Low stakes legal gambling?

by John Holbo on April 4, 2006

I’m thinking about issues of copyright and fair use – specifically, the rather unfortunate lack of clear legal precedents in certain areas. The inability to be sure a given use is fair has an unfortunate dampening effect. (But this situation is no doubt mirrored in other areas where black letter implications are unclear, and precedent is thin on the ground.) What is to be done? Could you engineer the setting of precedents like so: semi-staged, lowball lawsuits. That is, someone claims ‘fair use’, in the secure foreknowledge that they won’t be sued for huge damages (because this has been informally settled or determined with the plaintiff in some manner, in advance.) So the defendant doesn’t have to risk catastrophic loss, just – say, a couple thousand dollars, plus legal fees (not trivial, but not crippling to certain folks.) The suit needn’t be strictly a fake, in that there could be real disagreement between the parties about what constitutes ‘fair use’. But the main idea is making it attractive as fairly low-stakes gambling for both parties. Presumably this would work best if both parties felt that setting a relevant precedent would be a considerable value in itself. Obviously aspiring fair-users will see the value of this; but some rights-holders will, too, if only because they may foresee wanting to make confident fair uses themselves; or perhaps because they are just plain idealistic. So you arrange for such parties to sue each other … slightly.

I can see that the law, in its majesty, might frown on this as slightly disrespectful of its aforementioned majesty. There is something frivolous about agreeing to disagree, just for the sake of taking up some judge’s time. But the goal – setting a precedent – is distinctly non-frivolous. Is there any precedent for setting out to set precedent in this way?



Seth Finkelstein 04.04.06 at 3:45 am

[Disclaimer: I am not a lawyer.
Claimer: I’ve done signficant civil-liberties activism]

Short answer: No.

Long answer:

1) That’s called a “collusive action”:

“n. a lawsuit brought by parties pretending to be adversaries in order to obtain by subterfuge an advisory opinion or precedent-setting decision from the court. If a judge determines the action does not involve a true controversy he/she will dismiss it.”

Judges don’t like people trying it.

2) You might want “declaratory judgment”

“n. a judgment of a court which determines the rights of parties without ordering anything be done or awarding damages. While this borders on the prohibited “advisory opinion,” it is allowed to nip controversies in the bud. Examples: a party to a contract may seek the legal interpretation of a contract to determine the parties’ rights, or a corporation may ask a court to decide whether a new tax is truly applicable to that business before it pays it.”

These cases, however, are difficult. One which I followed, about the censorware company N2H2, was dismissed with the judge showing perceptible hostility to the free-speech side. It’s extremely hard to walk the line between having a real case, and putting someone at high-stakes risk.

3) There’s enough real cases happening all the time that fooling around with creating hypothetical ones is likely a waste of resources. If these cases don’t reflect what’s really happening, they won’t have much precendential value.

The declaratory judgment attempts in #2 are probably the closest to what you want, but again, they haven’t worked out very well in practice.


John Holbo 04.04.06 at 4:01 am

Thanks, Seth. I sort of suspected 1, but I didn’t think ‘collusive action’ was the word for it. Now I know. (Unless someone else says different.) Why is there such hostility to seeking advisory opinions or precedent-setting decisions? There are legal systems in which this sort of thing is common and accepted (I am led to understand.) There is transparently a utility to the practice. It isn’t collusive in any malicious or even especially underhanded sense. When did the precedent of hostility to this sort of thing get set, I wonder?


joe o 04.04.06 at 4:05 am

You often want a defendant at real risk because that is someone with incentive to effectively search for and present the best arguments.


joe o 04.04.06 at 4:13 am


John Holbo 04.04.06 at 4:19 am

joe o, I would think that defendants who were gung-ho fair use enthusiasts could be counted on to muster enough creative legal gymnastics without saddling them with midnight coldsweats about bankruptcy. But point taken.

Again in response to Seth: rereading – phrases like ‘semi-staged’ – I realize now that the post was unclear. I did know, before writing it, that courts would frown on a completely artificial set of adversaries. (Although I didn’t know the technical term for that.) What I was really suggesting was that there might be adversaries who would be willing to take a case to court without necessarily going for the jugular, damages-wise. You could find two parties, with a sincere difference of opinion about fair use, but no particular desire to try to extract that difference in terms of piles of cash, who could put the occasion of their sincere difference to good use by … etc. etc. In part you could just look for relatively small cases. Cases in which the damages are not large because it’s a not particular profitable (but not unprofitable) borrowing from a work that is not, say, Harry Potter. But it may be that I am now conjuring such a rarified confluence of legal elements … anyway. If there are so many intellectual property cases, as Seth says, why aren’t there more clear precedents (which everyone I have read says there really aren’t)?


