The Copyright Small Claims Court will be commencing operations in a few weeks (late June, 2022), and Oliver & Grimsley is pleased to announce that we will be providing both plaintiff and defense services for copyright small claims actions.
Copyright small claims actions should be a cost effective way of enforcing copyrights in the United States, if the copyright holder is primarily seeking a determination of infringement, and willing to receive an award of no more than $30,000. There are some considerations to keep in mind, however.
One advantage is that Copyright small claims actions can be filed without having previously received a certificate of registration, and without filing an application for special expedited status (which is expensive). However, an application for a certificate of registration must have at least been filed at the time of filing a small claims action.
The ability to file small claims efficiently should also provide a slightly better basis for pre-litigation resolution, as prior to this, it has always been a bit of a poker game to figure out whether an actual full suit would be filed in Federal court. Federal cases are very expensive, and if the copyright was not timely registered (see note 1), no statutory remedies or attorneys fees are available. With the ability to file claims informally, for much less cost, and without significant risk of years of discovery, a defendant receiving a cease and desist letter will have to more carefully consider whether a small claims action might be filed. However, the defendant receiving a small claims complaint can treat that claim as a true case or controversy, opt out of the proceeding, and commence a declaratory judgment action in some remote location, so this risk is not mitigated with the small claims process.
The biggest problem with the small claims process is that the small claims court is not mandatory – it is elective. If a defendant has such a claim filed against it, it can “opt out” of the proceeding, in which case “If you opt out, the CCB will dismiss the claim against you, but the claimant can still bring the same claim in federal court.” See https://ccb.gov/respondent/. Therefore, a plaintiff could go to the trouble of filing the small claim, spending money and filing fees, only to have the defendant opt out, and then the plaintiff has to start all over again in Federal court. It is virtually never cost effective to file a Federal court claim in the $30,000 range, so it will be easy for defendants who determine their risk is only at or around that number, to opt out and thus bet that the plaintiff will not follow through.
On the other hand, if a defendant believes that the claim is higher than $30,000, and there is real risk of plaintiff winning and also collecting fees (see note 1) – then opting in might make sense for the defendant.
In short, there is no one answer whether a plaintiff should file in small claims, and no one right answer whether a defendant should opt out. However, as the process is currently set up, it is generally going to be more likely that a defendant elects to opt out, especially where the plaintiff failed to timely register their copyright, and cannot seek statutory damages and the collection of attorney fees.
Note 1: Under 17 U.S.C. § 412, statutory remedies and attorneys fees are not available to a plaintiff/copyright holder unless the effective date of registration is either within 3 months of first publication of the work, “or 1 month after the copyright owner has learned of the infringement,” https://www.copyright.gov/title17/92chap4.html#412
Last week, the Ninth Circuit upheld the lower court ruling that the artists of the 2013 “Blurred Lines” best-selling single infringed the copyright of Marvin Gaye’s 1977 song “Got To Give It Up”.
In 2013, the family of the late Marvin Gaye sued musicians Pharrell Williams, Robin Thicke, and T.I. (Clifford Harris, Jr.), and related recording companies, for copyright infringement. “Blurred Lines” was the best-selling single in the world that year and the Gaye family believed it to be similar in composition to Marvin Gaye’s 1977 song “Got To Give It Up”. In 2015, the trial jury agreed. After three years of an appeal process brought by the musician defendants, the United States Court of Appeals for the Ninth Circuit upheld the infringement ruling (Williams, et al. v. Gaye, et al. Case No. 15-56880)(March 21, 2018).
The decision was not unanimous. Judge Nguyen wrote a dissenting opinion stating that the songs “differ in melody, harmony, and rhythm.” She also noted that it can be “challenging for judges untrained in music to parse two pieces of sheet music for extrinsic similarity. But however difficult this exercise, we cannot simply defer to the conclusions of experts about the ultimate finding of substantial similarity. […] Judges must still decide whether, as a matter of law, these elements collectively support a finding of substantial similarity.” This ruling ultimately changes the music industry landscape moving forward, as it is arguable that the decision improperly protects an artist’s form of musical style. The majority opinion written by Judge Milan D. Smith, Jr., however, focused mostly on the technicalities of the case and the grounds for appeal, determining that the trial court erred only in finding Interscope Records and T.I. liable.
The Gaye family is entitled to approximately a $5.3 million-dollar judgement and running royalties of 50% on future songwriter and publishing revenues. The damages breakdown consisted of: $3,188,528 in actual damages, plus profits of $1,768,192 against Thicke and $357,631 against Williams (and companies collecting royalties on William’s behalf). TI and his associated recording company were cleared of any infringement.
