The Limitations of the CASE Act on Copyright Trolls and a Possible Solution to this Problem

by Emmaline Fisher, Associate Member, University of Cincinnati Law Review Vol. 91

I. Introduction

The U.S. Constitution describes the purpose for intellectual property, such as copyrights very clearly as, “[t]o promote the Progress of Science and Useful arts.”¹ A new form of litigant, called a copyright troll, is counteracting the goals enumerated in this clause through the use of tactics that take advantage of copyright laws for financial gain.² A typical copyright troll alleges copyright infringement against many different parties.³ Since litigation is costly, many of the alleged infringers settle.⁴ Copyright trolls’ actions inhibit the spread of knowledge, making individuals hesitant to create works inspired by existing ones under copyright.⁵ In 2020, Congress passed the Copyright Alternative in Small Claims Enforcement Act (“CASE Act”).⁶ Some disagree on whether this Act will deter these so-called copyright trolls. This article discusses that disagreement and how the CASE Act affects copyright trolls. Part II provides background on the CASE Act and explain more in depth about these predatory litigants’ typical tactics. Part III discusses whether the CASE Act truly has any effect on copyright trolls, and ultimately concludes that it does not. It also discusses possible measures that either Congress or courts can take to deter copyright trolls. Finally, Part IV concludes by highlighting the techniques that will serve to solve this problem.

II. Background

To fully appreciate the need for combatting the complex problems surrounding the issue of copyright trolls, it is necessary to first develop a full understanding of what a copyright troll is, the laws addressing copyright infringement, and the systemic flaws that allow for copyright trolls to exist. Finally, a method for addressing copyright trolls, based on existing anti-patent troll legislation, will be introduced.

A. What is a Copyright Troll?

A troll in intellectual property law is an entity that does not produce a product, nor does it license, patent, copyright or sell anything at all. A troll simply holds either the copyright or the patent.⁷ They sue and use coercive methods designed to generate revenue.⁸ That is their primary business.⁹ They sue hundreds, even thousands of supposed copyright infringers.¹⁰ Due to the very nature of the copyright system and the bundle of rights it protects, it encourages copyright trolls.¹¹

Often, copyright trolls allege that copyright infringement occurred online, and then use the subpoena power of the courts to demand information about the alleged infringers from internet service providers.¹² The copyright trolls send threatening demand letters indicating that they will pursue the case in federal court, which lead to defendants settling regardless of whether they actually infringed.¹³ Additionally, there are specialized attorneys and law firms who focus almost exclusively on searching out anyone who uses their client’s work without their permission.¹⁴ They then send out demand letters to any infringer they can find and settle for whatever money they can get.¹⁵ There are great incentives for those holding copyrights to pursue troll-tactics, since there is a high likelihood that the alleged infringer will simply settle in order to avoid the difficulties and costs of litigating in federal courts.¹⁶

Copyright trolls take advantage of the system for their own financial gain.¹⁷ They waste the time of the alleged copyright infringers, who often did not truly infringe; they simply settle to avoid the high cost of litigation and the potential statutory damages. Additionally, copyright trolls waste the time of federal courts by bringing minor and unnecessary lawsuits.¹⁸

B. Federal Copyright Protection Laws

The two pertinent pieces of federal law that provide protection to copyright holders are the Copyright Act and the CASE Act.

1. The Copyright Act

Copyright law is governed by federal statute, primarily the Copyright Act of 1976, which defines the basic protections, rights, and copyright term duration given to “original works of authorship fixed in any tangible medium of expression.”¹⁹ Copyright law protects the author’s expression of an idea or work, not the ideas or facts contained in the work.²⁰ Copyright infringement happens when the work is duplicated, distributed, performed, displayed publicly, or used in the creation of a derivative work without the copyright holder’s permission.²¹ Copyright infringement cases had to be brought to federal court prior to the enactment of the CASE Act.²²

2. The CASE Act

The CASE Act allows people to litigate claims in a less costly manner.²³ Many hope that it will help address the issue of copyright trolls. The CASE Act instructed the Copyright Office to create the Copyright Claims Board (“CCB”).²⁴ This is a three-member tribunal that is meant to be as user-friendly and efficient as possible.²⁵ It is a voluntary alternative to resolving copyright disputes up to $30,000.²⁶ According to the CCB’s website, its proceedings are meant to be easily understood, even to users without legal training; users can represent themselves or have an attorney.²⁷

