[Senate Report 116-105]
[From the U.S. Government Publishing Office]


                                                      Calendar No. 206
116th Congress     }                                     {      Report
                                 SENATE
 1st Session       }                                     {     116-105

======================================================================



 
  COPYRIGHT ALTERNATIVE IN SMALL-CLAIMS ENFORCEMENT (CASE) ACT OF 2019

                                _______
                                

               September 12, 2019.--Ordered to be printed

                                _______
                                

           Mr. Graham, from the Committee on the Judiciary, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1273]

    The Committee on the Judiciary, to which was referred the 
bill (S. 1273) to amend title 17, United States Code, to 
establish an alternative dispute resolution program for 
copyright small claims, and for other purposes, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
  I. Background and Purpose of the CASE Act of 2019...................1
 II. History of the Bill and Committee Consideration.................10
III. Section-by-Section Summary of the Bill..........................10
 IV. Congressional Budget Office Cost Estimate.......................15
  V. Regulatory Impact Evaluation....................................15
 VI. Conclusion......................................................15
VII. Changes to Existing Law Made by the Bill, as Reported...........15

I. Background and Purpose of the Copyright Alternative in Small-Claims 
                     Enforcement (CASE) Act of 2019

    Despite the existing remedies for copyright infringement 
and misrepresentation in conjunction with a Section 512 notice 
provided for in Title 17, there have been repeated complaints 
regarding their effectiveness in deterring and penalizing such 
actions. For copyright infringement cases, copyright owners 
have argued that the existing remedies are only effective for 
larger copyright owners with higher value claims who have more 
financial resources to spend on litigation expenses including 
attorney fees. Small business and individual copyright owners 
with lower value claims often cannot afford the prohibitive 
expenses associated with initiating and maintaining copyright 
claims in federal court. Even if they go forward with such 
suits they must consider the chances of a Pyrrhic victory in 
court with an award of damages that may cover the lost 
licensing fee, but not the expenses including attorney fees. 
Even a complete award of damages may not generate enough of a 
financial award to attract an attorney willing to work on a 
contingency fee basis. Similarly, Section 512(f) provides for a 
rarely utilized cause of action for misrepresentations since 
the damage amounts are difficult to quantify and the litigation 
expenses can also be significant. This makes retaining an 
attorney as challenging as it is for copyright owners facing 
lower value infringement of their works.
    In 2011, the U.S. Copyright Office was requested to study 
these concerns and issue a report with its recommendations to 
Congress. After several public comment periods, hearings, and 
roundtables held over a two-year period, the Copyright Office 
issued its ``Copyright Small Claims, A Report of the Register 
of Copyrights'' in September 2013.\1\ The opening paragraph of 
the Executive Summary states:
---------------------------------------------------------------------------
    \1\Copyright Small Claims, A Report of the Register of Copyrights. 
September 2013. Page 3. Available at www.copyright.gov/docs/
smallclaims/usco-small/copyrightclaims.pdf

        It appears beyond dispute that under the current 
        federal system small copyright claimants face 
        formidable challenges in seeking to enforce the 
        exclusive rights to which they are entitled. The 
        Copyright Office therefore recommends that Congress 
        consider the creation of an alternative forum that will 
        enable copyright owners to pursue small infringement 
        matters and related claims arising under the Copyright 
        Act.\2\
---------------------------------------------------------------------------
    \2\Ibid, page 3.

    The 161-page report first details the operation of the 
existing remedies system; its challenges; the constitutional 
issues involved in creating an alternative system; existing 
State small claims systems for non-copyright claims; and other 
existing Article I tribunal models such as the Copyright 
Royalty Board, Patent Trial and Appeal Board, and the U.S. Tax 
Court, in addition to the non-federal the Uniform Domain Name 
Dispute Resolution Policy. The Register then recommended either 
an opt-in or opt-out system housed within the Copyright Office 
with specific criteria for the types of claims that would 
eligible to be heard (infringement claims that do not exceed 
$30,000 in statutory damages, declarations of non-infringement, 
misrepresentations for Section 512 notices, and associated 
counterclaims) as well as operational procedures. The first 
legislation based upon the report was introduced in the House 
in the 114th Congress with additional legislation in the 115th 
Congress.\3\ Congress has consistently chosen an opt-out model 
due to the minimal burden of a respondent to using a prepaid 
opt-out selection form designed by a Government agency to 
exercise their opt-out rights. Other Federal agencies have used 
non-voluntary Article I tribunals to make initial dispute 
determinations before allowing parties to enter an Article III 
court. This creates a mandatory financial burden upon all 
parties to a case. Under the opt-out approach for S. 1273, 
respondents will actually be able to decide whether they wish 
to use an Article I tribunal with lower damage caps and likely 
lower legal costs or remain in an Article III proceeding with 
potentially much higher damage awards along with much higher 
legal costs and potential liability.
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    \3\H.R. 5757 and H.R. 6496 were introduced in the 114th Congress 
and H.R. 3945 was introduced in the 115th Congress. A hearing on H.R. 
3945 was held before the House Judiciary Committee on September 27, 
2018.
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    The process set forth in S. 1273 is intended to be 
completely voluntary for both claimants and respondents. 
Neither party should be coerced into participating. 
Consequently, no party may, by contract or agreement, 
relinquish or abridge their right to pursue or not to pursue a 
claim, counterclaim, or defense before the Copyright Claims 
Board or their right to opt out of a proceeding before the 
Copyright Claims Board.

