On October 22, 2019, the U.S. House of Representatives passed the Copyright Alternative in Small-Claims Enforcement Act of 2019, also known as “CASE.” H.R. 2426 S. 1273, 116th Cong. (1st Sess. 2009)
The Senate still has to vote on CASE before it can become law. If successful, CASE will amend title 17 of the United States Code to establish an alternative dispute resolution (“ADR”) program for copyright small claims, and for other purposes. Disputes over copyright claims of relatively modest value may not be efficient in federal court. CASE’s goal is to create a simpler and more affordable judicial process for these disputes.
Here is what CASE seeks to establish.
Who are the Adjudicators?
CASE will establish a Copyright Claims Board (“Board”) in the Copyright Office that will serve as an alternative forum in which parties may voluntarily seek to resolve copyright claims. S. 1273 § 1502(a). The Board will consist of three Copyright Claims Officers. S. 1273 § 1502(b)(1). There will also be at least two Copyright Claims Attorneys to assist in the administration of the Board. S. 1273 § 1502(b)(2).
What claims would the Board review?
Only straight-forward copyright infringement-related claims and defenses, including (1) a claim for infringement; (2) a declaration of noninfringement; (3) a claim for misrepresentation in connection with a notification or counter notification; (4) respective counterclaims; (5) respective legal or equitable defense; or (6) other related claims arising out of the same infringing activity. S. 1273 § 1504(c).
Exceptions to the claims listed above are (1) claims that are pending in a court, or have been finally adjudicated in a court, (2) claims against a Federal or State governmental entity, and (3) claims against persons or entities residing outside the U.S. S. 1273 § 1504(d).
The Board may also dismiss claims that are too complex or too lengthy to administer. S. 1273 § 1505(f)(3).
What remedies would the Board be able to award?
Damages: Actual damages, profits, and statutory damages. S. 1273 § 1504(e)(1). The total monetary award is capped at $30,000 per proceeding, and $15,000 per claim. Id.
Injunctions: Injunctive relief is given in the form of an agreement between the parties, and the agreement can also include monetary awards. S. 1273 § 1504(e)(2).
Attorneys’ fees and costs up to $5,000, or costs up to $2,500 if a party appears pro se. The Board will only award fees and costs when it finds bad faith conduct. S. 1273 § 1504(e)(3).
Effect of the Board’s determination
CASE Actions are subject to judicial review. S. 1273 § 1503(g). Determination does not preclude litigation or re-litigation and should not be cited as legal precedent. S. 1273 § 1507. While a claim is before the Board, if that same claim is also being litigated in a district court, then the district court should issue a stay. S. 1273 § 1509(a).
Additional information about the ADR program
Participation in the ADR program is voluntary, and parties have the right to pursue their claims in court instead. S. 1273 § 1504(a).
Participants do not have to appear in-person. S. 1273 § 1506(c)(1). Unless physical evidence is necessary, all documents are submitted over the internet. S. 1273 § 1506(c)(2). Participants can be represented by an attorney. S. 1273 § 1506(d).
The statute of limitations for the ADR program is the same as that under the Copyright Act, 3 years. S. 1273 § 1504(b).
What other purpose does CASE serve?
The main purpose of CASE is to establish an ADR program. Its other purpose is to establish a study.
Within 3 years of the Board’s first issued determination, the Register of Copyrights shall conduct a study on the effectiveness of the Board on: (1) whether CASE needs any adjustments, particularly with respect to its claims and damages; and (2) whether the Board needs expansion to offer mediation and other ADR services. The Register of Copyrights is to report its findings to Congress.
What are the pros of CASE?
CASE would give independent creators a practical way to enforce their rights without having to hire an attorney or fight the infringement in court. Music makers and songwriters are big supporters of CASE. Other independent creators that would benefit greatly from CASE are photographers, illustrators, graphic artists, authors, bloggers, YouTubers and other types of creators and small businesses.
What are the cons of CASE?
CASE caters to less sophisticated parties, who will likely be self-represented. CASE Actions may expose these less sophisticated parties to potential abuse. For example, a CASE Action might create greater opportunities for claimants to potentially obtain settlements from unsophisticated and unrepresented defendants because many small claims do not involve damages as high as $30,000. The relatively small amount of damages at issue may deter defendants from engaging counsel and more likely to accede to settlement payments to resolve the claims.
Some observers believe that CASE may create a “default judgment mill.” An accused infringer who fails to opt-out within 60 days of receiving notice of a claim is subject to default. S. 1273 § 1506. Unsophisticated parties may not appreciate the implication of a default. However, by the same token, this opt-out provision would allow more sophisticated defendants to avoid the copyright ADR program, forcing claimants into federal court. S. 1273 § 1505(g)(1).
The effect of CASE and whether it achieves the desired results of providing a sensible, affordable forum for small value claims remains to be seen, if and when CASE is passed and signed into law and enacted.
About the author: Jing Zhao is a registered patent attorney and a member of Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. Ms. Zhao has a degree in computer science, and her commercial litigation practice focuses on intellectual property and ERISA disputes, with a special interest in emerging intellectual property and other legal issues in the eSports industry. Ms. Zhao’s biography can be found here.
In a recent decision, the Federal Circuit Court of Appeals ruled that design patents on Ford truck hoods and headlights are not invalid as functional articles, holding “the aesthetic appeal of a design to consumers is inadequate to render that design functional.” Automotive Body Parts Association v. Ford Global Technologies, LLC, No. 2018-1613 (Fed. Cir., July 23, 2019).
Design patents protect a “new, original and ornamental design for an article of manufacture.” 35 U.S.C. § 171(a). Established law prohibits design patents on primarily functional designs due to their lack of ornamentality. Utility patents, on the other hand, must be functional to be patentable. Valid design patents may contain some functional elements but may not claim a “primarily functional” design. “If a particular design is essential to the use of the article, it cannot be the subject of a design patent.” L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117, 1123 (Fed. Cir. 1993).
This case was brought by the Automotive Body Parts Association (ABPA), who asked the court to hold that the aesthetic appeal, and not the mechanical or utilitarian aspect, of a patent design may render it functional. The court declined to adopt the ABPA’s unique argument.
The designs at issue are below.
Ford testified that a design team, and not engineers, designed the ornamental features for the hood and headlights, and although engineers reviewed the final designs, there were no changes to the aesthetic designs based on engineering or functional requirements. The court stressed the importance of prior tests that looked at the presence or absence of alternative designs. Of course, there are a variety of hood and headlight designs available.
Overall, the court found the ABPA’s arguments that designs that derive commercial value from their aesthetic appeal are functional, would gut the principles of design patents: “The very thing . . . for which [the] patent is given is that which gives a peculiar and distinctive appearance, its aesthetic.” The commercial edge the design may give a patent owner is “exactly the type of market advantage manifestly contemplated by Congress in the laws authorizing design patents.”
This recent ruling from the Federal Circuit clarifies that design patent defendants should not focus on whether a design’s aesthetic appeal is functional, but rather focus on the functionality of the article of manufacture itself. Patent owners will do well to develop evidence early of invention by designers and not engineers, and of a variety of design options in the field to show the lack of functional necessity for the particular patented design.