Cyberspace Licensing in the Electronic Age: Focus on E-Commerce Copyright/Misappropriations

Originally Published in the 10th Annual Cyberspace Licensing In the Electronic Age: Focus on E-Commerce Course Materials
By Glasser Legal Works
© 2000-2001 Glasser Legal Works. All Rights Reserved.

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I. Digital Millennium Copyright Act of 1998 ("DMCA") (Pub. L. No. 105-304, 112 Stat. 2860 (Oct. 28, 1998))

1. There are five titles in the DMCA:
   1. Title I . WIPO Copyright and Performances and Phonograms Treaties Implementation Act of 1998 . implements WIPO treaties.
   2. Title II . Online Copyright Infringement Liability Limitation Act (ISP Safeharbor) . limits liability of online service providers for copyright infringement when engaging in certain types of activities.
   3. Title III . Computer Maintenance Competition Assurance Act . exempts an owner of a copy of computer program for making a copy of it by activating a computer for purposes of maintenance or repair.
   4. Title IV . Miscellaneous Provisions . effects the functions of the Copyright Office, distance education, the exceptions in the Copyright Act for libraries, making ephemeral recordings, "webcasting" of sound recordings on the Internet, and collective bargaining agreement obligations in the transfer of rights in motion pictures.
   5. Title V . Vessel Hull Design Protection Act . creates a new form of protection for the design of vessel hulls.
2. Title 1 . WIPO Treaty Implementations ²
   1. Title 1 implements the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. Each requires member countries to protect certain works from other member countries or created by nationals of other member countries.
      1. Circumvention of Technological Protection Measures 17 U.S.C. ' 1201 . Each treaty requires member states to prevent circumvention of technological measures used to protect copyrighted works, and to prevent tampering with the integrity of copyright management information. Chapter 12 of Title 17 of the U.S. Code implements these measures. There are two categories of technological measures . 1) prevention of unauthorized access to a copyrighted work and 2) prevention of unauthorized copying of a copyrighted work. In certain situations, the making or selling of devices or services that are used to circumvent either category of technological measure is prohibited. The act of circumvention itself is prohibited with respect to unauthorized access of copyrighted work, but not unauthorized copying. This ensures that the public still has the ability to make fair use of copyrighted works.
      2. Integrity of Copyright Management Information ("CMI") 17 U.S.C. ' 1202 . CMI is defined as the identifying information about the work, the author, the copyright owner, and potentially, the performer, writer or director of the works, as well as the terms and conditions for use of the work, and such other information as the Register of copyrights may prescribe by regulation. ' 1202(c). Information on users of work is excluded. This protection covers false CMI and removal or alteration of CMI. The knowing provision or distribution of false CMI, if done with the intent to induce, enable, facilitate or conceal infringement is prohibited. In addition, the intentional removal or alteration of CMI without authority, and the dissemination of CMI or copies of works, knowing that the CMI has been removed or altered without authority is prohibited. This section exempts law enforcement, intelligence and other governmental activities.
      3. Remedies 17 U.S.C. ' 1203 . The courts have the power to grant equitable and monetary remedies similar to those in the Copyright Act, including statutory damages.

C. Online Copyright Infringement Liability Limitation . Title II of the DMCA adds section 512 to the Copyright Act and creates four limitations on liability for copyright infringement by online service providers. ³17 U.S.C. ' 512. The limitations cover four categories of conduct including 1)transitory communications; 2)system caching; 3) storage of information on systems or networks at direction of users; and 4) information location tools.