            A. ESTABLISHMENT OF THE COPYRIGHT CLAIMS BOARD 
                           PURSUANT TO S.1273

    The members of the Copyright Claims Board are to be 
appointed by the Librarian of Congress in consultation with the 
Register of Copyrights. As the head of the agency of record, 
the Register is best positioned to identify the proper 
individuals to serve as Copyright Claims Officers. The Register 
should ensure that those who are considered for the position do 
not bring pre-existing biases to the Board since each claim 
requires independent judgement of its merits, or lack thereof, 
in addition to an independent judgement of the amount of 
damages that should be awarded, if any. The Register is also 
responsible for hiring attorneys to assist the operation of the 
Board.
    Once hired, a Copyright Claims Officer may not be removed 
before the expiration of their term as a result of a particular 
determination, nor may a performance review be based upon a 
determination with the exception being how a claim was handled. 
Independence of Copyright Claims Officers is key, making any 
violation of this requirement by an Officer grounds for 
immediate removal. Gross unprofessionalism is also grounds for 
removal. Although the Copyright Claims Officers and Attorneys 
are not governed by the Code of Conduct for United States 
Judges, its canons are instructive for how the Board should 
identify and avoid potential ethics issues. The Code should 
also assist the Register and Librarian of Congress in 
determining whether the actions of an individual Board member 
rise to the statutory threshold for their removal. Concerns 
about temperament, professionalism, and the ability to work 
with other members of the Board and its staff, as well as the 
Copyright Office and general public, may result in a poor 
performance appraisal. The Register and Librarian are 
encouraged to reasonably provide remedial training, if there is 
a reasonable possibility of its success, in order to keep a 
qualified individual in service. However, if unprofessionalism 
continues or rises to the extent that it violates an ethical 
standard of conduct, the Librarian should remove the Officer.
    Once a potential claimant decides to pursue a claim before 
the Board, they will need to file a claim with the Board along 
with the required filing fee.\4\ In recognition that a 
respondent may opt-out and therefore not require much 
involvement by Board staff, the initial filing fee itself 
should be smaller than the fee charged later when a proceeding 
becomes active. Filing fees that are set too high would 
discourage potential claimants from considering using the Board 
to resolve their disputes since respondents who exercise their 
right to opt-out would result in the loss of the filing fee by 
the claimant. Board staff will review each claim to ensure it 
complies with applicable regulations before permitting service 
to occur. Should a claim not meet the terms of Copyright Office 
regulations, parties shall have two 30-day opportunities to 
correct any errors before a claim will be dismissed without 
prejudice. The Board may dismiss a claim without prejudice if 
it is unsuitable for determination by the Board. Within 30 days 
of service, the respondent has the right to opt-out in writing 
of the proceeding. In the event a proceeding becomes active, 
limited discovery is permitted. In-person appearances by 
parties before the Board in Washington, D.C. are not required. 
The Board may hold oral hearings that will be transcribed for 
the record. All findings of the Board will be made on a 
preponderance of evidence standard. Default determinations are 
permitted, but only after notice to the failure of the party to 
respond.
---------------------------------------------------------------------------
    \4\Since not all claims will proceed to being considered active 
either due to settlement or opting out, the Register should consider 
establishing a two-tier fee structure such that an initial fee is due 
upon filing of the claim followed by an additional fee once a claim is 
deemed active.
---------------------------------------------------------------------------
    Parties are not required to have legal representation since 
the process is simplified and it is expected that many will 
forego them in order to reduce overall costs. Parties may also 
rely upon law school legal clinics to represent them before the 
Board. The Patent and Trademark Office offers law school 
clinics a limited number of ``priority'' filings under their 
Law School Clinic Certification Program and the Register could 
consider this as an option to encourage the use of pro-bono law 
school clinics while giving law school students real life 
training in copyright dispute resolution.
    The claimant or counterclaimant will elect whether to 
recover damages or not. A claimant or counterclaimant may 
choose not to pursue damages as a way to encourage the other 
party to not opt-out or to agree to cease certain activity if 
the claimant or counterclaimant prevails. If the claimant or 
counterclaimant elects to recover damages, the claimant can 
elect whether to recover either actual damages and profits or 
statutory damages. To mirror the process used in copyright 
infringement claims before Federal courts, the legislation does 
not require the claimant or counterclaimant to elect between 
the two types of damages until the point right before a final 
