IP Small Claims Roundtable part 2

Brauneis: what could be done within the existing federal courts?  Patent side: discussion of package of local rules as a model, suggesting certain case management procedures/discovery limits for smaller claims.

Samuelson: patent cases have much more extensive discovery than the average copyright case, and trials tend to be longer/more complicated.  Case management isn’t a serious issue for most copyright cases.

Besek: Courts/public think patents are different; harder to sell courts on the idea that copyrights are different.  Possible reaction: Why shouldn’t this be about all small claims?

David Carson, US Copyright Office: Small claims of all kinds are problems in federal court; one argument that might be helpful is that, at the moment, you have no choice but federal court for copyright claims; often people have state court as an alternative, which may depending on the state be more efficient/faster/cheaper.  But other exclusive jurisdiction claims have the same issues.

Grecco: we already have an incredibly complex system. Anything nonuniform will increase complexity.

Nimmer/Grecco proposal within the existing system.  Nimmer:  It’s astonishing that a jury is told to figure out fair use, originality, substantial similarity given the complexities, but we take the 7^th Amendment as a given.  We think we’ve mostly avoided 7^th Amendment problems.  Basically, we propose a minimal amendment to the copyright statute: define a small infringement claim, authorize the C.O. to make regulations about that, and modify the provisions for award of attorneys’ fees.  Give incentive to both sides to call the claim small: under $20,000, or under $80,000 per the regulations, or something else.  Once a claim is small, both parties are incentivized to go to a small claims tribunal and make offers of settlement through attorneys’ fees.  If p recovers more than d’s offer, p gets all its attorneys’ fees; if d loses less than p’s offer, d gets all its fees, and if it’s somewhere in the middle the court gets discretion.  Current problem: d can’t get its fees even if the award is way less than its settlement offer.  (This is a result of a common but not uniform misinterpretation of the offer of judgment rules governing all claims; the 7^th Circuit got it right.)

Brauneis: what if the d doesn’t want to do this?

Nimmer: d can’t be forced to waive right to jury trial.  D won’t get its attorneys’ fees even if it wins.  Could be viewed as a hammer on which to challenge constitutionality: there is a penalty for asserting right to jury trial.  (This seems like a really bad idea for defendants with valid fair use defenses who want to fight.  You’re taking away a major deterrent of strike suits.)

Grecco: political issue: on its face, it looks like artists are giving up protection if they lose, exposing them to legal fees. But in a Rule 68 situation, you’re exposed to that anyway, especially if you add non-copyright claims in the cause of action.  (Again, many courts have refused to apply Rule 68 to copyright cases, if you’re not in the 7^th Circuit.) 

I made my point about losing your right to claim fees by standing on your rights, and Nimmer suggested that you could allow the defendant to make a zero offer and if defendant wins it could still get its fees.

Nimmer: copyright-plus claims would be out—copyright plus Lanham Act claim.  Not for preliminary injunction; not against the US government.

Samuelson: cases involving close questions of substantial similarity/derivative works or fair use, where there are fuzzy boundaries, there’s a societal advantage to litigating it out.  If I feel like I’m totally unable to get fees if I don’t make an offer, that will discourage legitimate disputes.

Nimmer: photog. X puts out a photo, and Random House puts out a book with the photo. Should that be in or out?

Samuelson: book isn’t a derivative work of the photo; a reproduction case seems fine to her.  But compare ClearPlay case: useful to get court to interpret the boundaries of the derivative work right.  If ClearPlay has to make a settlement offer to get fees, have to bet the fair use defense on p not accepting.  (Which makes the point that if you also want to continue the activity going forward, making a low offer is not helpful to you—if p accepts $5, you would be screwed, so you have to say “no” and thereby give up your right to seek fees if you win.)

Nimmer: Yes, D who opts out won’t get fees even if it’s prevailing party. 

Perlman: Supposed to make it easier for small copyright owners to litigate.  This proposal is too intricate to do that.

Grecco: can be implemented within present system, though, and perhaps there should also be a more traditional small claims system.

Calzada:  Risk of fees is a primary deterrent of going to court.  Minimizing the risk is key to getting participation.  If I know I could get stuck with $200,000 in fees just from honestly being wrong about my rights, that’s a huge obstacle to asserting rights. (And this is true of defendants and plaintiffs.)

