The CASE Act: Copyright Small Claims Court

by Dennis Crouch

Few patent litigators would file a lawsuit if the potential payout is less than $1,000,000 — that amount ordinarily does not cover the expected cost of litigation and risk of loss. Except in the most simple cases, copyright litigation can be similarly expensive.  What this means is that it can be difficult to earn a regular ‘living’ independently creating and licensing intellectual property.

A bipartisan group of legislatures are working on a small claims solution and have proposed the CASE Act: Copyright Alternative in Small-Claims Enforcement Act of 2019.

The basics: The statute calls for creation of a “Copyright Claims Board” empowered to decide infringement cases with a limit of $30,000 damage award per case and no injunction (except to enforce a settlement agreement) and no attorney fees (except for bad faith conduct).  Although the Board will be based in DC, hearings will be via the internet with very limited procedural requirements.

I like it in theory, but need to consider implementation aspects.  Small claims IP court in the UK has received a good amount of positive response — three tiers: Small Claims (<£10,000); Smallish Claims (<£500,000); and Everything Else.

Read the Bill: https://www.congress.gov/bill/116th-congress/house-bill/2426/text

 

 

41 thoughts on “The CASE Act: Copyright Small Claims Court

  1. 8

    This is a very large trend that is going on that we should consider.

    The federal courts are overloaded and they have been coming up with ways to off load work and ways to make their work easier. There was a very detailed article not long ago in my state bar association journal about this topic in relation to federal prosecutions. It was detailing how federal prosecutors dissuade pretty much all but the very rich to have a jury trial.

    I think a lot of what we are seeing in IP is because of this trend.

  2. 7

    If this goes anywhere, they may have to amend the statute into an affirmative opt-in system to avoid serious constitutional problems. A similar issue arose with respect to magistrate judges in district courts, a lot of districts had an automatic default rule that cases would be assigned to magistrates unless one of the litigants specifically objected and wanted an Article III judge. Some courts found that automatic opt-in procedure to be infirm, reasoning that waiver of right to an Article III tribunal would have to be express and could not be inferred by silence.

  3. 6

    The actual text of the proposed bill can be found here:

    link to copyrightalliance.org

    In my opinion, the CASE Act seems somewhat toothless and dumb. It’s a purely voluntary system, so either side can opt out and go straight to district court. It’s basically nothing more than a form of voluntary private arbitration.

    I personally think the statutory approach is all wrong. They wrote a 62-page statute describing the small claims system in extreme and granular detail, which is going to lead to a lot of inflexibility and unforeseen problems. They should have just done something similar to 35 U.S.C. 316 (for IPRs), by sketching in broad strokes the basics of the procedure, and leave it to the Copyright Office to promulgate (after notice and comment) regulations for the specifics of how small claims proceedings will proceed. You never know how a dispute resolution system will function until you see it operate for a while, and this statute doesn’t give enough nearly enough flexibility to the Copyright Office to fine tune the mechanics of the process.

    Aside from that, because of its voluntary nature, seems pretty toothless. You’re really looking at a system that would only attract very unsophisticated plaintiffs (such as unrepresented parties), who have weak claims or cannot afford counsel. Any copyright holder who has counsel would understand that it’s much better to just go straight to district court, because the discovery obligations and financial burdens in litigating for the defendant are so wildly asymmetric. Even if the size of your claim is small, I mean come on, you could get a $30K settlement from just about any reasonably sized company by just filing the complaint. Because both sides have to consent, the plaintiff could withhold consent for a $30K claim, and likely collect it before the defendant has to file an answer in district court.

    So it seems like you’re going to wind up with a lot of pro se copyright claims using this form of arbitration. The crazies will also come out of the woodwork pretty fast with all of their dumb claims about people ripping off movie ideas, film ideas, etc., claims that would otherwise have never seen the light of day if they had to get counsel. Probably 90% of the complaints will be rejected pretty fast under the detailed procedural requirements in the proposed act.

    1. 6.1

      Excellent post, LR

  4. 5

    If we are talking about patent small claims rather than copyright, the gargantuan asymmetry between patent litigation defense costs and actual infringement damages (or if you will, litigation costs and fair license revenue/ obstacles to injunction) is a failure of justice. The system is broken. The cost of litigation cannot be radically cut. The only reasonable solution is to restrict patenting to only those most usefully described newly disclosed claims and to much more carefully examined, higher quality inventions, or creating mandatory licensing when the number of accused infringers hits a certain level- licensing that can be ordered early in a case, at grave risk of consequences for the defendants who decide to take their chances.

