Tell Congress: Online Creators Need Net Neutrality!Learn how net neutrality affects your ability to make money online
It’s almost axiomatic that independent artists face unique difficulties in the digital environment. Unlicensed commercial use of creative works is not uncommon, and the money that those uses theoretically represent in unpaid licensing fees can be substantial. So it’s understandable that artists would push for a system that makes it cheaper and easier for them to recover royalties for infringements of their copyrights.
But tweaking the legal system to produce better results in such a narrow set of cases is like playing high-stakes Jenga. One wrong move, and the whole incentive system of copyright litigation can topple. The latest attempt to streamline -- the CASE Act -- takes the table and threatens to flip it right over.
The Act establishes a “small claims” court tasked exclusively with adjudicating copyright cases. But, unlike most small claims courts, the Copyright Claims Board (aka the “CCB”):
- Would be run by the Copyright Office and not answerable to the regular court system;
- Could assign damages up to $30,000 -- when the national average for small claims courts is only one fifth of that; and
- Would be an “opt-out” system (more on that later).
Why do any of these matter? We’ll go in order.
1. The CCB is not meaningfully answerable to traditional federal courts
The CCB would not be a traditional court. It would exist within the Copyright Office, with the Register of Copyrights overseeing its day-to-day function. Judges (or, in the bill’s parlance, “Copyright Claims Officers”) would be appointed by the Librarian of Congress, and while the Librarian theoretically could remove them, the bill specifically prohibits removal based on the “substantive result of any individual determination reached by the Copyright Claims Board.” While the Act’s drafters advertise this as a provision to guarantee independence, it calls into question whether the Librarian could fire a judge who routinely exhibited bias toward one class of parties, even in the face of opposing law. Given the systemic bias issue at the Office, this hypothetical doesn’t seem so remote.
Meanwhile, the decisions of CCB judges could only be appealed to the Register of Copyrights. A party who wanted to appeal a decision because they disagreed with the judge’s interpretation of the law could not legally appeal their case to a federal court. Cases could only be transferred to federal court in instances of “fraud, corruption, misrepresentation, or other misconduct”; where a party failed to appear for an excusable reason; or where the CCB “exceeded its authority” (a provision whose definition is unclear, at best). The bill would not allow parties to move their case to federal court when the CCB has erred in interpreting the law.
All of which underscores the importance of housing any small claims system within the federal judiciary. Unlike the Copyright Office -- a small office for which these kinds of complex, individual damages calculations are uncharted territory -- the judiciary has meaningful experience adjudicating individual claims for damages. Moreover, the Copyright Office is currently facing a mountain of other challenges (such as modernizing its famously outdated IT infrastructure), even without absorbing a new mandate like this.
2. The CCB can assign 5x the national average for small claims damages
Small claims courts are nothing new; they exist in all 50 states, and have an average limit on damages of around $6,000. The CCB, in contrast, can assign up to $30,000 in damages, in part because the court isn’t limited to actually providing what are called “actual damages” (i.e. the money the artist would have received if the infringer had just paid the license in the first place, plus attorney’s fees). No, the CCB can provide statutory damages, a much higher amount set specifically for the CCB that can be used to punish parties accused of infringement. The CCB can assign up to $15,000 in damages per infringement, with up to $30,000 in damages total. For comparison, that’s higher than any small claims court in the nation, and more than double the small claims limit in 49 states.
As the CCB illustrates, statutory damages in general are dangerous (and contentious) in copyright cases. The general principle behind them is to deter defendants by allowing plaintiffs to recover large sums even when it would be difficult to prove actual damages under traditional proof standards. In copyright cases, however, statutory damages are set at an eye-popping $150,000 per file. These inflated claims have no connection to financial reality -- such as a (theoretical) $8 billion iPod.
Why, then, would deterrence-oriented statutory damages be necessary in an alternative tribunal whose essential purpose is for lower-cost resolution of smaller claims? If the CCB was designed to succeed as a low-cost forum, then it needs to be economical for claimants to bring and recover claims based on their actual damages, without the need for the deterrent factor of statutory damages.
3. The opt-out system could create a default-judgment mill for copyright trolls
The CCB operates on an “opt-out” system. What this means, in practice, is that if individuals are accused of infringing a creative work, they will (in theory) receive a notice, and unless they respond that they want to use federal court as a venue, they are sucked into the CCB’s jurisdiction. The CCB becomes the default venue unless the defendant -- who may not have an understanding of what is happening or what to do -- chooses otherwise. Failing to respond means that the defendant is subject to the CCB’s jurisdiction, its process, and its statutory limits. (It also means that they’re required to fly to Washington, D.C., since the CCB will only sit in one place.)
So what happens when you have a court that is (a) not answerable to the judiciary, (b) capable of assigning steep damages, and (c) capable of subjecting people to its jurisdiction by default? If you guessed “litigation mill,” you’d be right.
Imagine for a moment that you own a few copyrights. You’re not an artist, but you claim to have a handful of copyrights that you’d like to make some money off of. (You may not even own those copyrights, but you can make a facial claim that you do.) You can find “your” material online, and you’re relatively certain that the person behind posting the material can’t be found, or if they can, won’t respond. You can send a complaint to the CCB, and when the defendant doesn’t respond, ask for a default judgment for full statutory damages. That damages award is now enforceable by the police power of the state. The procedural bar is so low that you can do this 10 or maybe even 100 times over the course of a few weeks, and if you get even one default judgment, that’s up to $30,000 in your pocket. The CCB starts to look like a mighty attractive business model.
Of course, few sophisticated businesses will allow themselves to be sued in the CCB; it’s better to be a defendant in the federal courts, where defendants have set procedural rights and the costs of pursuing a case may deter many plaintiffs. Sophisticated defendants -- the kind of repeat infringers that artists express the most concern about -- probably won’t be common in the CCB. Instead, the typical claims to proceed will likely be against less sophisticated defendants, such as individual households and small businesses. After all, it is these defendants -- not big businesses or sophisticated mass infringers -- who will be far less likely to opt out, in many cases because they fail to understand and properly respond to the complaint, and therefore end up defaulting. Unfortunately, these are the sorts of cases where the risks of abuse are the highest. Thus, it’s not hard to see how trolls and default judgments could come to dominate the system.
At the end of the day, the CASE Act wouldn’t do what it set out to do. Instead of creating a reliable, fair mechanism for independent artists to pursue scaled infringement claims online, it would establish an opaque, unaccountable legislation mill that will likely get bogged down by copyright trolls and questionable claimants looking for a payout. This isn’t the solution artists need, and it isn’t the solution the public wants.