1. Eligibility Limitations . To benefit from the limitations on liability provided in Title II, a party must qualify as a "service provider." Under the transitory communication category, a service provider is "an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user's choosing, without modification to the content of the material as sent or received." Section 512(k)(1)(A). For the other categories, a service provider is "a provider of online services or network access, or the operator of facilities therefor." Section 512(k)(1)(B). In addition to being a service provider, there are two other conditions included in section 512(i), which must be met for a service provider to be protected by Title II. First, the service provider must adopt and reasonably implement a policy of terminating in appropriate circumstances the account of subscribers who are repeat infringers. Second, it must accommodate and not interfere with "standard technical measures." The standard technical measures are defined as measures that: (i) copyright owners use to identify or protect copyrighted works, (ii) have been developed pursuant to a broad consensus of copyright owners and service providers in an open, fair and voluntary multi-industry process, (iii) available to anyone on reasonable nondiscriminatory terms, and (iv) do not impose substantial costs or does not burden service providers.
2. Limitation for Transitory Communication, Section 512(a) . Limits the liability of service providers who send communications initiated by others through a service provider's system, where the service provider does not alter the content. To qualify for this limitation, the service provider activities must meet the following conditions: 1) transmission must be initiated by a person other than the provider; 2) transmission, routing, provision of connections, or copying must be carried out by an automatic technical process without selection of material by the service provider; 3) service provider must not determine the recipients of the material; 4) any intermediate copies must not ordinarily be accessible to anyone other than anticipated recipients; 5) material must not be retained for longer than reasonably necessary; and 6) material must be transmitted with no modification to its content.
3. Limitation for System Caching, Section 512(b) . This section limits the liability of service providers for the practice of retaining copies of material, for a limited time, that have been made available online by a person other than the provider, and then transmitted to a subscriber at his or her direction. The limitation applies to both intermediate and temporary storage, when executed through an automatic technical process for the purpose of making the material available to a request from subscribers. There are several conditions that apply. First, the content of the retained material must not be modified. Second, the provider must comply with rules about "refreshing" material . replacing retained copies of material with material from the original location . when specified in accordance with a generally accepted industry standard data communication protocol. Third, the provider must not interfere with technology that returns "hit" information to the person who posted the material, where such technology meets certain requirements. Fourth, the provider must limit users' access to the material in accordance with conditions on access imposed by the person who posted the material. Fifth, any material that was posted without the copyright owner's authorization must be removed or blocked promptly once the service provider has been notified that it has been removed, blocked, or ordered to be removed or blocked, at the originating site.
4. Limitation for Information Residing on Systems or Networks at the Direction of the Users, 17 U.S.C. ' 512(c) . This section limits the liability of service providers for infringing material on web sites (or other information repositories) hosted on their systems. It applies to storage at the direction of the user. Three conditions must be met. First, the service provider must not have actual knowledge that the material or activity is infringing nor awareness of facts or circumstances from which infringing activity is apparent. Second, if the service provider also has the right and ability to control infringing activity, the service provider must not receive a financial benefit directly attributable to such activity. Third, upon proper notification of alleged infringement to the designated agent, the service provider must respond expeditiously to remove, or disable access to, the material in question. The service provider also must file a designation of an agent to receive notifications of claimed infringements with the U.S. Copyright Office. A suggested form for designating an agent is provided at (http://www.loc.gov/copyright/onlinesp/).

   Section 512(c)(3) establishes notification of claimed infringement procedures and rules. First, notification must be proper. To be proper, notice must substantially comply with the following conditions: 1) it must contain a physical or electronic signature of a person authorized to act on behalf of the owner of an exclusive right in the material; 2) it must identify the allegedly infringing material with information that is reasonably sufficient to permit the service provider to remove or disable access to it; 3) it must provide information sufficient to contact the party providing the notice; 4) it must contain a statement under penalty of perjury that the complaining party has a good faith belief that use of the material is not authorized; and 5) it must contain a statement that the information in the notice is accurate and that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

   Upon receipt of notice, the material in question must be removed or disabled. In addition, the affected user should be notified that the service provider has taken steps to remove or disable access to the material.

   There are safeguards built into section 512 to protect against the possibility of fraudulent notifications. Section 512(g)(1) gives the subscriber the opportunity to respond to the notice and subsequent removal of the material by filing a counter notification. The counter notification must 1) be written and contain either a physical or electronic signature of the user; 2) identify the material that has been removed or to which access has been disabled and the location at which such material appeared before its removal or disabling; 3) contain a statement under penalty of perjury that the user has a good faith belief that the material was removed or disabled as a result of mistake or misidentification of the material to be removed or disabled; and 4) contain the user's name, address and telephone number, and a statement that the user consents to the jurisdiction of the federal district court for the jurisdiction where the user is located.

   After receipt of the counter notification, the service provider must replace the removed material or re-enable access to it in no less than 10 nor more than 14 business days, unless its designated agent first receives notice from the person who submitted the notification that such person has filed an action seeking a court order to restrain the infringing activity relating to the material on the service provider's system.