    Fee shifting and venue reform have helped, and Alice too, but even perfect 101 would not solve the underlying imbalance, esp. in a multi multi-component technological world.

    1. 5.1

      The only reasonable solution is to restrict patenting

      Complete non-starter.

      1. 5.1.1

        Marty,

        Reading again your post, every single aspect therein is based on not having the Infringer pay as much.

        There is an inherent bias and skew that needs to be corrected for your sense of “Justice” to align with real world justice.

        We should be going in the opposite direction and making patents stronger — for example, a default of injunction (a remedy making the transgressed most whole) should be restored.

        The patent right is not as you want to portray it as some type of (minimalized) business expense with your “fair license revenue” and “mandatory license” verbiage.

        The patent system has always worked best when BOTH a carrot and a stick have been involved.

        Just because you personally have seen the stick part does not make that part “wrong.” It just means that you did not (and apparently, still do not) understand the terrain of patent law.

        You don’t have to “like” what happened to you to appreciate just why both the carrot and the stick are important. But you really should try to see that bigger picture, no matter that sense of “victim” that you want to hold on to. You won’t understand what Justice actually is until you can get over yourself.

    2. 5.2

      If we are talking about patent small claims… [t]he only reasonable solution is to restrict patenting to only those most usefully described newly disclosed claims and to much more carefully examined, higher quality inventions, or creating mandatory licensing when the number of accused infringers hits a certain level- licensing that can be ordered early in a case, at grave risk of consequences for the defendants who decide to take their chances.

      I do not imagine that any serious attention is being given to a small claims court for patent disputes, so the “if” of your “if/then” hypo is probably not likely to present. Still and all, just so that I understand the idea being advanced, are you suggesting that there should be two grades of patent, one of which could only be asserted in traditional court settings, and the other of which could be asserted both in traditional courts and in a sort-of “small patent claims” court, where the second sort of patent would require a higher standard to get to grant?

    3. 5.3

      I wonder about the extent to which England’s “small claims” court for actions on patent infringement and validity inspired this initiative on copyright claims. The small claims IPR court in England is called IPEC (the intellectual property enterprise court). Here a link that reveals its role in patent disputes:

      link to uk.practicallaw.thomsonreuters.com

      In the jurisdiction that invented the law of equity and the discovery process, is that something you would concede is “reasonable”? Might it be something to build on, in the USA?

      1. 5.3.1

        Perhaps a pincite or maybe a selected page instead of “here’s a link to a whole system, and something somewhere here might be of interest”…

        1. 5.3.1.1

          Yeah, I agree that the material revealed by the link is for the whole system. But what else is more useful than that? If one is to form a view of the usefulness of IPEC and its relevance to patent litigation in the USA one needs to know how the IPEC fits into the wider system (Patent Office, High Court) of patent litigation in England.

          It took a great deal of thought to come up with Rules for IPEC that could achieve the over-riding objective of doing justice between the opposing parties while, at the same time, achieving a substantial reduction of the heavy costs of litigating at the High Court. The initiative has stuttered along but is getting incrementally stronger, thanks to determined and untiring refinement of the Rules being delivered by the IPEC judges and the court service of England.

          1. 5.3.1.1.1

            What else is more useful?

            Did I not indicate that?

            A pincite, or perhaps a direct page or two.

            It is NOT helpful to merely indicate that one should copy an entire system that another sovereign has chosen as an answer to a single particular problem on the table. You are basically saying that you don’t understand just why the different whole system works, but the different whole system does have a piece that sounds like the piece being discussed, so you all just figure it out.

            Your “answer” is even less clear by your addition of “stuttering along, but untiring refinement” — just not helpful. You are basically saying “here, wear my glasses, they work for me.”

            1. 5.3.1.1.1.1

              No, Martin Snyder asserts that there is only one “reasonable” solution. Could it be that there is more than one? In England, yes. In the US, I do not know.

              1. 5.3.1.1.1.1.1

                Well, I do suppose that I should be less harsh – in comparison to Marty, at least your “encyclopedic” reference is at least touching real patent law.

                But I would sincerely hope that readers (at least repeat ones) would immediately recognize how dissociated with real law that Marty is (as noted recently, a hard slap rather than a touch of a velvet glove is a better approach for the likes of Marty).

  5. 4

    There would have to be a lot of safeguards for the accused to keep it from being another tool in the copyright troll arsenal, including limiting damage to actual provable damage.

    1. 4.1

      Also, it should be codified that an suit cannot be brought where the defendant was identified based only on an IP address.

    2. 4.2

      This will absolutely NOT be a tool in the copyright troll arsenal. This is a voluntary system, and trolls would never opt for a system like this because it would be very cost-effective for a company to defend smaller copyright claims. They could defend these claims in-house and wouldn’t even need outside counsel. No troll wants a system like that.

