United States: No Claim Is Too Small: Copyright Office Proposes Small Claims Tribunal

Ieuan G. Mahony is a Partner and Samuel L. Taylor is an Associate both in our Boston office.

The U.S. Copyright Office has proposed legislation that would enable copyright owners to enforce their rights in a streamlined alternative to federal court litigation designed for smaller-value claims.

On September 30, 2013, Register of Copyrights Maria Pallante submitted an in-depth report to the House Committee on the Judiciary recommending the establishment of a copyright small claims tribunal. The report is in response to the committee's 2011 request that the Copyright Office assess the current copyright system's barriers to relief and submit recommendations for changes that "will improve the adjudication of small copyright claims and thereby enable all copyright owners to more fully realize the promise of exclusive rights enshrined in our Constitution."

Composition of the Copyright Small Claims Tribunal

The report proposes a centralized tribunal within the Copyright Office that would be staffed by three adjudicators. Two of the adjudicators would have significant experience in copyright law, and the third would have a background in alternative dispute resolution. The tribunal would be a voluntary alternative to federal court. Its focus would be on small infringement cases valued at no more than $30,000 in damages. Copyright owners would be eligible to recover either actual or statutory damages up to the $30,000 cap, but statutory damages would be limited to $15,000 per work. Proceedings would be streamlined, with limited discovery and no formal motion practice. The tribunal would retain the discretion to dismiss without prejudice any claim that it did not believe could fairly be adjudicated through the small claims process.

Opt-In or Opt-Out Model?

The report discusses, but does not determine, whether an opt-in model or opt-out model would better serve the purposes of the small claims process. The opt-in model would require an affirmative written response from the respondent that the respondent agreed to participate in the small claims process. By contrast, the opt-out model would require service of process under Rule 4 of the Federal Rules of Civil Procedure (FRCP). If the respondent did not respond within sixty days to opt out, he or she would be considered to have consented to participate to the small claims process. Although the report does not choose between the models, it points out that the opt-out model allows claimants to pursue claims against uncooperative respondents.

Immediate Copyright Registration Not Required

Perhaps most significantly, the report recommends that plaintiffs in a small claims proceeding be able to recover statutory damages regardless of whether they registered their works within three months of publication, as is currently required. The copyright holder would only be required to file an application for registration prior to initiating the action. However, in the event of this late registration, the amount of recoverable statutory damages would be capped at $7,500 per work, with a maximum of $15,000 aggregate. Despite the reduced statutory damages, this policy is advantageous for individual or small business creators for which registration is not economically feasible, whether due to financial constraints or because they produce a high volume of original works.

Use of Expert Witnesses at Tribunal's Discretion

The majority of small claims should not require the presentation of expert evidence, according to the report. However, the tribunal would have discretion to decide whether such evidence should be considered. This recommendation fits with the Copyright Office's intention to create a pared down adjudicatory process in which the cost of maintaining an action is not prohibitive for small claims.

Software Claims May Not Be Ideal

The report recommends that all types of works be covered by the small copyright claims system. However, it also acknowledges that certain types of works, such as computer software programs, may require a level of technical analysis that is beyond the tribunal's capacity. Accordingly, the tribunal would be "allowed to dismiss sua sponte claims that cannot be decided due to a lack of essential witnesses, evidence, or expert analysis." In such situations, both parties may actually benefit from litigating these complex claims in district court.

Injunctive Relief More Appropriate for District Court

The report acknowledged that copyright holders are frequently most concerned with forcing an infringer to cease any unauthorized use of the work. However, due to the complexity of the injunctive relief analysis, including the question of irreparable harm and the balance of hardships, a small claims tribunal may not have the ability to adequately assess the evidence relevant to these determinations. This limitation could play a significant role in situations where the defendant stands to lose much more than the plaintiff will gain from an injunction. For example, if a movie impermissibly includes an artist's song, the artist's estimated damages may be several thousand dollars, but compliance with the injunction may cost the movie studio significantly more. As a result, the Copyright Office recommends that those seeking injunctive relief file a claim in district court. However, the report also notes that a defendant's willingness to cease infringing conduct could factor into the tribunal's assessment of damages.

Effect of the Report

If Congress enacts legislation according to the Copyright Office's proposal, copyright owners will be able to file claims that traditionally would not have been worth the expense of an action in federal court. This is true regardless of whether the copyright owner is an individual or a large corporate entity. The streamlined tribunal process will prevent a "Goliath" defendant from relying on federal litigation to discourage claims by a small "David" within the creative and tech industries. Conversely, large-entity copyright holders will have a cost-effective method to prevent widespread infringing uses of their content. The net effect promises to be increased respect for the protection afforded to rights holders, and ultimately better remuneration for those rights holders. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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