determination is rendered by the Board.
    There are specific maximum award amounts set forth in the 
legislation. This amount is not an automatic amount of damages 
for proven claims. For copyright infringement cases, as a 
baseline amount the Board should look to the parties' 
previously agreed upon licensing fee (if one was agreed to). 
The Board should consider what damages multiple is appropriate 
based upon the circumstances of the specific claim and the 
evidence presented including whether or not the respondent 
ignored requests for payment on the one hand or quickly 
accepted responsibility for the infringement on the other. If a 
respondent entered into negotiations with the claimant seeking 
to license the work and was then presented with a standard 
licensing fee amount by the claimant and the respondent then 
used the work without any payment whatsoever, the quoted 
licensing fee should be considered the appropriate baseline 
amount. If there was no previously agreed upon licensing fee or 
even a rate negotiation, the most comparable licensing fee that 
would have been charged by the claimant that they can 
reasonably demonstrate to the Board is the appropriate baseline 
from which a multiple should be applied. The Board may not 
issue injunctions, but may include in its determination an 
agreement for a party to cease certain activity if the party so 
agrees. In determining a proper damage award, the Board may 
consider whether the party has agreed to cease certain 
activity, and may increase or decrease the award accordingly.
    The notice and takedown provisions of Section 512 have been 
used on numerous occasions by copyright owners who have alleged 
infringement of their works. While many of these notices are 
properly issued, Federal courts have seen comparatively fewer 
cases involving misrepresentations in conjunction with Section 
512 where the notice filer has made no effort to verify that 
infringement has actually occurred or has sent a notice simply 
to take down speech that they disagree with.\5\ Both situations 
are likely to prove challenging for the Board to determine the 
appropriate financial damages. Congress did not provide for 
statutory damages for sending bad faith notices in Title 17, 
leaving it up to the courts to determine the financial penalty 
for stopping speech, engaging in commercial advantage, and 
other bad faith uses. Where commercial advantage has occurred 
or sought, some higher multiple of the actual harm or potential 
benefit (whichever is higher) would more than likely be 
appropriate.
---------------------------------------------------------------------------
    \5\The few cases include Online Policy Group v. Diebold, Inc., Lenz 
v. Universal Music Corp., and Automattic Inc. et al., v. Steiner.
---------------------------------------------------------------------------
    Where speech has been taken down and not for commercial 
advantage, the Board should take into account the size of the 
audience of the speech, the deliberateness of the action, and 
whether or not the party that has engaged in bad faith has 
agreed to post an online public apology of their actions for an 
extended period of time in order to determine an appropriate 
financial award. However, the legislation does not include such 
acts in the jurisdiction of the Board in order for no damages 
to be awarded under the mistaken view that taking down speech 
through misrepresentation results in little to no harm. As the 
Committee of jurisdiction for Constitutional issues generally 
and the First Amendment specifically, the Committee recognizes 
the value of freedom of expression and the harms caused to its 
removal by bad faith actors. Upon a final determination of such 
misrepresentation by the Board, sufficient damages to penalize 
the immediate behavior in question and to deter similar 
behavior in the future should be awarded.
    With the exception of bad-faith prosecution, no award of 
attorney fees or costs shall be made. For bad-faith 
prosecutions, it is not the requirement of the Board or the 
Copyright Office to re-educate the responsible parties, but 
simply to provide the entity with notice of their bad faith 
behavior and, after giving the party an opportunity to contest 
such determination, impose appropriate sanctions. The limit of 
attorneys' fees and costs of $2,500/$5,000 for bad faith 
actions can be exceeded in extraordinary circumstances. Since 
all extraordinary circumstances may be difficult to define 
prospectively, qualifying behavior should be of such nature 
that few besides the bad faith party would not consider the 
behavior or actions improper. Although the Committee expresses 
its hope that the statutory authority of the Board to ban 
parties who have engaged in bad-faith conduct more than once in 
a 12-month period is never needed, the Board should not 
hesitate to use such authority where warranted.
    Parties have the right to seek a reconsideration of a 
ruling of the Board within 30 days. The fees for such 
reconsideration shall be uniform for all similarly situated 
parties. If the Board then denies such a request, a party may 
seek further review within 30 days of denial by the Register of 
Copyrights on the grounds that the Board abused its discretion 
in denying reconsideration. The fees for such review shall be 
uniform for all similarly situated parties. In both situations, 
the other parties to a claim have the right to contest the 
request.

