Copyright Report Recommends $30K Small Claim Damage Cap
By Alicia Wagner Calzada
DURHAM, NC (October 4, 2013) – On the eve of closing its offices due to the federal government shutdown, the U.S. Copyright Office released its long awaited Report on Copyright Small Claims. The report adopts many of the positions advocated by the NPPA, including a tribunal, called the Copyright Claims Board, which would hear all types of copyright infringement cases and permit all defenses, including “fair use”. The report recommended a ceiling for claims at $30,000, which is the current upper limit of statutory damages for non-willful infringement. Limited statutory damage- awards would be allowed under the proposed system. All types of copyrighted works would be eligible for the system.
In a letter introducing the report, Maria Pallante, Register of Copyrights and Director of the U.S. Copyright Office wrote that copyright “small claims issues are anything but small. On the contrary, they present a range of complex considerations, from constitutional constraints to procedural concerns to questions of what claims should be eligible for alternative treatment.”
As the report notes, “certain claims for copyright infringement – in particular, those involving lesser amounts of damages – [can] not practically be pursued within the existing federal court structure.” As a result, the Office engaged in nearly two years of investigation that included public hearings and multiple calls for written comments from the public, all of which the NPPA participated in. NPPA, and NPPA’s attorneys, Mickey Osterreicher and Alicia Calzada, are quoted multiple times in the report, as are several other photo organizations such as ASMP and APA.
Before launching into its recommendations, the Copyright Office outlined many of the challenges facing copyright claimants under the current system, including the complicated nature of federal practice that makes it very difficult for a party to represent themselves and the high cost of having to retain an attorney. The report explained, “Especially in the case of lower-value copyright claims, the potential for monetary recovery can be quickly overcome by the costs of discovery, motion practice, and other litigation expenses. . . If a copyright owner hires an attorney to enforce his or her copyrights, those costs can easily exceed the value of the work that is being infringed.” The office cited a survey of intellectual property lawyers that stated that the median cost of litigating a copyright infringement lawsuit (in cases with less than $1million at risk) through to appeal was $350,000.
The 200-page report is not available on the Copyright Office website because of the federal government shutdown, but NPPA has obtained a copy of the report and it can be downloaded here.
An administrative tribunal is recommended
The Office discussed the options for hearing small claims in existing federal or state court systems, and decided that there was “no clear path” to do so, concluding that the best option is to create a specialized administrative entity with a voluntary tribunal. The Office recommended that the tribunal consist of a three-person panel, two of whom would be experienced in copyright law, and the third experienced in alternative dispute resolution. In addition, the office recommended that the tribunal employ staff attorneys to aid the panel as well as the litigants. In legislation proposed in the report, the tribunal is called the Copyright Claims Board.
The tribunal should be centralized, but made available by remote means, according to the Office, which suggested that a logical home for the small claims facility would be at the Copyright Office, which is located in Washington, D.C., not far from the U.S. Capitol.
There are constitutional considerations with a tribunal process, including constitutional rights to a jury trial, and the right of federal courts to adjudicate federal claims. A “mandatory approach without juries would appear to present a seemingly insuperable obstacle.” These issues are less of a concern in a voluntary system, which is ultimately what the Copyright Office recommends.
Bringing a Claim
In order to bring a claim, the Office recommends that a copyright owner have either registered their work or demonstrate that they have filed an application, fee and deposit (copy of the work) prior to commencing the action.
Though some stakeholders recommended that the tribunal system exclude certain kinds of works, namely music, the Office recommended that all copyrighted works be permitted in the system.
The Office further recommended that the main focus of any small claims proceeding be limited to infringement matters that fall under the Copyright Act, including rendering a declaratory judgment. The Office noted that such a determination might require consideration of contract and ownership issues, but that other ancillary claims such as trademark claims should not be permitted. The Office also recommended that the Copyright Claims Board be allowed to resolve disputes that arise from DMCA takedown notices. NPPA also proposed that the tribunal be able to hear related contract issues and DMCA claims.
A major concern that NPPA had throughout the process was the position taken by many that certain defenses, such as “fair use” defenses, should be disallowed in the tribunal process. Opponents of allowing the defense raised concerns about a complex legal issue being permitted in the tribunal setting, but NPPA was concerned that many infringers of news photos claim fair use, and barring the defense would render the tribunal unavailable for news photographers. Ultimately, Copyright Office recommended allowing all defenses, for similar reasons. “The Office does not see how claims of infringement can fairly be adjudicated without consideration of legitimate claims of fair use.” If the Copyright Claims Board found the claim to be too complex to properly evaluate the defense, they could dismiss it and allow the case to be litigated in regular federal court.