Grecco: but Rule 68 exists now.

Calzada: but we’re trying to do better.  If you perpetuate the risk of the current system, you’re not helping.

Grecco: need to incentivize taking the fast track.  Have to have a reason to opt in.

Calzada: yes, but this incentive won’t provide that.

Aistars: How do you deal with the risk of nuisance claims?  You don’t want to incentivize people to opt into a small claims process because it’s cheaper to deal with it than to fight.

Nimmer: then the defendant opts in and offers $5, and will get its fees at the end of the day when the court rules in its favor.  ((a) Unless the p accepts the offer.  (b) Which should have happened under the current system, right?)

Calzada’s concern is potent; if a rightsholder can vindicate rights with no risk, then this would be a step back, but right now your only hope is to go to court and spend $ on fees.  (But you could get fees if you win now; also it’s not like small defendants have the $ to pay big fees!)

Aistars: seems more like a contract negotiation than an assertion of defenses. Trying to incentivize making offers.

Nimmer: yes, not a lot at stake, and proposal tries to get both to compromise.  Problem: sometimes there’s a principle.

Aistars: raises again frivolous claims problem.

Nimmer: we view this as a step forward for avoiding the Rule 68 circuit split.

Average © trial is $300,000.  Purpose is to short-circuit trials and incentivize early settlement.  Would think about carveouts for defenses, complexity, or something else.

Pallante: what other incentives did you think about?

Nimmer: it’s the only one that occurred to us.  If d should have paid $10,000, then making it pay $10,000 after a drawn out suit isn’t much of a deterrent.  (Why not treble damages?)

Grecco: if there’s multiple infringements, we reduced the available recovery.

Michael Shapiro, PTO: if copyright-plus claims are out, would that mean reputational harms aren’t covered?

Nimmer: note also only covering post-1978 federal rights, including VARA and 1201/1202 but excluding pre-1972 sound recordings and foreign rights violation claims.  Forego right to preliminary injunction.

Brauneis: turn to new tribunal, giving us more freedom but more danger.

Kim Tommaselli, Ind. Film & TV Alliance: proposed specialized court similar to immigration courts.  $50,000 limit.  With the complaint, p should attach documentary evidence incl. certificate of registration.  Should be able to choose whether they want representation by counsel.  Minimal filing fee.  Trade association could act as a channeling group and file on behalf of a group; amount should be calculated per infringement and not per action.  Qualifications in copyright law should be required.  Should be set timeframe after filing for hearing on merits.  Film rights are inherently time sensitive.  Damages awarded should include monetary relief, including statutory damages, as well as equitable relief; limited discovery but permitted in the interest of justice if not to delay the proceeding.  Appeal: for very limited reasons similar to appealing arbitration award. 

Brauneis: shows all the choices that need to be made!

RT: I want to offer a suggestion that I think may help rights owners who would like to use streamlined procedures like these, especially if the idea is for there to be an aggregate plaintiff.  I also teach property, and I’ve been following the robosigning problems with mortgages, as well as with credit card debt.  It is increasingly the case that judges at pretty much every level have lost the presumption of good faith and proper recordkeeping they traditionally accorded to large, economically significant institutions, because those institutions didn’t invest in keeping records that actually tracked who owned what, and then faked a bunch of documents to cover up that fact.  Across the country, judges are—sometimes on their own initiative, when a defendant doesn’t—requiring plaintiffs to prove a real ownership interest.  Courts and legislatures around the country are rejecting streamlined procedures in foreclosures because they’ve simply seen too many abuses.

In copyright, we see a bit of an analogy in some judges’ unwillingness to entertain mass copyright joinders when defendants weren’t really acting together, or unwillingness to connect people to IP addresses without more evidence.  If we move further in the direction of small claims, with proceedings that are supposed to be decided on the papers, IP owners should be very aware of the need to invest in a system that keeps proper records from day one.  The equivalent of a “lost note affidavit” is not very credible after all the revelations of malfeasance, and a shift to small claims is unlikely to change that.  Especially if IP owners outsource enforcement, a “business record” with only a person’s name (or an IP address) and an allegedly infringed work on it is increasingly unlikely to hold up in court, just as an alleged debt that just has a name and amount on it is increasingly unlikely to be deemed collectable.  Document the claim in its entirety!

