Coming off of the August recess, lawmakers should have the concerns of their constituents fresh in their minds. That includes the concerns expressed through dozens of meetings with entrepreneurs during this year’s Congressional Startup Day, where lawmakers heard directly from startups about the policies that enable entrepreneurship and innovation. But Congress is poised to take up a bill that would change copyright enforcement, and open startups and their users to new risks.
The proposed Copyright Alternatives in Small-Claims Enforcement Act of 2019 (“CASE Act”), would increase uncertainty in copyright law. Against a backdrop of inconsistently applied copyright laws; massive, predetermined statutory damages; and “copyright trolls” coercing nuisance-value settlements — the CASE Act would make those things worse. And startups will be one of the first groups to suffer.
The CASE Act purports to create a process for addressing online copyright infringement by establishing a Copyright Claims Board within the U.S. Copyright Office that would hear “small-claim” copyright infringement cases. While well-intentioned, the CASE Act would exacerbate existing problems in copyright enforcement and cause new ones.
The board — which would not be a court, but instead sit within the legislative branch — would be empowered to adjudicate copyright infringement and award damages up to $30,000 per case. By contrast, copyright infringement cases are currently brought only in federal courts, where everyone has constitutional protections like the right-to-jury trials and appeal.
This bill would magnify the existing uncertainty in copyright law. Consider, for example, fair use, which permits the use of copyright material in certain circumstances. As the American Bar Association has observed, “courts have infamously favored different (fair use) factors in different cases, resulting in very unpredictable outcomes.”
Unpredictability in fair use is particularly important here because a lot of non-commercial, online uses of content are fair use, such as reposting and commenting on a short snippet of a news article. Another example of uncertainty can be seen in the realm of software interfaces, where courts disagree over whether ubiquitous tools used by developers are eligible for copyright protection and how fair use applies. Startups who use those important tools currently cannot predict whether and where they could be liable for infringement.
The CASE Act will increase these kinds of uncertainty. First, the new board would not have to follow its own precedent or consistently apply (its own or another court’s interpretation of) copyright law. Second, the board’s decisions would not be subject to appeal except in the unusual circumstance of outright misconduct. The right to appeal is an important tool for creating fairness and certainty in the law. Under the current system, if you think that a court got the facts or the law wrong, you can appeal. But under the CASE Act, there would be no similar check on the board, and no opportunity for an appeals court to correct its mistakes.
The CASE Act would couple uncertain legal standards with high, predetermined damages, which tends to create problems for startups. For one, uncertainty in the legal environment and the potential for large damages is a significant concern for investors. While $30,000 in damages might not seem “large,” it is when you consider that most small businesses get started with less than $25,000, and a recently launched startup raises on average less than $80,000. The risk of losing $30,000 would not be trivial, and could understandably make investors hesitant.
Experience has also shown that legal uncertainty breeds abusive litigation. For example, the scope and validity of patent claims can be uncertain for multiple reasons. So-called “patent trolls” have exploited that, threatening to assert weak and overbroad patents against startups unless they pay a settlement that is less than the cost of defending a lawsuit. Similarly, some copyright owners file lawsuits in an effort to monetize infringement accusations — asking people to settle to avoid embarrassment and the uncertain risk of damages in court. Some courts are cracking down on this behavior, which they refer to as an “extortion scheme.” But the CASE Act would create another place for unscrupulous actors to coerce small settlements from startups and their users.
Policymakers should strive for certainty in the law and reduce opportunities for abuse. Instead of taking up the CASE Act as it is currently written, Congress should consider alternative approaches that preserve copyright owners’ rights without creating a breeding ground for unanswered questions about copyright enforcement and abusive litigation.