Copyright Small Claims: A Bad Solution to a Non-Problem

Many of you may have heard about the small claims copyright system that is being encouraged by several organizations. Many of those groups are artists groups and, while they have very good intentions, the idea of a small claims system for copyright is, in my opinion, a very bad one. It is a fix to a problem that does not exist. And, in exchange, artists are going to lose rights and remedies they should not give up.

Here’s the underlying argument that proponents of a Copyright Small Claims system share, over and over again: litigating a copyright suit costs a plaintiff at least tens of thousands if not over a hundred thousand dollars.

That argument is not correct in so many ways. Its a scare tactic and too many artists groups are buying into it. Allow me to explain the errors.

First, assuming that a case is litigated all the way through trial and judgment is an unfair metric for the average cost. Why? Because according to the Federal Courts own statistics (the most recent ones I found were for a 12-month period ending March 31, 2016), only .07% of all copyright cases filed are terminated (settled or a judgment is entered) during or after trial. To put that into more concrete terms, in that 12 months there were 4836 copyright cases filed in the USA; of those, only 32 were terminated either at trial (settlement after trial started but before judgment entered) or at the end of trial (judgment entered). In the 12 months ending March 31, 2015, it was 26 out of 4253 filed (.06%).

In other words, the chances that a case is fully litigated are incredibly slim! In fact, in the 2016 statistics, 37% of the filed cases are terminated before there is any court action and another 54% are terminated before the pre-trial phase (that is, by the close of discovery). So, 91% of copyright cases get settled by the close of discovery and virtually all the remaining cases settle before trial.

What does this mean? It means the cases that get fully litigated are really hard cases. Parties don’t take a case to trial unless either someone refuses to accept that s/he/it is sitting on a loser (rare) or there is a real question of how the matter might turn out (almost always). When there is a real question especially, then there are lots of experts and more extensive discovery overall and, well, of course the costs are going to be large!

But, going back to my original point, that just doesnt happen hardly at all. Instead, most parties are smart enough (or at least their lawyers are) to settle and to settle pretty early in the process. Usually there have already been pre-litigation settlement negotiations of some sort so when a suit is actually filed, the parties generally know that this is serious now and get their shit together and work it out.

Often, this just happens on its own. In my own experience, I’ve seen it happen over and over–a case gets filed after months of trying to get the defendant to settle, the defendant (finally) gets a lawyer, the lawyer wisely advises Settle, now! and we work it out. And we should, frankly. Most copyright cases are pretty clear cut and most of them should settle before suit is even filed but, if not, then shortly after.

When the parties don’t settle on their own, though, the federal courts have put in mandatory Alternative Dispute Resolution (ADR) procedures into the litigation process. These processes save the court time and money and it saves them both for the parties, too. For example, here in the Southern District of California, we have a Early Neutral Evaluation (ENE) system that means no later than 45 days after the defendant(s) file its answer(s), the parties meet with the Judge Magistrate to look at the case and try to work it out. Often the case will settle at the ENE and, even when it doesn’t, cases usually settle shortly after. This all happens before you get into discovery (or it has barely started in some cases) and so costs are very limited.

The second major error in the scary math is that proponents of Small Claims don’t mention that, overwhelmingly, plaintiffs win copyright suits that go to trial. The latest statistics I saw on that (2009) put it at over 80%. When you win a copyright suit, you may be awarded your attorneys’ fees and costs (assuming you have registered your copyright before the infringement). While that award isn’t guaranteed, courts tend to make that award when it is a smaller plaintiff (like an individual artist) bringing suit, particularly when there is not a really unusual legal question at issue and/or the infringer is a big company that should know better. So, if you go through trial you have a very good shot at winning and, if you do win, you have a shot at having much of the out-of-pocket reimbursed. If your attorney is working on a contingency-fee-basis, you haven’t even been paying her yet anyway (just paying costs, like filing fees, etc.).