                  B. THE ROLE OF U.S. DISTRICT COURTS

    Only after the reconsideration and review processes have 
concluded may a party seek to challenge a determination by the 
Board in U.S. district court. One of the grounds for a court 
order vacating, modifying, or correcting a Board determination 
is excusable neglect. Excusable neglect does not refer to a 
respondent who has been properly served with an official notice 
from the Board and fails to opt-out due to a disbelief in the 
validity of the notice. The fact that the Copyright Office and 
the Copyright Claims Board are official Government entities can 
be quickly confirmed with the slightest of Internet searching 
or by contacting the Office directly. State small claims courts 
with parties often not represented by legal counsel regularly 
face questions concerning what is, and what is not, ``excusable 
neglect''. Rulings on this question in such cases should prove 
instructive for a district court facing a claim of excusable 
neglect. District courts should recognize the burden that would 
be created by reopening a default determination or 
determination based on a failure to prosecute upon parties who 
did in fact meet all of the associated requirements and 
deadlines. A high bar should exist for what would effectively 
create a new burden upon parties that have paid attention to 
deadlines and requirements.
    District courts should consider informing parties coming 
before them with qualified claims of the option of using the 
Copyright Claims Board in order to provide parties with a more 
informal and quicker dispute resolution process. Section 
1509(b) deems the Board as a qualifying alternative dispute 
resolution process.

 C. EXPECTATIONS OF THE COPYRIGHT OFFICE AND THE COPYRIGHT CLAIMS BOARD

    It is expected that the Copyright Office will develop clear 
regulations and practices to fairly balance the competing 
interests of claimants and respondents. Given the history of 
copyright litigation, it would not be uncommon for a respondent 
in one claim to be the original claimant in an altogether 
different matter such that a fairly balanced system will be of 
benefit to all potential parties.
    The Committee highlights two concerns in particular for 
special attention by the Copyright Office and the Board--claim 
management workflow and potential bad faith behavior by parties 
to a claim. The first concern stems from the fact that it is 
initially unknown how many potential claims will be brought 
before the Board, how many respondents will opt out, and how 
long on average the Board will take to hear a claim. It will 
take several years for the Board to have a complete 
understanding of these statistics. However, the legislation 
authorizes only three Copyright Claims Officers who will be 
working regular hours to process active claims. If each active 
claim takes exactly two hours of the Board's time, this will 
result in a maximum number of active claims decided per year of 
1,000. It may be that fewer than 1,000 claims per year become 
active. However, if this is not the case or if the average time 
spent on each active claim is more than two hours, the Board 
could quickly become backlogged. In such a scenario, claimants 
who have invested in preparing their claim and paid the 
necessary filing fees would not have their claim decided for 
some time. Similarly, respondents would be faced with a claim 
against them that would not be decided for some time. These 
delays have become all too common in Article III courts and 
should be avoided by the Board and Register. Section 1504(f) 
gives the Register the discretion to impose filing limits in 
both the startup phase as well as the ongoing phase of the 
Board to better manage Board workflow.\6\
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    \6\Other provisions in Sections 1510(a) and 1506(z) give the 
Register authority to adjust the maximum amount of damages that can be 
recovered per claim and to establish a one Claims Officer micro-court. 
The use of this authority must be balanced against its impact upon the 
Board's workflow and timeliness in claims processing.
---------------------------------------------------------------------------
    For both startup and ongoing phases of the Board, the 
Register should publicly identify an average claims processing 
timing goal that is then used to determine appropriate claim 
management efforts and to signal to interested parties a 
realistic estimate of how long the Board will take to process 
claims. An initial goal of concluding claims deemed active 
within six months to one year from the date of initial filing 
to the Board's initial determination would be appropriate. In 
order to gauge the actual interest in using this new system 
while maintaining a timely process, the Register should 
strongly consider either an initial fixed limit of one claim 
per claimant or a ranked priority system of claims by the same 
claimant for the first several months of operation. With a 60-
day opt-out process, it will take at least until the third 
month of operation to initially determine the percentage of 
respondents that are likely to opt-out. A ranked priority 
system may help to better enable a higher filing limit per 
claimant immediately upon an increase in the per claimant 
limit. However, the legislation does not require such a ranked 
system to be enabled, especially if it proves burdensome on the 