John Holbo 04.04.06 at 4:22 am

Thanks for that link, joe o. That clears up my questions pretty well.


Michael Mouse 04.04.06 at 6:21 am

It can’t be done for low stakes, even if you could come up with some iffy way of pre-limitingthe final award. The reason is one word: costs.

In pretty much all jurisdictions, you have to climb a certain level in the system before you get to precedent-setting level, and presenting a half-decent case there involves senior legal people who cost real money. It’s not at all unusual for the costs of a precedent-setting case to dwarf any award or fine imposed by the court.

Unless, of course, you have two private armies of ace lawyers who are prepared to do it all pro bono.


Seth Finkelstein 04.04.06 at 6:57 am

What he said (#7 / michael).

Being sued “slightly” is like playing with fire “slightly”. If you lose, you’ll always think you should have argued harder, which then turns any case into one that has to be fought as well as possible.

In fact, as michael notes, it’s not always about damages. The orginal case about DVD player encryption, which was far-reaching and a very bad precedent on fair-use issues, did not itself involve any damages against those defendants. It did, however, set the groundwork to sue into oblivion anyone who made unrestricted software DVD players.

Cases where not much is at stake (which doesn’t refer to dollar amounts _per se_) get settled long before going to court, because nobody wants to escalate them due to lawyer-cost.


John Holbo 04.04.06 at 7:49 am

Yes, that makes perfect sense. Thank you for clearing my head.


SamChevre 04.04.06 at 8:14 am

All points above are true, but it’s worth noting that some of the most famous cases were somewhat collusive–they had willing plaintiffs, who deliberately acted so as to have a case. If my memory is correct, Dred Scott was a case of that sort, as was the Snopes trial. I think that some of the cases consolidated into Brown vs Board were similar as well.


michael carroll 04.04.06 at 8:28 am


You’ve hit on a serious problem that intensifies as technology increases the number of “copyright events” in the world. As other commenters rightly explain, we lack a mechanism for cheap, quick anticipatory adjudication of fair use claims. I have a paper that I’ll be posting to the web in the next month or so that proposes the creation of a Fair Use Board in the Copyright Office to hear such claims.

Under the proposal, a person could petition for a Fair Use Ruling by submitting the copyrighted work and a description of the proposed use. Notice would be served on the copyright owner, who would have an opportunity to participate. The record would be only on paper. A favorable fair use ruling would insulate the petitioner from liability but would not be a precedent that anyone else could formally rely on. These rulings would be posted on the Web, however, which would provide informal guidance for others. Appellate review of such rulings would be first by the Register of Copyrights and then in the federal courts of appeals.

My fallback proposal is that such favorable rulings could be used to limit the damages if a court were to disagree about whether a particular use was fair. David Nimmer has a proposal along these lines.

The parallel strategy is to develop “best practices” regarding fair use. While these would not have the force of law, they might be taken into account by a court when applying the law. Documentary filmmakers have taken the lead with this approach. See http://www.centerforsocialmedia.org/rock/backgrounddocs/bestpractices.pdf
This strategy is particularly useful when the issue is not about the courts but media gatekeepers the refuse to rely on fair use even in the clearest cases (E.g. Two lines from song lyrics in a scholarly book).



JR 04.04.06 at 8:32 am

The genius of the common law system is that the resolution of genuine disputes, arising randomly out of the normal operation of society, creates an increasing number of decisions that eventually cohere into a body of decisional law. No one controls which disputes will be heard. No one brings a lawsuit unless he or it has a personal stake in the outcome. Uncertainty and ambiguity are the rule, until a dispute is important and sharply enough divided to require a clear decision. Once such a dispute arises, its resolution will serve as guidance for future disputes. This is the distinctive feature of the Anglo-American system — that a judicial ruling is both a determination of an individual dispute and a precedent for the resolution of future disputes. (In the continental system, decisions have no such precedential effect.) Think of the common law as a sort of evolutionary process as opposed to intelligent design, or a sort of free market economy as opposed to a command economy on the old Soviet model, or open source code as opposed to Microsoft.