Pierce: zero chance of constitutional survival.  Immigration court: the government is a party to the action, and makes it completely different.  Either have to make it subject to plenary review or “voluntary” inducements to choose it.

Brauneis: arguably people wouldn’t go through plenary rule that often: the dynamics of initial decisionmaking are very important even if we’ve insulated it from constitutional challenge.

Shapiro: who are the defendants that we expect to have in this process?  We haven’t been talking about joint authors fighting over percentages.  We are talking about defendants whose websites are hosting copies without paying.  Are we trying to address that narrow group?  Or are we trying to replace the federal courts as the go-to forum for ajudicating copyright issues?

Grecco: need all of it.  Music: biggest issue might be injunction. You’re not going to find deep pockets; mostly you want to stop them from dumping music. Photography isn’t traded as a commodity like that; it’s a large corp/publisher: I’ve had Dow Jones take my photos from Conde Nast.  You know it’s willful, because they embed a credit into the jpeg so it’s non text searchable. So whatever makes it easier is the winner.  Doesn’t think it should be that narrow; should be doable now.

Joseph DiMona, BMI: suppose there was a court subject to plenary review, which had a cap; if you wanted to appeal its decision, you had to waive right to fees.  So you wouldn’t have to make an offer to get your fees, but if you appealed a loss you would.  How many people really appeal?  Make it available to satisfy the Constitution, but most people would live with the initial ruling.  EFF would only get involved in an issue of broad application.

Mosenkis: some of the most important copyright cases are about small amounts.

DiMona: many of those involved secondary liability; not clear that we want those cases in small claims.

Jay Rosenthal: Proving up copyright is an issue (I don’t think ownership is the real issue; I’m more analogizing the chain of title issues to the question of identifying who actually did the infringing); having to identify the specific infringement/infringer would defeat plaintiffs even in small claims.  (But when you’re talking streamlined provisions, you traditionally want extra safeguards to make sure you’ve got the right guy, especially in the context of debt collection errors that are increasingly salient and well-recognized. How to do that?)

Brauneis: how does Nimmer/Grecco proposal deal with “it wasn’t me” defense?

Nimmer: D should offer one dollar to get rid of it.  (Though then that could count as a strike with your ISP: Nimmer is assuming P will reject low offers, but I’m not sure why that would occur or how an ordinary unrepresented citizen would figure out their optimal game theoretic move here.  Reflecting on this further: purely rational offer might be $1, but most people won’t do that because that is only intelligible in human terms as an insult.  Compare dictator games, etc.  Thus, we should expect higher offers even from ds who legitimately believe they have valid defenses if they fear huge downside risks from refusing.)

Trolls won’t make $ if ds only offer $1.  (Though trolls may make $ if ds offer $100 or $500, and their threat letter is likely to say they’ll accept that: this is already the business model, and if max damages are $20,000 that could sound pretty good; for most people receiving these letters, there is no functional difference between $20,000 and $120,000.)

Samuelson: judges often assume that an offer is an admission.

Maria Mathews, Professional Photographers of Am.: ADR mechanisms.  Rightsholders with claims under a certain dollar amount—perhaps $15,000—would have admin tribunal, limited to actual damages/reasonable compensation, not statutory damages.  Living under jurisdiction of Copyright Office.  Registration should be required.

Eugene Mopsik, Am. Soc. Media Photog.: likes simple solutions, allowing photographers to bring a claim themselves and get reasonable compensation quickly.  Doesn’t like absence of punitive damages.  Everyone’s figured out how to make $ out of photos but photographers, so impatient with scholarly/theoretical discussions.

Mosenkis: what are the cases you see?

Mopsik: phone calls every day about publishers exceeding licenses; images lifted from photographers’ sites with watermarks, used in commercial sites.  Nine times out of ten they tell the photographer to pound said, or the image has been used for a year and the site says “okay, I’ll take it down.”  Not good enough.

Grecco: Internet uses: exceeding licenses, and every permutation imaginable.  Stock agencies steal press kits from movie studios and syndicate it. It’s the Wild West.

Mosenkis: ASCAP/BMI strategize as an industry; bring suits in members’ names.  We try to license everything we can, but there are 1000s that hang up the phone/say come & get me. We have to pick and choose.