Copyright Office or the Board. This decision is left to the 
Register.
    The second issue of particular concern to the Committee is 
the potential for abuse of the system by parties or their 
representatives acting in bad faith. This bad faith could 
potentially arise from a one-off action by a party to a claim 
or as part of a more concerted effort to abuse the system as a 
whole. As a new dispute resolution process, the success of the 
Board will depend upon how it is viewed by both potential 
claimants and respondents. If claimants view the Board poorly, 
they are likely to avoid filing claims before it. If 
respondents view the Board poorly, they are likely to simply 
opt-out. Abuse of the system that goes unpunished will undercut 
the reason for Congressional action--an alternative system to 
resolve small value copyright claims is not effective if no one 
uses it in the first place because they have no faith in it.
    One potential avenue for abuse is copyright trolling. 
Fortunately, copyright trolling has been far less common than 
patent trolling. In the most notorious case, the principals of 
a Chicago based law firm operating under several names 
including Prenda Law were sanctioned by several Federal courts 
and two attorneys were convicted of felonies for actions 
related to their trolling activities. More recently, Judge Cote 
of the Southern District of New York recently described one 
attorney in a published opinion as a copyright troll due to 
their over 700 copyright infringement lawsuits.\7\ It is the 
Committee's strong desire that the Register and Board work 
together to deter and appropriately sanction any bad faith 
behavior, especially copyright trolling. Since pro se parties 
may be less constrained with pushing the envelope of acceptable 
conduct, the Board and Register should consider sample videos 
of how parties to the proceeding should act. Nothing in the 
legislation prevents the imposition of a requirement that 
parties to a claim acknowledge in writing that they have 
reviewed the procedural rules and/or watched such videos prior 
to the filing of a claim or responded to claim.
---------------------------------------------------------------------------
    \7\McDermott v. Monday, 17cv9230 (DLC), 2018 WL 1033240 (S.D.N.Y 
Feb. 22, 2018).
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    Beyond these two areas of high concern, the Register is 
expected to prudently use the standing authority in subsection 
1506(z) to create a micro-claim process in which one Copyright 
Claims Office will hear the claim with a maximum damage award 
of $5,000. The micro-claims process was created in recognition 
that the Copyright Office might be able to expend less money 
and resources on even smaller claims. The Register is expected 
to maintain as much as the existing regulatory framework 
established for the rest of Chapter 15 as possible. The 
statutory requirements applicable to claims heard by three 
Officers cannot be waived, but they can be added onto. 
Regulations can be tailored to a micro-claim process. For 
example, the Register may consider an additional initial notice 
that advises parties to a claim of the existence of a micro-
claim process, but may not modify the statutory requirements 
for notice format, opt-out deadlines, etc. The legislation does 
not require micro-claim regulations to be issued concurrently 
with the other required regulations, or even at all. Since the 
Register is likely to face an initially high workload burden in 
establishing the Copyright Claims Board regulations and hiring 
process, and will want some experience in operating with a 
three Claims Officer system before creating a one Claims 
Officer system, the Register should consider waiting for at 
least several months of final claim determinations under a 
three Claims Officer system before determining whether to 
proceed with collecting public comments on proposed regulations 
for a one Claims Officer micro-claim system.
    Section 1510(a) allows the Register to consider whether 
adjustments to the limits on monetary recovery or attorneys' 
fees and costs to be made. This would be a major change to the 
earlier recommendations of the Copyright Office report and what 
the Committee has considered appropriate at this time. Before 
considering changes to these limits, the Register should have a 
complete understanding of the Board's initial operation as well 
as the clearly demonstrated need for changes before proceeding 
with any. Since the legislation's short title contains the key 
words ``small claims'', the Copyright Claims Board is not to 
become a replacement for claims involving all damage amounts. 
It is a small claims tribunal by its very title. In 
consultation with the respective Committees of the Judiciary, 
the Register should consider at appropriate intervals whether 
the damage award amounts should be increased or decreased 
before proceeding with a public rulemaking on the issue. The 
upper bounds of the award amount are effectively limited by the 
notion of ``small'', while the lower bounds are effectively 
limited by the statutory authority in Section 1506(z) to create 
a one Claims Officer approach for awards below $5,000. As noted 
earlier, changes to the amounts should also be considered in 
relation to the workload of the Board since a backlogged Board 
should not be burdened with even more claims. The legislation 
does allow the micro-claim damage cap to be adjusted.