This rule is so important it’s in the constitution- courts may not hear disputes absent a genuine “case or controversy.” When George Washington was president, he asked the Supreme Court if it would give guidance on various topics and Chief Justice John Jay responded that the Court could not go beyond its narrowly defined duty of deciding specific cases that come before it.

Aside from its advantages in allowing law to develop incrementally, the case or controversy rule keeps the courts from intruding into the proper place of the legislature. Given the enormous power of judges in a common law system, the case or controversy requirement is a necessary protector of democracy. If you see a social problem that needs a remedy, then you talk to your congressman — by creating an organization that has some political muscle, if you want to have much of an effect. If you personally have been cheated out of money or denied a basic right, that’s when you bring a lawsuit. But it’s not a good idea for people to be able to choose a forum and a judge and put an important social issue before one governmental officer for decision.


Richard Bellamy 04.04.06 at 8:41 am

The most famous “collusion” case was Plessy v. Ferguson (the “separate but equal” case), where they carefully selected the most “sympathetic Negro” they could find to get thrown out of the White’s Only car — an “octoroon” who was so light skinned that they had to tell the conductor in advance so they would know that the races were mixing.


Tom T. 04.04.06 at 8:48 am

I think that part of the distaste for collusive actions, particularly for damages, is the suspicion that they are being pursued for the purpose of sticking it to some third party (like an insurance company).

John H’s idea would be especially interesting if employed to clarify the boundaries of sexual-harassment law.


Seth Finkelstein 04.04.06 at 8:56 am

Folks, “collusion” does not refer to finding a sympathetic defendant or plaintiff to bring the case. It refers to the defendant and plaintiff agreeing that they’ll fabricate a case they don’t really mean, in order to get a court ruling out of it.

This is different from both parties honestly thinking a real case is good for them – there, they presumably mean it.


John Holbo 04.04.06 at 8:58 am

jr, your point is well taken about how in the continental system cases don’t constitute precedents. I hadn’t really thought about that. And you are right that the idea of venue shopping for a favorable judge to set a favorable precedent is problematic. But it seems a bit implausible to suggest that ‘arise randomly out of the normal operation of society’ is a good descripton of how lots of cases get brought. It isn’t as though those who can afford whole phalanxes of expensive lawyers are JUST minding their personal knitting, as it were, and NOT looking to the legal field as a whole to see how their laywering is likely to affect it, and thinking how they would like it to tilt. These people aren’t just bouncing around ‘randomly’. So allowing what I proposed would, I think, pretty clearly NOT be more ‘soviet’ than not allowing it. Thinking about it as open source vs. Microsoft seems like a recipe for confusion about what’s really going on, how the various participants are really behaving.


John Holbo 04.04.06 at 9:02 am

Interesting proposal, Michael Carroll.


Christopher M 04.04.06 at 9:37 am

What John proposes is not a collusive action. His hypothetical parties aren’t scheming to fake a controversy — they really disagree about the law and their rights. Party A really believes that Party B owes him lots of money. John’s question (unless I misunderstood it) is whether they can agree to lower the stakes in order to make the litigation viable for both parties.

And the answer to that, it turns out, is yes.

For example, in Nixon v. Fitzgerald, 457 U.S. 731 (1982), the plaintiff was suing former President Nixon on a retaliatory-firing claim. The big issue in the case was whether Nixon had absolute immunity from such suits. The court of appeals said no, no absolute immunity. At that point, while the case was going up to the Supreme Court, the parties entered into a contingent settlement: Nixon paid the plaintiff $142,000, and they agreed that the plaintiff would receive an additional $28,000 if the Supreme Court affirmed the court of appeals, and no more money if the Court reversed.

The Supreme Court held that the arrangement did not make the case moot, because “[t]he limited agreement between the parties left both petitioner and respondent with a considerable financial stake in the resolution of the question presented in this Court.”


Tom Ames 04.04.06 at 9:57 am

Posted by SamChevre · April 4th, 2006 at 8:14 am

“…it’s worth noting that some of the most famous cases were somewhat collusive—they had willing plaintiffs, who deliberately acted so as to have a case. If my memory is correct, Dred Scott was a case of that sort, as was the Snopes trial.”

That aspect of the Snopes trial was just an unconfirmed internet rumor.


