We have written before on the new CASE Act, which sets up a Copyright Claims Board to resolve copyright small claims. However, it is not clear that the board can constitutionally issue binding decisions. The questions surrounding its constitutionality might seem academic, but they have real-world implications.

Most of the board’s decisions will be small. But the court can issue findings of non-infringement and render decisions that call into question the ownership of certain copyrighted material. This means there will be decisions that may make it financially reasonable to challenge the constitutionality of the regime.

The act might be unconstitutional because:

  1. It violates the separation of powers requirements that normally require the judicial branch to resolve disputes between private parties.
  2. Its opt-out provisions are not enough for a defendant to waive constitutional due process, personal jurisdiction, and jury trial rights.
  3. The manner in which the members of the board are appointed violates the Constitution’s appointments clause.

These questions should make plaintiffs wary of spending time and resources bringing actions in front of the board, since any award might not be enforceable. In fact, litigating the constitutionality of the board could be more expensive than litigating an infringement claim through the normal federal court process.

Does the CASE Act violate separation of powers requirements?

Under Article II of the Constitution, Congress does not have power to establish courts to resolve most types of claims. The Constitution requires that those claims be resolved by the courts created under Article III. The Supreme Court has, however, approved congressionally created courts or quasi-courts, which resolve public rights” as opposed to “private rights.”

Whether copyright infringements are “private” or “public” rights has not been resolved. The Supreme Court has said that what makes a right public rather than private is that “the right is integrally related to particular federal government action.” Courts have upheld Congress’s right to create specialty and administrative courts such as the Tax Court, Court of Federal Claims, and Social Security Appeals Court. However, each of those courts hears cases in which the U.S. is one of the parties.

Most recently, the Supreme Court defined public rights as matters arising “between the government and others, which from their nature do not require judicial determination.” In that case, it upheld the constitutionality of the Patent Trial and Appeal Board’s inter partes review process, because that process between private parties was merely a reconsideration of the government’s decision to grant a patent. However, the Court said it was not ruling on whether patent infringement disputes can be heard in a non-Article III court.

The board created by the CASE Act aims to resolve infringement actions between private parties. That raises questions about whether the CASE Act is constitutional, which the Supreme Court will have to decide.

Are the boards’ default judgments unconstitutional?

Even if the new Copyright Claims Boards are constitutional, the process for granting default judgments may not be. Parties are allowed to waive their constitutional rights. Parties, including sophisticated parties, waive those rights when it is in their best interest to do so. Parties in front of the board could waive their right to a jury trial, to personal jurisdiction, or even to due process without creating a constitutional question.

However, waiver of constitutional rights has to be done knowingly and freely. That is an easy enough hurdle for parties that willingly attempt to resolve their disputes in front of the board. However, the board also has the authority to issue default judgments. The Congressional Research Service (CRS) found that failure to take action to opt out was enough for a party to waive its rights to a jury trial or to due process. The CRS made this finding based on other constitutional waivers that can be made by failures to act. For instance, a party can waive its right to a jury trial by failing to make a written demand asking for a jury trial. Likewise, a party can waive due process rights by failing to respond to a lawsuit that has been properly served.

But is failing to assert rights through a judicial proceeding the same as failing to respond under a congressionally created alternative dispute resolution forum? The CRS does not look at this issue. The protections that are meant to ensure a fair process for trying cases are not easily waived, and it is not clear that failing to respond to the board will waive those rights.

Does the board’s membership comply with the appointments clause?

The CASE Act calls for the Librarian of Congress to appoint the board’s three members in consultation with the Register of Copyrights.

The Constitution’s appointments clause has certain rules for the appointment of high government officials or what the Constitution calls “officers of the United States.” The highest ranking “officers” can only be appointed by the president with the advice and consent of the Senate. “Inferior officers” may be appointed by the heads of departments.

Inferior officers are “officers whose work is directed and supervised at some level by others who were appointed by presidential nomination with the advice and consent of the Senate.” To decide whether an officer is an inferior officer, courts look at both:

  • The level of supervision and oversight presidential appointees exercise over the officer
  • Those appointees’ power to remove the officer without cause

The CRS thought it was likely that board members were inferior officers that could be appointed by the Librarian of Congress.

However, courts have ruled other officers overseeing intellectual property disputes, copyright royalty judges and patent administrative judges, were principal officers that needed presidential appointment with Senate confirmation. Such a determination for the board members could render them unable to issue binding decisions.

Further, even if the board members are inferior officers, there may be problems with their manner of appointment. The requirement that inferior officers be appointed by heads of departments recently led to the Supreme Court striking down the testing and selection regime for Security and Exchange Commission’s administrative law judges. The Court ruled that those judges should be appointed personally by the commissioner. That led almost every federal department to reappoint its administrative law judges and had a big impact. It required rehearings, unless waived by the defendants, for all cases in front of improperly appointed judges. Those reappointments also led to more lawsuits challenging whether the heads of departments could just reappoint judges using an autopen or had to make individualized decisions on each appointment.

What does this mean for copyright owners?

There are serious unanswered questions about whether the board created by the CASE Act is constitutional. These concerns should make plaintiffs wary of bringing actions before the board. A process designed to lead to fast and inexpensive resolutions may become complicated and expensive once collateral attacks on the constitutionality of the board are made.