      1. 4.2.1

        If proof of service has been filed by the claimant and the respondent does not submit an opt-out notice to the Copyright Claims Board within that 60-day period, the proceeding shall be deemed an active proceeding and the respondent shall be bound by the determination in the proceeding to the extent provided under section 1507(a) § 1506(i)

        I agree that most companies would likely be able to depend themselves with in-house counsel or even limited use of outside counsel. However, I worry more about individuals that are generally the targets of copyright trolls. Participation should be based on affirmative, written consent to participate.

        1. 4.2.1.1

          I am not familiar with the tale of these individuals beset with copyright Tr011s.

          This isn’t something you picked up from Besson and Co., is it?

          (That being said, your point about affirmative opt in is well taken)

          1. 4.2.1.1.1

            I would google Prenda and Rights Corp. if you want a tale of copyright trolls (and their ilk at Malibu Media, etc.).

  6. 3

    Copyright owners already have significant statutory advantages against small damages infringers in 37 USC §504:
    “(c) Statutory Damages.—
    (1) Except as provided by clause (2) of this subsection, the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just. For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.
    (2) In a case where the copyright owner sustains the burden of proving, and the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000. …”

    1. 3.1

      17 USC 504 (typo noted) provides that the award of statutory damages is for all infringements (with respect to any one work). Does that mean that the “per copy” effect is nullified? If an “actual damage” is, say $10 per each instance, and the actual copies made is 500,000, that’s a “payday” of $5M versus a potential statutory award of $30K (max), right?

      Even adding a potential ceiling of $150K for willfulness, the “statutory level” may not be a “boon.”

      Of course, mileage may vary.

      1. 3.1.1

        As noted, statutory damages are for small damages infringers. [The subject here.] And, as indicated, optional with the copyright owner. For such such large actual damages one would not elect statutory damages.

  7. 2

    Re: “Few patent litigators would file a lawsuit if the potential payout is less than $1,000,000 — that amount ordinarily does not cover the expected cost of litigation and risk of loss.”
    Dennis, while that may true for attorneys considering taking a suit on a contingent fee basis, there are more extensive situations where that is not the case. In particular, PAEs that have acquired some patents inexpensively and are suing with the intent of obtaining settlements from several companies, knowing that all but a small percentage of companies will make quick settlement offers just to avoid pre-trial litigation defense costs, which are much higher for defendants than for such patent owners. [Only roughly 5% of patent suits ever go to trial.] I have seen or heard of numerous such patent suit settlements for less than $1,000,000.
    Also, there are grudge suits by small business owner-inventors who feel they have been ripped off by a competitor and are hoping for an injunction. Plus there are some companies that refuse to even discuss licensing unless a suit is brought against them.

    1. 2.1

      You raise some excellent points here Paul.

  8. 1

    Key question is how much discovery will be allowed, if any. That is where many cases become expensive.

    1. 1.1

      Re: “Key question is how much discovery will be allowed, if any.”
      How often is there a bar or significant limitation on patent litigation discovery in most D.C.s other than for a stay for an IPR or by a prompt 101 motion decision?
      Sufficiently-early S.J. is rare unless there is an early Markman combined with an early non-infringement decision, and in what % of suits does that occur?

    2. 1.2

      One weakness in this legislation is that it specifically excludes actors outside the US from being subject to claims before the CCB. Much of the difficulty in today’s environment comes from people getting YouTube to do their dirty work, either by re-uploading someone else’s content, or by filing false DMCA claims on other people’s newly viral work and monetizing it. A substantial number of these offenders are based outside the US.

      It does seem that the authors of the bill have taken some of the YouTube-related issues into consideration. The bill has a specific line item creating a cause of action against false DMCA claims under 17 USC 512(f) (one of the issues I mentioned above). Unfortunately, the “knowingly” part of that subsection will make it tricky to prove, especially for laypersons, but at least it’s a start.

      While we’re on the topic, by the way – wouldn’t this be a good time to talk about folding the Copyright Office into the USPTO to create an overarching US IP agency? Are there Constitutional issues that would arise from having, in essence, an Article II “legislative” court, since the Copyright Office is currently under the Library of Congress?

      1. 1.2.1

        Oops, I meant for this to be a top-level comment.

        1. 1.2.1.1

          Also, I meant an Article I court. But you get the point.

      2. 1.2.2

        Are there Constitutional issues that would arise from having, in essence, an Article II “legislative” court, since the Copyright Office is currently under the Library of Congress?