Overall, the proceedings are much less costly than those of federal courts. Participants are not required to go through the process of exchanging evidence, the hearings are virtual, and it does not require formal motions, such as those used in the traditional method of litigating copyright infringement claims.²⁸ It is an entirely voluntary process, as either participant (the claimant or respondent) can opt out of CCB proceedings and move the matter to federal court.²⁹

The CCB’s procedures are meant to prevent practices that abuse copyright laws.³⁰ If a party brings a claim in bad faith, the CCB can order that party to pay the other party’s costs and attorney’s fees.³¹ If a party exhibits a pattern of bad faith or abusive conduct, the CCB can ban parties from filing claims and even dismiss their pending claims.³² Additionally, there is a limit per year on the number of claims a party may file.³³

Prior to the enactment of the CASE Act, the Copyright Act and the American Bar Association’s Model Rules of Professional Conduct repeatedly failed to prevent and rather seemed to encourage copyright trolls.³⁴ The system has minimal risks for copyright trolls; for example, courts often only place weak sanctions on attorneys that bring frivolous lawsuits, such as those involving unfounded copyright infringement claims.³⁵ Additionally, if litigation becomes too expensive for the plaintiff, they can simply withdraw the lawsuit.³⁶

C. Issues Contributing to the Continuation of Copyright Trolls

The combination of weak ethical rules and ineffective sanctions by courts for violations of said rules have resulted in the continuance of frivolous lawsuits by copyright trolls.

1. Weak Ethical Requirements

The Model Rules of Professional Conduct, which provide ethical rules for attorneys, are too weak to actually influence the actions of copyright troll attorneys.³⁷ Rule 3.1, which prohibits frivolous lawsuits, can result in sanctions.³⁸ However, the sanctions are minor compared to $150,000 statutory damages that the copyright troll could gain.³⁹ Additionally, since copyright infringement is a federal cause of action, it is difficult to enforce ethics violations.⁴⁰ A copyright troll attorney could exclusively focus on copyright infringement, a federal cause of action.⁴¹ As a result, since being disbarred from federal court usually occurs due to a state court’s decision to disbar an attorney, disbarment due to troll-tactics is unlikely.⁴²

2. Ineffective Judicial Sanctioning

Additionally, sometimes courts decline to sanction copyright trolls, even upon recognizing their tactics, as in McDermott v. Monday Monday.⁴³ The court actually called the attorney a copyright troll but did not pursue any sanctions.⁴⁴ In McDermott v. Monday Monday, the court discusses how filing in the district was “frivolous, unreasonable, or groundless”, and that the plaintiff’s attorney, Richard Liebowitz, was known to be a copyright troll.⁴⁵ At the time of the decision in McDermott, he had filed over 500 cases in that district within the past two years.⁴⁶ However, despite acknowledging that Liebowitz was a copyright troll, the court declined to award attorney fees to the defendant.⁴⁷ The court did state that if Liebowitz attempted to file a suit against any other defendant in the same manner, there would be consequences.⁴⁸

Clearly, based on this decision alone, efforts to prevent and sanction copyright trolls should not be left up to the courts. Liebowitz was known to be a copyright troll, and the court still decided not to sanction him at that time.⁴⁹ In 2021, he was eventually suspended for false statements and failing to comply with court orders.⁵⁰ However, this suspension appears to have occurred more as a result of him lying to judge about the date of his grandfather’s death as an excuse for missing a conference than about the copyright troll tactics that he used against unwitting defendants.⁵¹

D. Anti-Patent Trolling Laws as a Model to Prevent Copyright Trolling

Over thirty state have enacted laws against patent trolls, which are entities that use similar tactics as copyright trolls. However, they primarily pursue frivolous patent infringement lawsuits.⁵² For example, North Carolina passed the Abusive Patent Assertions Act (“APAA”) in 2014 to combat bad faith assertions of patent infringement.⁵³ The statute has a list of factors the court may consider when determining if a bad faith claim has been made.⁵⁴ Additionally, to protect plaintiffs that make good faith claims and ensure that only patent trolls are targeted by the North Carolina statute, it describes factors that indicate that the claim was made in good faith.⁵⁵ Evidence that the entity did not make a bad faith patent infringement assertion includes the following: (1) the demand letter is complete, (2) there is a good faith effort to establish that there was patent infringement, (3) a showing that the one alleging infringement has made a substantial investment in the patent itself, and (4) the claimant’s enforcement of the patent in the past was in good faith.⁵⁶ The statute enables the North Carolina Attorney General to investigate and file suits against patent trolls.⁵⁷ Those targeted by the patent trolls may join lawsuits.⁵⁸ The APAA has the following remedies: (1) damages, (2) costs and attorney’s fees, (3) payment of either $50,000 or three times the amount of damages, costs, and attorney’s fees (whichever is greater), and (4) requiring the defendant to post bond that could be up to $500,000 for a good faith estimate of the possible remedies.⁵⁹

