision by agreement of two of the three officers. The third may write a dissenting opinion like an appellate judge would. A losing party has two recourses.

First, they may, within thirty days, petition the Board to reconsider the decision due to a clear error of law or fact or a technical mistake.

This is the closest counterpart to a full appeal offered by the CCB.

A determination may be challenged in federal court, but only on three bases: that the determination was issued due to misconduct like fraud or misrepresentation, that the Copyright Claims Board “exceeded its authority,” or that a default decision due to a respondent’s failure to appear was caused by “excusable neglect.”

In other words, one can appeal to trial court because of procedural defects, but not to argue the substance of the determination. This is in line with the CCB’s objective to quickly dispatch cases without going to federal court.

How Will It Work in Practice?

Concerns linger regarding what litigants will experience in practice. Fears range from a belief the CCB will be unhelpful and underutilized to one that it won’t have the capacity to meet a flood of cases. It’s possible that IP “trolls” will target unsophisticated respondents with an arcane opt-out process or that an all-too-easy opt-out process will see respondents waving off cases as a matter of course.

Meanwhile, nearly every organization faces myriad questions. Is it beneficial to join the designated agent register? How do you join the register? Will it be necessary for large entities to register an agent for every sub-organization that might face copyright infringement? Is it practical to serve process on a defendant who does not register an agent? Is it preferable for large enterprises to make the designated agent more difficult to find, or will that add to the risk of default judgements?

Will unrepresented parties be able successfully navigate this process? Will it be practical for individuals to leverage pro bono or law school clinics for assistance?

Will the triumvirate of judges be overwhelmed with cases, or will nearly all cases be routinely dismissed? Most importantly, will small-time claimants finally get their day in court as intended, or will this be used as a tool for large organizations to easily dispatch with annoyance lawsuits, or even to actively target small-time infringers and pirates?

In a follow-up article, I will pose these questions and more to industry experts to understand their perspective.

Alan Shimp is a 20-year-old entertainment law specialist and analyst in residence at Futurum Research. He’s co-author of The Film Fan Handbook series. Connect with him on LinkedIn.