Okay, to recap, filing and litigating a copyright suit usually does not cost a terrifying pile of money. It is rare when it does and most of those suits are complex cases (and, by the way, often ones with large corporate plaintiffs like a movie studio). Small artists don’t need a system to reduce those costs because it is unlikely any small artist will get hit with them by filing an action[1].

What do small artists give up if they use the proposed Small Claims system? They give up their right to a jury trial (very bad thing), appeals are very limited, and most disturbingly, the system would limit the amount of money they can win–in fact, the maximum is cut in half (again, assuming the work is properly and timely registered). That depression in awards will affect those who opt out of the Small Claims system, too, even though the rulings of the tribunals would not be precedential. Artists would be giving up way too much for a protection they don’t even need!

The final argument made for a Small Claims system is that attorneys won’t take on small matters on contingency. That is just untrue. Some attorneys might not, but I know plenty who do, including me. In fact, that was a big part of my mission in becoming an attorney: to serve artists. Sure I can’t take every case, but I take a lot of very small ones. If the work is timely registered and the defendant looks solvent, there is a good chance I’ll take the case.

So, rather than give up your rights, use them to your advantage! Register your works, find an attorney who will work with you (it doesnt have to be me–I can recommend others, too), and go after infringers.


[1] Before you even go to the Monkey Selfie case and the photographer being bankrupted by it: the photographer did NOT file that suit–he has been the defendant in a suit filed by PETA.

Don’t Lash Out

I heard about a case recently that made me think about all the people, especially the small artists, who get angry when they find a (potential) infringement and go onto social media to rip the, um, lets just call em badguys. Short answer is, even though you think it will help or at least make you feel better, youd be wrong. In fact, you could be inviting a lawsuit filed by the badguys.

Heres the very generalized skinny on the case (because really, unless you are a geeky lawyer like me, it is a dull read). One business (a kind of review site) publicly published that another business was a copyright infringer and that it had adult movies on its site. That arguably hurt the second business, so that onesued the first for various things that roughly amount to the business version of defamation. The court threw out that suit, under the California Anti-SLAPP law, which which exists so that people cant use the judicial system as a way to silence legitimate speech.

Okay, you may be thinking, the allegedly name-calling business didnt lose so whats the big deal? The big deal was that it wasnt a slam-dunk. Proving that the publication of something (potentially) defamatory was protected speech and that the lawsuit had to be dismissed under Anti-SLAPP wasnt easy. Similar cases have not been dismissed and you don’t want to be one of those.

Lots of people think they have a First Amendment right to say[1] whatever they want about whomever they want. Trouble is, that isnt so. There are limits. You cant defame someone (or a business), for example. And if someone sues you in California[2] for what you said, then, to get the case kicked out, you are going to have to prove that your speech was (1) an exercise of your First Amendment free speech right and (2) that it was made in connection with a public issue or an issue of public interest. Thats a pretty high bar to get over. In fact, youre going to have to show that the subject person (business) was famous/a pubic figure, or that the subject matter of the speech is of great interest to enoughpeople not affected by the case, or that the topic was of general widespread interest. Just because you and your drinking buddies think something is important isnt going to cut it.

After you, as the defendant in the original law suit, prove all that, then the other side (plaintiff in the defamation suit) gets a chance at a save–if it proves that it would probably win, then, even after you proved the above, the case will not be dismissed. See, not so easy.

So, going back to anaggrieved artist who tweets about the evil bastard Joe Doe who stole my illustration and then, worse, follows up with No one should shop at his store because he is a lying thief! well, that artist may be facing a lawsuit for those tweets and one s/he may not win. Think about that second part of the Anti-SLAPP–the potential save for the plaintiff–maybe Joe Doe had an implied license or a legitimate fair use defense that you, as a non-lawyer, didnt know would gut your infringement claim.

Better to sit on your tweeting/social media hands than run the risk of getting sued. Even if you did win, youd have to go through the unpleasantness of litigation. Instead, register your copyrights regularly and, if something gets used without your permission, talk to an attorney about your infringement claim and what your options are.