III. Discussion

The current system does not effectively prevent copyright trolls. A possible way to deter them would be issuing fines for bad faith claims that exhibit copyright troll tactics.⁶⁰ Additionally, by lowering the statutory damages available under the Copyright Law, Congress can remove the incentives that motivate copyright trolls.⁶¹

Some argue that the CASE Act may be a way to limit suits by copyright trolls, since it has built-in deterrents against frivolous lawsuits.⁶² Others believe that it will increase the number of lawsuits filed by copyright trolls since the new system is less costly and simpler than federal court.⁶³ They argue that it will be a faster, more inexpensive way to coerce settlements.⁶⁴

However, the CASE Act does have some qualities that attempt to inhibit frivolous lawsuits. The CCB can award attorney fees to the respondent of up to $5,000. In extraordinary circumstances, where a party has a pattern of bad faith conduct, the CCB may choose to exceed that amount.⁶⁵ The CCB can dismiss claims for good cause, and even suspend a claimant from filing claims for up to one year.⁶⁶ It also can dismiss all of a frivolous claimant’s pending cases.⁶⁷ These are tactics that the CCB could use to prevent copyright trolls trying to take advantage of the CASE Act’s streamlined, user-friendly system.⁶⁸

While it is great for respondents that the CASE Act caps statutory damages at $30,000, using this process is voluntary.⁶⁹ This means that the copyright troll can still choose to bring the lawsuit in federal court.⁷⁰ Therefore, the copyright troll can still file the lawsuit in federal court, and completely avoid the penalties and deterrents set forth by the CASE Act.⁷¹ As a result, it is likely that the CASE Act will not be effective at lowering the prevalence of copyright trolls.

Since the CASE Act is unlikely to alleviate the problem of copyright trolls, it is important to consider the different options available. One is allowing the courts to continue as they have and sanction individual attorneys when their actions become too egregious. However, even when courts recognize that a party has utilized trolling tactics, they sometimes still allow the copyright trolls to continue to practice without being sanctioned.⁷²

Perhaps Congress needs to pass a bill specifically targeting copyright trolls, similar to North Carolina’s APAA law. Applying the principles derived from anti-patent troll state statutes to a law targeting copyright trolls will be more effective than relying on the CASE Act or on the courts to recognize copyright trolls. Congress should pass the statute, so copyright trolls cannot simply focus their efforts on states without a statute protecting against these abusive tactics. By creating a statute that provides remedies that help those targeted by these abusive tactics, as well as punishing the copyright trolls, these abusive techniques would be discouraged.

Additionally, the statute should enumerate factors that indicate that someone is not a copyright troll. This ensures that the statute is not used against those who are validly enforcing their rights.

IV. Conclusion

Frivolous copyright infringement suits have become a serious issue that requires a legislative solution. Unfortunately, the voluntary nature of the CASE Act prevents it from solving the problem. Copyright trolls can simply opt to use federal court as the venue for bringing claims. The Copyright Act and the Model Rules of Professional Conduct are not sufficient to prevent these techniques from continuing. Additionally, courts are unreliable in disciplining those using troll tactics. Therefore, Congress should model an anti-copyright troll statute after the anti-patent troll statutes recently passed in over thirty states. This would create effective deterrents, while ensuring that those with non-frivolous copyright infringement suits are still able to pursue their causes of action.

Cover Photo by Markus Winkler on Unsplash

Emmaline Fisher

Emmaline Fisher graduated from Georgia Tech with a degree in Chemical Engineering, and after working for a bit, she decided to go to law school to pursue a career in intellectual property law. When she has free time, she enjoys spending it outdoors with her dog, Penny.

