Let’s pretend for a little bit. C’mon, bear with me here. Imagine that you — yes, you! — are an aspiring artist. Maybe you craft in wood. Maybe you write novels or poems. Perhaps you take stunning photographs. If you want to spice things up, imagine that you are a high-energy drummer in an up and coming rock band. One day, as you walk down the street, you see your photos or an excerpt from your book, or hear your latest single — whatever — in a storefront. It could be exciting, right? “Hey! I’m finally making it!” But what if you never sold your work to that store owner, or anybody else, in the first place? If you’re not making money off your art… who is?

In theory, hypothetical-you could sue the store owner for copyright infringement. And yet… if independent creators are, as the stereotype goes, truly “starving artists,” then the soaring costs of litigation will almost certainly act as a nuclear-level deterrent, ensuring that independent artists and creators who victims of piracy remain victims of piracy. This has the consequence of making it effectively impossible for authors, writers, and artists to protect their livelihoods. In turn, this may dissuade the most creative among us from pursuing their vision.

In a 2015 survey, The American Intellectual Property Association found that, on average, the cost of a single copyright litigation case with less than one million dollars in damages was $270,000. It’s hard to imagine any but the most successful artists having the kind of financing available for even small-claims copyright infringement litigation.

Congress, in a surprising move, has decided to take note and actually do something about it. House Resolution 3945 — the Copyright Alternative in Small-Claims Enforcement Act of 2017 (CASE Act, for short) — seeks to provide a cost-efficient avenue for independent and up-and-coming artists to protect their creations from infringement.

The CASE Act, if made into law, would establish a series of tribunals — called the Copyright Claims Board or “CCB” for short — made up of experts in copyright law. These expert judges would review infringement claims without incurring the astronomical costs of full-on copyright litigation.

There are three major aspect of note with regard to the CCB: (1) issues of jurisdiction and due process; (2) the limitation of damages; and, (3) the existence of an opt-out system.

Jurisdiction and Due Process

Critics of the bill complain that the CCB circumvents due process by allowing an alternative to the federal courts — which currently have exclusive jurisdiction over copyright infringement claims. Indeed, the CCB would be a subsidiary of the Copyright Office, completely independent from the judiciary. Further, the judges would be appointed by the Librarian of Congress, and could not be removed based on the “substantive result of any individual determined reached by the” CCB. Federal courts would still not have jurisdiction on appeal, either; instead, decisions of the CCB could only be appealed to the Register of Copyrights. Only in instances of “fraud, corruption, misrepresentation, or other misconduct”, or when a party failed to appear with an excusable reason, or when the CCB has “exceeded its authority” could the decision of the tribunal be removed to federal court. Importantly, removal to federal court is not available when the CCB errs in interpreting the law.

However, the CASE Act seeks to remedy this, built-in, by requiring both the plaintiff and the defendants to consent to the CCB’s jurisdiction. Thus, if one is a defendant in a copyright infringement case they must agree to the tribunal system for it to have jurisdiction; if the defendant does not consent to its jurisdiction, then federal district courts retain their jurisdiction over the claim. It should also be taken into account, however, that, from a practical standpoint, the astronomical expenses of copyright litigation act as a sort of de facto hurdle in preventing due process.

Limitation of Damages

Under the CASE Act, the CCB’s jurisdiction is limited to cases in which damages up to $30,000 are in play. In other words, the CCB could only award a copyright holder up to $30,000.00 — any claim for a larger amount would still be within the federal circuit’s sole jurisdiction. Small claims courts are not a new idea; indeed, small claims divisions exist in the judicial branch of all 50 states. On average, these small claims divisions have a limitation of damages of approximately $6,000.

The CCB, on the other hand, could levy damages five times more than the average small claims court. This is, in part, because the CCB would not be limited to providing so-called “actual damages,” but could also assign statutory damages under 17 U.S.C. § 504. Statutory damages are available in certain circumstances to punish infringers even when the copyright in question is not wildly profitable.

Thus, the CCB is ultimately limited to awarding $15,00 in damages per infringement, with up to $30,000 in damages total. The bill’s critics take issue with the fact that the CCB’s damage limitation is more than double of the damages available in the small claims courts of 49 states. However, these critics seemingly ignore the reality that copyright infringement may not result in much actual damage, especially for smaller artists, and that statutory damages are available in copyright cases for the deterrence effect. Further, critics seemingly ignore that the $30,000.00 limit on damages — even statutory damages — is far less than the $150,000.00 in statutory damages available under Title 17 of the United States code for willful infringement.

