I belong to the Electronic Frontier Foundation (EFF). This great organization focuses on helping “little people” who find themselves at the butt end of a nasty lawsuit due to first amendment or copyright problems. You can find them at www.eff.org. Now, I should note that not every “little guy” is innocent, and sometimes, a copyright violation is just that — oops, I stepped in it! But that doesn’t mean that a mistake has to cost you your entire business. In this blog, I wanted to share one way of jamming internet “copyright enforcement” lawyers. It won’t stop you owing something for your copyright violation, but a trivial payment is significantly different than $5000 or $10000 which is often the demand amounts from these trolls.

Welcome, my “homies”, to the dreaded Federal Rule 68. Most states have an analogous rule, although almost all copyright violations are brought as federal action to make them seem scary. Which, I might add, is often successful, and is a rather good tactic. But I digress!

Let me give you the example of the McCleary’s. Obviously, I have changed the name – but the fact pattern is the same. Mr. and Ms. McCleary own a small internet music review and production company. They play at various cover concerts, and maybe earn $20 to $25K per year from their newsletter, productions and sales, and cover engagements. Recently, they were contacted by Evil Empire Lawyers who stated that one of the pictures in their blog from seven years ago was actually a copyrighted picture of an artist, and it was used without permission. It was seen a whopping 177 in the last 7 years. Violation of copyright image laws (the image is legal (i.e. not a violation of the first amendment or invasion of privacy), but its use is restricted by rights) has fines up to $30,000 (if willful, up to $150,000) plus the cost of attorney fees. See 17 USC 504(c) which reads in part:

(c) Statutory Damages.— (1) Except as provided by clause (2) of this subsection, the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just. For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.

Now, as you might be saying — if the Court believes the violation was not willful, and finds that the act was trivial in nature, what’s the fuss? A fine of $1000 or so is not likely to cause complete ruin. The problem, folks — is attorney fees. The judgment may be for $750, but the attorney fees could be considerably more. The filing of a complaint in federal court can cost upward of $5000 between costs and attorney fees. Image if this continues for a year of litigation? A trial? You get the idea.

Here is where Rule 68 comes in. Because the internet law firms enforcing the copyright only get paid if the court awards them money (at a trial) or 33% of a settlement, they will always threaten a trial to scare you, and hope you fight. If you threaten them with a Rule 68 motion, you will cripple their will to fight. Here’s why — Rule 68 says that if you make an offer, and the final judgement is LESS than the offer you made, the internet law firm cannot collect attorney fees from the date of the offer. ALWAYS MAKE A RULE 68 OFFER (if you violated) when filing your initial answer to any complaint.

RULE 68:

(a) Making an Offer; Judgment on an Accepted Offer. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.

(c) Offer After Liability is Determined. When one party’s liability to another has been determined but the extent of liability remains to be determined by further proceedings, the party held liable may make an offer of judgment. It must be served within a reasonable time—but at least 14 days—before the date set for a hearing to determine the extent of liability.

(d) Paying Costs After an Unaccepted Offer. If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.

Always consult with a competent attorney to determine what the amount to offer should be. A review of copyright rules and liabilities is required as well.

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