References

1
U.S. Const. art. I, § 8, cl. 8; see also Elif Sonmez, Copyright Troll or Ugly Rights Holder? The Spread of Troll-Tactics and Solutions to the Abuse of the Courts and Degradation of the Copyright Protection Scheme, 19 U.S.F. Intell. Prop. & Tech. L.J. 137, 139 (2015).
2
Michael P. Goodyear, A Shield or a Solution: Confronting the New Copyright Troll Problem, 21 Tex. Rev. Ent. & Sports L. 77, 79 (2020).
3
Id.
4
Id.
5
Id.
6
About the Copyright Claims Board, Copyright Claims Bd. https://www.ccb.gov/about/ [https://perma.cc/8TSV-FP9F].
7
Matthew Sag, Article: Copyright Trolling and Empirical Study, 100 Iowa L. Rev. 1105, 1108 (2015).
8
Id.
9
Id.
10
Id.
11
Sonmez, supra note 1, at 139.
12
Matthew Sag & Jake Haskell, Defense Against the Dark Arts of Copyright Trolling, 103 Iowa L. Rev. 571, 578 (2018).
13
Id.
14
Goodyear, supra note 2, at 92.
15
Id.
16
Sag & Haskell, supra note 12 at 578.
17
Goodyear, supra note 2, at 123.
18
Id. at 80.
19
17 U.S.C. § 102.
20
What does Copyright Protect, Copyright.gov, https://www.copyright.gov/help/faq/faq-protect.html [https://perma.cc/ESW5-ZJX4].
21
Definitions, Copyright.gov, https://www.copyright.gov/help/faq/faq-definitions.html. [https://perma.cc/F563-DQCU].
22
Keith Kupferschmid, The CASE Act is the Solution to the Alleged Copyright Troll Problem, Not the Cause., Copyright Alliance (June 7, 2018), https://copyrightalliance.org/case-act-solution-copyright/ [https://perma.cc/G6CH-5FNS].
23
Id.
24
Id.
25
Id.
26
Id.
27
Id.
28
Id.
29
Id.
30
Id.
31
Id.
32
Id.
33
Id.
34
Goodyear, supra note 2, at 80.
35
Id. at 90.
36
Id. at 101.
37
Id. at 90.
38
Id.
39
See 17 U.S.C §504.
40
Goodyear, supra note 2, at 90.
41
Id.
42
Id.
43
McDermott v. Monday Monday, LLC, No. 17cv9230, 2018 U.S. Dist. LEXIS 28664, at *8 (S.D.N.Y. Feb. 22, 2018).
44
Goodyear, supra note 2, at 91.
45
McDermott v. Monday Monday, LLC, No. 17cv9230, 2018 U.S. Dist. LEXIS 28664, at *8 (S.D.N.Y. Feb. 22, 2018).
46
Id.
47
Id. at *9.
48
Id.
49
Id. at *8.
50
Blake Brittain, Embattled Copyright Lawyer Suspended from Practice in New York, Reuters (Nov. 3, 2021, 7:16 PM) https://www.reuters.com/legal/legalindustry/embattled-copyright-lawyer-suspended-practice-new-york-2021-11-03/ [https://perma.cc/M2B8-3CZV].
51
Id.
52
Blake Brittain, N.C. Federal Court Upholds State’s Anti-‘Patent Troll’ Law, Reuters (Aug. 20, 2021, 3:13 PM), https://www.reuters.com/legal/transactional/nc-federal-court-upholds-states-anti-patent-troll-law-2021-08-20/ [https://perma.cc/3WTT-6JQ5].
53
Steven A. Scoggan, The (Patent) Troll Toll: NC’s Abusive Patent Assertions Act, Ellis Winters (May 10, 2022), https://www.elliswinters.com/trade/the-patent-troll-toll-ncs-abusive-patent-assertions-act/ [https://perma.cc/A7Z9-F8HZ].
54
N.C. Gen. Stat. § 75-143 (2022).
55
Scoggan, supra note 53.
56
N.C. Gen. Stat. § 75-143 (2022).
57
Scoggan, supra note 53.
58
Id.
59
Id.
60
Goodyear, supra note 2, at 81.
61
Id.
62
Kupferschmid, supra note 22.
63
Brian L. Frye, The CASE Act is for Trolls, Jurist (Apr. 10, 2020), https://www.jurist.org/commentary/2020/04/brian-frye-case-act/ [https://perma.cc/4FG8-KF3C].
64
Id.
65
Kupferschmid, supra note 22.
66
Id.
67
Id.
68
Id.
69
Goodyear, supra note 2, at 107.
70
Id.
71
Id.
72
Id. at 91.