    D. EXPECTATIONS OF PARTIES TO A CLAIM AND THEIR REPRESENTATIVES

    Parties should adhere to the statutory and regulatory 
requirements at all times. Although parties may wish to proceed 
pro se, hiring an attorney or seeking the assistance of a pro 
bono law clinic should be considered if a party has any concern 
about their ability to represent themselves before the Board.
    The Committee is aware of concerns that the Board will be 
faced with situations in which the behavior of a party to a 
claim departs from the established norms of a district court to 
the detriment of other parties. The Committee has established 
this alternative dispute resolution process to be an effective 
way of resolving small value claims. The Board cannot be 
effective if it is burdened by those who ignore the rules of 
the Board or engage in abusive tactics. The Committee has 
strongly encouraged the Board to utilize its standing authority 
to penalize abusive behavior, including an outright dismissal 
of a claim with an imposition of financial sanctions, in order 
to allow those who do follow the rules of the Board to have 
their claims heard more quickly instead. Parties and their 
representatives should be on notice that improper behavior will 
cost them more than a proverbial ``slap on the wrist.''

             E. EXPECTATIONS OF THE COPYRIGHT CLAIMS BOARD

    Over time, the Board will hear claims that will be similar 
in nature to other claims. Although each claim deserves and 
requires an independent review, the Board needs to be 
consistent, but not necessarily formulaic, in how it treats 
similar claims as well as how it awards damages. This will help 
give guidance to those who are choosing whether to utilize this 
new process or not as either a claimant or respondent. It may 
also help to deter cases from arising in the first place.
    Since parties to a claim may not be represented by counsel, 
the Board will need to operate in a manner easily navigable by 
those who are not familiar with traditional courtroom 
procedure. However, there is a limit that the Board will need 
to identify for how far it should tolerate errors by a party. 
An appropriate line between acceptable and non-acceptable may 
be that actions which impose burdens upon other parties to a 
claim should be taken more seriously than a one-time diversion 
from the traditional expectations found in other courts. 
However, just as it is not the responsibility of the Board to 
provide legal advice or assistance with particular claims, it 
is not the responsibility of the Board to babysit parties who 
have the means to properly engage with the Board with some 
effort of their own.

          II. History of the Bill and Committee Consideration


                      A. INTRODUCTION OF THE BILL

    S. 1273 was introduced on May 1, 2019 by Senator Kennedy 
with Senators Durbin, Tillis and Hirono as original cosponsors 
and was referred to the Judiciary Committee.

                       B. COMMITTEE CONSIDERATION

    The Committee considered S. 1273 on July 18, 2019. No 
amendments were offered. The Committee then voted to report the 
Copyright Alternative in Small-Claims Enforcement (CASE) Act of 
2019, without amendment, favorably to the Senate by voice vote.

              III. Section-by-Section Summary of the Bill


Section 1. Short title

    This section of the bill provides that the legislation may 
be cited as the ``CASE Act of 2019'' or the ``Copyright 
Alternative in Small-Claims Enforcement Act of 2019''.