5. The Act does not impose affirmative duties on service providers to monitor their service or seek facts indicating infringing activity, except to the extent consistent with a "standard technical measure" for protecting copyrights.
6. Limitation for Information Location Tools, Section 512(d) . This section covers hyperlinks, online directories, search engines and the like. Service provider liability is limited for referring or linking users to a site containing infringing material by using such information location tools, if the service provider: 1) does not have the requisite level of knowledge that the material is infringing; 2) has the right and ability to control the infringing activity, and does not receive a financial benefit directly attributable to the activity; and 3) expeditiously takes down or blocks access to the material upon receiving a notification of claimed infringement.
7. Liability of Nonprofit Educational Institutions, Section 512(e) . The eligibility of a nonprofit educational institution may be affected by the action or knowledge of a faculty member or graduate student who is performing a teaching or research function. With respect to transitory communications or system caching, the faculty member or student is a "person other than the provider." With respect to other limitations, the knowledge or awareness of the faculty member or student will not be attributed to the institution if the following conditions are met: 1) the faculty member or graduate student's infringing activities do not involve providing online access to course materials that were required or recommended during the past three years; 2) the institution has not received more than two notifications over the past three years that the faculty member or graduate student was infringing; and 3) the institution provides all of its users with informational materials describing and promoting compliance with the copyright law.

D. Title III . Computer Maintenance and Repair, Copyright Act Section 117 . Allows the owner of a copy of a program to make reproductions or adaptations when necessary to use the program in conjunction with a computer.

E. Title IV . Miscellaneous Provisions . 1) Clarifies the authority of the U.S. Copyright Office to continue to carry out its functions in section 701 of the Copyright Act. 2) Provides an exemption in section 112 of the Copyright Act for the making of "ephemeral recordings" (recordings made to facilitate a transmission). 3) Section 403 of the DMCA directs the U.S. Copyright Office to consult with affected parties and make recommendations to the U.S. Congress on how to promote education through digital technologies. 4) Section 108 of the Copyright Act permits nonprofit libraries and archives to create up to three copies of a work, which may be digital, for purposes of preservation or interlibrary loan provided that digital copies are not made available to the public outside library premises. 5) DMCA amends the Digital Performance Rights in Sound Recordings Act by expanding the statutory license for subscription transmissions to include webcasting as a new category of "eligible nonsubscription transmissions," revising eligibility criteria, considerations for setting rates, and creating a new statutory license for making ephemeral recordings. 17 U.S.C. ' 114. 6) DMCA adds a new chapter (Chapter 180 . Assumption of Certain Contractual Obligations) to Title 28 of the U.S. Code which imposes on transferees the obligation to make residual payments that the producer requires the transferee assume under the relevant collective bargaining agreement for actors, directors and writers.

F. Title V . Protects the certain original designs of vessel hulls by adding a chapter 13 to Title 17 of the U.S. Code.

G. Litigation under the DMCA .

1. Kelly v. Arriba Soft Corp., 1999 U.S. Dist. LEXIS 19304 (C.D. Cal. 1999) . The plaintiff alleged that Arriba violated the DMCA by removing copyright management information from plaintiff's images. To prove that Arriba violated the DMCA, the plaintiff needed to show that defendant "made" available to its users the "thumbnails" and full-size images, which were copies of plaintiff's work separated from their copyright management information, even though defendant knew or should have known that this would lead to infringement of plaintiff's copyrights." Kelly, at *19. There was no dispute that Arriba's "ditto crawler" removed copyrighted images from plaintiff's web site. Id. In addition, there was no dispute the Arriba showed full-size images without the corresponding copyright information. Id. However, Arriba's users who obtained full-size images from double-clicking on the "thumbnail" received information including the web site from which Arriba obtained the image, which contained the copyright information and a link to that site. Id. at *20. In addition, Arriba notified users of the web site that copyright limitations might apply to the images on their site. Id. Nevertheless, the court held that under the DMCA "defendant (Arriba) did not have 'reasonable grounds to know' that it would cause its users to infringe plaintiff's copyrights." Id. at *21.
2. Universal City Studios, INC., et al. v. Reimerdes et al. - Universal City Studios and various other studios have filed suit against several computer hackers. Universal Studios argued that the defendants illegally distributed through Internet web sites, a software utility that allowed encrypted, copyrighted movies contained on DVDs to be "decrypted" and copied. The utility, "DeCSS," circumvented the proprietary Contents Scrambling System ("CSS"), which had protected plaintiffs' films released on DVD format. According to the plaintiff, the distribution of this utility violates the "anti-circumvention" provisions of the DMCA, enacted to protect the technological measures copyright owners put in place to prevent unauthorized access to, and infringement of their works. See Memorandum of Law in Support of Plaintiffs' Application for a Preliminary Injunction, 3. The Court granted a preliminary injunction against the defendants on January 20, 2000.