        That was my thought as well. Infringement is a strictly private affair. I do not believe that it lies within the constitutional allotment of powers to place the adjudication of infringement (even for small sums) outside of the Art. III courts.

        1. 1.2.2.1

          Except for the fact that BOTH the patent right and the copyright right stem from the same Constitutional authority, and — as we have seen in Oil States — some have had no problem whatsoever migrating the personal Private right of a patent into a franchise Public right.

          What possible core legal principle stops the same from applying to copyright as has been applied to patent?

          What is the basis of your “Infringement is strictly a private affair” comment? What does that mean (in comparison to, for example, 35 USC 261)?

          1. 1.2.2.1.1

            The two issues are not comparable at all. Patent rights are granted by the government, so whether you were properly issued a patent is a public right, one in which the government which granted that right has an ongoing interest. (I know its debatable, but that is what Oil States held).

            An infringement suit, in contrast, seeks money damages (and possibly injunctive relief, although that is not what is proposed here). The dispute is between the IP owner and the accused infringer. Hard to see how an administrative court can award money damages in such a dispute.

            1. 1.2.2.1.1.1

              Bored,

              Perhaps you can alleviate your boredom by paying a little better attention – BOTH the patent right and the copyright right come from the exact same Constitutional clause.

              Start there.

              Remedy against your rights being violated, while indeed variable, also flow from the law. Here, there ARE definite differences based on the fact that Congress recognized differences in protecting utility and in protecting expression.

              But those differences really are not at point here.

              Further, along either of patent or copyright, the suit in remedy remains a suit pursued by the rights holder against someone that rights holder is accusing of violating that right.

              There is NO difference then from what has happened to patents to what COULD happen with copyrights (in how Oil States played out and is being applied).

              None.

              Feel free to point out how this logic does not hold.

              1. 1.2.2.1.1.1.1

                I read your original post and got the point. The difference here is not patent vs. copyright. The difference here is in one case, the govt. is deciding whether the limited monopoly it granted to you was properly granted or perhaps should be revokved. In the other, the IP owner is seeking money damages from a private party, the defendant.

                The same would apply in a patent case. I very much doubt that the SCt. would allow an administrative board to drag a putative infringer before it and award damages against it, whether it is a patent case, a copyright case, or some other case.

                The distinction is pretty obvious, notwithstanding your snark.

                1. I very much doubt that the SCt. would allow an administrative board to drag a putative infringer before it and award damages against it, whether it is a patent case, a copyright case, or some other case.

                  Exactly. The distinction here is not between “patent” and “copyright,” but rather between “infringement” and “validity.” Validity is a matter of public concern. Infringement is a purely private dispute.

                2. …defense to infringement includes…

                  Not valid.

                  Of course there is a difference – but the distinction does not matter for the point at hand.

                  With patents, it still takes a private party to ASK the government for the post-grant “Public Franchise” action.

                  The problem Bored is YOUR snark, as my point is pretty straight forward and snark free.

                  What you see that has happened TO patents IN Oil States could just as well as happen to copyrights; especially if enough “noise” is made about “infringement,” Tr011s,” and the like (which is what you see here).

        2. 1.2.2.2

          This raises no Article III/jury trial issues whatsoever. It’s a voluntary system, both parties have to consent. No different from agreeing to arbitrate your claims.

          1. 1.2.2.2.1

            Ah, I see. Thanks for that clarification. I agree that—to the extent that this is a purely voluntary forum for resolving disputes, with no power to compel an unwilling party to accept its jurisdiction—there is no separation of powers or VII amendment problem.

            1. 1.2.2.2.1.1

              How does “voluntary” play into this?

              Pretty sure that “voluntary” was not an option (or a consideration) in Oil States….

              1. 1.2.2.2.1.1.1

                “Voluntary” plays into this because there is case law saying that adjudication before an Article III court, like the right to a jury trial, is something that can be waived.

                The requirement of adjudication before an Article III court is oftentimes couched as jurisdictional, but sometimes also, as a personal and waivable right. The ability of parties in district to consent to trial before an Article I magistrate judge is based on the line of cases finding that it can be waived. The same line of thinking would allow both parties to agree to adjudicate a copyright claim before an Article I tribunal.

                But “voluntariness” cannot explain the decision in Oil States, because it’s only voluntary if both parties agree. Patent owners don’t have the right to refuse to defend their patents in IPR/PGR grounds, if a petition is instituted, they have no choice. (Some amici in the Oil States case made the argument that by prosecuting a patent, the patentee was implicitly consenting to IPR/PGR challenge post-issuance, but I think that rationale is flawed and the Supreme Court rightfully did not rely on it.)

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