Section 2. Copyright Small Claims

    This section of the bill creates a new Chapter 15 within 
Title 17 of the U.S. Code entitled ``Copyright Small Claims'' 
as follows:
            Sec. 1501  Definitions
    This section creates definitions for the purposes of the 
new Chapter 15 for the terms `party', `claimant', 
`counterclaimant', and `respondent'.
            Sec. 1502  Copyright Claims Board
    This section establishes a new Copyright Claims Board 
housed within, and supported by, the U.S. Copyright Office. 
Three full time Copyright Claims Officers who are appointed by 
the Librarian of Congress after consultation with the Register 
of Copyrights will serve on the Copyright Claims Board. 
Specific skills and background criteria are listed for the 
Board members. The Register shall also hire no fewer than two 
Copyright Claims Attorneys with specific backgrounds to assist 
the Copyright Claims Board. The pay rates for the Officers and 
attorneys are specified along with a staggered initial term of 
4, 5, and 6 years for the Officers in order to provide 
continuity for the Board as each term ends. All future terms 
are for 6 years with a specified process for filling vacancies 
either at or prior to the expiration of the associated term. 
Interim appointments are permitted in case of a temporary 
inability of an Officer. The Librarian has standing authority 
to sanction or remove an Officer subject to Section 1503(b).
            Sec. 1503  Authority and duties of the Copyright Claims 
                    Board
    This section sets forth the authority and duties of the 
Board. Eleven functions of the Officers are specified along 
with four functions of the Attorneys. All Board determinations 
shall be made independently although the Officers and Attorneys 
may consult with the Register on general issues of law, but not 
in regards to the fact of a particular matter unless that 
matter is the subject of a review by the Register under 
Sec. 1506(x). The Officers and Attorneys are barred from 
inconsistent duties, subject to mandatory recusal, and are 
barred from ex parte communications. The Officers and the 
Attorneys serve under the general direction of the Register of 
Copyrights. All actions of the Board and Register in connection 
with a determination are subject to judicial review as 
specified in Sec. 1508(c).
            Sec. 1504  Nature of proceedings
    This section specifies that participation in a Board 
proceeding is voluntary and that any party may instead pursue a 
claim, counterclaim, or defense as well as seek a jury trial in 
a U.S. district court or other appropriate court. There is a 
three-year statute of limitations for all claims and the time 
for an action in district court is tolled during the time a 
proceeding is pending before the Board. Permissible claims and 
counterclaims are identified in Subsection (c) including 
infringement of an exclusive right in a copyrighted work by the 
owner or beneficial owner, a claim for a declaration of non-
infringement, and claims under Section 512(f) for 
misrepresentation in connection with a notification of claimed 
infringement or a counter-notification (usually referred to as 
a DMCA Section 512 notice and takedown claim). Subsection (d) 
further identifies impermissible claims.
    Subsection (e) identifies the permissible remedies. For 
infringement claims only, allowable monetary recovery is 
limited to actual damages, profits, and statutory damages which 
are capped at either $7,500 or $15,000 per work depending upon 
timely copyright registration. Willfulness is not to be 
determined although the Board may consider in assessing damages 
whether the infringer has agreed to cease or mitigate the 
infringing activity.
    For all proceedings, the total monetary recovery excluding 
any costs or attorneys' fees that may be awarded due to bad 
faith conduct is capped at $30,000. Joint and several liability 
may be found by the Board.
    Subsection (f) authorizes the Register of Copyrights to cap 
the number of proceedings brought by the same claimant each 
year in order for the system to run effectively. The same 
claimant is defined as the same real party in interest as 
defined in Section 1501.
            Sec. 1505  Registration requirement
    For claims or counterclaims involving alleged infringement, 
claim or counterclaim cannot be asserted before the Board 
unless the legal or beneficial owner of the copyright has filed 
a copyright application, deposit and required fee with the 
Copyright Office and a registration certificate has been issued 
or has not been refused. While the Board may hold a proceeding 
with respect to the pending claim(s) where a registration 
certificate is pending before the Copyright Office, the Board 
may not render a determination until the registration 
certificate is issued by the Copyright Office and shared with 
the other parties.
    If there is more than a one year delay before a certificate 
is available, the Board may dismiss the proceeding without 
prejudice. The Register may establish expedited proceedings to 
process registration applications for works that are the 
subject of a Board proceeding. Proceedings may be held in 
abeyance automatically for up to one year pending submission of 
a registration certificate. After one year, the Board may 
dismiss the proceeding without prejudice upon notice and a 30 
day response period to the parties. The same presumption under 
Section 410(c) applies for works registered not less than 5 
years after the date of publication. The Register is directed 
to establish regulations concerning expedited registration 
procedures for works before the Board.
            Sec. 1506  Conduct of proceedings
    This section sets forth the Board proceedings in detail. In 
general, the Board is directed to follow the legal precedents 
applicable in the jurisdiction most applicable to the claim. 
Subsection (b) requires the Board to maintain records to 
document all proceedings. Subsection (c) notes that no in-
person appearances are required and that video conferencing is 
encouraged. Subsection (d) states that parties are not required 
to have legal representation, but may choose to have an 
attorney or a pro bono legal clinic represent them.
    Pursuant to subsection (e), a proceeding is commenced only 
after a statement of material facts is filed by the claimant 
along with the filing fee specified by the Register. Before a 
claim is heard, subsection (f) requires that it must first be 
reviewed by a Copyright Claims Attorney who has the authority 
to require a refiling with specified deadlines if the original 
filing does not comply with applicable regulations. Claims 
shall be dismissed without prejudice if a claim cannot be heard 
by the Board due to the failure to join a necessary party; the 
lack of an essential witness, evidence or expert testimony; or 
the determination of the claim imposes too great a burden upon 
the Board or is beyond the subject matter competence of the 
Board. Counterclaims are permissible after a similar review by 
a Claims Attorney.
    Pursuant to subsections (g) and (h), claims must be served 
within 90 days of approval of the claim by a Board Attorney 
using a standardized process and notice format established by 
the Register. The notice shall contain a prominent statement 
concerning a 60 day opt-out mechanism and the impact of not 
opting out. Several requirements govern the service of the 
notice and waivers of personal service. The Board may maintain 
its own list of designated agents that have been submitted by 
corporations, partnerships, or unincorporated associations. 
Personal service may also be waived via a prepaid option of 
returning a signed form to the Board. However, waiver of 
personal service does not constitute waiver of the right to 
opt-out. All service of a claim and waiver of personal service 
may only occur within the United States. The means of service 
for other documents are governed by regulations established by 
the Register of Copyrights pursuant to subsection (j).