[1] And by say I mean speech made in any medium–wrote, recorded, painted, shouted in a public space, etc.

[2] Some other states have similar laws.

Forming an Entity: The Other Stuff

I wrote recently on some of the copyright considerations related to running your business as an entity. Today, I want to address some of the other things you have to do whenyou decide to form an entity. First, a quick reminder that I am speaking generally here and with California law in mind: each state has its own laws so your mileage may vary, so to speak.

Most creative pros start their businesses as sole proprietorships. As Ive explained before, there are no formalities required to do that, outside of maybe having to register a fictitious business name (DBA) with your county or city. Forming an entity requires filing various papers with the state, but after that is done, are you done? Not by a long shot.

Assuming youve been running your business like a business, you may have things like business banking accounts, credit cards, or insurance policies. When you have a new entity, you are going to have to convert all of these to the new entity. In some (probably most) cases, youre going to have to close existing accounts and open new ones. Youll also have to get new checks printed.

Its particularly important to talk to your insurance provider to get your policies worked out. You dont want to get caught with those proverbial pants down. This may also mean your auto policy, dont forget.

Speaking of your car, did your CPA tell you it would be best to have your company own your car? Then, youll have to transfer it (and yes, we all love the DMV, but do it). What about your other assets? Computers? Cameras? Furniture, etc.? Even if you own these things outright, it would be best to document the transfer of the assets to your new entity. Talk to your CPA before doing any of this to make sure you dont do anything to mess up her/his careful tax planning for you.

You also need to think about your IP licenses. No, not your licenses out (those you sell to other people to permit them to use your work–although you will need to update those moving forward) but the one ones you purchased for things like the software that you use in your business. Some of those will be non-transferable and you will have to purchase new licenses. Dont get angry about it and dont skip this–especially if you issue non-transferable licenses, you should understand this.

You may also have issues with any office/studio space you lease (landlords often will be fine with updating a lease) and definitely youll need to set up new payroll accounts if you have employees, including getting a new EIN number for the entity not to mention new workers comp., etc. Also, if you have a business license with the city (or county) you’ll have to get a new one for the new entity, too.

Finally, you need to learn how to sign documents properly for your entity. You may no longer sign justBetty Smith, but rather must sign as Betty Smith, Managing Member, Smith Creative, LLC, a California LLC, if you formed an LLC; or, if you did the corporation thing, Betty Smith, President, Smith Creative, Inc., a California Corporation. Yes, it’s a pain in the butt but if you don’t sign properly you can personally be liable for things. No, I’m not kidding.

Relatedly, you will need to update all your business paperwork to reflect the new entity–like your licenses you offer clientsand your contracts/estimates/invoices/model releases/etc. Also be careful in the contracts you are offered: make sure they are naming the entity and not you as the party and that there are no “Personal Guarantees” or other clauses that effectively remove the protections of the entity.

Your CPA should provide you with a lot of guidance on the financially related changes you needs to make. An attorney can help you with the rest.

One Year

Yesterday, July 1, was the first anniversary of Burns the Attorney.
Ive been incredibly lucky. Its been a really good first year.

I have wonderful clients, both new and old, who honor me with their trust. I take very seriously their reliance on me to do my best for them because, in very important ways, it means I help them focus on being creative professionals. Think about it: which would an artist rather do, make new art or chase down people who have used existing art without permission or payment?

That is most of what I do, helping artists with copyright infringement matters. But I do other legal work as well, of course. In the past year, Ive helped clients with contracts and releases, discussed business formations and the effects of community property on clients copyrights, and, well, lots of other things too.

Not everyone gets the opportunity to do what she really loves. I do, and I am so grateful for it.

I want to thank all of my clients and, in advance, all of those who will call on me to help in the future. I intend to be here for some time, serving artists of all sorts.

If you ever need me, you know where to find me.

And thanks.