The Opt-Out System

As mentioned above, the CCB would be an “opt-out” tribunal. This means that, upon being served a notice of the suit, a Defendant will have the opportunity to deny the CCB’s jurisdiction, instead having the federal circuit determine the case. However, a defendant who fails to respond will automatically be subjected to the CCB’s jurisdiction. This could pose problems by creating what could be a “default judgement farm system,” so to speak. If copyright holders know that defendants are not likely to appear, they may be inclined to “farm” complaints against defendants in front of the CCB and then achieve a default judgment — all outside of the scope of the judicial process and, indeed, circumventing the judicial process as we have known it.

Conclusion

It may be that the CASE Act is fundamentally flawed and not the proper answer to the very real issues of a de facto lack of availability for independent copyright holders to enforce their copyrights. However, it is interesting legislation which highlights areas in which enforcing one’s copyright is fundamentally broken in 2018. Clearly, something — whether it be the CASE Act or a derivative of the CASE Act — should change to provide for easier access to small claims copyright enforcement legislation.

If you are an author or artist in need of help obtaining a federal copyright registration or enforcing your copyrights, you can contact the professional attorneys at Law Offices of John D. Gugliotta, P.E., Esq., LPA. Our registered attorneys can help you secure federal copyright registration! Contact us today here, or call us at (888) 298-8580.

The Law Offices of John D. Gugliotta, P.E., Esq., LPA publishes this blog for educational purposes only, not to provide specific legal advice. By using this blog site you indicate that you understand there is no attorney-client relationship between you and the Law Offices of John D. Gugliotta, P.E., Esq., LPA. This blog should not be used as a substitute for obtaining legal advice from a licensed attorney. In addition, statements made on this blog represent the viewpoints of the individual authors, and do not necessarily reflect the views of Law Offices of John D. Gugliotta, P.E., Esq., LPA or any of our clients.

Redbox, the popular movie-rental terminals outside of your local grocery store, has begun reselling download codes for popular movies, including Disney’s Beauty and the Beast, Frozen, and its three newest Star Wars films.

You know the ones. When you buy a Blu-ray or DVD (why are you still buying DVDs? It’s 2018!) from Disney, it comes bundled with a piece of paper inside, affixed with a special code allowing you to download a digital copy of that same movie on [Redeem Digital Movies] and [Movies Anywhere]. This allows you to watch the movie on your computer, phone, tablet, video game console, or TV-streaming-box.

Redbox has viewed these disc-and-code bundles as two separate products. Thus, Redbox purchased Disney Blu-Rays and DVDs, coupled with digital codes. from ordinary retail outlets. Redbox would then allow consumers to rent the physical media discs, as it always has. However, Redbox also began reselling the digital codes packaged in its purchases directly to consumers.

As you could probably imagine, Disney did not take too kindly to this, suing Redbox for copyright infringement — specifically for violating the licensing terms that accompany the purchase of these disc-and-code bundles dubbed “Combo Packs.” Disney argued that the physical disc and the digital code are not two separate products, but rather offered together as one product for customer convenience. Indeed, the products come affixed with the language “codes are not for sale or transfer.” Disney’s argument, essentially, was that Redbox had to agree to the terms of that condition in order to un-package the products and gain access to the digital code to begin with. A further claim Disney brought against Redbox was that Redbox is encouraging end-users to infringe on Disney copyrights, thus being liable under the doctrine of contributory infringement. Disney requires consumers “represent” that they own the physical disc that accompanied the download code in order to access the digital movie provided by the digital code.

Federal judge Dean Pregerson recently ruled against Disney in this case, rationalizing his decision with the somewhat obscure doctrine of Copyright Misuse. Copyright Misuse occurs when the copyright holder is abusing their copyright, and applies to prevent the copyright holder from enforcing the copyright. Judge Pregerson held that Disney’s tying of physical disc ownership and digital download codes was inconsistent with the copyright law’s First Sale Doctrine.

Judge Pregerson ruled that merely including the language “codes are not for sale or transfer” on the disc’s box didn’t create a binding contract. Other language included on Disney’s boxes stated that “this product cannot be resold or rented individually.” However, Judge Pregerson noted, correctly, that this is legally incorrect — the First Sale doctrine gives a customer the right to resell copyrighted matter that they legally purchases, regardless of whether the copyright owner wants them to or not.

With respect to Disney’s claims that Redbox was liable for contributory infringement, Judge Pregerson again noted that Disney was at fault for fundamentally tying physical media to digital download codes, holding that “Disney’s copyrights do not give it the power to prevent consumers from selling or otherwise transferring the Blu-ray discs or DVDs contained within Combo Packs.” In Judge Pregerson’s view, Disney’s requirement that owners of a physical disc are the only people that can use digital download codes also means that consumers can’t access the digital movie derived from that code unless they give away their right to resell the physical disc. The Judge held that this practice constitutes copyright misuse by Disney, viewing this behavior as a gambit by Disney to use its copyrights in order to restrict customers beyond what the copyright laws provide.

