To Opt Out or Not to Opt Out, That is the Question … for Respondents

There Are Numerous Factors That Every Respondent Should Consider When Deciding Whether to Participate in a CCB Proceeding.

A few weeks ago, we published a blog post discussing the 15 Things You Need to Know About the Copyright Office’s New Small Claims Court. One of the most important items on that list was the fact that “participation [in the Copyright Claims Board (CCB) process] is voluntary.” Voluntary participation means that the person who is being sued in the CCB (referred to as the “respondent”) can opt out of the proceeding and, if they do, the proceeding is immediately dismissed.

The voluntary nature of the CCB may seem absurd to some people, as they question why lawmakers who enacted the laws to create the CCB would grant alleged infringers the right to choose whether to participate in the CCB proceeding. But it is important to understand that the U.S. Constitution gives them this right and prevents the CCB process from being mandatory. More specifically, the Constitution guarantees a person’s right to have a case heard by an Article III court with the right to a jury trial. But even though a person has this right, they can waive it. This waiver is accomplished by giving respondents the ability to choose whether to participate in a CCB proceeding and the opportunity to opt out if they wish not to.

People may also question how useful and effective the CCB can be if alleged infringers can easily opt out. The CCB launched almost two months ago so it’s much too early to determine how frequently respondents will opt out, but there is a good chance that the opt out numbers will not be nearly as high as some might suggest. That’s because there are numerous features of the CCB process that may incentivize respondents to participate rather than opt out. Instead of impulsively opting out, respondents would be wise to consider all the different factors at play as they decide whether to opt out or participate. Some of these factors that respondents should consider include the following:

Cost of Hiring an Attorney

When a case is litigated in federal court, the largest cost associated with bringing or defending a copyright case is usually the cost of hiring an attorney, which as we all know can be fairly high. The CCB process is intended to be so simple that the parties will not need to hire an attorney to represent themselves. Giving parties the practical ability to defend themselves without paying an attorney should encourage respondents to participate.

Limitations on Monetary Liability

When an infringement claim, or counterclaim, is brought before the CCB, a successful claimant or counterclaimant may be awarded up to $15,000 in statutory damages per claim and up to $30,000 in total damages per case. That is significantly less than what may be awarded in federal court. By capping the amount of damages that may be awarded, the CCB dramatically reduces an alleged infringer’s potential liability. Parties who may be liable for tens of thousands of dollars or more if the copyright owner brings a copyright infringement case against them in federal court may be unwilling to take that risk and will instead want to limit their liability by choosing to proceed before the CCB. And although federal court is too expensive for many copyright owners, there will still be those who can afford federal court but who choose to bring a case to the CCB first because of the cost savings and efficiency of the process.

Expertise of CCB Officers

Federal court judges are generalists by design, hearing cases on a range of criminal and civil issues. In contrast, the CCB judges (called “CCB Officers”) are copyright experts. At least two of the three CCB Officers must have “substantial experience in the evaluation, litigation, or adjudication of copyright infringement claims” and have “represented or presided over a diversity of copyright interests, including those of both owners and users of copyrighted work.” Thus, a party who believes that they have a meritorious defense(s) or a viable counterclaim(s) may choose to proceed before the CCB, with the benefit of judges who are dedicated experts on copyright law (including the available affirmative defenses under copyright law such as fair use).

Inconvenience and Expense of Travel

Unlike cases litigated in federal court, participation by the parties in a CCB proceeding is entirely remote. The proceedings take place through written submissions and virtual communications. As a result, the parties do not need to incur the expense or inconvenience of travel. The time and money saved by not having to take multiple long car rides or flights across the country to the tribunal, the value of not having to take days away from your regular business to participate in the proceeding (which may lead to lost opportunities and revenue), and the elimination of the safety and health risks associated with traveling during a pandemic are all significant factors that respondents should consider.

