Creating a Small Claims Proceeding for Intellectual Property Right Enforcement

Wednesday, March 27, 2013, by Seiko Okada

The United States Copyright Office is seeking public comments as to whether the U. S. should establish a copyright small claims adjudication system.  Concurrently, the United States Patent and Trademark Office (“USPTO”) is seeking public comments as to creating a small claims proceeding for patent enforcement.

Ideas behind patent and copyright small claims courts are similar: to facilitate enforcement of infringement claims with small economic value.  In the U.S., all patent or copyright infringement cases are heard in a Federal District court.  It ordinarily does not make much sense to file a lawsuit when there is less than $1,000,000 at stake.

Each agency wants to assess a desire and need for a small claims proceeding, as well as its scope and core characteristics, including subject matter jurisdiction, venue, case management, appellate review, available remedies, and conformity with the U.S. constitutional framework.

“The current system fails to guarantee economical enforcement to all deserving patent or copyright holders.”

Creating an inexpensive small claims court system seems promising in addressing current problems, helping individuals, small businesses, large businesses, and the court system itself.  First, an option for a patent or copyright holder to file in a small claims court motivates ex ante behavior that more predictably avoid lawsuit, including good faith pre-suit negotiations.  Second, an availability of inexpensive small claims proceedings decreases the transaction costs of whatever lawsuits cannot be avoided.  Third, the existence of such an enforcement forum would also reduce overall federal court burdens.  Lastly, unblocking access to the courts for a deserving subset of patent or copyright holders will have the salutary effect of encouraging innovation, which, in turn, will help consumers.

Deciding on specific scopes and detailed characteristics of a small claims court system, however, is a challenge.  For example, a voluntary small claims resolution system may not be effectively utilized.  On the other hand, a mandatory system raises constitutional concerns including infringement with the seventh amendment right to a jury trial and with the due process right to non-abbreviated procedures.  A related consideration is who would be the judges.  The scope and function of non-article III courts would be limited by constitution (as articulated in CFTC v. Schor, 478 U.S. 833 (1986)).  Delegating to state small court systems may be a practical option, but may not be a good idea in terms of federal law expertise.  Yet another consideration is whether a small claims court is authorized to grant an injunctive relief.  While many patent or copyright holders would want it, injunctive relief could be a complicated undertaking in a small claims context.  When the unauthorized use is but one part of a larger work such as film, book, or sound recording, for example, plaintiff’s monetary damage may be small but the economic consequences of an injunction may exceed any damage cap adopted for the small claims process.

The Copyright Office is accepting comments about copyright small claims proceedings until April 12, 2013.  The USPTO is accepting comments about patent small claims proceedings until April 30, 2013.