By Craig Gipson
As if 2020 and 2021 failed to bring enough change, the legislative and regulatory environment for creative industries also entered a period of transition. As part of the COVID relief package, Congress passed the CASE Act, initiating a soon-to-be streamlined alternative for copyright infringement claims. The new administration and Congress displayed a renewed interest in antitrust law, particularly the market dominance of Amazon and Big Tech. The same law firm that took on Apple and the Big Five publishers is back again, this time setting its class action sights on Amazon. And that is not the only potential shakeup to the e-book market as state legislatures begin passing their own e-book pricing laws.
A Simpler (Less Expensive) Path for Copyright Enforcement?
Tucked into the myriad of items in the December 2020 COVID relief bill was the Copyright Alternative in Small-Claims Enforcement Act (“CASE Act”). While this understandably did not grab headlines like direct cash payments and federal unemployment add-ons, it may offer a realistic means of enforcement for rights holders. The bill garnered support from organizations throughout the visual arts and creative industries. The impetus for the new law was simply the cost of enforcing rights. A professor at Santa Clara University School of Law estimated pre-trial discovery and preparation in copyright infringement suits “can easily cost upward of $10,000 per month.” [1] In a 2013 report to Congress, the Register of Copyrights noted, “the costs of obtaining counsel and maintaining an action in federal court effectively preclude many authors whose works were clearly infringed from being able to vindicate their rights and deter continuing violations.” [2]
Enter the CASE Act’s Copyright Claims Board (CCB). The CCB will consist of a tribunal with alternative dispute resolution experience empowered to hear and dispose of “small” copyright claims. Proceedings operate like a streamlined lawsuit: evidence is generally limited to documents and written party statements (i.e. no depositions or oral hearings), there are no pre-trial motions, and no formal rules of evidence apply. The lack of formalities, especially limited discovery and motions, should significantly reduce legal expenses.
Although, with lower expenses come small remedies. Statutory damages of up to $15,000 per work are still available if a party registered copyright to a work in timely manner (usually before the infringement occurred) but there is a total damages cap of $30,000. In a new twist, statutory damages of up to $7,500 per work, up to a maximum of $15,000, are available for works not timely registered. This is a significant development for rights holders as existing law does not permit any statutory damages without timely registration. And as an alternative, actual damages of up to $30,000 are also permitted.
But like most potential positive developments, there is a catch. After receiving notice of a claim before the CCB, an alleged infringer may opt out of the proceedings within 60 days. After an opt-out, the CCB will dismiss the claim and the rights holder may proceed with traditional litigation in federal court. It remains to be seen whether alleged infringers would also prefer a less expensive option or will risk that rights holders will not resort to federal litigation. The CCB must be implemented by December 27, 2021 (with a possible 180-day extension) and the Register of Copyrights will review its effectiveness within three years.
What does all this mean for ECPA publishers?
When the CCB comes online, this may be a realistic option for ECPA members to address infringement—not only in that it would allow publishers to recover damages from smaller infringers, but because it offers leverage of a more realistic threat of litigation. Some small infringers know they may not be worth pursuing in federal court. But a streamlined administrative process may be worth the investment in some cases.
Antitrust Awakening?
Anyone with an email address or smartphone knows all too well the near-ubiquity of Big Tech in modern life. But, as former News Corp. and Bloomberg Beta executive Roy Bahat said, the price of power is scrutiny. And the scrutiny Amazon and other Big Tech giants face—by means of private-party litigation, government agency litigation, and potentially legislation—is beginning to reach a critical mass.
In January, the same law firm that accused Apple and the Big Five publishers of fixing e-book prices in 2011 filed a similar suit against Amazon. The plaintiffs accuse Amazon of negotiating anticompetitive deals in 2015 with those same Big Five to inflate e-book prices by 30 percent. [3] A 2018 Bloomberg study estimated Amazon controlled approximately 90 percent of the e-book market. [4] The plaintiffs claim Amazon leveraged this market position to institute pricing parity through most-favored-nations clauses. In other words, Amazon prevents publishers from selling their e-books on other sites at a lower price. The court combined this case with several others and it will be ongoing for some time absent settlement. A reminder: Apple paid more than $400 million in compensation following its 2011 case.
