The new provisions establish a different track to copyright that may ease the path for copyright holders who otherwise might not pursue claims in district courts against infringers.

The United States Constitution gives Congress the power to “promote the progress of… useful arts, by securing for limited times to authors… the exclusive right to their respective writings… .”[1] To date, Congress has done so through promulgation of the Copyright Act, which protects the rights of authors over their original works and derivatives. As part of the December 2020 COVID-19 relief bill[2], Congress enacted a new 15th chapter of the Copyright Act establishing the Copyright Claims Board (CCB)[3].

The new provisions establish a different track to copyright that may ease the path for copyright holders who otherwise might not pursue claims in district courts against infringers. Beyond that, however, it is not entirely clear to whom the system will appeal. Though Chapter 15 has provisions seemingly intended to deter bad faith claims, it nonetheless may raise issues for certain defendants, particularly with respect to the available damages and limitations on recovery of attorneys’ fees incentivizing them to opt out of this voluntary system[4]. It is unclear what practical impact the new Chapter 15 will have on the landscape for enforcement of copyrights. Below, we outline some of the salient features and offer the reader a table to compare them with the existing regulation.

In 2019, the Supreme Court of the United States confirmed in a 9-0 decision that the filing of a pending application at the Copyright Office does not allow actions to be filed in district courts[5]. Under these parameters, a U.S. plaintiff claiming copyright infringement must have an issued certificate of registration and plead observance of this formality[6]. Many are unaware that under the Berne Convention[7], to which the U.S. is a signatory, the granting of protection to foreign authors under the Copyright Act and enforcement actions by foreigners in U.S. courts must be free of any “formalities.”[8] Thus, while American copyright owners must secure a certificate of registration prior to filing a complaint, foreigners need not comply with this often burdensome requirement, even when bringing a claim in the U.S. However, holding a certificate of registration provides the further benefit of allowing a copyright owner to seek statutory damages[9] and attorney’s fees[10], creating an incentive to seek registration in the U.S. Copyright Office even for foreign works to be distributed in the United States.

Under the new administrative system, set to be available by the end of 2021 (unless an extension of time is sought for good cause), a claimant may file an action with only a pending application, thereby relaxing the rigid formalities of the current system[11]. Although the claim can be commenced, a decision will be placed on hold if it is ready before registration is granted[12]. If registration is ultimately refused during the pendency of the action, the proceeding will be dismissed without prejudice.[13] Further, while courts can grant statutory damages only if the work is registered before the onset of the infringement, the CCB can award statutory damages regardless of timing, but the maximum recovery of damages―already limited by the CCB to a $15,000 maximum per work and $30,000 overall[14]―is halved if issuance of the certificate post-dates the registration[15].

The new CCB process is unique in many ways. For example, claims can only be filed against persons or entities “residing” inside the United States[16]. This limitation may limit most claims as online digital infringement too often is linked with foreign-residing defendants.

At the CCB, statutory damages, which are normally capped at $30,000 (or $150,000 in the case of willful infringement) per work infringed, are limited to $15,000 per work[17]. Profits and actual damages, available on election, are limited to a total of $30,000, exclusive of attorneys’ fees, for all claims brought in a single action[18]. Claimants are advised to be very careful, since by pushing the doors of the CCB, even with a certificate in hand, attorneys’ fees are only available upon showing of bad faith[19]. The value of attorneys’ fees, if awarded, is further limited to a maximum of $5,000[20].

Of key importance is the provision that participation in the CCB is voluntary[21] and defendants are given 60 days to opt out[22]. Parties may opt in to proceed before the CCB as an alternative forum for dispute resolution even after an action is commenced in federal court, and district courts must stay cases until resolved at the CCB or until the defendant has opted out of returning jurisdiction to the district court[23]. Claims already at a district court cannot be filed at the CCB without proper judicial approval[24].

The same three-year statute of limitation common to copyright claims applies from the date that the claim has accrued[25], but actions at the CCB toll the statute for federal court claims[26]. To help the reader, we offer the following table:

Reading the long statute reveals mostly the expected administrative rules and process of claim management similar to other boards like the Trademark Trial and Appeal Board (TTAB) or the Federal Trade Commission (FTC). The CCB is given declaratory jurisdiction power allowing an accused defendant to file a claim[27]. Limited discovery procedures will be in place[28]. Given the procedural formalities at the CCB, unlike a traditional “small claims court,” a party should seek legal representation. District courts are also tasked with the enforcement of judgments within one year from issuance of a decision by the CCB[29]. Litigants will have a limited right to appeal to district courts within 90 days of a final resolution[30].

In sum, other than for certain small businesses and individual copyright holders, the CCB seems unlikely to provide an attractive alternative to federal court for copyright holders. Potential defendants will need to weigh the possible availability of statutory damages as high as $7,500 in circumstances where actual damages are low, and statutory damages otherwise would not be available, against the potential benefit of a streamlined procedure that is less costly and does not include the specter of an award of attorneys’ fees. In the event the regular three year statute of limitation is running out and a certificate is not available, filing at the CCB may be the sole remedy to protect the claim. It is also unclear whether the CCB will actually deter “copyright trolls” or simply be another arrow in their quiver, since infringements that result in minimal actual damages may enable the recovery of a relative windfall. We are hopeful that the Copyright Office will implement rules and regulations that allow CCB claimants to litigate in the “spirit” of the small claims model where an author can stand up, tell their story and prevail.

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If you have any questions about this Alert, please contact Alain Villeneuve, Mark Lerner, any of the attorneys in our Intellectual Property Practice Group or the attorney in the firm with whom you are regularly in contact.

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