Another concern NPPA expressed was the availability of attorneys to assist in the tribunal process. Some stakeholders had advocated for attorneys not to be allowed, but NPPA was concerned that because corporations typically must be represented by attorneys, and would likely be assisted by attorneys, preventing claimants from using attorneys would be unfair.
Under the system proposed in the report, parties could use attorneys, but the system would be designed to accommodate people representing themselves, with the availability of forms and a standardized procedure as well as staff attorneys to assist with procedural questions and completion of the forms. The claims would have to set forth the nature and facts of the claim and would have to be certified. A staff attorney would assist litigants in ensuring that their claims meet the minimum requirements. A filing fee would be required.
The report also recommends that limited discovery be allowed, including some document production, interrogatories and written admissions. However, the report recommends against depositions as inconsistent with the goal of achieving an inexpensive and streamlined process. The discovery that is allowed would be narrowly focused and far less voluminous than what is currently allowed under the federal court system, although the tribunal would retain authority to expand discovery if warranted.
The report recommends that formal motion practice not be a part of the process, so that parties making claims before the Copyright Claims Board can focus on presenting their evidence in an informal manner to permit a quick decision on the merits.
Evidence would be submitted electronically and formal rules of evidence would not apply – instead the adjudicators would have discretion to weigh the evidence according to its worth.
Damages and Awards under the System
The report recommends that limited statutory damages be available, in part because it could “serve to reduce time-consuming and potentially costly wrangling over damage-related discovery issues and calculations.” By eliminating complex evidentiary needs, limited statutory damages could further the objectives of the system.
But the Office recommended that the statutory damages in the system be limited to $15,000 per work, with a cap of $30,000 per case. The report includes a recommendation that works registered after the infringement be eligible for statutory damages-although the damages would be less than for works that are timely registered.
The Office recommended against awards of attorney’s fees being included as a part of the system, however it noted that after the system is up and running, the question of attorney’s fees should be revisited. However, the Office said that while they generally recommended against attorney fee awards, there should be an exception for an award of attorney’s fees when it is established that a claim was brought in bad faith or when a party initiates a suit but fails to proceed, as a means of deterring frivolous claims. The report recommended that in such a case, the total attorney fees award be capped at $5,000.
On whether injunctive relief should be available, the report recommends that while the process might permit infringers to agree to cease infringing activity, the tribunal would not have the absolute power to order injunctions.
The NPPA is pleased with the outcome of the report and the proposal for the Copyright Claims Board which balances constitutional concerns with practical problems and, if the proposal is adopted, would assist countless photographers with infringement claims. The report, its findings, and the proposal is consistent with much of NPPA’s recommendations and addresses many of our concerns, as well as the concerns of other photo organizations that NPPA works closely with.
The Executive Summary of the Report outlined the highlights of the Report:
Congress should create a centralized tribunal within the Copyright Office, which would administer proceedings through online and teleconferencing facilities without the requirement of personal appearances. The tribunal would be staffed by three adjudicators, two of whom would have significant experience in copyright law – together having represented or presided over the interests of both owners and users of copyrighted works – with the third to 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 required to have registered their works or filed an application before bringing an action. They 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 (or $7,500 for a work not registered by the normally applicable deadline for statutory damages).
Claimants who initiated a proceeding would provide notice of the claim to responding parties, who would need to agree to the process, either through an opt-out mechanism or by affirmative written consent. Respondents would be permitted to assert all relevant defenses, including fair use, as well as limited counterclaims arising from the infringing conduct at issue. Certain DMCA-related matters relating to takedown notices, including claims of misrepresentation, could also be considered, and parties threatened with an infringement action could seek a declaration of non-infringement.
Parties would provide written submissions and hearings would be conducted through telecommunications facilities. Proceedings would be streamlined, with limited discovery and no formal motion practice. A responding party’s agreement to cease infringing activity could be considered by the tribunal and reflected in its determination. 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.
Determinations of the small claims tribunal would be binding only with respect to the parties and claims at issue and would have no precedential effect. They would be subject to limited administrative review for error and could be challenged in federal district court for fraud, misconduct, or other improprieties. Final determinations could be filed in federal court, if necessary, to ensure their enforceability.