***To investigate or consider copyright protection for music, lyrics, or other works of art, or for more information, please contact Pamela K. Riewerts, Esq., partner at Oliver & Grimsley, LLC. Pamela may be reached via email at: email@example.com
The Maryland Legislature passed Senate Bill 585, adding a new section to Md. Commercial Law Annotated Section 11-1605, “Bad Faith Assertions of Patent Infringement” That law was signed by the Governor and became effective June 1, 2014. That bill contains a litany of requirements to be met before sending a patent infringement letter to an accused infringer in Maryland. As a result of the bill, sadly, a patent rights holder needs to strongly consider NOT sending any pre-litigation letters, and instead, simply suing first. More on why that is an important consideration below.
SB 585 is one of many similar bills passed in several states, is aimed squarely at non practicing entities that assert allegedly unviable patents as a “shakedown” to extort license fees – also euphemistically labelled “patent trolls.” The problem is that not every non practicing entity is a “patent troll,” and diluting the right to enforce patents can have a negative impact on innovation. For a good article on why this may be a bad thing, see Inventing the Smart Phone: Why the ‘Trolls’ Were Saviors.
Bad faith assertion of intellectual property rights is nothing new in the law, the Supreme Court has addressed it numerous times. The Supreme Court settled a long standing issue under the Noerr-Pennington doctrine (the 1st amendment doctrine that determines when a person is validly exercising 1st amendment rights to petition the government for redress of grievances) in PREI, INC. v. COLUMBIA PICTURES, 508 U.S. 49. There, the Supreme Court held that “First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim premised on the sham exception must fail. [n.5] Only if challenged litigation is objectively meritless may a court examine the litigant’s subjective motivation. Under this second part of our definition of sham, the court should focus on whether the baseless lawsuit conceals “an attempt to interfere directly with the business relationships of a competitor,” , through the “use [of] the governmental process–as opposed to the outcome of that process–as an anticompetitive weapon,” . This two tiered process requires the plaintiff to disprove the challenged lawsuit’s legal viability before the court will entertain evidence of the suit’s economic viability. ” While the Noerr Pennington Doctrine is most often applied in the context of antitrust law, the rule is one based on the 1st Amendment – and hence, applies across all rights-assertion scenarios, and is the Supreme Law of the land.
Pre-litigation demand letters are pre-cursors to effective petitioning of the government. Indeed, numerous cases have held that the the law favors dispute resolution, and favors the parties communicating before filing suit, in an effort to settle their disputes. However, under SB 585, engaging in those efforts could cost you $50,000 if you fail to comply with the requirements.
In general, SB 585 requires that a patent rights holder include in the letter several pieces of information (the patent holder’s real identity, the patent number, certain facts about the accused infringer), that the patent rights holder engage in specific analysis regarding infringement, and that the accused infringer be given a not “unreasonably short” time to respond. Further, the law requires that the demand be based on a “reasonable estimate of the value of the license.” As a practicing lawyer, I can tell you that if you put any two (or more) lawyers in the same room and asked them what a reasonable royalty was or what an “unreasonably short” period of time was – they would not agree.
If the patent rights holder gets it wrong in the letter, the risk is huge. The court can award 3 times “damages” (whatever that is in this context) or $50,000, and reasonable attorneys fees.
SB 585, while aimed at some of the more reprehensible “patent trolling” conduct in the news, is unfortunately a law that is going to promote patent rights holders to not engage in pre-litigation resolution effort, and instead sue. A person who sues still must engage in pre-litigation investigation to avoid numerous other bad faith litigation related remedies, like Fed R. Civ. P Rule 11 relief. However, that standard applies to the substance of the claim – not the demand for resolution – and is much harder for a defendant to meet.
SB 585 also appears to apply both prior to, and during litigation, so even making written offers of settlement during litigation is dangerous.
We strongly urge our clients who are considering sending patent enforcement/settlement letters to consider whether or not to do so. If they do, they need to comply with this law or risk severe penalties.
On January 10, 2013, the United States District Court, N.D. California, San Jose Division entered a permanent injunction against a patent-infringing defendant in BROCADE COMMUNICATIONS SYSTEMS, INC. v. A10 NETWORKS, INC., Dist. Court, ND California 2013 – Google Scholar. The ruling restrained the defendant and parties in active concert with it from “making, using, selling, or offering to sell in the United States, or importing into the United States any AX series application delivery controller that includes features that infringe claim 25 from U.S. Patent No. 7,454,500, claims 13 and 24 of U.S. Patent No. 7,581,009, or claim 1 of U.S. Patent No. 7,558,195.”