JR 04.04.06 at 10:16 am

The “phalanxes of lawyers” are on both sides of disputes. Corporate America has proven itself no match for the trial lawyers, who in asbestos and tobacco cases have been more effective than their adversaries. Corporate America generally prefers to settle rather than to risk a hit to the next quarter’s bottom line. The trial lawyers, on the other hand, are patient and tenacious.

On the other hand, some cases just can’t settle. The lead paint trial in Rhode Island, which just concluded, is a great example of the rare sort of case that was of such importance that it could not settle and therefore will create a precedent. This case has been around for five years, with a trial to a hung jury three years ago, and now a retrial. All but one defendant refused to settle because they felt that a settlement would be worse than a loss, in that settlement would encourage copycat cases. Now three of the four defendants that went to trial have lost, and the issues will go up on appeal and we’ll get some answers.

What you have are powerful and organized groups throughout society who are in conflict with each other, and out of these conflicts genuine, hard-fought disputes emerge. The Sierra Club looks for cases to make precedent and to rally contributors around, and so does the American Forest and Paper Association. But these people are actually fighting each other over real disputes, and the stakes are high. And there is always a real plaintiff and a real defendant, who have injuries (and in the case of corporate defendants, shareholders) as well as principles. The cases that actually make precedent are thrown up as a result of struggle among social actors, not by agreement. Participants have poor information about what their adversaries are up to and often misunderstand the relative strengths of their own position. Judges do things that no one anticipates, based on bureaucratic pressures within the courthouse having nothing to do with the case. Lawyers make recommendations to management, which moves too slowly to implement a strategy. Management tells lawyers to carry out a plan, which is botched due to the lawyers’ failure to understand the client’s business. There’s a tremendous amount of randomness in what cases actually go to trial and up on appeal, and the posture that they arrive there, just as there is a lot of randomness whenever decisions are made under circumstances of conflict.

There are, by contrast, cases where no one has a genuine stake in the litigation, and these cases aren’t pretty. These arise in the context of class action litigation, where trial lawyers front a plaintiff’s representative for large numbers of people who supposedly each have very small injuries. The problem is that none of the plaintiffs really cares what happens. The abuses in this area are well-known– particularly in what are called “coupon settlements,” where defendant agrees to give each plaintiff a coupon worth, say, 15% off their next purchase of a product they don’t want, and the defendant also agrees to pay the plaintiffs’ lawyers’ fees- in the millions of dollars. These settlements are pay-offs. You can think of them as stick-ups, or you can think of them as bribes, but either way they are not justice for the class members or the defendants.

Remember that the judge has no power to investigate and no interest in seeking out facts that the parties don’t present to her or in devising legal theories that the parties don’t articulate. The judge is passive- she knows only what the parties tell her, and her only goal is to settle the dispute that’s in front of her. This system only works if you have parties who are really adverse- and that means people and companies that are invested in the case.

Some of the worst precedents, ironically, are made when a complex issue arises in a small-dollar case – the lawyering is often poor and slapdash, and the resulting decisions are unworkable or have bizarre consequences. But because the same issue is likely to arise again in another court, usually the bad effects are eventually limited in time or in space.


John Lederer 04.04.06 at 10:52 am

Copyright is broken. No law (even including immigartion laws ) is so frequently broken.

The problem is that the system has been bent out of whack, largely as the result of successfuly lobbying and long term international campaign tactics by the Hollywood Moguls (OK there are others but “Hollywood moguls” has a nice pejorative sound).

It will not be fixed by trying to better define the edges.


constablesavage 04.04.06 at 1:36 pm

Regarding #12’s reference to an “Anglo-American” legal system, most UK administative law commentators would I think now say that the UK Courts have become far less inhibited lately in giving declaratory judgments, and any objection thay had towards doing so in the past would have been based on a general dislike of collusion. The justiciability principle is a constitutional law inhibition against hearing such cases. I doubt it has any real equivelant in the UK.


Tim 04.05.06 at 2:48 pm

Fair use is an interesting part of the law, because (AFAIK; IANAL) it’s the only place that the law doesn’t say, “A, B, and C are unacceptable, D and E are mitigating factors, and S is a special case” or the like, but merely says, “Act fairly.”

The law only goes so far as to say, “These four factors (but not only these four factors) should play a role in a decision of whether or not a use is fair.”

On the one hand, that’s pretty neat: Congress saying, “Listen, people, act fairly.” One another hand, it’s ill-defined, and uncertainty does impose costs.

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