Governments are also becoming involved. The District of Columbia’s attorney general filed suit against Amazon in May, claiming Amazon’s actions against third-party sellers who list a lower price elsewhere effectively controls the price on shopping sites all over the internet. [5] Facebook and Google are facing their own lawsuits from the federal government and various state attorneys general. In December, the Federal Trade Commission and 40 states sued Facebook, claiming its acquisition of rival social media platforms was anti-competitive. [6] Last fall, the House Judiciary Committee hosted hearings on the anticompetitive effects of Big Tech’s market position and in June passed several bipartisan bills aimed at curtailing this power. [7] Big Tech responded as expected: by firing up their lobbying engines, casting doubt on whether any of the bipartisan bills to make it out of committee will actually become law.
What does all this mean for ECPA publishers?
Eventually it could mean different agreement terms with Big Tech firms (a court ordered Apple to alter its most favored nation clause with Big Five publishers in 2013) but that may still be several years away. Antitrust litigation is notoriously long, expensive, and difficult to win, even relative to other types of litigation, so it’s unlikely we will see a resolution in the near future. A judge already dismissed the suit against Facebook referenced above and ordered the FTC and states to refile amended claims by August 19. And we all know the obstacles to Congress passing meaningful legislation. Still, the growing interest in addressing Big Tech and the bipartisan nature of that interest means some change to the status quo is a realistic expectation. ECPA and the Association of American Publishers (AAP) will keep members informed of significant events in this area as various cases and proposed legislation advance.
Libraries, E-books, and State Legislatures
In March, Macmillan dropped its controversial embargo against selling new release e-book licenses to libraries. But library lobbyists and their tech-related partners were already working to ensure publishers would lose leverage in future library negotiations. Despite opposition from AAP, Maryland became the first state to enact a law requiring a publisher who sells e-book licenses to the public to also sell to libraries. New York followed with its own bill passed in June, like Maryland, requiring that publishers offer the same e-book licenses to libraries on “reasonable” terms. As these laws require sales to libraries, the great unknown will be what terms courts consider to be “reasonable.”
The strategy to force publishers into agreements with potentially unfavorable terms on a state-by-state basis appears to be gaining momentum. Rhode Island introduced a similar measure. And after the Maryland and New York bills passed unanimously, librarians in Connecticut, Washington, and Virginia are encouraging similar bills be brought forward in their states. [8]
Maryland’s law becomes effective in January 2022. New York’s bill is awaiting the governor’s signature and will be effective 19 days after execution.
ECPA will continue to monitor the legislative and regulatory landscape for changes affecting ECPA members.
This article is provided for informational purposes and is not intended as legal advice. This article was first published as an ECPA Legal Update.
Notes
[1] Tyler Ochoa, A Short Summary of the CASE Act, January 19, 2021. https://blog.ericgoldman.org/archives/2021/01/a-short-summary-of-the-case-act-guest-blog-post.htm
[2] Copyright Small Claims: A Report of the Register of Copyrights. September 2013. https://www.copyright.gov/docs/smallclaims/usco-smallcopyrightclaims.pdf
[3] Shannon Fremgen, Mary Christopherson-Juve, Denis Deleon, on behalf of themselves and all others similarly situated v. Amazon, Inc., No. 1:21-cv-351 (S.D.N.Y. Jan. 14, 2021)
[4] Tyler Sonnemaker, Amazon hit with class-action antitrust lawsuit alleging it colluded with major publishers to illegally drive up e-book prices by 30%, January 14, 2021. https://www.businessinsider.com/amazon-hit-with-antitrust-lawsuit-alleging-ebook-price-fixing-2021-1
[5] Shira Ovide, The Big Deal in Amazon’s Antitrust Case May 25, 2021, updated June 22, 2021. https://www.nytimes.com/2021/05/25/technology/amazon-antitrust-lawsuit.html
[6] Mike Isaac and Cecilia Kang, It’s Hard to Prove’: Why Antitrust Suits Against Facebook Face Hurdles, December 10, 2020, updated June 28, 2021. https://www.nytimes.com/2020/12/10/technology/facebook-antitrust-suits-hurdles.html
[7] H.R. 3843, the Merger Filing Fee Modernization Act of 2021; H.R. 3849, the Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act of 2021; H.R. 3826, the Platform Competition and Opportunity Act of 2021; H.R. 3816, the American Choice and Innovation Online Act; H.R. 3825, the Ending Platform Monopolies Act.
[8] Rebecca Klar, Amazon takes big step in e-book deal with libraries, but activists seek more, June 2, 2021. https://thehill.com/policy/technology/556381-amazon-takes-big-step-in-e-book-deal-with-libraries-but-activists-seek-more