II. ISP Safe Harbor

III. Proposed Database Legislation

A. Two bills pending in the U.S. Congress address the intellectual property protection of computerized databases:

1. H.R. 1858 . Sponsor . Rep. Tom Bliley . Consumer and Investor Access to Information Act of 1999
   1. Status . This bill was discharged by the House Judiciary Committee and placed on the Union Calendar, Calendar #213, on 10/8/1999.
   2. Summary .
      1. Title I . Commerce in Duplicated Databases Prohibited .
         1. Sec 102 . Prohibits the sale of a database that is 1) a duplicate of another database that was collected and organized by another person or entity and 2) is sold or distributed in commerce in competition with other databases.
         2. Sec 103 - Permits 1) certain news and sports information gathering, dissemination and comment; 2) law enforcement and intelligence activities; and 3) scientific, educational, or research activities not part of the consistent pattern engaged in for competition with the database organizer.
         3. Sec 104 . Excludes 1) government databases; 2) databases related to Internet communications; 3) computer programs; 4) subscriber list information; 5) certain databases of primary legal materials; and 6) specific securities market data.
         4. Sec 105 . Preempts state law not consistent with this Act.
         5. Sec 106 . Limits liability for service providers 1) if the service provider did not initially place the database on a system or network controlled by such provider or operator; and 2) a person or entity benefiting from the protection afforded a database under section 102 misuses the protection.
         6. Sec 107 . Federal Trade Commission granted jurisdiction for enforcement.
      2. Title II . Securities Market Information
         1. Sec 201 . Prohibits the misappropriation of real-time market information. Provides for civil remedies including temporary and permanent injunctions, monetary relief, and disgorgement.
2. H.R. 354 . Sponsor Rep. Howard Coble . Short Title . Collections of Information Antipiracy Act.
   1. Status . This bill was discharged by the House Committee on Commerce and placed on the Union Calendar, Calendar # 212, on Dec. 8, 1999.
   2. Summary . This bill has only one chapter
      1. Sec 1402 . First, the Act prohibits making available, or extracting to make available to others, all or substantial part of a collection of information gathered, organized, or maintained by another person through the investment of substantial monetary or other resources, so as to cause material harm to the primary market or a related market of that other person, or a successor in interest of that other person, for a product or service that incorporates that collection of information and is offered or intended to be offered in commerce by that other person, or a successor in interest of that other person. Second, the Act prohibits any person from extracting all or a substantial part of a collection of information gathered, organized, or maintained by another person etc.
      2. Sec 1403 . Permits 1) extraction of information for reasonable uses such as illustration, explanation, example, comment, criticism, teaching, research, or analysis: to determine reasonableness, the bill provides factors such as commercial or nonprofit use, appropriateness for purpose, good faith, extent of incorporation, and the affect of availability on the primary or related market; 2) certain nonprofit education, scientific, or research uses; 3) making available or extracting individual items of information, or other insubstantial parts of a collection of information; 4) gathering or use of information obtained through other means; 5) making available or extracting information for verification; 6) news reporting; 7) transferring lawful copies of all or part of a collection of information; 8) use of genealogical information; and 9) investigative, protective, or intelligence activities.
      3. Sec 1401 . Excludes from prohibition 1) government collections of information except with respect to Securities Exchange Act information and Commodity Exchange Act information; 2) computer programs; and 3) digital online communications.
      4. Sec 1405 . The Act would preempt state law.
      5. Sec 1406 . The Act provides for civil remedies including temporary and permanent injunctions, impoundment, monetary relief, and reduction or remission of monetary relief for nonprofit educational, scientific, or research institutions and employees thereof. The relief provided in this section would only be available against an ISP if it had willfully violated Sec. 1402.
      6. Sec 1407 . Provides monetary penalties for criminal offenses.
      7. Sec 1408 . A complete defense will be given to certain organizations when using certain government information.
      8. Sec 1409 . Provides for limitations on actions.

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[1] John Vassiliades is a partner and Nena Shaw is an associate in the Washington, D.C. office of Perkins Coie LLP. Their legal speciality is intellectual property and technology business law.

[2] This section summarizes the requirements of the DMCA regarding the WIPO treaty implementation. For the specific requirements of the DMCA, see 17 U.S.C. ' 1200.

[3]This section summarizes the requirements of the DMCA regarding online copyright infringement liability limitation. For the specific requirements of the DMCA, see 17 U.S.C. ' 512.