Speed of the Proceedings

Because of its reduced complexities, fewer requirements, and more streamlined process, CCB proceedings will progress to a resolution much more quickly than equivalent federal court proceedings. A respondent who believes they have a one or more meritorious defenses may choose to proceed before the CCB in order to more quickly resolve any legal claims against them. This is especially true where the outcome of litigation may have a significant impact in a company’s business operations. For example, resolving an infringement dispute might be necessary before a product launch or before a business agreement with another party can be consummated. In these instances, a respondent may prefer the quicker process afforded by the CCB so it can move forward without undue delay. 

Simplicity of the Discovery Process

Ask anyone who has been involved in litigation in federal court and they will tell you how arduous, complex, invasive, and costly the discovery process can be. The CCB process is the polar opposite of federal court when it comes to discovery (the portion of a proceeding during which parties exchange information and documents related to a case). The entire CCB process is intended to be simple, efficient, and streamlined for faster resolution of copyright disputes. What this means in practice is that discovery is much more limited and is much quicker than discovery that takes place in federal court. For example, there is no formal motions practice (formal requests made to a court, e.g., a motion asking the court to dismiss a case) at the CCB. The CCB also provides standard forms and questions for the parties to conduct the discovery process, so that parties do not have to develop and draft discovery requests on their own to get relevant information from the other party. And if the case involves “smaller claims” (i.e., claims in which damages are less than $5,000 and the claimant has chosen to proceed through the much less demanding smaller claims process), in most cases there is no discovery at all. Not only would a respondent likely appreciate the simplicity of the CCB discovery process, they may also welcome how much less intrusive the CCB discovery process is in relation to federal court.

Insurance Considerations

Many insurance policies require businesses to promptly notify their insurance carrier of any pending lawsuits. Given the significant reduction in potential liability before the CCB as well as the drastically reduced costs for defending against claims as compared to federal court, there is good chance that an insurance carrier may require that the claim be litigated before the CCB rather than risk going to federal court.

No Injunctions

In federal court, a copyright owner can seek an injunction to stop the alleged infringer from continuing an infringing activity. Unlike federal court, injunctions are not available in a CCB proceeding. Depending on the nature of the alleged infringement and the relationship between the respondent’s business and the alleged infringing activity, the unavailability of injunctive relief may be a significant factor in a respondent choosing to proceed in the CCB instead of federal court. Despite the fact that formal injunctions are unavailable at the CCB, if the parties reach an agreement for the respondent to cease the infringing activity, the CCB can make that agreement part of its final determination. The CCB Officers can then take that agreement into consideration when determining the damage award (if any). In other words, by agreeing to what is in essence an injunction, the respondent can potentially lower its monetary exposure—which is another reason participating in the CCB may be beneficial. Lowering damages in this manner is not possible in federal court.

Claimant May Bring the Case in Federal Court if Respondent Opts Out

The CCB was created because many independent rightsholders cannot afford to enforce their rights in federal court, and the CCB will offer them this opportunity. As a result, many people might expect most respondents to opt out of the CCB under the assumption that the claimant cannot afford to sue in federal court. That assumption fails to appreciate the numerous incentives discussed above. But it also fails to consider that, while the CCB was created with those who cannot afford federal court in mind, there will be those who can afford federal court but choose to bring case to the CCB initially because of the cost savings, expediency, and simplicity of the process. In fact, during the six weeks or so since the CCB first launched we have noticed that several claimants have previously brought copyright suits in federal court and/or can clearly afford to do so. Often a respondent won’t know whether the claimant can afford federal court. So, in situations where the respondent recognizes that they may be held liable, opting out under the assumption that the claimant can’t afford federal court is a huge risk.

When all these factors are considered together, they certainly provide a strong enticement to participate in the CCB instead of opting out. Even where the respondent opts out, the mere bringing of the case serves to educate them about copyright law so that the user may think twice before engaging in the same or similar infringing activity in the future. In fact, we may have already seen this play out in practice in cases that have already been filed. Through a process that encourages parties to participate while at the same time not penalizing them if they choose not to, the CCB achieves balance and fairness.

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