    The opt-out procedure in subsection (i) sets forth that 
respondents have 60 calendar days to opt-out of the small 
claims process after being served with the claim.
    After the respondent does not opt out, the proceeding is 
considered to be active pursuant to subsection (k) allowing for 
scheduling of the proceeding in addition to conferences and 
discovery authorized in subsection (l) to occur.
    Subsections (m), (n), and (o) govern the materials and 
evidence to be considered by the Board. Discovery shall occur 
pursuant to regulations established by the Register. There is 
no formal motion practice before the Board, although the Board 
may request submissions sua sponte or at the request of parties 
to the proceeding. Mandatory submission of discovery materials 
is limited to the parties in the proceeding although the Board 
may request voluntary submissions from non-parties. Any 
confidential information may be covered by a protective order 
to limit public disclosure. The Board may consider relevant 
evidence to the claims in a proceeding including sworn 
testimony. Expert witnesses are not permitted unless the Board 
agrees that good cause can be shown for them.
    Subsections (p), (q), (r), (s), and (t) provide the 
statutory framework for how hearings are conducted including 
potential voluntary dismissals and settlements. Conferences may 
be held by one or more Officers which may be recorded or 
transcribed to assist the other Board members as well as being 
part of the claim record. Board determinations shall be made by 
a majority of the Officers, in writing and based upon a 
preponderance of the evidence standard. All determinations 
shall be made publicly available although confidential 
information shall be redacted. Information related to the 
proceedings are exempt from FOIA.
    Subsections (u) and (v) address proceedings that are not 
able to proceed either due to a respondent's default or a 
claimant's failure to proceed. Unless a justifiable cause can 
be shown, a respondent can be found in default if they fail to 
appear or cease to participate in a proceeding. If this occurs, 
the Board shall prepare a proposed default determination after 
a showing of sufficient evidence by the claimant and provide a 
written notice with the proposed finding to the respondent and 
give the respondent 30 days to provide information in 
opposition to the proposed default determination. Such default 
determination may only be challenged pursuant to Section 
1508(c). If a claimant fails to complete service, each 
respondent with failed service shall be dismissed without 
prejudice. If a claimant fails to prosecute, the Board may 
dismiss the claim and award attorneys' fees and costs as 
appropriate.
    Requests for reconsideration are permitted in writing to 
the Board within 30 days after the final determination, 
pursuant to subsection (w). Pursuant to subsection (x), if the 
request is refused by the Board, a party may appeal for a 
review by the Register of Copyrights who shall determine if the 
Board abused its discretion in denying reconsideration and, if 
abuse is found, remand the claim to the Board for specific 
issues identified in the remand.
    Subsection (y) authorizes actions by the Register and the 
Board to take specific actions in order to address bad faith 
conduct through awarding attorneys' fees, costs, and financial 
sanctions in the amount of up to $5,000 ($2,500 if the 
adversely affected party appeared pro se) or higher in cases of 
extraordinary circumstances or where a pattern or practice of 
bad faith conduct has occurred. Parties can also be barred from 
Board proceedings if on more than one occasion within a 12 
month period they come before the Board for a harassing or 
other improper purpose. If such abuse is found by the Board, 
the party is then banned from initiating a claim before the 
Board for an additional 12 months from the date of the finding.
    The Register of Copyright is also directed to establish 
regulations to hear claims below $5,000, exclusive of any 
attorney's fees and costs, by one Claims Officer. These 
regulations are to be as consistent as possible with the 
regulations that apply to larger claims except where reasonably 
necessary to enable such claims to be heard.
            Sec. 1507  Effect of proceeding
    This section sets forth the non-precedential effect of 
Board determinations and the inability of anyone to use a 
statement or submission in a claim before the Board in any 
other forum. The conditions by which a claim before the Board 
qualifies as an action seeking an order to restrain a 
subscriber from engaging in infringing activity under Section 
512(g)(2)(C) are identified. The non-impact of a proceeding 
upon class actions is highlighted in addition to the 
applicability of claims or counterclaims before the Board to 
Section 512(g)
            Sec. 1508  Review and confirmation by district court
    Subject to meeting specified filing procedures, a party 
that has failed to pay damages awarded by the Board or 
otherwise complied with the relief awarded in a final 
determination may seek enforcement in an appropriate U.S. 
district court. Within 90 days of a final determination by the 
Board, a party to the proceeding may seek an order vacating, 
modifying, or correcting a determination of the Board if it was 
issued as a result of fraud, corruption, or other misconduct; 
if the Board exceeded its authority; or if excusable neglect 
causes the issuance of a default determination.
            Sec. 1509  Relationship to other district court actions
    This section identifies the nature of the relationship 
between the Board and other district court actions including 
the qualification of a proceeding before the Board as an 
alternative dispute resolution process under Section 651 of 
Title 28.
            Sec. 1510  Implementation by Copyright Office
    The Copyright Office is authorized to establish regulations 
to carry out this new Chapter 15 of Title 17. The Register is 
authorized to adjust the limits on monetary relief after a 120-
day review period by Congress. The filing fee for a claim is 
set at a minimum of $100 and the maximum at the cost of the 
filing fee for an action in a U.S. district court.
            Sec. 1511  Funding
    This section authorizes funding necessary to operate the 
Copyright Claims Board.

Section 3. Implementation

    This section of the bill provides that the Copyright Claims 
Board shall begin operations within one year of enactment.

Section 4. Study

    This section of the bill provides that not later than 3 
years after the first determination by the Board, the Register 
of Copyrights shall conduct a study on the operation of the 
Board including potential recommendations for changes to the 
operation.

Section 5. Severability

    This section of the bill provides a severability clause 
incorporated into the legislation.

             IV. Congressional Budget Office Cost Estimate

    The cost estimate provided by the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974 was not available for inclusion in this report. The 
estimate will be printed in either a supplemental report or the 
Congressional Record when it is available.

                    V. Regulatory Impact Evaluation

    In compliance with rule XXVI of the Standing Rules of the 
Senate, the Committee finds that no significant regulatory 
impact will result from the enactment of S. 1273.

                             VI. Conclusion

    The Copyright Alternative in Small-Claims Enforcement Act 
of 2019, S. 1273, addresses the enforcement challenges faced by 
small copyright owners with low value claims and claims for 
misrepresentations under Section 512(f) of Title 17 of the 
United States Code, the Copyright Law of the United States.

       VII. Changes to Existing Law Made by the Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee finds no changes in 
existing law made by S. 1273, as ordered reported.

                                  [all]