While this result would not have seemed odd before May of 2006, Brocade is now one of the few cases where permanent injunctions have been issued since the decision in eBay, Inc. v. Mercexchange, LLC, 547 U.S. 388 (2006). While the Supreme Court was careful to make it clear that permanent injunctions remained a viable remedy in patent cases, the eBay case changed somewhat well established case law that a prevailing patent infringement plaintiff was virtually always entitled to a permanent injunction.
A successful patent plaintiff must meet its “burden of showing that the four traditional equitable factors support entry of a permanent injunction: (1) that the plaintiff has suffered irreparable harm; (2) that “remedies available at law are inadequate to compensate for that injury”; (3) that “considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted”; and (4) that “the public interest would not be `disserved’ by a permanent injunction.”
While those factors might seem easy to meet, in practice, it is often very hard to show that legal remedies (damages) are inadequate. In Brocade, the court found that Brocade “practices its patent, that [the defendant] is its direct competitor, and that Brocade does not license its patents,” and therefore that “Brocade has shown that it suffers the type of irreparable harm that a permanent injunction is intended to remedy” (emphasis added).
For more information on patent licensing contact Mike Oliver.
Brocade is a district court case and may be subject to an appeal, but it now stands as one of the relatively few cases post eBay in which a permanent injunction was issued.
One take-away from this ruling for licensing transactions, is that a patent holder must consider whether this type of remedy will be sought before engaging in licensing, particularly come one come all or non exclusive types of licenses. That was one of the three key factors the court pointed to in finding irreparable harm and lack of an adequate remedy at law.
In AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. (Fed Cir. August 31, 2012) the en banc court held that a person can be liable for inducement to infringe even if the direct infringement is only found by combining the acts of more than one other person. You can read all 103 pages of the case here: Akamai v Limelight
What? In English: If you are aware of a patent (inducement requires specific intent to induce, so it requires knowledge of the patent) and you either perform one step in the method and induce one or more other persons to perform the remaining steps, or if you induce two or more other persons to engage in steps that together infringe, you are liable for inducement to infringe.
This is a major change in the law. This case overruled a recent prior case that had held that inducement requires inducing a single other party to engage in the acts that constitute direct infringement.
What does this mean? It means that if you are a business that say, provides a load balanced server farm for your clients, and you make that server farm available to your clients, who use it to manage their web content, and Akamai informs you of their patent that covers this technology, you will be liable for inducement to infringe even though the mere operation of a server farm does not practice every element in the claims of the patent. It means that businesses that are made aware of patents will have to consider every conceivable set of steps, whether done by their clients or others (inducement does not require any agency between the inducer and the person engaging in direct infringement) because the patent holder can “aggregate” all of the users it needs to meet the requirement of showing infringement.
There were numerous dissenting opinions, and it is somewhat probable that the Supreme Court will take this case.
A question often arises – does an owner of an intellectual property right have the duty to enforce it? While the answer is no, the failure to do so in the face of known infringement can damage and limit the ability to enforce the right in the future. This legal doctrine – laches – borrows from the statute of limitations – which prevents a claim from being filed if the event giving rise to the claim occurred a distance in the past. This doctrine applies differently in each area of intellectual property, but is most critical, and hardest to determine, in trademark cases.
In trademark cases, the elements in the 4th Circuit (and most circuits) are as follows: “In determining whether laches operates as a defense to a trademark infringement claim, we consider at least the following factors: (1) whether the owner of the mark knew of the infringing use; (2) whether the owner’s delay in challenging the infringement of the mark was inexcusable or unreasonable; and (3) whether the infringing user has been unduly prejudiced by the owner’s delay.” Ray Communications v. Clear Channel, 4th Cir Ct (March 8, 2012).
The mark at issue in Ray Communications is AGRINET for “educational services rendered through the medium of radio; namely, a program of interest to farmers.” The the defendant used similar marks such as “OKLAHOMA AGRINET” for agricultural news programming on the air and in marketing. The defendant had been using the potentially infringing marks for many years – plaintiff filed its case in 2008, but the use of the defendant commenced in the late 70’s and early 80’s – about 20 years prior to the filing date of the complaint.
While this case reversed the district court’s decision in favor of the defendant – largely because the record was not developed adequately to establish such relief, the case demonstrates the complexity of determining when and how to enforce a trademark. For example, there was evidence that the defendant had changed certain marks, and that it had used some of the marks under license from the plaintiff – facts not considered in the lower court.
Trademark enforcement is important to maintain the trademark strength, but the failure to enforce it in some cases, will not prevent later enforcement as the infringement looms large.