Disney is likely to appeal this ruling. It will be interesting to see whether this holding would survive an appeal. This is because, according to fans of resale rights, this ruling could have wide-spread, massive consequences. As such, the appellate court may be hesitant to uphold it. Indeed, this ruling would effectively create a ban on tying digital download codes to physical disc media, because movie studios may stop offering digital download codes entirely rather than have consumers able to resell the digital codes.

Interestingly, this doesn’t just affect the movie industry. Indeed, video games often include download codes with physical game discs (often for downloadable content known as DLC); Internet-of-Things devices, like those compatible with the Amazon owned Alexa voice assistant, tie copyrighted software to a physical device and sell both together. This ruling could effectively stop both practices, or otherwise cause copyright holders of the like to severely reanalyze their business methods.

Given the large stakes, and how fundamentally this ruling could change the copyright law, it will be interesting to see whether the appellate court ultimately decides to overturn this ruling, and instead prefer that Congress implement such changes, as it deems appropriate. Time will tell, but perhaps one day, years from now, copyright law professors will tell their students that “a long, long time ago… Star Wars helped to fundamentally change the way copyrights work.”

If you are an author or artist in need of help obtaining a federal copyright registration, you can contact the professional attorneys at Law Offices of John D. Gugliotta, P.E., Esq., LPA. Our registered attorneys can help you secure federal copyright registration! Contact us today here, or call us at (888) 298-8580.

The Law Offices of John D. Gugliotta, P.E., Esq., LPA publishes this blog for educational purposes only, not to provide specific legal advice. By using this blog site you indicate that you understand there is no attorney-client relationship between you and the Law Offices of John D. Gugliotta, P.E., Esq., LPA. This blog should not be used as a substitute for obtaining legal advice from a licensed attorney. In addition, statements made on this blog represent the viewpoints of the individual authors, and do not necessarily reflect the views of Law Offices of John D. Gugliotta, P.E., Esq., LPA or any of our clients.

On Monday, Grumpy Cat Limited was awarded nearly one million dollars in damages for Grenade Beverage LLC’s copyright and trademark infringement via unauthorized use of the “Grumpy Cat” meme. But let’s rewind to get the whole picture, here.

Grumpy Cat is a popular meme, wherein the cat Tardar Sauce looks, well, grumpy. Take a look!

After the image of Tartar Sauce was posted online in 2012, it quickly went viral. This prompted invitations for Tartar Sauce to appear on a myriad of television shows — such as Today, Good Morning America, American Idol, and The Bachelorette) — as well as front page features in The Wall Street Journal and New York Magazine. Incredibly, Tartar Sauce even starred in her own Christmas movie, broadcast on Lifetime Television Channel. No, really! Check it out:

This widespread fame prompted Tartar Sauce’s owners to form Grump Car Limited, which then acquired copyright and trademark protection in Grumpy Cat’s name, image, and likeness. By leveraging this intellectual property, Grumpy Cat Limited reaped millions of dollars in sales from officially licensed products. In 2015, Grenade contracted with Grumpy Cat Limited to leverage the company’s “Grumpy Cat” copyrights and trademarks in the sale of ice coffees branded “Grumpy Cat Grumppuccino” in exchange for royalty payments.

However, Grenade had bigger ambitions and wanted to use the Grumpy Cat meme — protected by Grumpy Cat Limited’s trademarks and copyrights — in the sale of its roasted coffee beans and tee shirts. Grenade approached the proud cat owners with plans, but was rebuked by the company. Nevertheless, Grenade continued and, without authorization, began making and selling roasted coffee beans and tee shirts featuring the meme. Grenade advertised these unauthorized products heavily on social media and, to make matters worse, failed to pay Grumpy Cat Limited any royalties on these unauthorized sales.

Grenade countersued Grumpy Cat Limited for breach of contract, for failure to uphold its end of the licensing agreement by not properly advertise the authorized iced coffee product covered by the licensing agreement. Nevertheless, the jury must have been taken with the grumpy Tartar Sauce, because it awarded Grumpy Cat Limited $701,000.00 in damages stemming from Grenade’s copyright and trademark infringement.

That’s enough to, hopefully, make Tartar Sauce enjoy the joys of life.

The Law Offices of John D. Gugliotta, P.E., Esq., LPA publishes this blog for educational purposes only, not to provide specific legal advice. By using this blog site you indicate that you understand there is no attorney-client relationship between you and the Law Offices of John D. Gugliotta, P.E., Esq., LPA. This blog should not be used as a substitute for obtaining legal advice from a licensed attorney. In addition, statements made on this blog represent the viewpoints of the individual authors, and do not necessarily reflect the views of Law Offices of John D. Gugliotta, P.E., Esq., LPA or any of our clients.