DiMona: photographers have an economic problem as well as a legal problem: individuals don’t have the time to monitor even if there is a simple procedure. BMI/ASCAP were created for songwriters in a similar boat. Nirvana wouldn’t be to litigate with anyone, but to get a $200 fee in most cases (except when there’s an exclusive license or very valuable photo).  First someone has to find you.  Have an organization with watermarked, searchable photos and easy cheap licenses.  CCC = solved similar problem.  Before CCC, photocopying cases came out differently, but court said it wasn’t fair use once the CCC was around.  Harder to say pound sand to ASCAP than to an individual, b/c ASCAP will go after you.

Grecco: but you have a compulsory licensing system.  CCC is one of the biggest offenders.  We lost a ruling where we couldn’t find a specific infringement even though they’re offering to license our stuff.

Mopsik: CCC pays only publishers, who’ve affirmed they own the rights to the collective work.  Ask photographers if they ever got a check for that—no one does.

Grecco: every other company in the world divides licensing fee between publisher, writer, and photographer.  We get checks as organizations and don’t have a distribution method. In this country we don’t have a system.  Google, Facebook—the revenue streams could be significant but we don’t have the statutory backing.

Mopsik: extended compulsory licensing might make this possible.

Brauneis: maybe combined with small claims. 

Mosenkis: need coordinated efforts by photographers.

Mopsik: we lack means to coordinate. Moving photographers in the same direction is very difficult.

Mathews: Our clients, portrait/wedding folks, are different from media photographers; most of our infringers are our clients: you aren’t going to sue your bride for going to Kinko’s and running off five copies of her wedding portrait, because then she won’t refer you.

Mopsik: no photog will get rich, but at least could monetize smaller uses.  Wouldn’t want this for negotiated/ad uses, but collective licensing might be good for the current thefts.

Grecco: could break this out into primary sale v. reprint of magazine/secondary usage.

Brauneis: nobody seemed to be in favor of state court jurisdiction.  Any opening for that?

David Carson: horrible solution, but maybe the only way. Either as a practical matter, Congress won’t set up what you want, and there are constitutional hurdles for almost anything. In many states, you do have courts that can quickly and efficiently deal with small claims. They’re not specialists in copyright/IP.  If you say “fair use,” they won’t understand.  Thus decisionmaking quality won’t be great, but at least you’ll get a decision. May be the only thing that works.  Worth holding states in reserve in case everything else doesn’t work out.

Nimmer: suing states in state court to solve 11^th Amendment problems?

Carson: sure.

Michele Woods, Copyright Office: in state courts, active and maybe overactive systems to push people into mediation; in DC there are too many small claims for the court to hear, so mediation is highly touted.  Experienced mediators could help resolve at least licensing fee type cases.  In some systems, you can’t have the attorney as the principal spokesperson in the mediation.

Carson: some states have a jury trial right, and others don’t.  Pick a maximum amount in controversy—say $20,000—and allow state jurisdiction.

Besek: one concern: many states don’t have small claims jurisdictions to that amount, so you’re talking about main state court systems.  11^th Amendment issues will not go unnoticed by state university systems etc.; will be political opponents.

Rick Carnes, Songwriters Guild: hodgepodge of state laws confer immunity on states, so it’s not a complete answer.

Grecco: bigger issue is jurisdictional, with the internet. 

Brauneis: but personal jurisdiction issues are the same in federal court.

Grecco: would need to enable service for small claims.

Nimmer: offender might try to abuse the system: ex-employee of company claims ownership, sues for infringement.  We booted that out of our system.  Shouldn’t allow that person to file in Oklahoma court for $10,000 to defeat vindication of federal claim.  Should we allow removal?

Carson: Don’t know how you deal with that as a blanket matter.  Can do that under current system.  If counterclaim is beyond state jurisdiction, does that move them both out?

Nimmer: states used to be able to retain jurisdiction over counterclaims, but AIA removed that; need to figure that out.

Brauneis: conclusions and next steps?

Pallante: Copyright Office will have more studies over the next year, and meetings on both coasts.

Besek: more study on how many people do seek plenary review across different types of cases.

Perlman: should also separate out statistics for individual defendants v. corporate defendants. His constituency: more likely claims are against corporate entities.

Mosenkis: are those more expensive? Are corporate defendants more likely to run up the bill?  Also, how often are attorneys’ fees actually granted?

Pallante: Congress will need the views of constitutional scholars.