Introduction
Copyright class actions are not new.
But, in comparison to other types of class actions, they are exceedingly rare.
Indeed, since the advent of the modern-day class action,
it is likely that only a few hundred copyright class actions have ever been filed—less than 0.5% of all class action cases.
While small in number, however, copyright class actions are enormous in impact: They have resulted in sweeping settlements that contained provisions not just for past harms but for ongoing royalties, shaping the future income streams for hundreds of thousands of copyright-holding class members.
They have been the driving impetus for landmark copyright legislation that imposed royalties on home-recording devices,
digital radio,
and streaming services.
Despite the import of the class action mechanism
for copyright law, virtually no scholarship has been written on copyright class actions.
Likewise, even as procedural scholars point to the general trend of class actions and aggregated settlements in the modern technological age, scant attention has been paid to how the rise in prominence of copyright class action settlements provides concrete proof of this transactional model of litigation.
This Article is the first to present an in-depth analysis of the class action mechanism in copyright cases and, in doing so, to demonstrate that copyright class actions present a little-examined solution to a problem that has vexed copyright scholars with the rise of digital creation and dissemination. As others have written about, new technologies present two unique problems for rights clearances. First, new technologies often aggregate and disseminate large quantities of copyrighted works, which itself requires obtaining rights from a large number of copyright holders.
Second, new technologies lower the cost of content creation.
On the one hand, this creates a democratizing effect: As Professor Madhavi Sunder put it, new technologies “empower[] democratic cultural participation . . . in which all individuals can ‘rip, mix, and burn’ culture.”
Yet the now trite adage that “anyone can be a creator” in the internet age has, as Professor Molly Van Houweling has explored, a downside: Many rights are now spread out among millions of individual creators, rather than concentrated in a discreet set of large industry repeat players.
Some refer to this as the “long tail” of copyright holders.
In short, digital technologies exacerbate, rather than reduce, the problem of transaction costs.
And these costs are only likely to increase, as the newly-enacted Copyright Alternative in Small-Claims Enforcement (CASE) Act makes it easier for individual creators to file infringement actions in a specialized copyright claims court, potentially subjecting large technology users, like Google, to thousands of claims each year from long tail copyright holders.
The use of class actions in addressing how copyright law has responded to new technological uses has gone largely unexplored, and its potential underutilized, in the intellectual property literature. Copyright scholars addressing the acute problem of transaction costs in the digital age have either advocated for a vision of private ordering via new licensing collectives or contractual arrangements, or common law and legislative interventions in the form of fair use reform, specialized rate courts, and tailored legislation.
Missing from their analysis, however, is how aggregate litigation may fulfill a different function, something much closer to an administrative copyright: administering millions of licenses for not merely past infringement but future uses and, in the process, filling in statutory gaps to address a rapidly shifting technological landscape.
In this sense, copyright class actions also differ from procedural scholars’ understanding of aggregate litigation as either a regulatory device for the wide-scale administration of public policy or a joinder device to ensure litigation efficiency.
Mass torts, discrimination, and consumer class actions attempt to do some form of rough justice to make class plaintiffs whole for economic or personal injuries that are defined by existing substantive law.
But this Article’s examination of copyright class actions uncovers the class mechanism doing something slightly different from merely administering compensation for defined harms: It updates and fills in gaps in the substantive law and determines exactly what constitutes a copyright injury in the first place for new technological uses such as audio recording, user-generated content, and digital streaming.
Thus, this Article fills the chasm between two domains that are rarely in conversation with one another and offers a novel view of the class action device as both an efficient legal coordinating mechanism—as a hybrid public–private licensing scheme—and as having a part to play in making substantive copyright law. The copyright class actions and ensuing settlements examined in this Article are notable: as court-fashioned compulsory licenses establishing forward-looking royalty payments for millions of rightsholders, as sweeping settlements containing market-based royalty rates, as catalysts for significant legislative reform, and as precisely the type of hybrid solution (of private ordering and judge-made law) to the problem of digitization and dissemination of copyrighted works that scholars have long cogitated over.
This Article proceeds as follows. Part I begins by examining the problems posed by new technologies that redistribute mass quantities of existing copyrighted works. Not only do these technologies fail to fit comfortably into the fair use paradigm, but they also present the intellectual property corollary to the holdout problems that Professors Guido Calabresi and Douglas Melamed famously identified in the real property context.
Part I also discusses solutions, and problems with those solutions, posed by scholars and implemented by courts, ranging from judicially imposed liability rules that may mimic compulsory licenses to the establishment of private collection societies that could issue voluntarily negotiated blanket licenses. Part II provides a historical overview of the development of copyright class actions, from examples of early representative suits, to increased class action suits in the 1990s as responses to new digital technologies, to two recent, and particularly advanced, settlements in class action cases, involving Google Books and Spotify. This Part pays particular attention to the nonmonetary components of any ensuing settlements, analyzing them as explicit or implicit attempts to advance legislative changes that ultimately resulted in the passage of several landmark copyright laws. By joining far-flung, disparate rightsholders as putative class members, these class action suits exposed the defendants to enormous risk while creating enormous opportunity—to craft private settlements that would first release all claims, known or unknown, past, present, and future, against the defendant in one fell swoop and serve as the blueprint for industry-wide change. Using these learnings, Part III argues that aggregate litigation, if implemented properly, can solve the problem of mass infringements, high transaction costs, unwieldy holdouts, and a long tail of small, individual rightsholders. Part IV addresses potential objections, such as concerns that reform by private settlement usurps the role of legislatures, or that any such ensuing settlements may vest monopoly power in the settling defendant. This Article concludes by looking toward the future and suggesting that the class action mechanism represents one model for what the future of copyright infringement remedies may look like in a digital age rife with increasingly fragmented rights and rightsholders.